An alarming situation, Pakistan’s current account deficit peaks at $17.99b

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The current account deficit, which remains the single largest challenge for economic managers, shot to a record high of $17.994 billion (5.7% of GDP) at the end of fiscal year ended June 30, 2018 mainly due to exorbitant imports and less-than-projected inflows.

This is 44.7% higher than $12.44 billion recorded in the previous fiscal year 2017.

State Bank of Pakistan (SBP) Governor Tariq Bajwa said last week that the deficit has grown to an “unsustainable level” due to soaring aggregate demand in the economy.

To tame demand, the central bank has let the rupee fall by close to 22% to Rs128 to the US dollar since December 2017, and made borrowing expensive by increasing the benchmark interest rate by 175 basis points to 7.5% in the last six months.

“The Real Effective Exchange Rate (rupee-dollar parity) and monetary policy (the benchmark interest rate) are two effective tools available with the central bank to deal with the situation,” he said. “We are using both of them.”

Rest can be done by the government to deal with the situation like imposing regulatory (additional) duties on imports and announcing an export package, he said.

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The deficit is close to double the set target of $9 billion (2.9% of GDP) for FY18. Surprisingly, it is also much higher than the one estimated at around $16 billion by independent economists many months ago.

The gap has widened mainly due to the country’s exorbitant foreign expenditure (mainly imports and debt repayments) and sluggish income (mainly export proceeds and workers’ remittances).

The fall of the rupee over time has helped the country achieve 13% higher exports and slightly higher (1.4%) workers’ remittances. However, it has failed to offset the impact of record high imports and debt repayments.

The growing deficit has pushed the country near a default-like situation. The country’s foreign currency reserves have dropped to an alarming level of less than two months of import cover. They stood at $9.06 billion on July 13, a four-year low.

Pakistan’s current account deficit widens to record high

To tackle the situation, the caretaker government has kick-started the process of seeking a bailout from the International Monetary Fund (IMF) to enable the incoming government to move along quicker if it chooses to exercise the option.

The SBP also said on Thursday that imports have surged 14.71% to $55.84 billion compared to $48.68 billion last fiscal year.

Exports have increased 12.59% to $24.77 billion compared to $22 billion. Workers’ remittances improved 1.41% to $19.62 billion compared to $19.35 billion last fiscal year.

Foreign direct investment (FDI) in different sectors of the economy has slightly improved by 0.8% to $2.76 billion in the fiscal year ended June 30, 2018, compared to $2.74 billion last fiscal year.

How low can it go? Sears will close 63 more stores. Is yours on the list?

Sears Holdings continues to shrink its footprint, saying Thursday that it will close another 63 Sears and Kmart stores as it tries to shave costs and regain its footing in the midst of sagging sales.

The retailer told employees that it will shutter 15 Kmart and 48 Sears locations in early September, with liquidation sales starting as soon as June 14.

Earlier Thursday, officials said they’d be shuttering 72 locations out of roughly 100 non-profitable stores but a “a small group of stores was pulled from the closing list … as they are being evaluated further,” the company said in a statement.

The stores that will be going out of business are:

KMART

California

Ridgecrest: 910 North China Lake Blvd.

Colorado

Arvada: 9881 W 58th Avenue

Florida

Tampa: 5400 E Busch Blvd

Hawaii

Lihue: 4303 Nawiliwili Road

Iowa

Des Moines: 2535 Hubbell Avenue

Illinois

Rockford: 5909 E State Street

Louisiana

Lake Charles: 4070 Ryan Street

Minnesota

Duluth: 215 North Central Avenue

New Jersey

Passaic / Clifton: 24 34 Barbour Avenue

New Mexico

Albuquerque: 2100 Carlisle Avenue

New York

West Babylon: 1000 Montauk Highway

Rosedale: 25301 Rockaway Blvd

Oregon

Portaland: 12350 N E Sandy Blvd

Pennsylvania

Latrobe: 1072 Mountain Laurel Plaza

Texas

Laredo: 5000 San Dario

SEARS

Arizona

Phoenix: 10001 N Metro Parkway West

California:

City Industry: 100 S Puente Hills Mall

Florida

Tampa: 7902 Citrus Park Town Center

Sanford: 320 Towne Center Circle

Georgia

Atlanta: 2201 Henderson Mill Road N.E.

Morrow: 1300 Southlake Mall

Duluth: 2100 Pleasant Hill Road

Iowa

Davenport: 320 W Kimberly Road

Illinois

Vernon Hills: #2 Hawthorn Center

Aurora: #2 Fox Valley Center

Gurnee: 6136 W Grand Avenue

Springfield: 104 West White Oaks Mall

Indiana

Lafayette: 2415 Sagamore Pkwy S

Muncie: 40 Muncie Mall

Indianapolis: 6020 E 82Nd Street

Kansas

Topeka: 1781 Sw Wanamaker Road

Louisiana

Alexandria: Alexandria Mall

Massachusetts

Peabody: Hwys 114 & 128

Springfield: Eastfield Mall

Michigan

Flint: 3191 S Linden Road

Dearborn: 18900 Michigan Avenue

Sterling Heights: 14100 Lakeside Circle

Traverse City: 1212 S Airport Road W

Minnesota

Brooklyn Ctr: Shingle Creek Crossing

Duluth: Miller Hill Mall

Missouri

St. Louis: 250 S County Center Way

Chesterfield: #1 Chesterfield Mall

Mississippi

Hattiesburg: 1000 Turtle Creek Drive

Montana

Billings: 1515 Grand Avenue

North Dakota

Grand Forks: 2800 S Columbia Road

New Jersey

Lawrenceville: 300 Quaker Bridge Mall

Ocean: 2341 Rt 66

Burlington: 2501 Mt Holly Road

New Mexico

Albuquerque: 10000 Coors Bypass N.W.

New York

De Witt/Syracuse: 3649 Erie Blvd E

Ohio

Lima: 2400 Elida Road

Strongsville: 17271 Southpark Center

Pennsylvania

Pittsburgh / South Hills: 300 S Hills Village

Pittsburgh: 1000 Robinson Center Drive

South Carolina

Spartanburg: 205 W Blackstock Road

Anderson: 3101 N Main Street

South Dakota

Sioux Falls: 3400 Empire Mall

Tennessee

Knoxville: 2931 Knoxville Center Drive

Texas

Lewisville: 2401 S Stemmons Freeway

Fort Worth: 1800 Green Oaks Road

Cedar Park: 11200 Lakeline Mall Drive

Denton: Golden Triangle Mall

Washington

Tacoma: 4502 S Steele Street

Amazon to block Australians from shopping on its international sites

Australian shoppers will find themselves limited to a much smaller Amazon item selection beginning on July 1st. Instead of being able to visit and make purchases from international versions of Amazon’s web store — as most of us can do — they’ll be redirected to the local Australian site. Geoblocking isn’t the only strategy Amazon is taking; Amazon.com and the company’s other sites will no longer ship to Australian addresses as of the same date.

When I say “much smaller,” Amazon’s local Australia site still sells tens of millions of products, but it’s definitely a significantly lesser total than you’d find from Amazon’s US site. Reuters estimates that it offers one-tenth of Amazon.com’s selection. All the basics should be readily available, but this will be a real problem for certain item categories.

The move is the result of Amazon’s unwillingness to cooperate with Australia’s updated GST (goods and services tax), which would require the online retail giant to collect a 10 percent tax on all purchases that are shipped to Australia from overseas; previously the GST only applied to imported items over A$1,000.

“While we regret any inconvenience this may cause customers, we have had to assess the workability of the legislation as a global business with multiple international sites,” an Amazon spokesperson told The Sydney Morning Herald.

The legislation was lobbied for by local, smaller online and brick-and-mortar retailers like Harvey Norman. “They think they have the right to pay no tax in Australia,” the company’s executive chairman Gerry Harvey told the Herald. “They’ve done the dirty on the government. They’ve done the dirty on the public.”

Accusations that Amazon attempts to skirt around or mold tax laws to its liking are nothing new, but this is one instance where consumers are going to feel the brunt of the standoff. The Herald notes that some savvy shoppers are already looking into utilizing package redirection services so that they can continue getting their very particular items from Amazon — even if shipping will take a little longer.

Amazon reportedly “baulked at the massive administrative burden of tracking Australian GST from all overseas transactions,” according to Australia’s ABC News. eBay had also once warned that the revised GST legislation would similarly force it to block Australian shoppersfrom importing items, but it has since changed its tune. “We won’t block Aussie buyers, redirect them, or require them to pretend they are located overseas. Australians will continue to be able to buy from any eBay site,” a spokesperson said. “This requires major changes to eBay’s global systems and we are working to have these ready by July 1st.”

U.S. Launches Criminal Probe into Bitcoin Price Manipulation

The Justice Department has opened a criminal probe into whether traders are manipulating the price of Bitcoin and other digital currencies, dramatically ratcheting up U.S. scrutiny of red-hot markets that critics say are rife with misconduct, according to four people familiar with the matter.

The investigation is focused on illegal practices that can influence prices — such as spoofing, or flooding the market with fake orders to trick other traders into buying or selling, said the people, who asked not to be identified because the review is private. Federal prosecutors are working with the Commodity Futures Trading Commission, a financial regulator that oversees derivatives tied to Bitcoin, the people said.

Authorities worry that virtual currencies are susceptible to fraud for multiple reasons: skepticism that all exchanges are actively pursuing cheaters, wild price swings that could make it easy to push valuations around and a lack of regulations like the ones that govern stocks and other assets.

Bitcoin extended its Thursday declines after Bloomberg News reported the investigation, and was down 3 percent to $7,409 as of 9:32 a.m. London time. It’s down more than 20 percent since a May 4 peak.

Such concerns have prompted China to ban cryptocurrency exchanges and nations including Japan and the Philippines to regulate them, contributing to a slump that has sent Bitcoin below $8,000 this year. Still, digital coins continue to be a global investment craze, drawing legions of loyalists to industry conferences, generating celebrity endorsements and increasingly attracting the attention of Wall Street.

Traders Colluding?

The illicit tactics that the Justice Department is looking into include spoofing and wash trading — forms of cheating that regulators have spent years trying to root out of futures and equities markets, the people said. In spoofing, a trader submits a spate of orders and then cancels them once prices move in a desired direction. Wash trades involve a cheater trading with herself to give a false impression of market demand that lures other to dive in too. Coins prosecutors are examining include Bitcoin and Ether, the people said.

A Justice Department spokesman declined to comment and CFTC officials didn’t respond to requests for comment.

The investigation, which the people said is in its early stages, is the U.S.’s latest effort to crack down on an industry that was initially embraced by those who were distrustful of banks and government control over monetary policy.

But Bitcoin’s meteoric rise — it surged to almost $20,000 in 2017 after starting the year below $1,000 — has been a lure for mom-and-pop investors. That’s prompted regulators to grow concerned that people are jumping into cryptocurrencies without knowing the risks. For instance, the Securities and Exchange Commission has opened dozens of investigations into initial coin offerings, in which companies sell digital tokens that can be redeemed for goods and services, due to suspicions that many are scams.

Cryptocurrency trading is fragmented on dozens of platforms across the globe, and many aren’t registered with the CFTC or SEC. As a derivatives watchdog, the CFTC doesn’t regulate what’s known as the spot market for digital tokens — which is the trading of actual coins rather than futures linked to them. But if the agency finds fraud in spot markets, it does have authority to impose sanctions.

Fraud Target

The limited oversight of crypto trading makes it a target for crooks, said John Griffin, a University of Texas finance professor who has studied manipulation, including in digital-coin markets.

“There’s very little monitoring of manipulative trading, spoofing and wash trading,” Griffin said. “It would be easy to spoof this market.”

Signs are emerging that some crypto exchanges realize the industry’s growth could be constrained if large swaths of investors conclude that trading platforms have a “buyer beware” approach to oversight.

The Winklevoss twins, who are known for getting rich off Facebook Inc., hired Nasdaq Inc. last month to conduct surveillance of digital coins trading on their exchange, Gemini Trust Co. Cameron and Tyler Winklevoss have also urged trading platforms to band together to form a group that would serve as a self regulator for the industry.

Some market participants have alleged that crypto manipulation is rampant. Last year, a blogger flagged the actions of “Spoofy,” a nickname for a trader or group of traders that have allegedly placed $1 million orders without executing them.

Elon Musk’s Boring Company wants to charge $1 for a 150 mph Loop ride

Elon Musk finally shed pulled back the curtain on where The Boring Company is headed. And, well, it’s definitely not boring.

The billionaire entrepreneur on Thursday showed off his concept for the Loop, a “personalized mass transit” system that carries 16 people and travel at 150 miles per hour, which could get you from Downtown Los Angeles to Los Angeles International Airport in eight minutes in a vacuum tube. His projected fare for people would be only $1. He also said he envisions dozens to hundreds of small stations, about the size of a single or double car parking spot, to alleviate traffic at any one spot.

Musk also unveiled the project details, including 2.7 miles of tunnel that will run north to south parallel to the 405 freeway. It will be privately funded, and not utilized for public transportation. He spoke to a crowd of roughly 750 people crowding the pews of the Leo Baeck Temple in Los Angeles, which sits alongside the 405 freeway by the Getty Center.

Musk, who’s known for making grand promises, didn’t provide a time frame for the project.

His comments provide the most detail yet on what he wants to do with these vast underground tunnels after two years of teasing. Musk created the The Boring Company, which has spent the last year digging (or “boring”) underground tunnels in Los Angeles, to further his vision of creating a new form of transportation — and to get out of that nasty Los Angeles traffic he has famously complained about.

“It’s the only way we can think of to address the chronic traffic issues in major cities,” Musk said at the event. He added that over the 16 years he’s lived in Los Angeles, the 405 freeway “varied between the seventh and eight level of hell,” and noted the event had started late because of traffic.

Musk, the flamboyant tech executive who is a must-follow on Twitter, has said that the Boring Company takes up 2 to 3 percent of his time, essentially a hobby as he runs his other two — yes, two — companies, Tesla and Space X, tweeted a week ago that his first tunnel in Los Angeles is nearly completed.

These tunnels aren’t yet part of his grander idea of a cross-country “Hyperloop” system, which would ferry people or things in tubes traveling at airline speeds — but at a much lower cost. At least, not yet. Musk previously said that the Boring Company is involved in proposed Hyperloop projects, including one for the US east coast. After unveiling the idea of using pressurized capsules to fly through tubes at insane speeds in 2012, Musk initially let other startups run with the idea. But last year, Boring Company had gotten approval to build a Hyperloop between New York and Washington, DC, signaling his intentions.

Musk telegraphed that the Los Angeles tunnels would use a different approach. About an hour before the event began, he retweeted a tweet from Metro Los Angeles about work on its proof-of-concept tunnel under Sepulveda Boulevard. “We’ll be partners moving forward,” the statement said. At the event, Musk reiterated that he was working with the city and was excited to complement the city’s metro system.

The idea is that The Boring Company would take method and model of tunneling in Los Angeles and eventually bringing it to other major cities with traffic issues. “If you can build a tunnel in LA, you can build it anywhere,” he said.

In March, he teased an animation of people riding in sleek minibuses running on rails through the underground tunnels. He played the video again on Thursday. There had also been suggestions that pedestrians, bikes and public transit will get priority access to the system

Musk kicked off the event by noting that flying cars wouldn’t work, throwing a bit of shade at Uber. He cited the advantages of an underground transportation system, including the fact that it’s weatherproof, and you can create more lanes if you want. “Highways are at the outer limit of their capacity… for tunnels you can have hundreds of lanes, there’s no real limits,” he said.

He also talked about the improvement to the actual boring, from continuous mining to tripling the power of the machines themselves, as well as ways to decrease cost.

Likewise, he stressed this would be a safe project, and that the community wouldn’t hear any of the tunneling below. He answered questions like how safe it would be in an earthquake (it’s fine).

The Boring Company, the much, much smaller sibling to Musk’s other companies, has resorted to some unorthodox merchandise for funding. The company raised $7.5 million selling $500 flamethrowers bearing the company logo (they’re supposed to arrive in the spring). Musk also teased plans to sell large Lego-like bricks made from bored rocks.

“They’re really good bricks,” he said, eliciting laughter from a crowd that wasn’t quite sure he was serious.

PayPal Agrees to Buy European Fintech Startup iZettle for About $2.2 Billion

PayPal Holdings Inc. PYPL 1.76% has agreed to buy European financial-technology startup iZettle AB for about $2.2 billion, a move that would catapult the U.S. digital-payments giant into hundreds of thousands of brick-and-mortar retailers around the world.

The acquisition, the largest in PayPal’s history, sets up a showdown between the San Jose, Calif., company and Jack Dorsey’s Square Inc., which has built a big payments business catering to coffee shops, flea-market vendors and millions of other small businesses with physical locations that PayPal historically overlooked.

Stockholm-based iZettle, which has been called the “Square of Europe,” builds devices and technology that nearly 500,000 businesses in around a dozen European countries, Mexico and Brazil use to accept credit cards. Most of those countries are ones where PayPal has a small presence already, and it plans to roll out iZettle devices in some of its biggest markets, including the U.S.

PayPal’s goal is to give a more comprehensive offering to retailers that want to sell products in stores and across digital platforms, Chief Executive Dan Schulman said in an interview Thursday, at a time when competition from Amazon.com Inc. and traditional retailers is fierce.

“Helping small businesses compete with the giants in the market really resonated for both of us,” Mr. Schulman said. Combining PayPal’s services with iZettle’s would allow the company to offer a “full-service, one-stop-shop solution” to current and prospective customers, he said.

The deal also would help PayPal offset the loss of one of its largest sources of customers:eBay Inc., EBAY 0.13% the online marketplace that owned the payments firm until it was spun out as a separate company in 2015. PayPal shares fell more than 12% earlier this year when eBay, which had accounted for around one-fifth of PayPal’s 2017 revenue, said it would start managing the payments flow of buyers and sellers transacting on its website.

The shares have recovered much of that drop, and after they soared last year, PayPal has a market value of more than $90 billion.

Meanwhile, Square has been moving into PayPal’s turf. Square Cash, a smartphone app that lets people send money and buy things online, has amassed more than seven million users. Last month, Square agreed to buy website builder Weebly Inc. for about $365 million in a deal that would give it a bigger footprint in e-commerce. Square also counts former PayPal finance chief Roelof Botha as a board member.

PayPal, which is around twice as old as Square, still has a big size advantage. It processed $132 billion in total payment volume in the first quarter of 2018, or more than seven times Square’s $17.8 billion of volume in the same period. iZettle, which had been preparing an initial public offering, expects its 2018 payments volume to be roughly $6 billion.

The rapid growth of cross-border commerce and the blurring of the lines between online and offline sales has led to a frenzy of deal making in the payments industry. Last year,Vantiv Inc. agreed to acquire U.K. payments processor Worldpay Group PLC for $10.4 billion, while two private-equity firms agreed to buy U.K. online-payments processorPaysafe Group PLC for $3.89 billion.

PayPal and eBay have had a mixed record when it comes to payments deals. The 2013 acquisition of Braintree Payments Solutions LLC for $800 million turbocharged PayPal’s mobile-payments acceptance tools and brought it popular digital money-transfer service Venmo.

But last year’s $238 million deal to buy bill-payments company TIO Networks became a “black eye” for PayPal, its finance chief, John Rainey, said at an investor conference this week. The company decided to wind down TIO after discovering a data breach in TIO’s systems that potentially compromised the personal information of up to 1.6 million users. TIO’s systems were never integrated to PayPal’s.

Jacob de Geer, chief executive of iZettle, will continue to lead that business and report to Bill Ready, PayPal’s chief operating officer. Mr. Ready joined PayPal as part of its Braintree acquisition.

Mr. de Geer said in an interview that he decided to sell to PayPal rather than pursue an IPO after “realizing that combining forces was effectively giving my company superpowers.”

The price is a lofty one at roughly 13 times iZettle’s projected 2018 revenue of $165 million. Mr. de Geer and iZettle co-founder Magnus Nilsson will receive a windfall when the deal closes as each owned a nearly 9% stake in the company as of the end of 2016, according to iZettle’s most recent corporate filing. iZettle’s largest shareholder at that time was venture-capital firm Index Ventures, which had a 12.5% stake, according to the filing.

Evercore advised PayPal on the transaction. JPMorgan Chase & Co. advised iZettle.

Apple, Intel and these other US tech companies have the most at stake in China-US trade fight

  • Apple and Intel are on a list of 16 U.S. companies that made a total $105.5 billion from China last year, or 23 percent of overall revenues, Jefferies analysts said Monday.
  • As a result of U.S. commercial interests, they expect the Trump administration to pursue concessions from Beijing, rather than an outright break in technology-related trade.
  • Shares of optical component makers working directly or indirectly with ZTE rose in Monday morning trading after President Donald Trump unexpectedly said the U.S. would help the Chinese telecom equipment giant get back into business quickly.

U.S. technology companies generate roughly $100 billion to $150 billion in revenues from China annually, Jefferies analysts estimate.

As a result, the Trump administration will likely pursue concessions from Beijing, rather than cut off all tech trade, analysts Edison Lee and Timothy Chau said in a note Monday. ” We continue to believe the US will make only highly calculated moves, by factoring in the commercial interest of US tech firms.”

Apple and Intel are on a list of 16 U.S. companies that made a total $105.5 billion from China last year, or 23 percent of overall revenues, the analysts said.

Other names include Microsoft and Qualcomm. Including HP, Dell and other companies that don’t break out their China revenues brings the total estimate to around $150 billion, the analysts said.

The U.S.-China trade dispute has increasingly focused on technology and intellectual property rights.

In mid-April, the U.S. Commerce Department banned American companies from selling components to Chinese telecom equipment giant ZTE for seven years. The decision was a response to ZTE’s violation of U.S. sanctions against Iran and North Korea, to which the Chinese company pleaded guilty last year. Trading in its Hong Kong and Shenzhen-listed shares was halted after the ban, and last week the company said its main business operations have ceased.

However, President Donald Trump unexpectedly said Sunday that he is working with Chinese President Xi Jinping to help ZTE “get back into business, fast.”

Shares of optical component makers working directly or indirectly with ZTE rose in Monday morning trading:

  • Acacia Communications received 30 percent of 2017 total revenue from the Chinese telecom company. Shares closed up 8.7 percent.
  • Oclaro generated 18 percent of fiscal year 2017 revenue from ZTE. Shares closed up 2.9 percent.
  • Lumentum, which has agreed to acquire Oclaro for $1.8 billion, saw its shares rise more than 2 percent.
  • Finisar also counts ZTE as a customer. Its shares gained 1 percent.

Amazon Primes the Pump at Whole Foods

Amazon’s acquisition of Whole Foods has been far from a smooth transition to date. Between culture clashes (the data driven approach at Amazon versus the emotional and experiential approach of Whole Foods), changes of policies to small vendors and systems integration with widely reported out of stocks, Whole Foods seems to have lost some of its retail mojo. To be fair to Amazon, Whole Foods was struggling to re-position itself prior to the acquisition.

I have been watching closely to see how Amazon would be working to make changes.  To date, I have seen the following:

  • Some very hyped (over-hyped) price cuts on a few hundred items within the store, mostly in perishables
  • The installation of Amazon pick-up lockers in many stores, which leverages convenience and presumably drives traffic
  • Amazon taking over delivery from Instacart in several markets, which replicates the rapid (1-2 hour) delivery model
  • Some “spot” price offerings linking discounts to Prime membership including a recent Mother’s Day special on tulips

Now, the long awaited integration appears to be happening.  Whole Foods announced the roll-out of a rewards program in Florida, where Amazon Prime members will receive 10% off hundreds of items initially and also have access to rotating weekly specials. Whole Foods believes this will be a significant off-set to its high priced reputation.

The move is one that I have been expecting since the onset of the announcement. There is extremely high overlap between the customer bases. CEO John Mackey estimates that there are 8 million Whole Foods shoppers who are also Prime members. According to Consumer Intelligence Research Partners (CIRP), it is estimated that there is a 40% overlap between Amazon and Whole Foods shopper base, with 80% of those customers having shopped recently. At the same time, Amazon has just raised the annual prime membership to $119 and needs to demonstrate that Prime will continue to add value beyond the most valued perk of free two day shipping.

And of course, ideally, this may spur further Prime membership for Whole Foods shoppers who are not part of the program.

I expect this to create a short term sales lift for Whole Foods. Long term, it provides Amazon with further data to understand omnichannel shopper behavior which can only benefit them more as Amazon continues to attack the retail food business on all fronts.  Another tidbit from CIRP is that grocery is now the second most shopped category (after electronics) on Amazon. Food will only continue to grow off a very small base.

Islamophobic? Coffee shop refuses to serve man who confronted Muslim woman in niqab

Another coffee shop confrontation caught on smartphone video is causing a stir on social media — only this time it involves man angered by a woman who identifies her herself as a Muslim.

A barista at a coffee shop in Riverside, Calif., refused to serve a man after he appears to insult the woman, who was wearing a black niqab, a headscarf that covers most of the face except her eyes.

In a video seen 1.6 million times on Twitter by Monday night, the man turns to the woman and asks, “Is it Halloween or something?” When she replies, “Do you know I am a Muslim?” and inquires whether he has a problem with it, he says, “I don’t like your religion, how’s that?” and adds, “I don’t want to be killed by you.”

The incident took place Friday at a Coffee Bean & Tea Leaf shop in Riverside, east of Los Angeles, KTLA-TV reports.

In the confrontation, the woman, in a loud voice, then seeks to engage the man in a discussion about religion, asking him whether he has read the Koran or the Bible, and mentions the teachings of Jesus. The man dismisses her, saying “I don’t have any kind of conversation with idiots.”

She says, “You are committing hate speech against me” as another customer is heard shouting at the man from across the room, invoking the f-word and calling him a racist. A barista behind the counter who identifies herself as the supervisor said she isn’t serving the man because he’s being disruptive and “being very racist.”

He then leaves.

This latest video, posted to YouTube, comes a month after Starbucks became embroiled in a controversy over racism at a Philadelphia location. In that incident, also videotaped, a manager called police after two black men came to wait for a friend, but didn’t order anything. One was denied permission to use the restroom.

Police arrested the pair for trespassing, but Starbucks didn’t press charges and both the coffee giant and police later apologized. Starbucks plans to hold a chainwide day of training May 29 to educate employees on issues involving racial sensitivity and profiling.