<ul class="summary-list"><li>A number of high ranking Kremlin insiders have growing concerns about Putin's war in Ukraine.</li><li>10 insiders told Bloomberg of their concerns about the economic and political impact of the invasion.</li></ul><p>A small but growing number of Kremlin insiders are questioning President <keyword id="11899444" type="UNKNOWN" weightage="60" keywordseo="vladimir-putin" source="Orion">Vladimir Putin</keyword>'s war in Ukraine and have serious concerns about its potentially devastating economic and political impact, <a href="https://www.bloomberg.com/news/articles/2022-04-20/putin-s-war-in-ukraine-has-russian-elites-fearing-global-isolation">Bloomberg reported.</a></p><p>Bloomberg cited ten sources with direct knowledge knowledge of the situation in its report, and described the critics as being spread across senior positions in government and state run businesses. </p><p>According to the report, the Kremlin insiders regard the invasion as a catastrophic mistake that will set the country back decades. </p><p>They told the outlet that Putin is surrounded by a group of hardline advisors, and has dismissed attempts to warn him of the steep economic and political costs of the conflict. </p><p>Bloomberg's sources reportedly <a href="https://www.businessinsider.com/cia-director-putin-could-get-desperate-enough-to-nuke-ukraine-2022-4?r=US&amp;IR=T">share the concerns of US intelligence officials that Putin</a> could resort to the use of tactical nuclear weapons in Ukraine.</p><p>But the report says that while Putin has acknowledged the damage Western sanctions will do, he claims the conflict was pushed on him by Western powers.</p><p>Putin regards himself as being on an historic mission, Bloomberg reported the sources as saying, and believes he has the support of the Russian people. They see no prospect of a serious challenge to his power domestically.</p><p>Bloomberg's report echoes previous claims from <a href="https://www.businessinsider.com/kremlin-staff-didnt-expect-ukraine-invasion-sanctions-shock-report-2022-3?r=US&amp;IR=T">analysts that the Kremlin was surprised by the breadth and scale of Western sanctions,</a> and underestimated the stiff Ukrainian resistance Russian forces would encounter. </p><p>Russia initially expected to seize Ukrainian capital <a href="https://www.businessinsider.com/vladimir-putin-russian-forces-could-take-kyiv-ukraine-two-days-2022-3?r=US&amp;IR=T">Kyiv in a matter of days, analysts say.</a> After nearly two months of fighting, its forces have pulled back from the city, and efforts are instead being focused on seizing territory in the eastern Donbas region.</p><p>Putin has publicly claimed that Western sanctions have failed to undermine Russia's economy, with the value of the ruble having recovered in recent weeks after a 40% collapse in value in the wake of sanctions.</p><p><a href="https://www.businessinsider.com/russian-central-banker-warns-country-reserves-finite-nabiullina-ukraine-war-2022-4?r=US&amp;IR=T">The head of Russia's central bank, however, has warned</a> that the full impact of sanctions is yet to be felt, and <a href="https://www.businessinsider.com/russia-200000-jobs-western-companies-exit-moscow-mayor-2022-4?r=US&amp;IR=T">Moscow's mayor said that up to 200,000 jobs will likely be lost in the Russian capital.</a></p>

A growing number of Kremlin insiders are questioning Putin's war in Ukraine, and believe it will set Russia back decades: report

<ul class="summary-list"><li>The UK's cyber intel chief says <keyword id="11899444" type="UNKNOWN" weightage="60" keywordseo="vladimir-putin" source="Orion">Vladimir Putin</keyword> is being misled by top Russian officials. </li><li>"We believe Putin's advisers are afraid to tell him the truth," said Jeremy Fleming. </li></ul><p>A UK intelligence chief said that Vladimir Putin's advisors are not telling him the truth about the setbacks his military has faced in <keyword id="11985141" type="UNKNOWN" weightage="60" keywordseo="ukraine" source="Orion">Ukraine</keyword>, leading to a series of errors in <keyword id="11894337" type="UNKNOWN" weightage="60" keywordseo="russia" source="Orion">Russia</keyword>'s invasion.</p><p><a href="https://www.gchq.gov.uk/speech/director-gchq-global-security-amid-russia-invasion-of-ukraine">In a speech in Australia on Thursday, Jeremy Fleming said</a> that Putin "massively misjudged" the situation before launching Russia's invasion of Ukraine.</p><p>Putin, he said, made mistakes about the strength of opposition he'd face from Ukraine, how the West would react, and how hard sanctions would hit Russia.</p><p>"And even though we believe Putin's advisers are afraid to tell him the truth, what's going on and the extent of these misjudgments must be crystal clear to the regime," he said. </p><div type="image" title="Putin" height="632" width="842" msid="90566737" hostid="261"></div><p>"It all adds up to the strategic miscalculation that our leaders warned Putin it would be. It's become his personal war, with the cost being paid by innocent people in Ukraine and increasingly, by ordinary Russians too."</p><p>Fleming's message mirrored briefings given by US officials on Wednesday, who said that Putin was being misled by top officials too afraid to give accurate information.</p><p>"We have information that Putin felt misled by the Russian military which has resulted in persistent tension between Putin and his military leadership," said <a href="https://www.youtube.com/watch?v=CqpOAp3yDCo">Kate Bedingfield, director of communications at the White House.</a></p><p>"We believe that Putin is being misinformed by his advisers about how badly the Russian military is performing and how the Russian economy is being crippled by sanctions because his senior advisers are too afraid to tell him the truth."</p><p>Anonymous briefings by <a href="https://www.businessinsider.com/putin-top-advisors-bad-information-ukraine-war-nbc-reports-2022-3?r=US&amp;IR=T">top US intelligence officials told a similar story</a>.</p><p>As the invasion stalled and the Russian death toll mounted, Putin <a href="https://www.businessinsider.com/putin-rumored-to-be-purging-kremlin-officials-over-ukraine-invasion-2022-3">is rumored to have lashed out at top officials</a>, including two FSB foreign intelligence chiefs allegedly placed under house arrest.</p><p>Russia expert Andrei Soldatov <a href="https://www.businessinsider.com/russia-hunts-fsb-western-spies-amid-ukraine-intel-failings-expert-2022-3?r=US&amp;IR=T">told Insider that the Kremlin was likely searching for traitors within the FSB security agency</a>.</p><p>A former British military <a href="https://www.businessinsider.com/putin-rumored-to-be-purging-kremlin-officials-over-ukraine-invasion-2022-3?r=US&amp;IR=T">intelligence official recently told Insider</a> that reprisals against some Russian leaders were likely meant as a signal to others that the consequences for failure in Ukraine will be severe.</p>

UK spy chief says 'we believe Putin's advisers are afraid to tell him the truth,' leading to huge errors in Ukraine invasion

<ul class="summary-list"><li>Xi Jinping may be "contingency planning" in case Putin is deposed, an analyst told Insider. </li><li>He appears to be forming closer ties to Putin's deputy, another analyst wrote. </li></ul><p>China's President Xi Jinping and Russia's President Vladimir Putin have sought to portray themselves as adamant allies, engaged in a longstanding partnership to roll back the US' global dominance. </p><p>But China's president may not be as convinced as he appears that his "no limits" friendship with Putin will endure, amid rumors that the Russian president is suffering from a serious illness, <a href="https://www.businessinsider.com/how-putin-could-toppled-coup-former-intelligence-officers-russia-ukraine-2023-5?r=US&amp;IR=T">or may be deposed in a coup</a>.</p><p>According to one analyst, Xi is likely already seeking to form closer relations with potential successors to the Russian president.</p><div type="image" title="Russia China summit" height="687" width="916" msid="100855950" hostid="261"></div><p><a href="https://www.atlanticcouncil.org/blogs/ukrainealert/is-china-preparing-for-a-post-putin-russia/" target="_blank" rel="noopener">Anders Åslund,</a> an economist and senior fellow at the Atlantic Council, said Xi appears to be cultivating closer ties to Russian Prime Minister Mikhail Mishustin.</p><p>At the April summit where the Chinese president visited Putin in Moscow,  Xi held a rare one-on-one meeting with Mistushin, noted <a href="https://www.atlanticcouncil.org/blogs/ukrainealert/is-china-preparing-for-a-post-putin-russia/" target="_blank" rel="noopener">Åslund</a>.</p><p>Then, in May, China's Prime Minister Li Qiang invited Mishustin to China, where he "<a href="http://sv.china-embassy.gov.cn/exp/Hoy/202305/t20230528_11084869.htm" target="_blank" rel="noopener">received</a> Mishustin at the Great Hall of the People, once again completely beyond the ordinary bounds of Chinese and Russian protocol."</p><p>"Why was Mishustin invited and not Putin? This cannot have gone down well with the Russian leader," he writes. </p><p>As evidence of Putin's displeasure, he points to Mishustin's absence from subsequent Russian Security Council meetings, of which the prime minister is a permanent member. </p><p>"This old-style Kremlinology is perhaps the best evidence we have that China may be looking beyond Putin and seeking to cultivate alternative relationships in Russia."</p><p>Mistushin's is not a name that usually comes up in discussions of potential successors to Putin. A former tax official, he has cultivated a reputation as an effective manager. According to Russian independent media organization <a href="https://meduza.io/en/feature/2022/07/22/he-doesn-t-speak-out-even-behind-closed-doors" target="_blank" rel="noopener">Meduza, he has played "no part"</a> in implementing Putin's Ukraine war, and does not discuss it. </p><p>In the closed world of Russian and Chinese politics, where reliable information on the thinking of its leaders is rare, analysts have long relied on subtle signals and snippets of information to read the underlying power dynamics. </p><p>It's a discipline that became known as "Kremlinology" during the Cold War, and is still very much alive today, with Putin's use of a huge table for meetings with top officials the subject of weeks of speculation <a href="https://www.businessinsider.com/putin-super-long-table-kept-people-15ft-covid-fears-nyt-2022-12?r=US&amp;IR=T">last year about his state of mind. </a></p><p>The same methods are applied to the secretive world of politics in Beijing. </p><p>Reading between the lines, analysts have previously found signs of underlying tensions in <a href="https://www.businessinsider.com/china-flexes-influence-russia-dangles-gas-project-2023-5?r=US&amp;IR=T">Putin and Xi's relationship, such as Xi's refusal to approve a new gas pipeline from Siberia to China,</a> which they say is a power play Xi is using to underscore Russia's new reliance on China. </p><p>Ali Wyne, an analyst with the Eurasia Group in Washington, DC, told Insider that given rumors about Putin's health, and potential challenges to Putin's power, it made sense for China to be engaged in "contingency planning." </p><p>"Governments regularly engage in contingency planning; that activity does not necessarily indicate strategic preferences," he said.</p><p>"Given ongoing rumors about Putin's health and speculation that a Ukrainian defeat of Russia could undermine his rule, many countries—including the United States and China—are likely envisioning various post-Putin futures and weighing the implications of each for Russia's domestic politics and foreign policy."</p><p>However, he cautioned, it's too early to suggest that Xi would prefer to be dealing with a different president in the Kremlin. </p><p>"Whether one considers the number of occasions on which Xi and Putin have met, however, the growing intensity of their shared grievances against US influence, and the priority that both have placed on deepening Sino-Russian relations, it seems premature for now to conclude that China seeks different Russian leadership," he said. </p>

China and Xi are making a backup plan in case Putin dies or gets deposed, analyst says

<img src="https://static-ssl.businessinsider.com/image/5ca37a85ffcb27210e011a13-2000/2017-08-27t225758z1625506843rc1d02624950rtrmadp3spacex-hyperloop.jpg" alt="Elon Musk" /><p class="source"><span>Mike Blake/Reuters</span></p><p class="caption">Celebrate good times, come on!</p><ul class="summary-list"><li>Tesla's stock price has rallied 100% over the past three months and is now at an all-time high above $500 per share.</li><li>The company's market cap, at about $92 billion, is almost as much as Ford's and GM's combined.</li><li>The rally has been driven not by Tesla's familiar up-and-down story, nor by CEO Elon Musk's cult of personality, but by facts and fundamentals.</li><li>Tesla sold over 100,000 more vehicles in 2019 than in 2018 and has been posting profitable quarters.</li><li>The fundamentals aren't going to change; there are no looming plot twists, and consequently the naysayers' case now lies in ruins.</li><li><strong><a href="https://www.businessinsider.com/prime">Click here for more BI Prime articles</a>.</strong></li></ul><p>At the risk of invoking a cliché, I'll point out that Tesla isn't a company whose stock trades on fundamentals, but rather on a story.</p><p>Think about that. At a simple level, the fundamentals are facts, while the story is an illusion - a suspension of disbelief. When I was in my 20s, I spent a lot of time on story, before I dropped out of a doctorate program in literature at NYU. Stories have plots, subplots, plot twists, complicated characters who do complicated things. Stories can turn on a dime: in the space of a page, comedy becomes tragedy. As an author, you want to take readers on a ride.</p><p>For years now, story has dominated the debate around Tesla. And some large-scale characters, ranging from CEO Elon Musk to big-name hedge-funders like Jim Chanos and David Einhorn, have populated the tale. Even the minor characters have been interesting, and the plotlines and plot twists have been endless.</p><p>But the truth is that this story - something of an epic, really - filled a vacuum. Established automakers such as Ford and General Motors, have less lively stories because their actual businesses are so ... busy. The fundamentals - the business facts - produce millions of vehicles every year.</p><p>Tesla has only recently joined that club: 2019's total sales were about 367,000, a notable move up from 2018's roughly 250,000. But just a couple of years back, the company barely sold 50,000.</p><h2>Story trumped fundamentals - but that's all changed in a hurry</h2><img src="https://static-ssl.businessinsider.com/image/5e21d9adb6d52d44f2108af8-1558/screen shot 2020-01-17 at 105809 am.png" alt="TSLA CHART" /><p class="source"><span>Markets Insider</span></p><p class="caption">Sorry, shorts.</p><p>The sprawling, obsessively detailed, constantly argued over Tesla story happened only because there wasn't enough production or sales to stop it. If Tesla had built a competent franchise dealer network in the US (or joined with an existing mega-dealer) rather than trying to sell vehicles direct to customers, and if Tesla had hired a seasoned contract manufacturer to build some vehicles and meet demands sooner, the story would have petered out in 2017 or 2018.</p><p>Didn't go that way, and thus we got an insane episode of Musk tweeting his way into an SEC investigation and eventual settlement, a pitched battle between the #TSLA fanboy and the #TSLAQ bankruptcy crowds, and a preoccupation with Tesla's inner-workings that resembled Cold War Kremlinology.</p><p>But look what's happened since Tesla's output of actual cars has picked up: the stock has been on a tear, blasting through $300 per share, $400 per share, and (remarkably) $500 per share in a matter of months. Tesla's market cap, at $90 billion, is nearly equal to GM's and Ford's combined.</p><p>This isn't a rally story. Tesla completely dominates the electric vehicle market and can now look forward to potential competitors having to spend, spend, and spend some more if they want to duke it out for market share. This is going to be painful because the traditional automakers won't have to break a sweat to build EVs, but they'll be forced to expend millions if not billions of dollars convincing consumers to buy them. </p><p>Tesla, meanwhile, isn't spending anything, and hasn't. That doesn't constitute a first-move advantage so much as an only-mover leg up. Electric cars were stupid risky in the past, but Tesla gobbled up that risk. Now, the reward.</p><p>Busting through three resistance levels on the stock in three months is mind-blowing. And there isn't necessarily anything on the horizon to slow Tesla down. It reports fourth-quarter and full-year 2019 earnings in late January, and they're expected to be positive. If Tesla meets or beats, look out above. The 100% return of the past three months could look like a tame precursor, as Tesla's substantial short interest is decisively flushed out of the action.</p><h2>Tesla has challenges, but the old story is over</h2><img src="https://static-ssl.businessinsider.com/image/5a8eddd3391d941d008b4650-2000/56bd1a532e5265b6008b6c6c.jpg" alt="tesla store germany" /><p class="source"><span>Hannibal Hanschke / Reuters</span></p><p class="caption">Tesla could have service issues in the future.</p><p>Tesla has some looming challenges. The biggest is that as it sells more Model 3 vehicles - and soon, Model Y SUVs - at lower price points to less well-heeled buyers, it's going to be highly stressed on the service front. Like any relatively new automaker, Tesla's vehicles lack ironclad reliability, so the company compensates consumers with a great warranty. </p><p>But without dealerships, Tesla doesn't have a solid built-in servicing model. Poor service means often means that owners who aren't living with fleets of vehicles at home fail to buy again from a manufacturer. Up to this juncture, Tesla has been selling to patient early adopters who probably own two or three cars; now that it's moving toward single-vehicle households, it could endure some pain.</p><p>That's merely the cost of doing business, however. With shares above $500, Tesla can now effortlessly make good on its convertible debt obligations and, should it want to, raise additional capital to bolster its balance sheet. I think that would be smart, and if Tesla goes for it in 2020, the approximately $5 billion that the company has in cash could swell to $10 billion, and Tesla could start to deleverage.</p><p>This leaves Tesla's naysayers, so previously dependent on a story, with not much to use to push the stock around. The facts are the facts, the fundamentals are the fundamentals, and if you think the market for EVs could grow in the US, Europe, and China, then Tesla stock looks cheap in a world were EVs now make up just 2% of global sales.</p><p>I'll use the analogy of a predicted snowstorm to depict the naysayers' plight. The weather report is uncertain: we could get a few inches, but we could also get a blizzard. The discussion is speculative: What would we do in the worst case, assuming that it probably won't happen? </p><p>But then, the blizzard comes. And you have no choice but to surrender and dig yourself out.</p><p class="tagline"><a href="https://www.businessinsider.com/intelligence/future-of-retail?IR=T&amp;itm_source=businessinsider&amp;itm_medium=ctgr_bii&amp;itm_term=ctgr_leadgen&amp;itm_content=tesla&amp;itm_campaign=future-of-retail-2"><img src="https://static.businessinsider.com/image/5dcb11a63afd37083c1cbb6b" alt="Exclusive FREE Slide Deck: Future of Retail: Delivery &amp; Fulfillment by Business Insider Intelligence" style="width: 100% !important" /></a></p>            <h3>NOW WATCH: <a href="https://www.businessinsider.com/hydrogen-fuel-cell-cars-teslas-biggest-threat-2019-12">Why hydrogen cars will be Tesla's biggest threat</a></h3>                    <iframe class="bijwplayerclass" src="https://content.jwplatform.com/players/WDmK4m5e-CEZHWCBG.html" width="100%" height="100%" frameborder="0" scrolling="auto" style="margin:0px;"></iframe>            

Tesla is on a tear, with no end in sight. That means the naysayers' case is in ruins.

<p><div class="KonaFilter image-container display-table"><div><div class="image"><img src="https://static-ssl.businessinsider.com/image/5378c93d6bb3f7562aa345f2-1200-924/janet-yellen-fed.jpg" border="0" alt="janet yellen fed" /><p class="source"><span>Jonathan Ernst/Reuters</span></p></div><p></p></div></div>Good morning! </p>
<p>Markets are pretty quiet today, as the world waits for the latest decision from the FOMC, which will be this afternoon.</p>
<p>Everyone is wondering whether the Fed - or Janet Yellen in particular - will give some kind of hint that the first rate hike might be a little sooner than the market currently anticipates. It's unlikely she'll say anything too dramatic, so there's likely to be a lot of Kremlinology, and picking apart her words in order to ascertain meaning.</p>
<p>Like we said, markets are quiet, which is in a way surprising.</p>
<p>Concerns over missing metals are rising in China, as a state-owned firm says half of the aluminum it was holding in one location <a href="http://online.wsj.com/articles/citic-resources-unable-to-locate-alumina-at-qingdao-port-1403062125?mod=djemalertMARKET">has gone missing</a>.</p>
<p>Meanwhile, r<a href="http://news.sky.com/story/1284641/insurgents-attack-iraqs-biggest-oil-refinery">ebels have attacked Iraq's biggest oil refinery</a>, though the price of oil hasn't moved much on it.</p>

Markets Are Quiet, As The World Waits For Yellen

<p><div class="KonaFilter image-container display-table float_right"><div><div class="image on-image"><img src="https://static-ssl.businessinsider.com/image/568be66de6183e23008b6c60-1208-906/screen shot 2016-01-05 at 10.50.30 am.png" alt="swimmer, china, china snow" data-mce-source="Reuters/Aly Song" data-mce-caption="A swimmer competes in a pool carved from thick ice covering the Songhua River during the Harbin Ice Swimming Competition in the northern city of Harbin, Heilongjiang province, January 5, 2016. The swimming competition was held on the official launch day of the Harbin International Ice and Snow Sculpture Festival." /><p class="source"><span>Reuters/Aly Song</span></p><p class="caption">A swimmer competes in a pool carved from thick ice covering the Songhua River during the Harbin Ice Swimming Competition in the northern city of Harbin, Heilongjiang province, January 5, 2016. The swimming competition was held on the official launch day of the Harbin International Ice and Snow Sculpture Festival.</p></div><p></p></div></div>After 15 years, Nevsky Capital, a London-based global long/short equity hedge fund led by Martin Taylor and Nick Barnes, is shutting down, according to an <a href="http://www.scribd.com/doc/294654490/Nevsky-Newsletter-151231">investor letter posted by ZeroHedge.</a></p><p>The fund isn't closing because of bad performance. In fact, Nevsky did just fine in 2015, finishing the year up 0.39%.</p><p>In comparison, t<span>he average fund fell 3.49%, </span><a href="https://www.hedgefundresearch.com/hfrx_reg/index.php?fuse=login_bd">according to Hedge Fund Research</a><span>. Nevsky has also posted annualized returns of 18.4% since inception.</span></p><p><span>Nevsky said it made the "difficult" decision to close because there are "certain features of the current market environment" that are inconsistent with the fund's goal of "producing satisfactory risk adjusted absolute returns." </span></p><p>Specifically, Nevsky says that both the<span> macro and micro data coming out of countries such as China and India is flawed. </span><span>From the letter [<a href="http://www.zerohedge.com/news/2016-01-05/why-15-billion-nevsky-capital-shutting-down-full-letter">via ZeroHedge</a> and emphasis ours]: </span></p><ul><li><span style="color: #222222; line-height: 1.5em;">Data releases have become much less transparent and truthful at both a macro and a micro level. At a macro level the key issue is the ever increasing importance of China and India. China is the world's second largest economy, but already much larger than the US in a broad swathe of sectors. India will be the world's third largest economy within a decade. <strong>Unfortunately their rise is increasing the global cost of capital because an ever growing share of the most important data they produce is simply not credible.</strong> Currently stated Chinese real GDP growth is 7.1% and India's is 7.4%. Both are substantially over stated. <strong>This obfuscation and distortion of data, whether deliberate or inadvertent, makes it increasingly difficult to forecast macro and hence micro as well, for an ever growing share of our investment universe.</strong></span></li><li>At a micro level corporates have also responded to greater market scrutiny since the [Global Financial Crisis] to disclose less not more, on the basis that the less they reveal the less often they can be proved wrong by regulators, investors or law courts. This means the cost of capital relating to holding large company specific exposures has risen as the 'headline' risk of being proved wrong with regard our earnings projections is now commensurately higher.</li></ul><p><span><span><span>Nevsky also went on to blame politics trumping economics and the rise algorithmic trading. From the letter:</span></span></span></p><ul><li>At the start of our careers we spent much time being forced to try and decipher the indecipherable - the moods and subsequent decisions of Boris Yeltsin. This 'Kremlinology' was truly the definition of banging your head against a proverbial brick wall. Fortunately this and similar masochistic macro-analytical tasks then gave way to the logical joy of the Washington Consensus which was adopted almost without exception across the Emerging World following the multiple devaluation crises in the mid-1990s. <strong>Unfortunately though the Washington Consensus, having been severely wounded by the GFC is now stone dead. Kremlinology, with an additional nationalist twist, is back - and it is now the norm, not the exception, for most countries in the Emerging World. We are not convinced that knowingly continuing to bang our heads against these newly erected brick walls would be a sensible decision.</strong></li><li>Equity markets are also less transparent</li><li>The unintended consequences of those new regulations introduced as a result of the GFC, which have largely removed the market making role of investment banks from global equity markets, has coincided with the recent massive increase in market share of both 'dumb' index funds and 'black box' algorithmic funds to create a situation where equity market volumes have fallen sharply and individual stock volatility has risen dramatically. An initially badly executed order can now inadvertently create a price trend (because there is no longer the cushion to price moves which was in the past provided by market maker inventories) that, as algorithmic funds feast on it, can create a market event even if the initial order was a simple innocent error. <strong>Truly - to mix metaphors - butterflies flapping their wings now regularly create hurricanes that stop out fundamentally driven investors who cannot remain solvent longer than the market can remain irrational.</strong></li><li>In such a world dominated by index and algorithmic funds historically logical correlations between different asset classes can remain in place long after they have ceased to be logical. More butterflies.</li><li>Index and algorithmic fund [maneuverings] also make it very hard to ascertain what the markets 'clean' positioning is at any given time. All of which pushes up the cost of capital.</li></ul><p><span><span><span>All of this has made the fund managers' jobs "no longer enjoyable." From the letter:</span></span></span></p><p style="padding-left: 30px;">"In summary, all of the above factors now mean that it is more difficult than ever before for us to accurately forecast macroeconomic and corporate variables.<strong> This pushes up our cost of capital and substantially increases the risk of us suffering substantial capital loss on individual positions either because of a forecast error or simply because we could be caught up in an erroneous market trend, which could then persist for far longer than we could take the pain. This has made what we enjoy most - the thrill of analyzing economic data releases and company accounts - no longer enjoyable</strong>. It is therefore time to accept that what we have done has worked brilliantly for twenty years but does not work anymore and move on. We are confident our process will eventually work again - for the laws of economics will never be repealed - but for now they are suspended and may be for some time; an indefinite period involving indeterminate levels of risk during which we think it would be wrong for us to be the stewards of your money."</p><p>Nevsky is the first high-profile closure of 2016. More <a href="http://www.businessinsider.com/don-steinbrugge-on-hedge-fund-closures-2016-1">are expected</a> to come.</p>    <div class="margin-top">        <h3>NOW WATCH: <a href="http://www.businessinsider.com/jeff-immelt-future-data-general-electric-2015-12">GE CEO Jeff Immelt: This one thing will drive the future of GE</a></h3>        <div>            <div>    <script src="http://player.ooyala.com/v3/6e12e8b3387a44daacfb73afba25a76e"></script>    <div class="ooyala-video-player" data-video-autoplay="false" data-video-id="pvNzRneTo9QNTxTl7EcG4fLibWrq0XrC" data-player-variable="ooyalapopvideo" id="ooyalaplayer_popvideo" style="width:1280px;height:720px"></div>    <script>    if (typeof RunFunctions === 'undefined') { var RunFunctions = []; }     RunFunctions.push(function()    {         var ooyalapopvideo = OO.Player.create('ooyalaplayer_popvideo', 'pvNzRneTo9QNTxTl7EcG4fLibWrq0XrC',{ autoplay: 'false' });     });    </script>    <noscript><div>Please enable Javascript to watch this video</div></noscript></div>        </div>        <script>(function() { function createPlayer() { OO.ready(function() { RunFunctions.forEach(function(ooyalaFunction) { ooyalaFunction(); }); RunFunctions = [];}); } createPlayer(); }()); </script>    </div>

A hedge fund just laid out why it is closing-and it is enough to chill investors everywhere

<p><strong><div class="KonaFilter image-container display-table"><div><div class="image on-image"><img src="https://static-ssl.businessinsider.com/image/5a16e9833dbef4b5748b786d-1500/rtx3dle8.jpg" alt="elon musk" data-mce-source="Mike Blake/Reuters" /><p class="source"><span>Mike Blake/Reuters</span></p><p class="caption">Tesla CEO Elon Musk.</p></div><p></p></div></div></strong></p><p> </p><ul><li><strong>As the first quarter draws to a close, numerous <a href="http://www.businessinsider.com/category/tesla">Tesla</a> watchers are trying to figure out how many <a href="http://www.businessinsider.com/category/tesla-model-3" target="_blank" rel="noopener">Model 3</a> vehicles the company is making.</strong></li><li><strong>By the end of the second quarter, <a href="http://markets.businessinsider.com/stocks/tsla-stock">Tesla</a> is supposed to be making 5,000 Model 3's per week, but current estimations predict that Tesla will fall well short of that target.</strong></li><li><strong>Ultimately, it doesn't matter much. Tesla is still among the most valuable car companies in the world.</strong></li></ul><hr /><p><br />A cottage industry has lately arisen in Tesla Model 3 Kremlinology.</p><p>Bloomberg has created a <a href="https://www.bloomberg.com/graphics/2018-tesla-tracker/">"Tesla Model 3 Tracker,"</a> and <a href="https://www.bloomberg.com/news/articles/2018-03-12/tesla-s-production-problems-spawn-a-legion-of-model-3-stalkers">according to that publication's Tom Randall</a>, numerous other Tesla obsessives have concocted elaborate and borderline unethical systems to hack their way into the true numbers.</p><p>Tesla says it will be building 5,000 Model 3 vehicles each week by the end of the second quarter. The first quarter is about two weeks from closing, and shortly after that Tesla will update an eager world in Model 3 deliveries for the first three months of the year.</p><p>Weekly production is supposed to be 2,500 per week by the end of March, but Bloomberg reckons the number is less than 1,000.</p><p>This is hardly shocking. The entire Model 3 rollout has been, to put it mildly, a mess. But so what? The Model S rollout wasn't exactly perfect, and the first six months of Model X SUV production introduced the Teslerati to Elon Musk's favorite term - "production hell" - and found the CEO sleeping on the floor of his Fremont, CA factory. </p><p>Musk once said that Tesla would be selling 500,000 vehicles by the end of 2018. The Model 3 would have accounted for roughly 400,000 of that ambitious total (Model S and X assembly is likely capped at around 100,000 annually). I'm happy to be proven wrong here, but I don't think Tesla is going to make it.</p><h2>The markets are shrugging off all of Tesla's bad news</h2><p><div class="KonaFilter image-container display-table"><div><div class="image on-image"><img src="https://static-ssl.businessinsider.com/image/58efd1a18af578521f8b5762-1200/sales-vs-market-cap.png" alt="Tesla Detroit sales vs market cap" data-mce-source="Andy Kiersz/Business Insider" /><p class="source"><span>Andy Kiersz/Business Insider</span></p><p class="caption">Tesla's valuation has soared.</p></div><p></p></div></div></p><p>The markets don't care: Tesla is trading at well over $300 per share and has a $550-billion market cap, despite incinerating $3.5 billion last year and posting zero yearly profits for 14 years. If you look at Tesla's balance sheet, you could argue that the company is worth exactly zero. But investors are convinced that the carmaker will vindicate its lofty value, and so the party goes on. </p><p>Musk's personal stock has never been higher.</p><p>In February, Musk sent his own Tesla Roadster into space, atop a huge rocket built by his other company, SpaceX. And this month, Tesla shareholders will vote on a pay package that predicts a $650-billion future market cap for the company. </p><p>There's nothing rational here, so spying on Tesla's Model 3 tally makes about as much sense as <a href="http://www.businessinsider.com/shorting-tesla-is-a-complete-waste-of-time-2017-6">shorting the stock</a>.</p><p>Of course, the company shouldn't be worth as much as General Motors. And of course Model 3 production will miss targets. But, Tesla occupies parallel reality. We should just get used to it.</p><p>Even if Model 3 production targets of 5,000 per week get pushed back to Q3 or Q4, what's the worst that could happen? The markets saw a few billion off the company's value? Then it's only worth more than Ford and Fiat Chrysler Automobiles. Plus, a lot of folks would see that as a buying opportunity.</p><p>Here's what's likely going to happen: Tesla is going to hit something like 1,000 per week in Model 3 output in Q2. It will be lucky to get to 5,000 by the very end of the year. It will still deliver 100,000 Model S and Model X vehicles in 2018. Total production for the year will be on the order of 150,000-200,000. Optimistically, a quarter of the current Model 3 reservation holders will get their car (<a href="http://www.businessinsider.com/how-tesla-model-3-compares-to-suvs-2018-3">it's a nice car, too, for the record</a>).</p><h2>Tesla overestimated its capabilities</h2><p><div class="KonaFilter image-container display-table"><div><div class="image on-image"><img src="https://static-ssl.businessinsider.com/image/5a861bcdd0307289038b4670-1800/tesla model 3-3.jpg" alt="Tesla Model 3" data-mce-source="Hollis Johnson/Business Insider" /><p class="source"><span>Hollis Johnson/Business Insider</span></p><p class="caption">The Tesla Model 3.</p></div><p></p></div></div></p><p>The bottom line is that it's time to stop the madness with this endless parsing of Tesla's capabilities. The company bit off way more than it could chew with the Model 3. End of story. Any rational investor can see that and is thereby empowered to stay the course or bail out. Morgan Stanley's Adam Jonas, a Tesla bull, recently advocated for some prudent profit-taking.  </p><p>Customers holding Model 3 reservations might turn on Tesla, but I doubt it. The brand's gravity is simply too strong. And it's not like they don't have plenty of other cars to buy while they wait. </p><p>Tesla is, therefore, something close to perfectly irrational. It's like Pi or infinity: baffling, but there, incontrovertibly. The Model 3 is the extremely local example: I've never seen a vehicle with this much hype take this long to hit the streets at scale. Even noted automotive travesties such as the Edsel were briskly produced and delivered to market; Ford sold over 100,000 in the two years that the ill-fated car was manufactured.</p><p>I've also never seen anybody literally guess at how many of a particular vehicle an automaker is producing. This is largely because the automakers will basically tell you, via monthly sales reports. Tesla doesn't tell, quite simply, because it doesn't want people to know. </p><p>That's how Tesla rolls. A pretty significant number of people think that whether Tesla makes 10,000 Model 3's in Q1 or a lot less than that, the company is going to triumph no matter what.</p><p class="tagline">Get the latest Tesla stock price<a href="http://markets.businessinsider.com/stock/TSLA-Quote"> <strong>here.</strong></a></p>    <div class="margin-top">        <h3>NOW WATCH: <a href="http://www.businessinsider.com/jim-chanos-tesla-elon-musk-truck-video-2018-2"> Jim Chanos says Elon Musk just told his 'biggest whopper' about Tesla yet </a></h3>        <div>            <iframe class="bijwplayerclass" data-player="jwplayer" src="https://content.jwplatform.com/players/sla2Bpuq-xjRU7l6Z.html" width="100%" height="100%" frameborder="0" scrolling="auto" style="margin:0px;" allowfullscreen=""></iframe><script>function receiveMessage(event){ console.log(event.data.fullscreen); Android.fullscreen(event.data.fullscreen); }window.addEventListener("message", receiveMessage, false);</script>        </div>    </div>

Tesla's Model 3 production is reportedly nowhere near its target -but don't expect it to hurt the company

<p><strong><div class="KonaFilter image-container display-table"><div><div class="image on-image"><img src="https://static-ssl.businessinsider.com/image/5a861bcdd0307263058b4662-1800/tesla model 3-33.jpg" border="0" alt="Tesla Model 3" data-mce-source="Hollis Johnson/Business Insider" /><p class="source"><span>Hollis Johnson/Business Insider</span></p><p class="caption">The Tesla Model 3.</p></div><p></p></div></div></strong></p><ul><li><strong><a href="http://www.businessinsider.com/category/tesla">Tesla</a> has been drowning in negative news of late.</strong></li><li><strong>Meanwhile, the troubled launch of its <a href="http://www.businessinsider.com/category/model-3" target="_blank" rel="noopener">Model 3</a> is finally getting on track.</strong></li><li><strong>Conservatively, Tesla could achieve an annual production rate of over 100,000 Model 3's.</strong></li></ul><hr /><p><br />Despite all the bad news from the past 10 months, the <a href="http://markets.businessinsider.com/stocks/tsla-stock">Tesla</a> Model 3 is poised to be a huge success.</p><p>The car is a classic example of missing the forest for the trees. Yes, the Model 3's rollout has been an epic fail, and Tesla CEO <a href="http://www.businessinsider.com/category/elon-musk" target="_blank" rel="noopener">Elon Musk</a> looks sort of deluded in his production targets (20,000 vehicles by the end of 2017, versus a reality of barely 2,000). </p><p>But now we have one critical new fact to accompany an old fact. The new fact is that Tesla is nearing 2,500 in weekly Model 3 production. That's a milestone and proof that the company can build over 100,000 Model 3's in a 12-month period. </p><p>The old fact is the estimated 400,000 pre-order that have been booked for the car. That's a debated number, but Tesla says it's remained stable through the Model 3's production ramp, so we can both give the carmaker the benefit of the doubt and note that even if that number plummeted, it would still be unprecedented in the auto industry. Nobody has ever logged that many advance orders for a vehicle.</p><p>(I could point out that nobody needs to, which would be churlish, but accurate. For example, if Ford figured there's annual demand for around a million new F-150 pickups, following a 2014 redesign, then the automaker just builds a million trucks into that demand - and nobody has to wait years for a new F-150, because they can just run down to the dealership on Saturday morning and drive home with a new truck on Saturday afternoon.)</p><h2>The Model 3 is finally getting on track</h2><p><div class="KonaFilter image-container display-table"><div><div class="image on-image"><img src="https://static-ssl.businessinsider.com/image/560a57429dd7cc17008bdb91-2400/img3397.jpg" border="0" alt="Tesla Factory" data-mce-source="Benjamin Zhang/Business Insider" /><p class="source"><span>Benjamin Zhang/Business Insider</span></p><p class="caption">Tesla's factory in California.</p></div><p></p></div></div></p><p>The Kremlinology around Tesla interprets that Model 3 as a costly disaster, and it might turn out to be just that; no one is sure if Tesla will be able to make a profit on a low-priced, mid-sized all-electric sedan, given its messy capital structure (Tesla has shown itself to be far better at losing billions than making them). </p><p>But objectively, the Model 3 is slowly getting on track. This was inevitable: Tesla might be bad at mass-producing cars, but it has achieved a reliable 100,000-unit annual run rate with its Model S and Model X vehicles, so the fits and starts of "production hell" for the Model 3 are in the process of being overcome, and wouldn't you know it! Tesla is rolling over 2,000 Model 3's a week.</p><p>That's probably sustainable, even if Musk's next target of 5,000 per week by the end of June isn't. What this translates into is roughly 220,000 vehicles produced and delivered in 2018, and that's not crazy far off what BMW sold in the US in 2017, just over 300,000 vehicles. And BMW has a lot more vehicles to sell than Tesla's three.</p><p>The bottom line is that Tesla has become the dominant purveyor of luxury all-electric cars, with the Model 3 adding to its lead because the company isn't selling the $35,000 base version, but rather the upmarket premium trim levels at $44,000 (<a href="http://www.businessinsider.com/tesla-model-3-first-drive-impressions-pictures-2018-2">Business Insider recently sampled a $57,500 example</a>). </p><h2>Time to step back from the hate</h2><p><div class="KonaFilter image-container display-table"><div><div class="image on-image"><img src="https://static-ssl.businessinsider.com/image/5ab16ddd68e1a838008b45b2-1200/elon musk.jpg" border="0" alt="elon musk" data-mce-source="Joe Skipper/Reuters" /><p class="source"><span>Joe Skipper/Reuters</span></p><p class="caption">Tesla CEO Elon Musk.</p></div><p></p></div></div></p><p>So let's take a step back from the negativity that's swirling around Tesla and assess what the company has done with Model 3. First, Tesla has made people want a relatively affordable electric car. There's no meaningful market for electric cars - they make up less than 1% of global sales - so selling over 100,000 a year if there aren't any more major Model 3 delays is quite an achievement.</p><p>Second, Tesla has done this with effectively zero advertising. You could argue that the rapturous levels of attention that Musk wrangles from the media represents many millions of dollars in free marketing, but that's a debate for another day.</p><p>Third, the car is pretty good. Assuming Tesla's traditional attitude toward fixing absolutely anything that goes wrong with early build vehicle - an infinite warranty for early adopters - most owners are going to be extremely happy with their Model 3's.</p><p>In the face of this, who can remain negative? Tesla short sellers, obviously. But also hardcore electric-car haters and people who just don't like Musk. There are reasons to not like him, starting with his flexible relationship with truthfulness and his tendency to didactically scold experienced auto experts when they question his methods. </p><p>The larger auto industry, by contrast, loves Musk. His appetite for risk is just what they dream of, so they can follow and chip away at his market share with much more plodding and conservative tactics. Remember, Henry Ford ruled the US auto market for a decade in the early 20th century, before General Motors came along and stole many of his customers, relegating Ford to a permanent second-place position that endures today.</p><p>This should actually be a chastening situation for some of the Tesla mega-bulls, who think that the company will take over the world. The car business doesn't work that way, and in any case, Tesla would be destroyed if the entire globe switched over to EVs and Tesla had to spend the money to satisfy that demand. At its current pace, Tesla would require four more factories to build and sell a tenth of what GM did in 2017. And it would be building those factories at 21st-century prices, not at 20th-century costs.</p><p>Challenges continue to abound for Tesla, but one thing is now clear: the Model 3 is finally living up to expectations.</p><p class="tagline">Get the latest Tesla stock price<a href="http://markets.businessinsider.com/stock/TSLA-Quote"> <strong>here.</strong></a></p>    <div class="margin-top">        <h3>NOW WATCH: <a href="http://www.businessinsider.com/tesla-model-3-best-worst-features-elon-musk-2018-2">The best and worst things about the Tesla Model 3</a></h3>        <div>            <iframe class="bijwplayerclass" data-player="jwplayer" src="https://content.jwplatform.com/players/RlbR9Z8r-CEZHWCBG.html" width="100%" height="100%" frameborder="0" scrolling="auto" style="margin:0px;" allowfullscreen=""></iframe><script>function receiveMessage(event){ console.log(event.data.fullscreen); Android.fullscreen(event.data.fullscreen); }window.addEventListener("message", receiveMessage, false);</script>        </div>    </div>

One of Tesla's biggest problems is finally starting to fade

<p><div class="KonaFilter image-container float_right"><div class="image on-image"><img src="http://static4.businessinsider.com/image/526e22866bb3f7fe32e65a13-1063-797/bernanke-3.png?maxX=480" border="0" alt="Bernanke" width="480" /><p class="source"><a href="https://www.youtube.com/watch?v=mWl6JI4KBTg&amp;list=SP08C0992430469B34&amp;index=1">YouTube</a></p></div><p></p></div>Citi's FX analyst Steven Englander provides the most detailed, forensic, Kremlinology of <keyword id="45366" type="PERSON" weightage="60" keywordseo="Ben-Bernanke">Ben Bernanke</keyword>'s speech last night to figure out what it means for the debate out when the Fed will scale back asset purchases.</p>
<p>Englander writes:</p>
<p style="padding-left: 30px;">The comments by Yellen and Bernanke have to be seen in the context of the key phrase in the last FOMC statement: "In judging when to moderate the pace of asset purchases, the Committee will, at its coming meetings, assess whether incoming information continues to support the Committee's expectation of ongoing improvement in labor market conditions and inflation moving back toward its longer-run objective." The word 'ongoing' seemed closer to 'maintaining' rather than 'accelerating' and that was viewed as somewhat hawkish relative to expectations.</p>
<p style="padding-left: 30px;">Now consider Fed Chairman Bernanke's speech this evening. <span style="color: #ff0000;"><strong>The key phrase "When, ultimately, asset purchases do slow, it will likely be because the economy has progressed sufficiently for the Committee to rely more heavily on its rate policies," is marked as dovish below because it seems to imply that there is a high bar to the beginning of tapering. </strong></span></p>
<p style="padding-left: 30px;"><span style="color: #ff0000;"><strong>Moreover, 'ultimately' does not sound like soon, so Bernanke may be trying to echo Yellen for the sake of unity, or it may signal that the beginning of tapering is pushed into the distance</strong></span>. However he does seem to be making a strong case that the Fed's issue with financial markets was more the market's advancing of rate hikes, rather than the backing up of rates: "In particular, it appeared that the FOMC's forward guidance for the federal funds rate had become less effective after June, with market participants pulling forward the time at which they expected the Committee to start raising rates, in a manner inconsistent with the guidance."</p>
<p style="padding-left: 30px;">So it sounds as if they are drawing a distinction between a backing up of long-term yields which is ok, and a pushing forward of FOMC hikes which certainly was occurring in August and early September but which is certainly not the case now.</p>

CITI: Here's What Bernanke's Big Speech Meant For The Tapering Debate

<p><div class="image-container" style="width:800px"><div class="image"><img src="http://static2.businessinsider.com/image/51e6548769bedd2a7000000c-900-675/doves-2.jpg?maxX=800" border="0" alt="doves" width="800" /><p class="source"><a href="http://www.gettyimages.com/detail/news-photo/thirty-doves-are-released-in-memory-of-former-macclesfield-news-photo/108244673#">Matthew Lewis / Getty Images</a></p></div></div></p>
<p>Bernanke is testifying in front of Congress today about monetary policy.</p>
<p>It will be the final Humphrey-Hawkins testimony of his career. Humphrey-Hawkins is the twice-per-year update on the state of the Fed that the Chairman must deliver, first to the House, and then to the Senate.</p>
<p>There's an obsession with Fed speak these days, given the widespread understanding that the discussions about "exit" from highly stimulative policy have begun, and that we're in a post-crisis world that may before too long not require as much easing as we've seen in the years since the collapse.</p>
<p>And of course, there's a long history of Fed Kremlinology, where economists and traders try to pick apart literally every world to see if they connote a bias towards tightening (hawkishness) or loose policy (dovishness).</p>
<p>So to feed your inner action junkie, that wants to figure connect every market blip to each word that comes out of Bernanke's mouth today, we wanted to spotlight this from a note from Citi's currency analyst Steven Englander.</p>
<p style="padding-left: 30px;"><strong>Dovish phrases</strong> – ‘Growth outturns weaker than we expect’, ‘US can support 200k plus payrolls’, ‘Low inflation could continue unless offset by policy’;</p>
<p style="padding-left: 30px;"><strong>Hawkish phrases</strong> – ‘Not clear how much jobs growth needed to get to full employment’, ‘No way for 2013 FOMC to pre-commit 2014 or 2015 FOMC on policy’, ‘Tapering will not be derailed by back up of bond yields’, any indication that Fed saw froth asset markets, ‘We expect growth to rebound strongly’, ‘Inflation very likely to pick up to target over time.</p>
<p>Those are your bingo words ladies and gentlemen. Listen closely for them or any variations, and then overreact accordingly.</p>

Here's A List Of Some Dovish And Hawkish Phrases That Bernanke Might Say Today That Could Send The Markets Up Or Down

<p><div class="image-container float_right" style="width:480px"><div class="image"><img src="http://static3.businessinsider.com/image/51f637eeeab8ea9153000002-1200-924/barack-obama-may-photos.jpg?maxX=480" border="0" alt="Barack Obama May photos" width="480" /><p class="source">White House Photo/Pete Souza</p></div></div>Obama probably won't announce his choice to head up the <keyword id="6355253" type="ORGANIZATION" weightage="60" keywordseo="Federal-Reserve">Federal Reserve</keyword> for another couple of months yet.</p>
<p>But the speculation and chatter is already getting very loud about who might replace Ben Bernanke (assuming Bernanke doesn't get re-appointed).</p>
<p>Multiple reports indicate that the two frontrunners are Janet Yellen (currently the Fed Vice-Chair) and the economist Larry Summers, who has held many positions, and who has been close to this White House, and who has a long history in Washington.</p>
<p>Among economists and Wall Street types, Yellen is seen as the front runner.</p>
<p>Among DC political chatterati types, Summer is viewed as the favorite. Ezra Klein of Wonkblog — who usually doesn't do much gossipy reporting — <a href="http://www.washingtonpost.com/blogs/wonkblog/wp/2013/07/23/right-now-larry-summers-is-the-front-runner-for-fed-chair/">said last week that Summers was the favorite</a>.</p>
<p><a href="http://www.nytimes.com/2013/07/28/us/politics/interview-with-president-obama.html?pagewanted=all">In an interview with the New York Times</a>, Obama gave his clearest comments yet about what he's looking for in the role.</p>
<p style="padding-left: 30px;">...what I’m looking for is somebody who understands the Fed has a dual mandate, that that’s not just lip service; that it is very important to keep inflation in check, to keep our dollar sound, and to ensure stability in the markets. But the idea is not just to promote those things in the abstract. The idea is to promote those things in service of the lives of ordinary Americans getting better.</p>
<p style="padding-left: 30px;">And when unemployment is still too high, and long-term unemployment is still too high, and there’s still weak demand in a lot of industries, I want a Fed chairman that can step back and look at that objectively and say, let’s make sure that we’re growing the economy, but let’s also keep an eye on inflation, and if it starts heating up, if the markets start frothing up, let’s make sure that we’re not creating new bubbles.</p>
<p>Okay, so we said Obama's comments were his "clearest" but that doesn't mean they're clear.</p>
<p>Still, if you really want to do some word parsing (and that is what Fed Kremlinology is all about), then there might be some clues here.</p>
<p>UC Berkely econ grad student Carola Binder <a href="http://carolabinder.blogspot.com/2013/07/president-obamas-big-frothy-hint.html">makes the case</a> that this sounds Summers-esque. For one thing, even though he talks about the "dual mandate" he's also talking a lot about inflation and bubbles, which indicates someone of, perhaps, a more hawkish persuasion (i.e., not Yellen). Furthermore, the idea that monetary policy is a good tool for fighting bubbles doesn't sound like a continuation of Bernanke's approach (again, perhaps not good for Yellen).</p>
<p>Of course, this is all speculative, and trying to make something out of a few words, because people are interested.</p>
<p>The bigger picture is that Yellen and Summer as viewed as being pretty different, and it could be that the debate about who will lead the Fed becomes a bigger monetary policy issue for markets than the Fed exit itself, at least in the short term.</p>

Obama Gave His Clearest Comments Yet On What He Wants To See In The Next Fed Chair

<p><div class="KonaFilter image-container display-table float_right"><div><div class="image on-image"><img src="https://static-ssl.businessinsider.com/image/563e81b06bb3f72937a0229e-1200-924/microphone-7.jpg" border="0" alt="microphone"><p class="source"><span><a href="https://commons.wikimedia.org/wiki/File:BSPC_19_i_Nyborg_Danmark_2009_(4).jpg">Wikimedia Commons</a></span></p></img></div><p></p></div></div>The US economy had a blockbuster October.</p><p>US companies <a href="http://www.businessinsider.com/october-jobs-report-november-6-2015-11">added a whopping 271,000 jobs</a> during the month, crushing expectations for an increase of 185,000. This helped bring the unemployment rate down to a <a href="http://www.businessinsider.com/october-2015-unemployment-rate-accurate-2015-11">7-year low of 5.0%</a> from 5.1% a month ago. Even the U-6 "underemployment" rate tumbled to 9.8% from 10.0%.</p><p>Importantly, wages jumped with <a href="http://www.businessinsider.com/average-hourly-wages-october-2015-2015-11">average hourly earnings growing at a 2.5% rate,</a> the highest rate since 2009.</p><p>All of this has implications for the direction of monetary policy. Indeed, traders are now pricing in a <a href="http://www.businessinsider.com/fed-futures-implied-probability-2015-11">70% likelihood</a> that the Federal Reserve will lift rates in December, which would be the first such hike since June 2006. An initial rate hike from the Fed would signal the end of extremely loose, zero-interest rate policy, which it introduced in December 2008 in its effort to stimulate the economy out of the the financial crisis.</p><p>"We've indicated that conditions look like they could be right for an increase," <a href="http://www.businessinsider.com/r-surging-us-job-growth-lowers-bar-for-fed-rate-hike-2015-11">Chicago Fed President Charles Evans said</a> to CNBC on Friday. "The real side of the economy is looking a lot better."</p><p>"We are doing about as good as we could ever do," <a href="http://www.businessinsider.com/r-surging-us-job-growth-lowers-bar-for-fed-rate-hike-2015-11">St. Louis Fed president James Bullard said</a> at an event in St. Louis.</p><p>But the tone at the Fed is not unanimous. Indeed, <a href="http://www.businessinsider.com/r-surging-us-job-growth-lowers-bar-for-fed-rate-hike-2015-11">Fed Governor Lael Brainard</a> remains concerned about the slowdown overseas. <span style="font-size: 15px; line-height: 1.5em;">"The ability to offset spillovers from adverse developments in foreign economies with conventional policy is constrained, suggesting greater caution than normal," Brainard told a conference sponsored by the International Monetary Fund.</span></p><p>This week comes with a lot more "Fedspeak" from America's monetary policymakers. So as we prepare to engage in some Fed Kremlinology, h<span style="font-size: 15px; line-height: 1.5em;">ere's your Monday Scouting Report:</span></p><p><strong>Top Stories</strong></p><ul><li><strong><strong><strong>All ears on Fedspeak. </strong></strong></strong>Economists, analysts and investors will all be obsessing over every word coming from Fed speakers. After all, that's <a href="http://www.businessinsider.com/ben-bernanke-brookings-post-on-fed-communications-2015-11">what former Fed Chair Ben Bernanke would probably recommend</a>. Here's Wells Fargo's Sam Bullard with what's coming up: "...Looking ahead to this week, on Monday, Boston Fed President Rosengren (2016 voter, dove) speaks in Portsmouth, RI on the U.S. economy. Thursday is a busy day with multiple Fed speakers-St. Louis Fed President Bullard and Richmond Fed  President Lacker (voter, hawk) speak in Washington at a monetary policy conference hosted by the Cato Institute; Fed Chair Yellen (voter, dove) gives the welcoming remarks at a Fed policy conference titled "Monetary Policy Implementation and Transmission in the Post-Crisis Period"; Chicago Fed President Evans speaks in Chicago on monetary policy and the U.S. economic outlook; New York Fed President Dudley (voter, dove) speaks in New York on the U.S. economic outlook and what it means for monetary policy; and Fed Vice Chairman Fischer (voter, moderate) speaks in Washington on financial stability and monetary policy. On Friday, Cleveland Fed President Mester (2016 voter, hawk) speaks in Cleveland on the U.S. economy and monetary policy. Bottom line, the financial markets will be interested to see whether there is a coalescing of Fed officials' opinion over the increased probability of a December rate hike."</li><li><strong><strong>It would take a "disaster" to keep the Fed from hiking in December.</strong></strong> After the <a href="http://www.businessinsider.com/federal-reserve-fomc-statement-october-2015-10">Fed's October FOMC statement</a>, economists increasingly warmed up to the idea that <a href="http://www.businessinsider.com/fomc-at-its-next-meeting-2015-10">the first rate hike would come in December</a>. And after Friday's huge US payrolls report, more and more economists were comfortable saying that a December rate hike was a "<a href="http://www.businessinsider.com/chris-rupkey-says-december-rate-hike-coming-2015-11">done deal.</a>" Even <a href="http://www.businessinsider.com/barclays-changes-fed-rate-hike-call-to-december-2015-11">Barclays' Michael Gapen</a>, who was among the minority forecasting the first rate hike to come in March 2016, flipped and moved his call to December.<br><br>Here's what others on Wall Street are saying: <span style="text-decoration: underline;">Goldman Sachs' Jan Hatzius</span>: "The October employment report was solidly better­-than-­expected, and we now see a rate increase from the FOMC at the December meeting as very likely." <span style="text-decoration: underline;">Bank of America Merrill Lynch's Ethan Harris</span>: "We have been arguing that 'something bad' has to happen to stop the Fed; now we think 'something <strong>really</strong> bad' has to happen to stop them." <span style="text-decoration: underline;">UBS's Drew Matus</span>: "[C]ancel December 16 vacation plans." <span style="text-decoration: underline;">BNP's Bricklin Dwyer</span>: "[The] payrolls report meets the Fed's threshold for hiking rates in December, but we need to see the positive string of data continue and no major financial market shocks." <span style="text-decoration: underline;">Capital Economics' Paul Ashworth</span>: "Unquestionably, [the falling unemployment rates] will be enough to convince Fed Chair Janet Yellen and Vice Chair Stanley Fischer to vote for a rate hike at the next FOMC meeting in mid-December." <span style="text-decoration: underline;">Pantheon Macroeconomics' Ian Shepherdson</span>: "Barring a disaster in November, rates are going to rise in December." <span style="text-decoration: underline;">PNC's Stuart Hoffman</span>: "Federal Reserve Chair Janet Yellen will testify before Congress on December 3, and she is likely to clearly signal that a 25 basis point increase in the federal funds rate is coming at the December 15-16 FOMC meeting." <span style="text-decoration: underline;">RBC's Tom Porcelli</span>: "The case for December was made prior to this payroll report." <span style="text-decoration: underline;">Societe Generale's Aneta Markowska</span>: "Financial conditions and further dollar strength remain potential hurdles, but we expect the Fed to manage this by delivering a dovish rate hike at the December meeting (as we expected in September)." <span style="text-decoration: underline;">Deutsche Bank's Joe LaVorgna</span><span>: "[T]he latest labor news will further embolden Fed members who want to raise rates next month. Whether the Fed ultimately decides to raise rates at the December 15-16 FOMC meeting will depend on the significant amount of data still to be released between now and then. The behavior of financial markets will also be taken into consideration by policymakers." </span></br></br></li></ul><p><strong>Economic Calendar</strong></p><ul><li><span style="text-decoration: underline;">Initial Jobless Claims (Thurs)</span>: Economists estimate initial claims slipped to 270,000 from 276,000. Here's Bank of America Merrill Lynch: "We expect initial jobless claims to improve to 270,000 for the week ending November 7, partially reversing the gain to 276,000 in the prior week. If our forecast proves correct, the 4-week moving average would rise to 266,250 from 262,750, which would still be a healthy low level of firings."</li><li><span style="text-decoration: underline;">Job Openings &amp; Labor Turnover Survey (Thurs)</span>: Economists estimate US companies had 5.385 million job openings in September. Here's Credit Suisse: "Job openings fell to 5.4M in August after rising sharply in July to 5.7M. But with further declines in unemployment, the drop in openings pushed the ratio of vacancies to unemployed workers down only slightly to 0.67 from 0.69. The August V-U ratio was still above the 2006-2007 peak and was the second-highest reading since 2001. The JOLTS numbers suggest the underlying health of the labor market continues to improve at a fast clip. However, the considerable tightness in the labor market is not yet translating into accelerating wage pressures. Measures of job turnover, which tend to lead wage acceleration, remained lukewarm. The rate of job quits was unchanged and has now stagnated for nearly a year."</li><li><span style="text-decoration: underline;">Retail Sales (Fri)</span>: Economists estimate sales increased by 0.3% in October. Excluding autos and gas, core sales climbed by 0.4%. Here's Nomura: "Retail sales surprised to the downside in September, suggesting that consumer activity lost some momentum in the latter part of Q3. Consumer spending has been one of the main drivers of growth this year, so any sustained slow pace of consumer activity could raise some concerns about the US economy. We expect to see some bounce back in retail sales in October, as consumer fundamentals continue to be favorable."</li><li><span style="text-decoration: underline;">Producer Price Index (Fri)</span>: Economists estimate producer prices climbed by 0.2% month-over-month in October, while falling 1.2% year-over-year. Excluding food and energy, core prices are estimated to have climbed by 0.1% and 0.5%, respectively. Here's Wells Fargo's John Silvia: "Energy prices were more stable in October, which likely supported headline prices in the month. Despite the dramatic swings in the headline number, core PPI has softened as well. Broad-based declines in commodity prices have pulled down the goods index, while services have held up somewhat better. We expect the producer prices ticked up slightly in October. The import price index is also set to be released next week, and energy will likely weigh on the index once again. The dollar was weaker on balance in October, which may soften some of the impact of lower energy prices."</li><li><span style="text-decoration: underline;">U. of Michigan Sentiment (Fri)</span>: Economists estimate this index of sentiment improved to 91.5 in November from 90.0 in October. Here's Barclays: "With positive economic momentum, as evidenced by strong motor vehicle sales and low jobless claims, we expect consumer sentiment to trend higher in the coming weeks."</li></ul><p><strong>Market Commentary</strong></p><p>Despite the strong jobs report, which increased the odds the Fed would tighten monetary policy sooner than later, the stock market didn't sell off.  Rather, it <a href="http://www.businessinsider.com/closing-bell-november-6-2015-11">closed on Friday effectively unchanged</a>.</p><p>In the coming weeks, Wall Street strategists will unveil their outlooks for the stock market in 2016. For now, some are reflecting on how far we've come.</p><p>"I don't know about you, but to me it feels like these past 6-plus years were a particularly challenging (and often tiring) global cycle," Morgan Stanley's Neil McLeish said in his Sunday Start note. "The S&amp;P500 is back within a few points of a new cycle high, but it is hard to feel good about the world.  I guess we can blame a rolling series of debt-related problems along the way, morphing from the eurozone crisis almost seamlessly into an EM bear market that gathered ferocity this past six months.  Or perhaps this is what all bull markets are supposed to feel like:  a wall of worry."</p><p><div class="KonaFilter image-container display-table float_right"><div><div class="image on-image"><img src="https://static-ssl.businessinsider.com/image/563f8a7aecad04977a949747-1200-924/china-synchronized-swimmers.jpg" border="0" alt="china synchronized swimmers"><p class="source"><span>REUTERS/Michael Dalder</span></p><p class="caption">Team China performs in the synchronised swimming team free final at the Aquatics World Championships in Kazan, Russia.</p></img></div><p></p></div></div>It's an unconventional take. But arguably a sound one.  The idea here is that there were always uncertainties out there that prevented investors and traders from going all in, which prevented the market from getting ahead of itself.</p><p>"At some level ... it is the lack of synchronization that has kept the global cycle intact," McLeish articulated. "Our economics team has long argued that an unsynchronized global cycle implies a lack of overheating and an ever-ready supply of central bank ammunition to tackle post-crisis disinflationary pressures.  Hence, the wall of worry performs a fundamental as well as its more traditional psychological purpose."</p><p>Obviously, if unsynchronized growth is a good thing for the markets, than the opposite must be true, right?</p><p>"To my mind, a China mini-cycle-led reacceleration of global growth combined with somewhat higher DM inflation is a realistic 2016 scenario not fully priced by markets," McLeish continued. "Given the great global growth scare of 2015, our Chief US Equity Strategist Adam Parker likes to say that 'good is good'.  In the near term, this sentiment makes sense to me.  However, I can't help thinking that a more synchronized upswing for the global economy would ultimately be a less good thing for global markets.  But we'll worry about this scenario if and when we get there."</p>    <div class="margin-top">        <h3>NOW WATCH: <a href="http://www.businessinsider.com/james-bullard-fed-baseball-analogy-2015-9">Fed's Bullard gave us a great baseball analogy to explain what the Fed is doing wrong</a></h3>        <div>            <div>    <script src="http://player.ooyala.com/v3/6e12e8b3387a44daacfb73afba25a76e"></script>    <div class="ooyala-video-player" data-video-autoplay="false" data-video-id="BjaWtwdzrxsIxy_ax8scl136xmYD66ao" data-player-variable="ooyalapopvideo" id="ooyalaplayer_popvideo" style="width:1280px;height:720px"></div>    <script>    if (typeof RunFunctions === 'undefined') { var RunFunctions = []; }     RunFunctions.push(function()    {         var ooyalapopvideo = OO.Player.create('ooyalaplayer_popvideo', 'BjaWtwdzrxsIxy_ax8scl136xmYD66ao',{ autoplay: 'false' });     });    </script>    <noscript><div>Please enable Javascript to watch this video</div></noscript></div>        </div>        <script>(function() { function createPlayer() { OO.ready(function() { RunFunctions.forEach(function(ooyalaFunction) { ooyalaFunction(); }); RunFunctions = [];}); } createPlayer(); }()); </script>    </div>

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