Joining today's show are Mike Barnicle, Nicolle Wallace, Barry Bennett, Richard Haass, Steve Kornacki, Jeremy Peters, Gov. Rick Scott, Carly Fiorina, John Kirby, Fmr. Mayor Rudy Giuliani, Sara Eisen, Candy Carson and in Taiji, Jpana, it is now confirmed that Bottlenose dolphins are netted in the cove. The trainers are now in water. A pod of six Bottlenose were deemed too unattractive for the "trainers". They're now on their way to the butcher's shop. All boats docked in the harbour. Transfer of bodies to butcher house complete. 7 Dolphins lost their lives if we include the one that died in Taiji harbour seapen. Sad day. 2016-7-01 12:50pm #dolphinproject#tweet4dolphins. China crashes its stockmarket with circuit-breakers meant to save it. U.N. poised to act against North Korea after latest nuclear test. Bernie Sanders wins Elizabeth Warren's praise on Wall Street reform. And the White House Says that it is 'Ironic' If Cruz Nominated After Obama Birther Debate...
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BIG swings in the Chinese stockmarket are par for the course. But even by its wild standards, the alacrity of its latest crash was stunning. Just 13 minutes into trading on Thursday, the CSI 300 index of blue-chip stocks fell 5%, triggering the first circuit-breaker: a 15-minute pause for traders to supposedly regain their cool. When the action resumed, it lasted all of one minute before the second and final circuit-breaker was hit: the CSI 300 fell 7%, which necessitated a closure of the market for the rest of day. Trading, in other words, lasted all of 14 minutes before being halted.
The obvious conclusion to draw from the market sell-off is that China’s economy is in big trouble. Why else would investors be in such a rush to dump their shares? Growth is certainly slowing, but the problem with this view is that the Chinese stockmarket has only ever had a tenuous relationship with reality. It is often derided as a casino. Wu Jinglian, a veteran economist, has quipped that this is unfair to casinos. They have strict rules and gamblers cannot see each other’s cards. In China's stockmarket, the rules rarely apply to big investors, who treat price manipulation as a basic trading strategy.
But while the swings of the Chinese market defy explanations most of the time, there is actually extensive research to help explain the dynamics of the latest crash. For the culprit, look no further than the circuit-breakers that regulators introduced at the start of this week. Only four days into operation, they have already been triggered in much the same manner twice: with the 5% threshold hit first and then full closure at the 7% level soon after. The theory of circuit-breakers is that they are supposed to help calm an over-excited market. In China’s case, it appears that they have done just the opposite: encouraging traders to lock in sell orders to make sure they are the first to escape the market before the bottom falls out.
For analysts who have studied circuit-breakers, this should not be surprising. They generally fall into two camps: those who think they help to reduce volatility and those who worry they exacerbate it by leading to an acceleration of trading before halts occur. But even the former acknowledge that circuit-breakers pose the risks described by the latter. The general view is thus that that they should only be applied in extreme cases.
As Arthur Levitt, then chairman of America's Securities and Exchange Commission (SEC), explained in 1998:
Circuit-breakers were meant, from their inception, to be triggered only in truly extraordinary circumstances—ie, a severe market decline when the prices have dropped so dramatically that liquidity and credit dry up, and when prices threaten to cascade in a panic-driven spiral. As long as the markets are closed or have the potential to close early, there is uncertainty. Uncertainty for individual investors leads to confusion.
In China, big swings between the open and close of the stockmarket used to be the norm, much to the chagrin of reporters who were expected to divine something intelligible from the movements. Peter Thal Larsen of Reuters Breakingviews put it best in a tweet: “Iron rule of Chinese stockmarkets: any observation based on intraday movements will be obsolete by the close of trading.”
The introduction of circuit-breakers has changed this logic. They have highlighted a problem known as the “magnet effect”. The Hong Kong Securities and Futures Commission defined this in a 2001 article as the possibility that circuit-breakers might “accelerate price movements towards the preannounced limits as market participants alter their strategies and trade in anticipation of a market halt”.
Based on the four days in which China’s breakers have been in operation, the first magnetic pull seems to kick in at around 4% down. Traders rush to sell before they are locked out. After trading starts again at 5% down, the magnetic draw to 7% is almost irresistible; no one wants to be left holding the hot potato.
In its design of the circuit-breakers, China has violated one of the basic principles of those countries that also apply them: the gaps between breaker levels should be sufficiently wide to avoid having an overwhelming magnet effect. The SEC halts trading at the 7%, 13% and 20% thresholds for the S&P 500 index. And bear in mind that American markets are far more mature, making even 7% changes a rarity. In China, the 5% threshold is something that was crossed with regularity before the circuit-breakers were introduced, with the market often giving up its gains or paring its losses over the course of the frenetic trading day. Now, though, the circuit-breaker makes those lurches permanent, until the next trading day begins.
None of this means that the Chinese stockmarket should be performing well. Share prices, especially for small-cap stocks, are still extremely frothy. But the madness of 14-minute-long trading days was utterly avoidable. The latest update is that the securities regulator has called an unscheduled meeting to discuss the circuit-breakers, according to Bloomberg. If only they had bothered to discuss them properly before implementation.
U.N. poised to act against North Korea after latest nuclear test. The U.N. Security Council is set to implement "significant" punitive measures after North Korea's nuclear test and will begin working on a new resolution "immediately," a statement released by Security Council President Elbio Rosselli says.
After Wednesday's meeting, the council, which includes China, Russia and the United States, together condemned the test as a "clear violation of (past) resolutions ... and of the nonproliferation regime."
Along with "strongly condemning" the test, members of the council determined to create a resolution that acts on previous promises to further curb the reclusive state's ability to further its nuclear weapons program.
The 15-member U.N. Security Council held a closed-door meeting Wednesday geared to preventing Pyongyang from getting more nuclear weapons and punishing it for the test earlier that day.
Past U.N. measures included arms, nonproliferation and luxury good embargoes, a freeze on overseas financial assets and a travel ban. None of them have so far stopped North Korea from continuing its nuclear program.
Meanwhile, U.S. President Barack Obama spoke to the leaders of South Korea and Japan, who both joined the President in condemning the act. Obama reaffirmed the United States' defense commitments to both of its regional allies.
South Korean President Park Geun-hye's office added that the two leaders agreed "there should be a corresponding price for this nuclear test."
Claims analyzed
North Korea bragged Wednesday about the "spectacular success" of its first hydrogen bomb test, a defiant act that leader Kim Jong Un, in a statement read on state television, said would "make the world ... look up to our strong nuclear country."
But did it really happen?
The United States doesn't think so, with White House spokesman Josh Earnest saying, "The initial analysis is not consistent with the North Korean claims."
That analysis isn't definitive, though, with some experts saying it's possible Pyongyang detonated a different type of hydrogen bomb.
Norsar, a Norway-based group that monitors nuclear tests, noted this fact and estimated, based on the seismic readings, a blast equivalent to less than 10,000 tons of TNT, smaller than those of the atomic bombs used on Hiroshima and Nagasaki, and far less than thermonuclear weapons that typically are as potent as millions of tons of TNT.
The group later added that as this test took place deeper underground, it would be harder to monitor radiation and thus determine the type of weapon tested. The U.S., South Korea Japan and China are all testing for airborne or ground radiation in the region. So far, the South Korean and Japanese attempts have not found any evidence of radiation.
It's possible North Korea has a "boosted" weapon, one that uses a small amount of fusion to boost the fission process, but is not a hydrogen bomb, but whether there was a hydrogen element isn't known.
Indeed, given the secrecy surrounding North Korea, it may be difficult to ever know; the last test, in 2013, has experts split over whether the device detonated then was plutonium or uranium.
Even if it wasn't an H-bomb, there's little doubt that North Korea did conduct a new significant nuclear test despite persistent calls not to do so.
'Game changer'
If it was, it would be a game changer, said Mike Chinoy, a fellow at the University of Southern California's U.S.-China Institute.
"But evidence seems to suggest it wasn't a full hydrogen bomb."
However, he said that with each test North Korean nuclear scientists get more data and as a result closer to being able to miniaturize nuclear weapons, a development that would allow the country to deploy nuclear weapons on long-range missiles.
"Whether it was a full H-bomb or not it is still a worrying development," he said.
The underground test, which happened at 10 a.m. (8:30 p.m. ET Tuesday), corresponded with a magnitude-5.1 seismic event centered 12 miles (19 kilometers) east-southeast of Sungjibaegam, according to the U.S. Geological Survey. That's comparable to readings from North Korea's most recent plutonium test in 2013.
Ongoing analysis
"We won't know for another few days or weeks whether this was (a hydrogen bomb)," said Martin Navias, a military expert at King's College London. "It doesn't look like one; ... one would have expected it to be greater if it was an H-bomb."
After being briefed by his nation's military, South Korean lawmaker Shin Kyung-min questioned the credibility of the hydrogen bomb claim. Joo Ho-young, who heard from the nation's intelligence service, told reporters, "It could be different from a usual hydrogen bomb."
Count Bruce Bennett, a senior defense analyst at the nonpartisan Rand research group, among the skeptics. He said North Korea has had trouble "mastering even the basics of a fission weapon," so it's a big leap to think it could create an even more complicated hydrogen bomb.
Whether or not it's a hydrogen bomb, the test did get the world's attention.
"Any kind of nuclear test, like the one that North Korea conducted ... is provocative and a flagrant violation of United Nations Security Council resolutions," said Earnest.
Will the world stop North Korea?
And that -- sticking it to world and regional powers -- may be Pyongyang's aim.
Who is Kim Jong Un?
"The present-day grim reality clearly proves once again the immutable truth that one's destiny should be defended by one's own efforts," North Korea's official KCNA news agency reported. "... The army and people of the DPRK will steadily escalate its nuclear deterrence of justice both in quality and quantity to reliably guarantee the future of the revolutionary cause."
China spoke out strongly against the latest test, saying it had no notice. Beijing had company, as leaders from around the world, including Russia and NATO, condemned the test, rare unanimity at a time of pervasive discord on issues like Syria's civil war, the Shiite-Sunni Muslim divide, Ukraine and migration.
The anger and danger were felt most in South Korea, which was split from the North seven decades ago.
"This is clearly a provocation and threatening the lives of people and safety," South Korean President Park said. "We have been continuously warning that (North Korea) will pay a price for conducting a nuclear test."
Test puts U.S. 'on the spot'
In its official statements, Pyongyang singled out the United States -- or, as it called it, "a gang of cruel robbers" and a "hideous nuclear criminal that has constantly posed nuclear blackmail for more than 70 years, seriously endangering mankind."
This latest nuclear test, following detonations in 2006, 2009 and most recently 2013, "puts the U.S. on the spot," according to Chinoy.
"Will any of their steps do anything to restrain North Korea?" he mused. "My guess is probably not."
A heavily militarized state
Combined with its secrecy and seclusion, North Korea's us-against-the-world perspective and the fact it doesn't play by traditional rules make it unpredictable at best and dangerous at worst. Add nuclear weapons to the mix -- even if they aren't thermonuclear -- and Pyongyang could unleash devastation of a sort not seen in over 70 years.
What weapons does North Korea have?
That's when U.S. forces used atomic bombs on the Japanese cities of Hiroshima and Nagasaki, ending World War II. Minuscule in power compared with H-bombs, the two blasts nonetheless killed about 200,000 people.
While it has done little outwardly to develop its economy, North Korea has put a lot of focus on its military, carrying a huge standing army of 1.2 million active soldiers plus 7.7 million reservists in a country of 25 million people.
What happens with an underground nuclear test?
North Korea's conventional weaponry is dated, with limited effectiveness. That's one reason, experts speculate, Pyongyang has sought nuclear weapons: to project power internationally.
The possibility of Pyongyang being able to strike the U.S. mainland, even now, can't be ruled out. And there's no doubt that South Korea and Japan, two countries that Washington has long vowed to defend, are within reach.
David Albright, a former U.N. weapons inspector, called the latest nuclear test "largely a mystery" and surmised that North Korea didn't test a standard two-stage hydrogen bomb, in which an atomic blast sets off a thermonuclear explosion.
"North Korea can bluff," said Albright, the founder of the Institute for Science and International Security. "It can claim that it now knows how to achieve high yields with thermonuclear concepts. It is difficult to prove it does not."
North Korea claims it has H-bomb as U.N. discusses human rights abuses.
CNN's Jim Acosta, Jim Sciutto, Richard Roth, Tim Hume, Lorenzo Ferrigno, Elise Labott, HyoungJoo Choi, Junko Ogura, Serena Dong, Steve Almasy and Shen Lu contributed to this report.
Bernie Sanders wins Elizabeth Warren's praise on Wall Street reform.
Sen. Elizabeth Warren appears to be feeling the Bern today, even though she’s not endorsing anyone yet for the Democratic presidential nomination.
The Massachusetts Democrat and progressive darling heaped praise on Sen. Bernie Sanders following a fiery speech he gave Tuesday on the need for Wall Street reform.
Elizabeth Warren
I'm glad @BernieSanders is out there fighting to hold big banks accountable, make our economy safer, & stop the GOP from rigging the system.
Then, walking a fine line, she tweeted later in the morning that she’s glad “ALL the Dem candidates for president…are fighting for Wall St reform.”
I'm glad that ALL the Dem candidates for president – @HillaryClinton, @BernieSanders & @MartinOMalley – are fighting for Wall St reform.
Wall Street reform is a signature issue for Warren, a consumer protection advocate who proposed and helped establish the Consumer Financial Protection Bureau in response to the 2008 financial crisis.
"We need to level the playing field and end too big to fail," she wrote in her series of tweets.
11 big banks are still so risky that if any one started to fail, they'd need a gov bailout or risk taking down the economy – again.
But the 2016 Republicans claim they'll repeal all the new financial regulations – hoping to be chosen as Wall Street's favorite candidate.
On Tuesday, Sanders called for breaking up the biggest banks and reinstating the Glass-Steagall financial law that separated commercial and investment banking activities.
Sanders has co-sponsored Warren’s Glass-Steagall legislation while his rival, Hillary Clinton, has not endorsed that approach. Clinton says her plan is tougher because it addresses risk in the shadow banking sector.
Last month, Warren shared on social media Clinton’s Op-Ed article in the New York Times about her Wall Street reform proposals and wrote in a Facebook post that Clinton was right to fight back against Republicans trying to “sneak Wall Street giveaways” into a government funding bill.
Warren, who progressives urged to run for president earlier last year, is the only female Democratic senator who hasn’t endorsed Clinton.
Warren told the Boston Herald in a December interview she doesn’t know if she'll endorse.
“It’s just not time for me to do that yet,” she said.
Donald Trump steps up attack on Ted Cruz. Donald Trump escalated his attack against Ted Cruz on Wednesday while the Texas senator sought to move past the hits and maintain his status as the favorite to win the Iowa caucuses.
In separate interviews with CNN, Trump and Cruz squared off over the businessman's comments -- reported Tuesday in The Washington Post -- that the senator's birth in Canada could pose a "big problem." Trump told CNN's Wolf Blitzer that Cruz, whose mother was a U.S. citizen, should go to court and ask a judge to rule that he's eligible to run for president.
"How do you run against the Democrat, whoever it may be, and you have this hanging over your head if they bring a lawsuit?" Trump said in an interview that aired on "The Situation Room."
Trump said Cruz should to ask a judge for a "declaratory judgment" that Trump said would protect Cruz against any future questions about his eligibility that could come in a general election.
He also claimed that it was The Washington Post -- not him -- that raised the issue.
"This was not my suggestion. I didn't bring this up. A reporter asked me this question," Trump said. He also repeated his assertion that Cruz has a Canadian passport, which Cruz denied during a separate interview Wednesday with CNN's Dana Bash.
Trump added: "I'm doing this for the good of Ted ... I like him. He likes me."
On Thursday, Trump kept up the drumbeat via Twitter, referencing the fact that Arizona Sen. John McCain -- who once called Cruz a "wacko bird" -- also said Cruz's eligibility was a "legitimate question."
"It was a very wise move that Ted Cruz renounced his Canadian citizenship 18 months ago. Senator John McCain is certainly no friend of Ted!," Trump tweeted.
Donald J. Trump
It was a very wise move that Ted Cruz renounced his Canadian citizenship 18 months ago. Senator John McCain is certainly no friend of Ted!
For his part, Cruz said he is certain that he never owned a Canadian passport, pushing back sharply on the idea that there is any legal controversy whatsoever.
"Of course not," Cruz told Bash, as his campaign bus traveled from Sibley to Spirit Lake close to the Iowa-Minnesota border. "Yes, I'm sure. The media, with all due respect, love to engage in silly sideshows. We need to focus on what matters."
He went on: "The legal issue is straightforward," he said, calling it a "non-issue." "Listen, the Constitution and the laws of the United States are straightforward. The very first Congress defined the child of a U.S. citizen born abroad as a natural-born citizen."
Experts largely agree that Cruz, who was born an American citizen thanks to his mother's nationality, is eligible to serve as president. The U.S. Constitution requires that presidents be "natural born citizens," which Cruz is alleged to not be, since he was born in Canada. Cruz has the backing of most legal experts and U.S. case law, according to a 2011 Congressional Research Service study.
Cruz's unequivocal answer comes as he is neck-and-neck with Trump in Iowa just weeks before that state's first-in-the-nation caucuses.
Cruz is in the middle of a six-day, 28-event bus tour, reveling in criticism from most of his fellow GOP rivals at nearly every stop.
Cruz has led Trump in the most recent batch of polling in Iowa. Trump, who at recent events has pondered aloud about the fact that he could lose Iowa to Cruz, has nevertheless recently begun intentionally poking at his faith, nationality, and as of Tuesday, his citizenship.
"I'd hate to see something like that get in his way," Trump told The Washington Post, saying that Cruz could get tied up in a lawsuit if elected. "But a lot of people are talking about it and I know that even some states are looking at it very strongly, the fact that he was born in Canada and he has had a double passport."
Cruz has defended himself by pointing to Arizona Sen. John McCain, Mitt Romney's father George Romney and former Arizona Sen. Barry Goldwater as examples of Republican presidential candidates who ran for office even though they were born outside the U.S.
Ted Cruz
My response to @realDonaldTrump calling into question my natural-born citizenship? https://m.youtube.com/watch?v=t4ZGKI8vpcg …
'Ironic' If Cruz Nominated After Obama Birther Debate, White House Says
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