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[Markets] Is America About To Officially Dump Pakistan As An "Ally"?

Authored by Andrew Korybko via Oriental Review,

Republican Congressman Andy Biggs just put forth House Resolution 73 seeking to remove Pakistan’s designation as a “major non-NATO ally”, which would eliminate its privileged military cooperation with the US that’s already been put under strain over the past year since Trump decided to suspend various sorts of aid to the country and decried it for supposedly not doing enough to fight terrorism. Biggs wants to make any reclassification of Pakistan as a “major non-NATO ally” contingent on the President proving to Congress that the country is fighting the so-called “Haqqani Network” that’s bedeviled the US for years, suggesting that this initiative might have something to do with once again scapegoating Pakistan for the latest setback to the incipient US-Taliban peace process.

In addition, the move itself is highly symbolic because it comes over two years after the US designated Pakistan’s rival India as its first-ever “Major Defense Partner” after entering into a military-strategic partnership with the country to tacitly “contain” China. It’s very likely that the US might be toying with the idea of replacing Pakistan with India as its newest “major non-NATO ally”, though that would provocatively push Pakistan even closer to the US’ Russian and Chinese rivals, something that could have serious implications for Afghanistan if Islamabad refuses to broker any more talks between Washington and the Taliban, for example. Altogether, however, the suggestion to strip Pakistan of its “major non-NATO ally” designation is predicable because the US was never Pakistan’s “ally” to begin with.

It never mattered how much Pakistan assisted the US with its War on Terror, nor how many tens of thousands of Pakistanis died as the country’s military fought its own version of this conflict on its home soil, the US always condescendingly treated Pakistan as a “junior partner” and criticized it to “do more”. Over the past couple of years, Pakistan finally decided to say “no more” and began pursuing an independent foreign policy that strives to achieve a “balance” between the world’s Great Powers instead of indefinitely perpetuating its erstwhile strategic dependence on a single one like the US, which has actually revolutionized regional and global affairs by virtue of the geostrategic importance of the CPEC megaproject.

NATO trucks crossing Pakistan’s border

For as much as some in the US’ permanent military, intelligence, and diplomatic bureaucracies (or “deep state”) might want to “punish” Pakistan for this through various means such as symbolically stripping away its “major non-NATO ally” status, others also understand that many Pakistanis would be happy to see their faux “alliance” with the US finally end and know that their country could potentially make matters difficult for the US in Afghanistan, which is why it remains to be seen whether this measure will pass into law. Even so, it nevertheless sends a very strong signal to Islamabad that some in Washington harbor very hostile intentions against their country and don’t appreciate its many sacrifices that were made on their behalf in the War on Terror.

Published:1/21/2019 10:13:46 PM
[Markets] Asia Markets: Asian markets slip on global growth worries Asian markets were lower on Tuesday after the International Monetary Fund trimmed its global outlook for 2019 and 2020.
Published:1/21/2019 10:13:46 PM
[Markets] "Drink Good Wine, Hide Cash": $364 Million Ponzi Scheme Mastermind Told Wife To Hide Assets

Federal officials announced in September the indictment and arrest of a Baltimore man, involved in the most massive Ponzi scheme ever in the Baltimore–Washington metropolitan area.

With his accounts frozen, Kevin B. Merrill, the mastermind behind the fraud, allegedly wrote a prison note to his wife telling her to hide their assets.

The note was found in Merrill's sock by prison guards as he faces charges of defrauding investors of $364 million.

“Have your dad take my golf clubs,” he allegedly wrote. “Hide cash or checks … drink good wine in sub zero’s, replace with sh-- wine in basement.”

“F--- them. They have taken enough! Get stuff out,” he allegedly wrote.

Federal prosecutors revealed the note in criminal charges filed last month against Amanda Merrill, the young wife of the mastermind fraudster. She was charged with conspiracy, obstruction, disobeying a court order and removing property to prevent its seizure.

US Attorney Robert Hur said Merrill swindled family offices and investors around the country. He called it the largest Ponzi scheme in Maryland's history.

Federal agents arrested Merrill in September and raided his multi-million dollar home in Ruxton-Riderwood, Maryland.

He and his business partner, Jay Ledford, 54, of Texas, have been indicted on federal charges of wire fraud, identity theft, and money laundering.

Investors in the scheme believed they were buying “consumer debt portfolios,” tranches of credit card debt, car loans, and student loans. Instead, Merrill shifted the money from new investors to old investors, prosecutors say.

Merrill spent investors' money on dozens of luxury cars, including a million dollar Bugatti Veyron. Prosecutors say he spent $37,500 on designer watches and jewelry, $50,000 on private flights and $100,000 at Las Vegas casinos. They even say he decorated his mansions with the fine art of the mustached Monopoly character Rich Uncle Pennybags.

A federal judge issued a restraining order stopping Merrill and Ledford from selling their assets. 

Federal officials have filed documents with the courts to instruct Sotheby’s International Realty to sell a dozen mansions the men owned in Maryland, Florida, Texas and Nevada, collectively worth $20 million or more.

Officials are also ready to sell off the fleet of 34 exotic cars, motorcycles and boats.

Both individuals have pleaded not guilty. Their trials have not yet been scheduled.

Published:1/21/2019 9:45:05 PM
[Markets] The Fetishization Of The Corporate Media

Authored by CJ Hopkins via The Unz Review,

So the corporate media have gone and done it again. As they have, repeatedly, for the last two and half years, they shook the earth with a “bombshell” story proving beyond any reasonable doubt that Donald Trump colluded with the Russians to steal the presidency from Hillary Clinton, or at least committed an impeachable felony in connection with something to do with the Russians, or Ukrainians, or other Slavic persons … which story turned out to be inaccurate, or not entirely accurate, or a bunch of horseshit.

This time it was BuzzFeed’s Jason Leopold, “a reporter with a checkered past” (i.e., a history of inventing his sources) who broke the “bombshell” Russiagate story that turned out to be a bunch of horseshit. Leopold, and his colleague Anthony Cormier, reported that Trump had directed his attorney, Michael Cohen, to lie to Congress about plans to construct a Trump Tower in Moscow, thus suborning perjury and obstructing justice. Their sources for this “bombshell” story were allegedly “two federal law enforcement officials involved in an investigation of the matter.”

Approximately twenty-four hours later, Special Counsel Robert Mueller’s office (i.e., the office “involved in an investigation of the matter”) stated that the BuzzFeed story was “not accurate,” which is a legal term meaning “a bunch of horseshit.” BuzzFeed is standing by its story, and is working to determine what, exactly, Mueller’s office meant by “not accurate.” Ben Smith, BuzzFeed’s Editor-in-Chief, has called on Mueller “to make clear what he’s disputing.”

Liberals and other Trump-obsessives have joined in the effort to interpret the Special Counsel’s office’s cryptic utterance. French hermeneuticists have been reportedly called in to deconstruct the meaning of “accurate.” Professional Twitter semioticians are explaining that “not accurate” doesn’t mean “wrong,” but, rather, refers to something that is “accurate,” but which the user of the word doesn’t want to disclose publicly, or that legal terms don’t mean what they mean … or something more or less along those lines.

Glenn Greenwald, in August 2018, reporting on another “bombshell” story that turned out to be a bunch of horseshit, compiled a partial list of Russiagate stories that the corporate media had published and promoted over the course of the previous eighteen months which turned out to be a bunch of horseshit (i.e., the stories did, not Greenwald’s list). In the wake of this latest horseshit story, Greenwald revised and renamed this list “The 10 Worst, Most Embarrassing U.S. Media Failures on the Trump/Russia Story.

But Greenwald’s list is just a small sample of the Russiagate stories that have turned out to be horseshit. For the record, here are several more:

My personal favorite remains the one about how Hillary Clinton may have been poisoned by Putinist operatives back in 2016. And then there’s the pot-smoking, prostitute-banging, incompetent Novichok perfume assassins, the African American-brainwashing memes, the Putin-orchestrated Yellow Vest rebellion, the brain-eating Russian-Cubano crickets, and various other bunches of horseshit.

I am using the terms “horseshit” and “a bunch of horseshit” (as opposed to terms like “failures” and “errors”), not just to be gratuitously vulgar, but, also, to try to make a point. One is not supposed to use these terms in connection with “serious,” “respected” news outlets. Which is why journalists like Greenwald and Aaron Maté (who have extensively reported on the corporate media’s ongoing production and dissemination of horseshit) do not use such terms in the course of their reporting, and instead use less inflammatory terms like “false,” “inaccurate,” “mistake,” and “error.” Principled journalists like Greenwald and Maté are constrained by (a) their journalistic ethics, (b) their integrity, and (c) their belief in the idea of a “free and independent press,” which is one of the pillars of Western democracy.

Being neither a respected journalist nor a believer in the existence of an “independent press,” I am under no such constraints. Because I’m not trying to get or keep a job, or maintain a “respectable” reputation, I’m free to call a spade a spade and a bunch of horseshit a bunch of horseshit. I am also free to describe “journalists” like Leopold, Luke HardingCraig TimbergFranklin Foer, and many of their corporate media colleagues (not to mention TV clowns like Rachel Maddow) as the liars and rank propagandists they are. I don’t need to pretend their fabricated stories are simply the result of “shoddy journalism,” or “over-reliance on official sources,” or any other type of “error” or “failure.” These people know exactly what they are doing, and are being extremely well paid to do it. They went to school to learn how to do it. Then they butt-sucked and back-stabbed their way up the ladder of establishment power to be able to do it.

Yes, of course, there are still principled journalists working for the corporate media, but they are doing so by walking a very fine line. No one has to tell them where it is. Every professional journalist knows precisely where it is, and what it is there for. Though they are permitted to walk right up to it, occasionally (to keep them from feeling like abject whores), one step over it and they will be cast into the Outer Darkness of the Blogosphere and excommunicated from the Church of Respectable Journalism. If you don’t believe me, just ask Seymour Hersh, or John Pilger, or any other journalistic heretic.

If Russiagate serves no other useful purpose, it is at least exposing the corporate media as the propaganda factories that they are. Given the amount of obviously fabricated horseshit they have disseminated during the last two years, you’d have to be a total moron or a diehard neoliberal cultist not to recognize the function they perform within the global capitalist ruling establishment (which is essentially no different than the function the establishment media perform in any other society, namely, to disseminate, maintain, and reify the official narrative of its ruling classes).

Sadly, there’s no shortage of morons and cultists. I don’t blame the morons, because … well, they’re morons. The cultists are another species entirely. These are people who, no matter how often the corporate media feed them another “explosive,” “bombshell” Russiagate story that turns out to be a bunch of horseshit, will defend the concept of the “independent media” like head-shaven, bug-eyed Manson followers. Confront them with facts contradicting their beliefs and they close their eyes and start chanting and humming and repetitiously babbling banishing spells. The notion that the Western corporate media may serve the interests of the ruling establishment (just like the media in every other society serve that society’s ruling classes) is unimaginable and tantamount to heresy.

This fetishization of “the independent press” is a phenomenon unique to Western capitalism. Basically, it’s a childish fairy tale, like believing that Santa Claus is an actual person or that voting in elections in a corporate oligarchy has anything to do with actual democracy. Think about it dispassionately for a minute. Why would any ruling establishment permit a genuinely “independent” press to disseminate ideas and information willy-nilly throughout society? If it did, it wouldn’t last very long.

Most people understand this intuitively, which is why the corporate media relentlessly repeat the mantra-like phrase, “free and independent press,” over, and over, and over again. Seriously, switch on NPR, or have a look at The Guardian or the Washington Post, or any of the other corporate media repeatedly reminding you how “independent,” “free” and “democratic” they are. It’s essentially Neuro-linguistic programming.

So let’s not be shocked when the corporate media continue to bombard us with “bombshell” stories about Trump and Russia that turn out to be horseshit. Personally, I welcome these stories. The more corporate media horseshit the better! Who knows, if they dish out enough blatant horseshit, more people might lose their “trust in the media,” and begin to investigate matters themselves. I know, that makes me a Nazi, right? Or at least a Russian propagandist? I mean, encouraging folks to distrust the corporate media? Isn’t there some kind of law against that? Or have they not quite gotten around to that yet?

Published:1/21/2019 9:15:27 PM
[Markets] BuzzFeed CEO Spoofed Prominent Gun Rights Activist To Spread Disinformation

Long before BuzzFeed was publishing unverified dossiers and anti-Trump claims refuted by Robert Mueller, founder and CEO Jonah Peretti created a fake website and email address in the name of prominent gun rights advocate John Lott in order to spread disinformation.

Peretti, then-director at Brooklyn-based technology nonprofit Eyebeam, used Lott's name in 2003 to trick people into thinking that Lott had changed his mind on a key piece of gun-rights legislation that protected gun makers from abusive lawsuits designed to put them out of business. 

I was already relatively well-known in 2003 to those who care about the gun control debate because of my book “More Guns, Less Crime.” Peretti sent emails under my name to convince people that I had changed my mind and come out against the Act.  The emails then urged people to ask their congressmen and Senators to oppose the bill. -John Lott via Fox News

Lott explains Peretti's deception in a Monday Op-Ed which you can read below. 

***

John Lott Via Fox News 

BuzzFeed, a popular “news” website, has once again been shamed for publishing fake allegations against Donald Trump. BuzzFeed’s anonymously sourced report claimed that President Trump ordered his former lawyer, Michael Cohen, to lie to Congress about a proposed business deal in Moscow. Supposedly, two unnamed federal law enforcement officials claimed that Special Counsel Robert Mueller’s office had the goods. They were purported to have collected emails, texts, and testimony proving the explosive claim.

The story dominated the news on Friday, with Democrats calling for Trump to be impeached. MSNBC’s “Morning Joe” opened with the announcement that this revelation was “a big one.” CNN’s “New Day” host John Berman claimed the disclosure was so dramatic he almost spilled his coffee.

But by late Friday, Special Counsel Robert Mueller’s office issued a very rare rebuke saying that BuzzFeed’s account was “not accurate.” This was hardly BuzzFeed’s first embarrassment. As Trump reminded people, “it was BuzzFeed that released the totally discredited 'Dossier,' paid for by Crooked Hillary Clinton and the Democrats . . .”

BuzzFeed’s culture of fake news starts at the top with founder and CEO Jonah Peretti, who has a history of knowingly spreading false information. He has used fraudulent websites and email accounts to pose as people he wished to defame. I was one of his victims.

Peretti’s first victim was MBA student Jeff Goldblatt, who had set up a dating service called the Rejection Hotline. This was inadvertently in competition with Peretti’s newly created rejectionline.com. Peretti’s sister and co-founder, Chelsea, contacted Goldblatt to gain information on his business. She “interviewed” him, under the false identity of New York-based reporter Vanessa Holmes.

Then Jonah Peretti set up the website JeffGoldblatt.com, under the pretense that it was Goldblatt’s personal website. Peretti sent out emails from me@JeffGoldblatt.com that, according to Goldblatt, “contained multiple lies about me and portrayed me as an arrogant jerk who was bragging about how I stole the idea of the New York City Rejection Line.”

Goldblatt contacted me after Peretti did the same thing to me in 2003.  In my case, Peretti set up AskJohnLott.org and used the email address john@AskJohnLott.org. Peretti’s expropriation of my name wasn’t for financial gain, but to support gun control.

Pretending to be me, Peretti sent out hundreds of thousands of emails lobbying against the proposed “Protection of Lawful Commerce in Arms Act.” This bill, which was being debated at the time (it ultimately passed in 2005), protected gun makers from abusive lawsuits that were solely designed to put them out of business with overwhelming legal fees. Peretti even purchased advertising for his fake website on Google, and the advertising promoting "my“ appeared at the very beginning of any search results on my name.

I was already relatively well-known in 2003 to those who care about the gun control debate because of my book “More Guns, Less Crime.” Peretti sent emails under my name to convince people that I had changed my mind and come out against the Act.  The emails then urged people to ask their congressmen and Senators to oppose the bill.

A number of the recipients were people I knew, and some wrote back using the John@AskJohnLott.org email address and questioned why I would have changed my mind. But Peretti continued the charade of being me in multiple email chains.

I first learned about the website from James K. Glassman, a former Washington Post columnist, who later served as U.S. Under Secretary of State for Public Diplomacy. He shared the email exchange with me that he had with Peretti's fake John Lott.

Peretti also used my name and picture to advise people on how to violate gun control laws. Soon, I received hundreds of angry phone calls from people who were upset that I was supposedly advising them to break the law.

My emails to john@AskJohnLott.org asking who was behind the effort were ignored. The website’s registration didn’t help, as it was supposedly registered to me.

I spent money to find out who was behind these efforts.  When I contacted Peretti, he denied any involvement.  After I hired lawyers, Peretti finally included a disclaimer on the website, stating that he intended to parody me. But he still refused to take down the website down or stop sending emails.

Goldblatt didn’t have the money for a legal battle, so I included him in my case.

After a year-and-a-half, we finally reach a legal settlement. Peretti, who worked for a company called Eyebeam, publicly acknowledged: “The AskJohnLott.org site was created by The Eyebeam Atelier, Inc. This site was never associated, endorsed or otherwise affiliated with John R. Lott, Jr. E-mail sent from the AskJohnLott.org domain that was identified as coming from Lott was also never associated, endorsed or otherwise affiliated with John R. Lott, Jr. Eyebeam deeply regrets any confusion and offers a formal apology to John R. Lott, Jr. The terms of the settlement are confidential.”

Peretti also apologized to Goldblatt and took down JeffGoldblatt.com. I received an undisclosed monetary settlement.

People are again asking how BuzzFeed could possibly publish such “fake” news against Trump. They need look no further than BuzzFeed’s CEO and founder Jonah Peretti.

John R. Lott, Jr. is a columnist for FoxNews.com. He is an economist and was formerly chief economist at the United States Sentencing Commission. Lott is also a leading expert on guns and op-eds on that issue are done in conjunction with the Crime Prevention Research Center. He is the author of nine books including "More Guns, Less Crime." His latest book is "The War on Guns: Arming Yourself Against Gun Control Lies (August 1, 2016). Follow him on Twitter @johnrlottjr.

Published:1/21/2019 8:16:32 PM
[Markets] The Disturbing Rise Of Modern Monetary Theory (MMT)

Authored by Mark Jeftovic via Guerilla-Capitalism.com,

Lately, we’ve suddenly been hearing a lot about Modern Monetary Theory (“MMT”) in the mainstream media. It could be that with the election of Alexandra Ocasio-Cortez to congress, MMT’s star will rise with hers as she is reportedly an adherent and possibly views MMT as a means to fund her Green New Deal.

As we see below, MMT has been around for some time, having come out of the Chartalism school in the first half of the 1900’s and was made into MMT in the early 90’s by Warren Mosler, apparently after a “long steam” with Donny Rumsfeld, who then referred him to Art Laffer (creator of the Laffer Curve). MMT mostly flew under the radar until around the time of the Global Financial Crisis and is now clearly spiking into public awareness.

To the casual onlooker, MMT may sound a lot like standard-issue Keynesianism, the idea that the Government can and should run deficits to smooth out the business cycle.

The big difference is this: Keynesians believe that the deficits should be run to stimulate our way out of a recession or financial crisis, after which there will be some kind of return to normalcy, when deficits will matter again .

To MMT-ers there is no return to normalcy, this is the The New Normal. Deficits don’t matter, the Government can’t go broke because they can issue money in any amount required. We’ll look at how they rationalize this below, but suffice it to say now that Keynesians and MMT-ers are not synonymous and even Paul Krugman has had his criticisms of it:

it would be quite likely that the money-financed deficit would lead to hyperinflation.

The point is that there are limits to the amount of real resources that you can extract through seigniorage. When people expect inflation, they become reluctant to hold cash, which drive prices up and means that the government has to print more money to extract a given amount of real resources, which means higher inflation, etc.. Do the math, and it becomes clear that any attempt to extract too much from seigniorage — more than a few percent of GDP, probably — leads to an infinite upward spiral in inflation. In effect, the currency is destroyed. This would not happen, even with the same deficit, if the government can still sell bonds.

We’ll revisit his point that if the government attempts to extract too much from seigniorage that it will ignite an inflationary spiral. For now let’s make sure we know what we are dealing with when it comes to Modern Monetary Theory…

How to Understand Modern Monetary Theory

When I was in high school I had a physics teacher once told me how when he was a kid he thought he should be able to hook up the outputs of a generator and a motor to each other and have himself a perpetual motion machine. For some reason it didn’t work and trying to understand why was what got him into physics.

The more I learned about MMT the more it seemed to be the same thing, in an economic sense and I have frequently made this quip expecrting MMT-ers to call it a strawman or point out some fundamental element that I’m missing but instead they usually confirm that I have it correct in broad strokes.

MMT-ers believe that currency is nothing more than an economic scoreboard or tally, and any government that denominates it’s own currency can never go broke because they can always create more currency. Of course, as Weimar Germany, Hungary, Yugoslavia and more recently Zimbabwe and Venezuela have all found out, you have to watch out for hyperinflation.

The MMT magic bullet for this is… taxation. Through taxation the government can drain excess liquidity from the system while printing as much currency as it needs to fund its projects and as long as the total value of currency printed doesn’t exceed the productive capacity of the economy as a whole. Thus:

This diagram is from “Diagrams and Dollars: Modern Money Illustrated” by J.D. Alt. After methodically taking the reader through how the old monetary system works, where the government has this HUGE untenable debt burden and is constrained by budgetary limitations, we arrive here.

The national debt is still present, but it has, through philosophical transmutation, been transformed by Alt into a “Net Spending Achievement” as measured by the “National Savings Clock” (formerly known as the “national debt clock”, or “Doomsday Clock”):

“the difference between what the FG plans to spend in a given budget-year, and what it plans to drain away in taxes, is “Net Spending Achievement”….imagine, for a moment, how our political discourse might change if everyone understood the discussion was no longer about the size of our national “budget deficit” but, instead, was about the concrete goals of our annual “Net Spending Achievement”….

We do NOT want a “balanced” budget—or, even worse, a budget “surplus”! What we want (as long as price inflation is under control) is the largest and most effective “Net Spending Achievement” we can envision.

“Entitlement” and “Discretionary” budgets do NOT have to compete with each other for a fixed pot of Dollars. As long as price inflation is under control, whatever Dollars are necessary can be allocated to the “Net Spending Achievement.”

MMT-ers believe that since our currency is actually comprised of debt obligations that government deficit is required to form net private savings:

Therefore:

  • government spending creates private goods and services

  • taxation drains excess liquidity and controls inflation

  • the government can never go broke

For this to work, it would posit a pretty powerful central planning government that knows all (and if so, why can’t the government control inflation via price controls and eliminate taxes altogether?) and has the inhuman self-discipline not to overissue currency in a crisis (I guess, under MMT, there will be no further financial crises).

Oh, I almost forgot, under MMT there is also the jobs guarantee. So anybody who wants a job would be guaranteed to have one, at a living wage, by the government.

That’s MMT in a nutshell.

It’s ascent into its newfound economic fashionability is simply the latest episode of a long history of the pursuit of alchemy.

The Holy Grail of Government: Unlimited Spending With No Restraint

Government being overwhelmed by debt and constrained as a result is as old as history itself. In the 14th century King Philip of France was so indebted to the Knights Templar, and absent some clever rationalization that would transform his debts to them into money itself; he did the next best thing. He suppressed the order and had their leaders burned them at the stake. His debts were thus cleared but he had also disincentivized future borrowing. Another way would have to be found…

What governments really want is a way to either A) bribe the populace to keep voting for them or B) as this Epsilon Theory article laments, fund one or another of their incessant wars from an inexhaustible supply of credit or funding:

Modern Monetary Theory – which is neither modern nor a theory – is a post hoc rationalization of political expediency and power-expanding action.

It makes us feel better about all the bad stuff we’ve done with money and debt for the political efficacy of Team Elite.

And all the bad stuff we’re going to do.

At its core, Modern Monetary Theory is an argument that would be wonderfully familiar to every sovereign since the invention of debt. It is essentially the argument that significant sovereign debt is a good thing, not a bad thing, and that budget balancing efforts on a national scale do much more harm than good. Why? Because there’s so much to do and so little time for the right-minded sovereign. Because it is fundamentally unjust for the demands of private lenders to thwart the necessary ends of the sovereign, and it is politically difficult to finance those ends through tax levies on a fickle citizenry.

MMT is the sovereign-friendly justification for deficit spending without end.

Historically, this argument has been used by sovereigns to support wars without end.

(emphasis in original)

When you take a step back and comb through financial and economic history, amongst the wreckage of worthless fiat currencies from our past (note that 100% of all previous fiat currencies became worthless), we find hints and precursors of what is being rebooted as Modern Monetary Theory

Bear in mind that “Net Spending Achievement” neologism as we follow the rise and fall of the Austrian fiat regime in the 1700’s…

Unlimited National Debt?

A new phenomenon was occurring throughout Europe. Royal debt was being transformed into national debt. What had been the personal debt of the monarch was becoming the burden of the nation, payable by the people. And many central banks were created to administer this debt through paper money.

Austria provides one of the best examples of this new way of thinking. The First Bank of Austria was founded in 1703, with the express purpose of funding public debt by issuing paper money in exchange for deposits. With too few deposits, and too many notes, the bank and its currency failed.

In 1759, Count Sinzendorff, a prominent Austrian official and renowned financier, went a step further and suggested that government debt be brought to all the people, not just the depositors. He issued Austria’s first paper notes for general circulation, as a loan instrument with interest coupons attached. The new money was well received. Impressed by the expansion of commerce when more credit was made available, the government authorized a second issue of paper bills in 1769, and a third in 1771. Yet this prosperity did not last long. As excessive new issues were printed, they provoked a panic in 1797. The next decade was no better. Austria became embroiled in wars, spent heavily and ended up with a currency that lost over 90% of its value.

— (from Fiat Paper Money by Ralph T. Foster, emphasis added)

The idea that money is nothing more than an economic scoreboard or tally was advanced by John Law when he was trying to devise a method for Scotland to stave off bankruptcy, which he expounded upon in his book “Money and Trade” (“Money is the Measure by which Goods are Valued, the Value by which goods are Exchanged, and in which Contracts are made payable” – quoted in Fiat Paper Money).

Scotland never adopted Law’s ideas, and in their own currency machinations went bankrupt and ceased to be an independent country 1707 (ibid). Law moved onto France, continuing to promote his monetary theories, at one point declaring to an astonished room of aristocrats that he had discovered the secret of alchemy: “I can tell you my secret. It is to make gold out of paper” (ibid).

Even the MMT proposal to use taxation to control inflation is nothing new and was tried in New York in the late 1700’s, stability seemingly achieved by the New York Assembly having strict laws on their books limiting the amount of paper notes that could be issued. It’s not really clear what happened to this currency as it overlaps with the period when British laws were barring the colonies from issuing their own paper currencies and the subsequent segue into the revolutionary war, and the advent of the Continental (which eventually collapsed in a hyperinflation).

The Ascent of the MMT Narrative Today

I first became of aware of MMT when I used to read Business Insider back around 2010 or so and Joe Weisenthal, one of the most vigorous proponents of Cullen Roche’s “Pragmatic Capitalist” site, and he would unfailingly repackage anything Roche wrote on BI. Fast forward to today, and Roche seems to have backed off his MMT evangelism, or is at least a lot more nuanced and rigorous in his examination of it. 

The next time I came across MMT was in David Golumbia’s book “The Politics of Bitcoin”, wherein he seemed to think that what we have today is MMT. I can see why people would make that mistake, and Roche notes that as well in the article I just linked. Golumbia’s book (which I deconstructed in detail here) also criticizes the economic truism that inflation erodes purchasing power as wrong, and an example of right-wing conspiracy theory.

I mention that here because that is an idea that  Weisenthal also glommed onto back in his BI days, and while it isn’t yet, I fully expect this notion to be embraced by MMT adherents as this ideology is relentlessly pushed mainstream (the TL,DR of this idea is that a dollar doesn’t lose purchasing power when you issue more dollars if you put it into a bank account and earn interest on it. I debunked this thoroughly in my review of PoB. It’s one of those “not even wrong” notions in that  it’s economically incoherent).

Now that Modern Monetary Theory and Democratic Socialism have found each other, we have to look at why it’s such a dangerous combination.

The Problems with Modern Monetary Theory

Most of the articles I’ve seen decrying MMT hone in on it being inflationary, full stop. Which is true. No government has the discipline to not bribe the populous with either other people’s moneyor “made up” pixie dust that they convince everybody to pretend is money.

Beyond that, there are numerous failings with MMT including the fact that calling debt something else, like “national spending achievement” doesn’t make it not debt,  but does lose sight of what debt actually is. 

When you think about it, all debt is the pulling of future value into the present. If it wasn’t, if you had present value on hand and the willingness to trade it for what was desired, there would be no debt incurred.

As I observed recently, when you rack up debt you are either borrowing or stealing from the future. The difference is whether you plan to pay off the debt (borrowing) or if you plan to perpetually roll it over (stealing). MMT is structurally and by design, the latter.

MMT says debt  (err, sorry, National Spending Achievement) can expand perpetually and inflation will not occur provided it doesn’t expand faster than the value in the private economy (which assumes central planners can actually measure that accurately ) and any excess liquidity is drained off via taxation.

Like all fiat monetary schemes, you can make a theoretical case for it working. I once called MMT the elevation of circular reasoning to an art form, and Austrian economist Bob Murphyemphasizes that MMT relies upon “accounting tautologies”.

In practice, governments will always promise entitlements today at the expense of consequences tomorrow, so the monetary base will always expand and as each crisis is postponed, over time this dynamic will accelerate. If the monetary base happens to be credit (read: “debt as money”) then remember what we said debt is: future value, consumed today.

Under MMT however, when things go bad, they will get very bad. Here’s why:

Money started as hard currency, so it was near impossible to lose faith in it, and it would only happen as coinage was debased or replaced with fractionally backed paper notes.

After Bretton Woods, money, or the worlds reserve currency was “backed by the full faith and credit of the US government” and for a few decades at least, that seemed “good enough”. Although there have been panics and the overall trend is toward less confidence in the current monetary regime and the USD as world reserve currency is openly acknowledged to be in its waning days. It’s a matter of “when” not “if” even in polite company.

Under MMT there is no more pretence that the currency has any intrinsic value – it’s an economic scorecard and nothing more. The system would work as long as confidence held for the system itself, not any faith in the currency. If any cracks appeared in the system, i.e. inflation accelerated or taxation crept too high, I submit that any speed-wobble in confidence would lead to a dramatic and sudden, disorderly reassessment. A panic. It would be a genuine “life imitates The Onion” moment.

Were an MMT system inevitably go awry, the outward manifestation would be of course manifest as inflation, so central planners would of course try to get ahead of it by draining more liquidity, faster, by increasing taxes. As this fed on itself and accelerated, the populace, as if being swept up in a hyperinflation isn’t bad enough, would be sandwiched between hyperinflation and hypertaxation!.

Think of an MMT crisis as an economic black hole sucking all value from further and further future generations into a gravitational vortex of the present moment, where all value collapses in on itself and disappears forever.

People seem on board with OAC’s 70% marginal tax rate on highest earners but in a failing MMT regime the hypertaxation effect would occur through the highest marginal tax rate threshold coming down.

People don’t mind Dwayne Johnson paying 70% on his income over 10M, but how will they feel when they’re paying 70% on any income over 300,000? 100,000? 40,000? How about an 80% tax rate on income over $20,000/year and a loaf of bread costs $250 today and $3,500 in a week? (When your marginal tax rate is then 92% on all income over $1,000/minute?)

That’s what a nightmare MMT scenario looks like. At least in Venezuela they’re only getting squeezed on one side of the vice, and their central planners are trying to go the other direction than MMT-ers, attempting to tie their currency to something tangible (failure of execution however, is hampering this).

Compared to what I see as the inevitable “dual death spirals of MMT”, letting all those banksters fry in 2008 looks a lot more palatable in retrospect. David Stockman’s Great Deformation shows how the economy would have fully recovered by 2010 or 2011 instead of being where we are now: trapped at the Zero bound and headed toward democratic socialism and MMT.

Published:1/21/2019 7:44:12 PM
[Markets] What Happens When The Fed Stops Hiking

As we explained last weekend, it's not the Fed tightening - and curve flattening - that is the recession catalyst: it is when the Fed begins cutting rates, sending the yield curve sharply higher, that one should be worried as all three prior recessions followed within 3 months of the first rate cut after a hiking cycle:

This is a critical distinction at a time when the Fed is contemplating not only ending its rate hike cycle - and thus curve flattening impulse - but potentially cutting rates, at least if it agrees with the market, so soon as late 2019, which in turn would prompt a sharp spike in the yield curve and, as we argued in our post explaining why the Fed is trapped, catalyze the next recession.

To be sure, nothing is set in stone, and as Goldman strategist Ian Wright writes, much focus remains on the state of US growth, the ongoing US-China trader war, the US government shutdown, and Brexit, each of which could tip the Fed's hand. And yet, amid this uncertain backdrop, recent weeks have been good for risky assets. Oil has risen sharply, with GSCI Energy now up 16% on the year. Credit has also rallied - especially on a risk-adjusted basis - and undone almost all of its December spread widening, in both IG and HY, and USD and EUR markets. Last but not least, the S&P 500 is up 14% since the Steve Mnuchin called the Plunge Protection team on December 24 (and since the government shutdown).

Sarcasm aside, the recent risk was largely the result of Powell's abrupt dovish reversal and has been supported by the abatement  of concerns about central banks hiking rates. In the past month, markets have priced both the Fed and ECB more dovishly in the coming year, with no hikes priced for the Fed in 2019 and a first ECB hike priced only in 2020 (notably, 10-year yields have risen amid the recent risk-on, as the correlation between stocks and bonds which recently shocked market watchers when it inverted, appears to be normalizing somewhat).

Meanwhile, as the Goldman strategist writes, even as the bank's economists’ view remains that the Fed will hike again in June, followed by December, the bank's clients have asked "if the Fed is done with its hiking cycle"... and, if so, what the implications for asset prices would be.

And while we know that the first rate cut following a hiking cycle has been a clear signal for an imminent recession in the last three contractions, the question is what happens to risk assets once the Fed stops hiking. Here the answer is a little more nebulous.

Looking at the end of the past four Fed hiking cycles (1989, 1995, 2000 and 2006), Goldman finds US equities have tended to do relatively well in the year following the Fed’s last hike (Exhibit 1).

The exception to this was in 2000, when the tech bubble burst, while equities did exceptionally well in 1995, which however was the only time the last hike was not followed by a recession in the coming years. It is also worth noting that while there was no immediate bear market in the year following the last rate hike in June 2006, everyone knows what happened shortly thereafter.

The average result, Goldman notes, may be surprising because growth expectations (measured by the ISM manufacturing) also tend to fall into and after the Fed’s last hike in a cycle (Exhibit 2).

What about rates? Here Goldman finds that 10-year Treasuries tend to rally strongly following the last Fed hike (Exhibit 3) hence the sharp steepening in the yield curve noted above just before a recession.

The fact that the Fed has not cut rates soon after ending hikes, but rather held rates high, could explain these findings.

In other words, equities may benefit from the reprieve in rates rising further, without recession concerns rising immediately (which would drive cuts). However, the bond market prices the end of hikes and future rate cuts over a long window, creating an interplay whereby the Fed's actions force a sharp curve steepening, which in turn is interpreted by the market as a recession onset and in turn results in a bear market for equities.

Finally, Goldman notes that these results could be different from what happens should the Fed pause in its hiking cycle, something Powell may be actively considering as he decides whether to keep hiking or capitulate, and cut rates, catalyzing the next recession.

Published:1/21/2019 7:12:43 PM
[Markets] "We Come Not To Praise Indexing, But To..."

Via DataTrekResearch.com,

Jack Bogle’s passing is a timely reason to spend a moment considering the growth of index-based investing, an approach he spent much of his professional life promoting with great success. Like many of you, we have watched indexing go from curiosity (in the 1980s) to limited acceptance (the 1990s) to widespread adoption (now). In terms of his impact on capital markets, Mr. Bogle has few peers in this or any century.

As far as what we can add to a discussion of index-based investing, we have three points to share with you today:

#1. Indexing’s rise – especially in US equity markets - over the past 20 years was not just a function of its low cost structure or notional simplicity.Rather, long run returns declined precipitously over the period. This left asset owners scrambling for ways to maintain equity exposure without paying active manager fees.

Some data to back this up:

  • Over the 20 years from 1980 to 1999, the S&P 500 compounded at an annual rate of 17.7%. If you had invested $100 at the start of this period, you would have come out the other end with $2,600.

    Now, if you paid an active manager 1-2%/year to invest in US equities over this period and they kept pace with the S&P, your returns would have been 5-11% lower than simply buying the index.
  • Over the 20 years from 1999 to 2018, the S&P only compounded at an annual rate of 5.6%. Instead of seeing $2,600 from a starting $100 investment (as with the prior point), at the end of 2018 you would only have $296. 

    Paying an active manager 1-2%/year over the last 2 decades would have cut your returns by 18 – 36%. A good deal more than 5-11%, in other words.

The upshot here is that indexing didn’t damage the active management business (as critics often claim) as much as structurally lower US equity returns pushed asset owners to lower cost solutions like index funds. Mr. Bogle and other indexers caughtthis wave beautifully, but they did not create it.

#2. While the rise of “passive” indexing has caused increasing concern that it makes societal asset allocation less efficient, other “active” approaches to capital investment have grown dramatically as well. Consider:

  • McKinsey estimates the size of the global private equity business at +$5 trillion. Twenty years ago, of course, this was a cottage industry in comparison to now.
  • Buyout funds represent the largest slice of this pie, at $1.6 trillion, followed by real estate ($810 billion) and private debt ($637 billion).
  • The fastest growing piece of private equity is venture capital, which on a global basis put over $300 billion to work in over 30,000 companies just last year according to industry source Crunchbase.

This point has a tie to the prior one: as equity returns declined over the last 2 decades asset owners shifted capital to higher risk/higher return investments even as they embraced public equity indexing. If you’ve ever worked in a firm owned by private equity or venture capital, you know how “active” those owners can be.

The upshot: even with the rise of indexing, there is still a growing business for active management – it just isn’t in public equity markets.

#3. Future returns for US stocks will not be tied to how much capital is indexed, but rather the sorts of companies that come public in the coming years. Just look at the returns from the 2007 peak to now for the S&P 500 versus either the MSCI Emerging Markets or EAFE (Europe and Japan) indices to see why. US stocks are 69% higher, but Emerging Markets are down 26% and EAFE stocks are 28% lower.

The reason why US stocks have been wealth creators and foreign stocks have floundered: Amazon, Facebook, Apple and other tech names play a large role here, but so does the entire Health Care sector. Innovation at global scale drives returns, and not much else. Even the Chinese Tech giants have not been able to drive the Shanghai/Hong Kong markets to fresh post-2007 highs.

Summing up: to really understand how indexing has changed capitalism you need to look at the big picture. Its rise was a function of larger capital market trends, namely lower structural equity returns. Those in turn pushed capital to other, more profitable asset classes that solidly check the “active” management box even if indexing does not. As far as what the future brings, that is in the hands of the IPO calendar.

Published:1/21/2019 6:45:33 PM
[Markets] Feds Prepare To Bail Out "Vast Majority" Of 90,000 Sears Pensions

The Pension Benefit Guaranty Corp (PBGC) said in a Friday press release that it believes Sears Holdings Corp's "continuation of the plans is no longer possible" following the Company's October bankruptcy, after it was revealed in a Friday filing that Chairman Eddie Lampert's $5.2 billion rescue package does not include pension plans

PBGC, a government agency, covers individuals' pensions in the event a pension plan shuts down without sufficient funding to meet its obligations. The Sears pension system, meanwhile, is underfunded to the tune of approximately $1.4 billion, which the agency could attempt to recover through the bankruptcy, according to MSN.

It should be noted that the PBGC is not supported by general tax revenues, rather, funding comes from four sources; insurance premiums paid by sponsors of defined benefit pension plans; assets held within the pension that PBGC takes control of; recoveries of unfunded pension liabilities from the bankruptcy estates of plan sponsors, and investment income. Sears entered into a five-year protection plan with the PBGC in 2016. 

Ron Olbrysh, chairman of the National Association of Retired Sears Employees, said the guarantee means retirees aren't worried about losing pensions, but they do have concerns about other benefits.

"The pensions are secure through Sears or through the Pension Benefit Guaranty Corp.," he said. "The big impact if Sears does liquidate is that retirees will lose life insurance."

The PBGC said it expects its guarantee will cover the "vast majority" of pension benefits earned under Sears' plans. Retirees who have questions about what the takeover would mean for their pensions can visit www.pbgc.gov/Sears-QA. ;-MSN

Until Sears agrees to terminate the pensions or the court orders them to do so, the Hoffman Estates-based retail giant will remain responsible for the plans, which the agency is looking to assume control of as of January 31. 

Lampert - then the company's CEO, wrote in a September blog post that the company's pension obligations had become a major sticking point. 

In addition to the very difficult retail environment, Sears has also been significantly impacted by its long-term pension obligations. In the last five years, we contributed almost $2 billion, and since 2005 we have contributed over $4.5 billion, to fund our Pension Plans.

...

The reality is that, while we strongly believe in our vision and our strategy for the Company, we also have had to address the pressures that result from the unsatisfactory operating performance as well as the ongoing burden of our legacy pension liabilities. -Eddie Lampert

Sears confirmed on Thursday that Lampert's $5.2 billion rescue package had been accepted, preserving 45,000 jobs - but not the roughly 90,000 pensions the company is on the hook for. Lampert's offer will still require approval from US Bankruptcy Court in the Southern District of New York - while the company's creditors are already beginning to complain. 

Published:1/21/2019 6:13:15 PM
[Markets] Demographic Catastrophe: China's Birth Rate Falls To Historic Low

Over the weekend, China's statistics bureau announced a significant dip in the country's birth rate with the number of babies born in China last year falling by 2 million to the lowest annual rate since the country was founded in 1949, despite Beijing's recent attempts to encourage couples to have more children.

In 2016, China partially ended its one-child policy to allow couples to have two children, but as we warned repeatedly since then, the policy has done done little to spur population growth as rising living costs weigh on couples considering a child.

In numbers (via DW):

  • The birth rate in 2018 dropped to 10.94 per thousand, down from 12.43 the previous year.
  • The number of babies born in 2018 dropped by 2 million compared to the previous year to 15.23 million.
  • The birth rate is the lowest since 1949.
  • China's population is nearly 1.4 billion.

Commenting on China's demographic collapse, Wang Feng, a sociology professor at the University of California, Irving, said: "Decades of social and economic transformations have prepared an entirely new generation in China, for whom marriage and childbearing no longer have the importance they once did for their parents' generation."

Cited by DW, Beijing officer worker Mina Cai said: "Many of us grew up as only children and we're a little selfish about putting our own satisfaction above having kids."

Independent Chinese demographer He Yahu echoed these concerns when he said: "The low birth rate has led to a seriously ageing population. On one hand, families are getting smaller, reducing support for the elderly; on the other hand, the elderly population to workforce is growing, which increases the burden on the working population."

As we reported at the time, China surprised the world three years ago when it announced the end of its one-child policy, which limited many families from having more than one child. The policy was criticized for giving rise to forced abortions and sterilizations, for encouraging couples to try to have boys rather than girls and for catalyzing China's sharp decline in births.

China's new civil code is set to be unveiled in 2020, with all mentions of "family planning" removed from the text, according to media reports. Observers suggest it could mean Beijing will be lifting limitations on family sizes introduced in 1979 to control population growth.

Besides demographics, China's transformation into the next Japan has major, and potentially dire, consequences for the local economy.

As we reported back in October via Econimica, the 0-to-24 year old Chinese population swelled by over 300 million from 1950 to it's ultimate peak in 1991.  Since that peak, the total population of young in China has fallen by 176 million, or a 30% decline in the number of children across China.  Moving forward, the UN has expressed hopes the formal elimination of the one child policy would simply slow the rate of decline in the population...but by no means will China's fast declining childbearing population (those aged 15-44) nor disproportionately young male population potentially be offset by a slightly less negative birth rate.  Contrast that with the quantity of debt being forcibly injected into a nation that faces a massive imminent population decline.

To put that debt into perspective, the chart below shows that total debt and annual GDP each divided by the 0 to 24 year old Chinese population.  As of 2018, every child and young adult in China under the age of 25 is presently responsible for over $100 thousand dollars in debt while the annual economic activity (GDP) created by all this debt continues to lag ever faster

And the coming decade only worsens as the young population continues its unabated fall and debt creation (absent concomitant economic growth) continues soaring... building more capacity all for a population that is set to collapse.

China's predicament and reaction to it are not particularly unique...but given China's size, the ultimate global impact of China's slow motion train wreck will be unprecedented... particularly as their 15 to 64 year old population is now in indefinite decline.  Chart below shows annual change in Chinese 15 to 64 year old population, in both millions (green columns) and percentage (blue line).

Simply said, without a dramatic rebound in China's birth rate, massive overcapacity (thanks to over a decade of government mandated malinvestment) versus an ever swifter declining base of consumption does not add up to a burgeoning middle class or a happy ending.

Of course, it's not just China: for context, here is a chart showing US federal debt per capita of the 0 to 24 year old US population...

... confirming that the next generation, whether in China or the US, is set for a painful collision course with debt bubble dynamics.

Published:1/21/2019 5:42:27 PM
[Markets] GMO Warns "...Own As Little US Equity As Your Career Risk Allows"

Authored by Martin Tarlie via GMO,

Key Points

  • A new model suggests that from early 2017 through much of 2018, the U.S. stock market was a bubble.

  • Driven by negative changes in sentiment, the bubble started to deflate in the fourth quarter of 2018, in spite of strong fundamentals.

  • Our advice, consistent with our portfolio positions established in Q1 2018 – as usual, we were early – is to own as little U.S. equity as your career risk allows.

Introduction

In the fourth quarter of 2018, the S&P 500 fell almost 14%. This large price drop occurred in spite of a strong fundamental backdrop. Earnings per share (EPS) for 2018, much of it already locked in, is expected to be about $140, a 28% increase over 2017. And expectations for 2019 are for EPS of about $156, a 12% annual increase. With fundamentals so good, what explains the recent price action?

A new model – the Bubble Model – explains this dichotomy between price action and fundamentals by suggesting that a bubble in the U.S. stock market started inflating in early 2017, and continued to inflate through the third quarter of 2018. In the fourth quarter, however, indications were that the bubble had started to deflate.

And when bubbles deflate, they generally do so with a volatility bang. In this new model, bubbles are prone to form when times are good and expected to get even better. Good times today and even better times ahead are reflected in high valuations and solid fundamentals that continue to improve. Improving fundamentals lead to positive changes in sentiment, and these positive changes in sentiment fuel the bubble.

However, sentiment cannot increase forever. When change in sentiment – not level – inevitably turns negative as hopes of even better times ahead are dashed, there is nothing left to fuel the bubble...

While there are indications that the bubble started to deflate in the fourth quarter of 2018, and the magnitude of both price action and the change in the quantitative measure of euphoria that defines the Bubble Model suggest that the odds are now tilted in favor of the view that this is the beginning of the end of the bubble, we would be well-advised to remember Yogi Berra’s counsel that “It ain’t over till it’s over.”

Past bubbles do exhibit “head fakes” in which bubble deflation is interrupted by a secondary growth event. For example, in the third quarter of 1998, the time of the LTCM crisis, the Bubble Model suggested the bursting of the bubble that had started inflating in early 1997. However, the 1998 reading was a head fake, and the bubble continued to grow for another 18 months before finally popping in early 2000.

... The Bubble Model, which focuses on the dynamics of valuation, captures both the quantitative and anecdotal euphoric elements of a bubble. Euphoria manifests as explosive dynamics, expressed quantitatively as a negative mean reversion speed. Because the model is quantitative, it does not suffer from the subjective uncertainties inherent in anecdotal stories. While most of the time valuation is mean reverting, on rare occasions valuation is temporarily explosive, or mean averting. This mean aversion goes hand in hand with expensive valuation and is the defining characteristic of a bubble...

Exhibit 1: Valuation in 2018 Matched the Peak of 1929

Mean aversion, or explosive dynamics, arises when speculators dominate the market. Speculators are subject to fads and fashion and have a tendency to follow the herd. Their demand for stocks is ephemeral. Fundamental investors, on the other hand, assess value based on fundamentals and expected return considerations. Their demand for stocks is relatively stable. To the extent that fundamental investors dominate the market, fundamental value provides an anchor around which market prices vary. This is standard mean reversion.

However, when speculators dominate, i.e., the percentage change in speculative value exceeds that of fundamental value, then price tends to move away from fundamental value because deviations of price from fundamental value get relatively bigger. This is mean aversion.

...

The anatomy of 2017-18 A bubble…and initial stages of a pop

The fifth period of explosive dynamics, shown as a close-up in Exhibit 3, begins in 2017 and extends into late 2018. The mean aversion from early 2017 through the third quarter of 2018 is a quantitative measure of euphoria and suggests that during this period a bubble is inflating in the U.S. stock market, even though this period lacks the conventional anecdotes of euphoria, such as barbers and shoe shiners turned stockbrokers. And while such anecdotes appear lacking, the optimism and enthusiasm surrounding Big Data, Artificial Intelligence, and Bitcoin, among other technological advances, are typical of bubble-like animal spirits.

Exhibit 3: Slowing Mean Reversion, a “Melt Up”…and a Bursting?

The data point for the fourth quarter of 2018 shows a dramatic change in the mean reversion speed, from an explosive, mean averting phase to a strongly mean reverting phase. The scale and duration of this move is consistent with the moves associated with the bursting of the 1929 and 1999 bubbles, and the reflation of the anti-bubbles of the late 1910s and the early 1980s.

...

Prior to the fourth quarter of 2018, the most extreme change in the mean reversion speed is the one from the third to the fourth quarters of 1929. Here, the mean reversion speed goes from slightly negative to strongly positive over the period of three months. However, the change in the mean reversion speed from the third to the fourth quarters of 2018 eclipses that of 1929, highlighting just how dramatic the last few months have been. The magnitude of this move also tilts the odds in favor of the view that we may currently be experiencing the initial stages of the bursting of the bubble of 2017-18.

Exhibit 4: Valuation and Euphoria, the Two Elements of a Bubble

So, what do we learn?

Own as little U.S. equity today as your career risk allows

The Bubble Model teaches us that bubbles form when times are good – high valuation – and expected to get even better – changes in sentiment are positive. Bubbles burst when changes in sentiment – not level – turn negative. This dynamic helps us understand how it is that during the fourth quarter of 2018 the market fell dramatically, even though fundamentals, both past and expected, looked solid. While as of December, 2018 expected EPS growth for 2019 is 12%, this is substantially below the 28% growth of 2018. Furthermore, since August, 2018 estimated EPS for 2019 has been revised downward by more than 4%. These changes, together with concerns about Federal Reserve tightening and trade tensions with China, point to negative changes in sentiment, a catalyst for popping a bubble.

The key role played by changes in sentiment also highlights why it is so difficult to time a bubble. While the benefit of successfully riding a bubble and getting out in time is obvious, there are two reasons why this is a challenge.

  • First, when the bubble pops, the reversal tends to be wicked, which is to say that mean reversion comes back with a vengeance. Mistiming can therefore be costly.

  • Second, the odds of mistiming are high because the catalyst for the pop is a change in sentiment. It is not the level of sentiment that we need to predict, but rather the change, which is much more difficult.

There is another subtle, but important point. I have been deliberately vague about what sentiment means. In Tarlie et al. (2018) the catalyst for both bubble formation and destruction is expected change in profitability. But more broadly we expect that change in sentiment is the catalyst, which is to say that there are myriad factors that can ignite animal spirits as the bubble forms, and then snuff them out as hopes for even better times ahead are dashed. Effectively, this vague definition reflects model risk. So even though we have a model that helps us understand how bubbles are created and destroyed, unfortunately it does not help us predict the timing of their demise. It does, however, give us insight into why timing is so challenging.

Our advice when the bubble is inflating is to avoid the siren song of buying into rising prices, thus avoiding the bubble altogether. While career risk can make this course of action difficult (hence giving further life to the bubble, of course), we believe the challenge of successfully timing the exit is such that bearing the career risk is the wiser and more prudent course for those with a sufficiently long time horizon.

Currently, we are faced with a volatile market that, through the end of 2018 at least, is down double digits from the September, 2018 peak. The volatility is consistent with a bubble bursting, though we caution that it is possible that the fourth quarter move in the mean reversion speed could be a head fake. While the dramatic nature of the move in the mean reversion speed to such strong mean reversion suggests that the odds are tilted toward this being the beginning of the end of the bubble of 2017-18, we cannot rule out reflation of the bubble, analogous to the event of late 1998-2000. Given that valuation is still high, our advice, consistent with our portfolio positions, is to continue to own as little U.S. equity as career risk allows.

*  *  *

Read the full paper here.

Published:1/21/2019 5:12:58 PM
[Markets] Native American "Harassed" By MAGA Kids Exposed As Outrage-Culture Grifter

Just when you thought your blue-pilled perception of the world couldn't take another red-pilling reality check - after Buzzfeed's lies and mainstream media's Covington Catholics chaos - it turns out that the man wondering quietly across the concourse before 'not being accosted' by young MAGA-hat-wearing teens is not some hapless native American...

It turns out that Nathan Phillips is raising money with the help of a major big-money left-wing operation, and has a history of appearing in the press claiming to be a victim of anti-Native racism.

In 2015, Phillips claimed that he was “bombarded by racial slurs” by students at Eastern Michigan University.

As Fox 2 Detroit reported, an Ypsilanti man says he was trying to teach a few students dressed in American Indian theme party about respecting Native Americans. Not long afterward, Nathan Phillips said that an interaction with party-goers and students turned ugly.

Nathan Phillips says he was out for a noon walk on a Saturday in mid-April.

He walked by a home where he saw Eastern Michigan University students dressed as Native Americans.

"They had little feathers on, I was just going to walk by," Phillips said. "A group of them said 'Come on over, come here.'"

He says he walked over to the fence and saw roughly 30 to 40 students involved in a theme party.

"They had their face painted," Phillips said. "I said what the heck is going on here. 'Oh we are honoring you.' I said no you are not honoring me."

It was a statement he says they took offense to.

"Then started whooping and hollering," he said. "I said that wasn't honoring, that was racist. Then at that time, it really got ugly."

Phillips says he was bombarded with racial slurs.

"(They said) 'Go back to the reservation, you blank indian,'" he said.

One student, he says, threw a beer can at him.

"If I would have stayed where I was at, it would have hit me in the head," he said. "I backed up and it hit me in the chest."

He had seen enough at that point and says he called the police.

"By the time police got there, it was like there was no party there at all," he said.

Phillips filed a report with campus police who tell FOX 2 they are investigating the matter.

"Whoever would sit judgement on them, the university the law, society, that is their job," Phillips said. "I will pray for them that they will see a better way."

Rings a bell?

Additionally, Phillips starred in a 2012 Skrillex video called “Make It Bun Dem,” in which Phillips does some spiritual warfare connected to a violent attack on a police officer. 

The point is this, as BigLeaguePolitics so eloquently summarizes:

Phillips is not simply a random Native man who was accosted by “racist” MAGA-hat wearing teens, as the mainstream press has reported. He is connected to leftist activists who donate large sums to leftist causes.

“[Phillips] is a Vietnam Veteran and former director of the Native Youth Alliance,” according to Heavy.

The Native Youth Alliance appears to be a standalone entity. However, as BigLeaguePolitics' Patrick Howley points out, the larger well-funded Native Youth Leadership Alliance - which told us that it is not associated with Phillips - is currently promoting Phillips’ fundraising campaign stemming from the incident with the Catholic teens. The Native Youth Leadership Alliance (NYLA) is a non-profit organization that is funded by the same far-left power players who are often involved in bankrolling leftist causes. The organization’s funding partners include the Bill and Melinda Gates Foundation, the Rockefeller Brothers Fund, and the Social Justice Fund Northwest.

And now, he is personally fundraising off the mainstream media's misdeeds...

Stay skeptical, question everything... appears to be the best way to handle the currently reality that we are fed every day. The oligarchs know, divide-and-conquer works and don't care about the inevitable blood on their hands.

Published:1/21/2019 4:42:19 PM
[Markets] There Will Be Blood: The Future Of Asset Management

Submitted by Three Body Capital,

TL;DR

The rise of passive and ETF investing is turning up the heat on active managers. Change is coming to our industry, and those that fail to adapt will fade into obscurity.

The old business was highly intermediated and lucrative, while the tokenised future is likely to be far less commercially attractive and unable to support the behemoths in their current form.

Despite the doom and gloom, we believe active management can generate compelling returns for investors and survive the impending upheaval that looks set to turn our entire industry upside down.

The elephant in the room

Asset management in its current form still looks much like it did back in the 80s, or even earlier. Asset managers aggregate investor funds and deploy capital in search of investment returns, seeking to identify mispricing in the market. The ascent of passive and ETF investing has turned the table on active managers, especially in terms of fees. Here at Three Body Capital, we're still in this line of business because we believe it can generate compelling returns for investors. And we believe it will survive the impending upheaval that looks set to disrupt our entire industry.

While other industries have experienced profound structural disruption, financial services have stayed largely the same. Asset managers still employ complex fund/manager structures (e.g. Cayman domicile with a Delaware feeder, Malta, BVI, Bermuda, Jersey etc), with a large chunk of active management fees effectively diverted to the likes of fund administrators, custodians, exchanges, brokers and service providers fulfilling a range of regulatory and administrative functions.

The hurdles to entry into the asset management industry are high, which is why large managers get bigger and small upstart managers struggle to gain traction. Case in point: BNY Mellon, one of the largest custodian banks and asset managers in the world, has about US$1.8tn of assets under management and US$35.4tn of assets under custody. Asset management is profitable at around 28% pre-tax margin, but its custodial/services business generates almost 35% pre-tax margin, represents almost 55% of its US$13bn of non-interest income, and 44% of US$17bn of total revenues.

Custody, clearing, settlement and other issuer services are big business. Add to that expansive regulation and the need for more compliance and supervisory oversight in the years since the crisis of 2008, and the regulatory cost of managing external capital is rising. This is inadvertently being passed to investors via lower net investment returns.

At the same time, a narrative has been constructed to defend super-normal profits, with investors barking up the wrong tree in search of better returns. Management fees have been paraded as the cause of poor returns, leading to the rise of passive managers offering low fees (or even zero/negative fee ETFs, as we are seeing from the likes of Fidelity and Vanguard, on the basis that less trading leads to lower costs. The end result is an investment environment that’s increasingly passive, with many “active” managers largely hugging their benchmarks, providing little outperformance against their passive counterparts and inadvertently perpetuating the story that alpha is dead.

The reality, however poorly understood, is that the high expense ratios generated by smaller active managers are not so much a function of trading commissions, but more a result of rising fixed costs relating to operations being distributed over a smaller net asset value. The end result? Investors in small funds are penalised more than those in larger funds.

As the “active versus passive” battle rages on, the market seems to have missed the elephant in the room. And it’s a very large, very aggressive elephant.

Light at the end of the tunnel

As the old joke goes, the light of the end of the tunnel might well be an oncoming train. In the case of asset management, we think this could well be true.

Our train started its journey in the heart of the 2008 crisis, with a little experiment called Bitcoin. For many years, Bitcoin was seen as a hobby for nerds and millennials who were either idealistic, impractical or naïve. Who needs a decentralised money transfer system that’s censorship proof, unless they're engaged in drug trafficking or other illicit behaviour? Well, it turns out, lots of people do. The Bitcoin bubble of the past 3 years has captured the imagination of the retail investor, and it all came to a head last year when Bitcoin spiked towards $20k, taking with it a plethora of "utility tokens" that raised an estimated US$20bn of capital through (now-infamous) Initial Coin Offerings (ICOs).

Unfortunately for many of these investors, the vast majority of these ICOs will turn out to be worthless as far as the tokens are concerned. But this process, however painful for its participants, drew a huge pool of capital into an industry run by lots of highly intelligent and innovative people. The most fortunate unintended side effect of boom/bust cycles is the establishment of infrastructure that eventually develops compelling use cases. This was the case with the dot com bubble of 2000. Many dot com companies evaporated in the ensuing market malaise, but the bubble turned out to be an overzealous extrapolation of future developments, far too early in the life-cycle of internet infrastructure to sustain themselves.

Almost 20 years after the dot com boom, we can hardly imagine a day without being connected to the internet and big tech. Amazon, Google, Facebook, Netflix and Spotify are just a few examples of what we can scarcely afford to live without. And to think that back in the day it was normal to ask, “Now why on earth would you want to read a book on a computer screen when you can just go to the library?” Not forgetting the fact that dial-up connections used to drive our parents nuts, hogging the phone line whilst we checked our emails or chatted on ICQ and MSN Messenger.

With hindsight, we see how the dot com boom catalysed a 20 year process of infrastructure rollout which effectively made the dreams of the its original founders a reality, albeit in a different form. We now have a dot com for everything. The ensuing disruption from the rise of the internet was also far-reaching - everything from retail to recreation to communications infrastructure has been turned on its head. Skype took down IDD calling and the traditional telco; Amazon took down the shopping mall (it’s now working on the high street); Netflix took down PayTV media behemoths - the list goes on.

It’s our view that the cryptocurrency boom (and bust) have set the stage for a new age for investment management by giving form to the concept of digital assets. The beneficiaries of a high fixed-cost structure under the status quo face immense disruptive pressure. Many asset managers are going to find it impossible to change, and will fold.

Have we learnt our lesson? Can we read the signs and predict the next technological paradigm shift? It doesn’t look like it. Most industry observers are aware that asset management is evolving thanks to technology, but they’re too busy talking about black boxes and robo-advisors to recognise the paradigm-shifting implications of security tokens.

A quick word on Bitcoin

This is not an evangelical pamphlet on the benefits of Bitcoin. In a separate note co-authored with Coinshares we have provided a rebuttal to the overarching negative narrative around Bitcoin and its impact on the environment, because we believe that particular claim to be misinformed. However, whether Bitcoin replaces everything as a global currency is very much open to debate.

Where we do see Bitcoin playing a role in this new age is as an attestation chain. For those unfamiliar with the concept, it confers characteristics of information security to the Bitcoin blockchain. As the longest blockchain in existence, almost 10 years old since the first block was generated and with more than 9,800 active nodes around the world continually authenticating distributed copies of the Bitcoin blockchain, the network is practically unhackable. A hacker attempting to falsify records on the Bitcoin chain would need to launch a simultaneous attack on the chain with another 9,800++ nodes to break the 51% consensus requirement, get a false majority to agree to a falsified increment to the chain and beat the processing power of all incumbents. Amending a prior record on the record would be exponentially more difficult.

Sounds complicated? It is. And it's very expensive too. The bottom line here is that everything that’s encrypted and posted on the public Bitcoin blockchain is effectively immutable. A permanent, constantly updated publicly-accessible record. That is what Bitcoin offers the new world. And this has huge implications for asset management.

The root of the problem: bridging physical to digital

The future we see revolves around security tokens: digital versions of physical assets, whether a share certificate, a title deed to a property, or even Michaelangelo's Pieta. The thought experiment that became real with the advent of ICOs and “utility tokens” was that physical assets, often indivisible, could be converted into a digital, legally binding claim of ownership that in turn could be infinitely divisible.

For traditional stock market investors, this would be analogous to a stock split: when the nominal price of a stock became too expensive, to improve liquidity in the market, one approach would be to split the stock into pieces, with each piece corresponding to its pro-rata value. As a result, investors who couldn't afford even a single stock at the old price could now buy, for example, a third of the original stock at a third of the price. There’s no change in valuation, but the asset is distributed to a much larger market, improving overall liquidity and price discovery. Security tokens take this divisibility to multiple decimal places, with no requirement for the issuer to engage in a change in capital structure. One simply decides to buy 0.00001 shares of Berkshire Hathaway Class A at an affordable $3, rather than the $300k+ at which it currently trades. Whether this still entitles the shareholder to attend Mr. Buffett's AGM will, of course, remain at the company's discretion.

Consider this concept applied to prime Mayfair property in London, or a portion of Banksy's half-shredded art piece, and the possibilities are endless (or at least they approach infinity). Non-financial assets will be another topic for exploration in the future, and we are definitely of the view that lots more can be done in this space.

This development opens the door to significant transformation, specifically with regard to financial assets that represent legal claims on ownership and profits of companies. It has the potential to change public perceptions around the concept of ownership. By rendering assets truly divisible, tokens make ownership possible for everyone everywhere and can transform capital markets, making them broader, deeper, more liquid, less vulnerable to catastrophic shocks.

Couple this with another innovation of the crypto bubble - the token wallet - and you get broad and deep disruption across the asset management industry. Like the wallets we currently carry in our pockets, token wallets are built to contain the assets we own, from a cash equivalent (e.g. Winklevoss Gemini dollar) to an actual claim on a company (e.g. digitally securitised Tesla shares). The key differences are the near-infinite divisibility of the assets in the wallet, and our ability to hold programmable money and assets, with permissions granted and revoked via wallet software.

A thought experiment for asset managers (and wine lovers)

Jacques is a winemaker living in the south of France, and thanks to a series of good harvests, has built up a nest egg of €2m in cash. He invests most of this in money market funds via securitised fixed income instruments, but has about €200k set aside for more speculative investments in the equities market. He is particularly interested in two themes:

  1. Robotics, because he sees the impact robotics has had on his vineyards and improvements in efficiency.

  2. Electric cars, because he feels passionately about climate change and believes he must support efforts to lower greenhouse gas emissions.

His security token wallet sits on his iPhone and is activated by his interactions with Siri. As he sits down to ponder his investment strategy, he opens his wallet app and gives the following instructions:

“Siri, please allocate €1m to a high quality bond issuer that is not only socially responsible, but also is supporting a project that will make a difference in people’s lives around the world.”

Siri: “Confirmed. €1m allocated to Symmitree Foundation social impact bonds, maturing in 2028.”

“Thank you Siri. Can you also buy me €100k of Tesla shares, but only when Elon Musk tweets something silly and the stock falls more than average.”

Siri: “Confirmed. Allocation set up, buy up to €100k of Tesla shares when Elon Musk tweets and the stock reacts negatively.”

“I want €100k in a bunch of robotics companies around the world, but I don't know what to own. Can you locate some stocks with big robotics businesses and are growing earnings at least 10% a year and relatively low risk and invest my €100k there please?”

Siri: “Confirmed. €100k has been invested in the following names: Fanuc and Yaskawa Electric in Japan, ABB in Switzerland, Google in the US, Estun Automation in China, Hiwin and Airtac in Taiwan. Would you like to enable dynamic rebalancing algorithms to manage the risk on some of the Emerging Market companies?”

“Yes please. How much more do I have left to allocate?”

Siri: “You have €800k more available.”

“I'd like to authorise my old friend David to manage €400k of that balance on my behalf, I like his investing style and he has a solid track record, please send him a notification that I've given him permissions. For the balance €400k, please buy me something that gives me a decent return but will leave the cash available for me to use anytime I need it.”

Siri: “Confirmed. €400k allocated to money market funds yielding 1.2% per year. I will send David a notification that he is now authorised to trade that allocation for you and set the required permissions to facilitate money laundering and other checks.”

“Merci Siri.”

Spot the difference

Right now, highly educated asset managers seem to view security tokens (at best) as an asset class, rather than a foundational technology and catalyst for wholesale change in the financial services industry. Considering the practical effects of asset digitisation enables us to glimpse the future of our industry. And it’s unrecognisable.

Custodian banks: gone.

Under a self-custody model, money never leaves the investor. Even if trading authority is handed over to an external manager, funds are managed while sitting within the investor's wallet. No third party is needed to guarantee that the manager hasn’t run away with the investor's cash, removing the need for an independent mediator to establish trust. Custodian fees subsequently become redundant - the investor is his own custodian, so there is nobody to pay for the privilege.

ETFs: gone.

ETFs solved the problem of imperfect divisibility of assets and gave investors a cost-efficient way to express an investment view on a specific theme e.g. robotics. However, ETFs are by nature passively managed and often track indices that end up having reverse correlation and causality with the ETFs themselves. While fees are falling and expense ratios are even negative in some cases (since the ETF provider lends out stock for interest to short sellers), the ability for software augmented with AI to dynamically tailor specific portfolios for individual investors renders ETFs obsolete. Moreover, if major indices like the S&P 500 get tokenised to an infinitely divisible level, investors can hold 500 tokens in their wallets sized to the correct weights, without having to own any ETF units. Furthermore, by not having to trade in the market with subscription and redemption flows, investment, custodian and administrative expenses can be reduced. Security tokens could spell the end of ETFs’ supposed cost advantage in the passive investment space.

Complicated compliance and identity checks: gone.

At the heart of cryptographic authentication is the idea of zero-knowledge proofs, which can generate mathematically certain yes/no answers to questions that are fully verifiable. Where a Know Your Client (KYC) check currently involves an investor disclosing personal information (e.g. passport scan) and a fund administrator checking that against a database of names known for money laundering/political exposure, a zero-knowledge proof system would see an investor holding custody of all his or her personal information, and an external party sending a yes/no query to the wallet (e.g. “Is Jacques old enough to drink?”). The wallet could respond, “Yes”, without divulging Jacques' date of birth.

Stock exchanges and clearinghouses: gone.

Exchange fees that currently constitute a sizeable chunk of asset management costs have little role in the future. After all, what does an exchange provide but a novation mechanism which serves as a central counterparty to two sides of a trade, with the exchange being the counterparty to both buyer and seller and guaranteeing a completed trade? Nobody wants to hand over stock and not receive payment. With programmable transactions on a blockchain, not only can transactions complete simultaneously and instantaneously (as opposed to T+2 settlement), a central counterparty is no longer needed and no transactions are reversible. They are of course offsetable, by entering into a reverse transaction. Moreover, trading digital assets can happen 24/7 - gone are the days where an exchange is only open for 6 hours a day with a 2 hour lunch break and no trading on weekends, avoiding violent gaps in opening and closing auctions when news hits exchanges that are closed.

Active management: back to basics.

With these changes comes a return to active management that focuses on identifying opportunities that are unknown or mispriced by the market. With passive investing streamlined into a mechanism that’s dynamic and adaptive, index-hugging “active” management with the aim of generating some alpha while minimising costs is unlikely to be sustainable. More likely is that passive strategies evolve into algorithms for rent, which investors can tap on (call it “Beta-as-a-Service”). Active management becomes a purely alpha-generating enterprise, since partial market beta from a strategy can be replicated in tandem with a passive algorithm at a lower fee. For the active investor, this heralds a return to the basics of stock picking. Active management evolves into an industry built on discretionary mandates, in other words, “pure alpha”.

The future is closer than you think

This vision of Asset Management might sound like something out of a science fiction novel. But change is happening, and it’s accelerating.

The announcement that NYSE will launch its fully regulated clearing and settlement security token exchange, Bakkt, in January 2019 suggests the regulatory environment is moving quickly to make this a reality. Starbucks, Microsoft and BCG are among the key partners, delivering the infrastructure and use cases for what we believe is the first step towards a regulated security token ecosystem. Even Fidelity, one of the most established “traditional” asset managers, is rolling out solutions for digital asset custody. We’re reaching a tipping point, with the backing of tokens by established financial market names set to precipitate mass adoption.

All this means that asset managers can no longer lounge in their high castles. Change is coming to our industry, and those that adapt will thrive in the new age. Those that don’t confront change with change will fade into obscurity, or explode into flames live on CNBC.

The old business was highly intermediated and lucrative, while the tokenised future is likely to be far less commercially attractive and unable to support behemoths in their current bloated form. The magnitude of the change that’s coming could be bigger than the industry can handle in its current state. The hard truth is that most incumbents won't be needed in future.

And what of investors? To take our argument to its eventual conclusion, consider this: all active management is eradicated and every fund in the world is passively run, leading to every algorithm converging towards the passive mean as a result of backtesting. Alpha becomes extinct, only beta remains, and excess returns move to zero. What happens then?

Two alternatives:

  • Give up investing.

  • Try and be different. Beat the crowd.

To us, Option 2 seems like the better choice. And it looks an awful lot like active management.

Published:1/21/2019 4:12:05 PM
[Markets] A $3.5 billion money manager makes a bullish market case for DC's partisan gridlock In the case of the government shutdown, money manager Larry Glazer believes it's favorable for Wall Street — at least in the short term. "The shutdown rally has been driven in part because investors realize gridlock isn't necessarily a bad thing for the stock market," said Glazer. Published:1/21/2019 4:12:05 PM
[Markets] NewsWatch: These 3 leading economic indicators show no recession is coming Watch the Federal Reserve’s Senior Loan Officers’ Survey as well as the yield curve and jobless claims.
Published:1/21/2019 4:12:05 PM
[Markets] Morgan Stanley: "A Retest Of The December Lows Is Coming On Scary Fundamental News"

Last week, Morgan Stanley's chief US equity strategist, Michael Wilson, doubled down on his reputation as one of Wall Street's biggest bears, when having predicted much of the market turbulence in 2018 - which most of his peers missed - he again warned that with (1) valuations still too high and (2) earnings downside even greater than what has been priced, he expects some further deterioration in US economic data, and thinks "the S&P 500 will suffer a re-test of the lows we experienced in December, but on less negative momentum and better breadth."

Fast forward to this weekend, when in Morgan Stanley's "Sunday Start" note, Wilson triples down on his warning, and urges clients to cash out of stocks ahead of an imminent retest of the 2018 lows.

We republish his note "Wait for the Retest" below, with highlights.

2019 has begun as strongly as 2018 ended badly. After the worst December since 1931, we’re on track for one of the best Januarys ever, with the MSCI All Country World Index up 4.5% and every region participating. Unfortunately, we don’t think this will hold up because the things we, and the market, have been worrying about for the past six months are now taking shape and turning out to be worse than we expected in some cases.

Specifically, economic growth is decelerating sharply and corporate earnings are being revised lower at a rate we haven’t seen since the global recession in 2015-16. Speaking of earnings, 4Q reporting season began last week. While it’s way too early to draw any conclusions, the EPS beat rate so far for the S&P 500 is only +0.75% – the lowest since 2016. As usual, financials have dominated the first week of reporting season, and this quarter the results are essentially coming in line with expectations which, in today’s world of managed earnings, amounts to a miss. Despite these weak results, financials were the best-performing sector on the week, both in the US and globally.

After a stretch of terrible performance in a stock or an index, positive price action on bad news can often be a strong buy signal, as it suggests the bad news is already in the price. In fact, it’s something I’ve been waiting for to get more constructive and blow the all-clear whistle for US equities more broadly. However, I can’t help but think that from this perspective, the strength in financials might be a bit of a trap. First, US financials were one of the worst performers last year, reaching their lowest valuations since 2011, a time when it wasn’t clear whether many of these companies would survive. In short, more was “in the price” for financials by the end of 2018 than perhaps any other sector. Second, earnings revisions have not yet troughed, in our view, and many companies have yet to report whose stocks are not pricing in bad results. Finally, the deterioration in the economic data is accelerating, thanks to the US government shutdown, ongoing trade uncertainty, unsuccessful Brexit negotiations and continued Fed balance sheet reduction.

Back in September, our call for a 2019 earnings recession in the US was out of consensus. But now that stocks have corrected and earnings are being revised lower, others are beginning to embrace our view and clients are starting to ask what the chances are that this turns into an economic recession. Our response has been that it doesn’t really matter to us because an earnings recession is the same thing to the market and it essentially got priced in this past December. I don’t know of a single prognosticator calling for an economic recession, but if that view gains traction, it’s likely to be a buying opportunity, not a time to sell.

The moment of recognition by the consensus of either bad or good news is typically the time for investors to go the other way. As an example, think about last year’s euphoria around tax cuts. The consensus got excessively bullish in January, precisely the wrong time. I think we could be setting up for the exact opposite situation this year as the negative news flow reaches a peak.

December’s sell-off was scary, with a large majority of stocks pricing in a recession and breaking support on very high volume. Some of this was due to poor Fed communication and tight year-end liquidity, but we also think the market was coming around to our view on earnings recession risk. In technical terms, this was a momentum low. Typically, the market needs to revisit that low on price but with less momentum to mark a definitive buying opportunity. We call that a retest, and it usually happens when the bad things the market has been worrying about become so glaring that they’re in every headline.

We think this time is no different and expect to see a retest as economic and earnings data deteriorate while concerns linger around the trade deadline and the Fed’s balance sheet reduction. Our advice is to lighten up here as the market rallies and wait for a retest of the December lows on what may seem like scary fundamental news, mixed in with more political theatre. In addition, we think the stocks that have been hit the hardest will prove to be the best buys as the rolling bear market turns into a rolling bottom. Think of it as a First-In, FirstOut (FIFO) process. Indeed, the recent strength in higher-beta stocks like financials, homebuilders and energy means they fit the bill.

We just think you’ll get a better chance to buy them lower, along with most other stocks.

Published:1/21/2019 3:42:17 PM
[Markets] The Wall Street Journal: Apollo may buy U.K. packaging company RPC for more than $3.8 billion Private-equity giant Apollo Global Management LLC (TICKER:APO)  is in advanced talks to acquire RPC Group PLC, one of Europe’s biggest packaging companies, for more than $3.8 billion, according to people familiar with the matter.
Published:1/21/2019 3:15:32 PM
[Markets] Shocking Admission By FBI Veteran Shows Why The FBI Shouldn't Exist

Authored by Caitlin Johnstone via Medium.com,

On the 18th of November, 1964, the FBI’s appallingly corrupt boss J. Edgar Hoover denounced Martin Luther King Jr. as “the most notorious liar in the country.” A few days later, a Hoover deputy named William Sullivan wrote King a letter posing as a disillusioned follower and using powerful, manipulative language to urge the civil rights leader to commit suicide before evidence of his extramarital affair became public. Enclosed was an FBI recording containing evidence of the affair.

Whenever America celebrates Martin Luther King Jr. Day we should remind ourselves that it is a known, undisputed fact that the Federal Bureau of Investigation engineered a psyop to manipulate one of the world’s greatest minds into committing suicide. It is also worth reviewing the compelling argument for the case that the FBI was behind King’s assassination as well.

Hoover, who headed the FBI for decades, obsessively despised King on a deeply personal level. He kept files on the civil rights leader in which he’d scribble hateful comments on memos he received about King, apparently for no purpose other than his own gratification and catharsis. On a memo about King receiving the St. Francis peace medal from the Catholic Church, he wrote “This is disgusting.” On the news of King’s meeting with the pope, he scribbled, “I am amazed that the Pope gave an audience to such a degenerate.”

FBI headquarters still wears the name of this childish pig, a brazen admission by the Bureau that it remains very much the same institution which tried to end Martin Luther King Jr.’s life, the same institution which assassinatedBlack Panthers leader Fred Hampton, the same institution which for years ran the unconstitutional COINTELPRO campaign to infiltrate and sabotage dissident political groups, and which has continued to infiltrate dissident political groups, including Black civil rights groups, to this very day.

We received yet another reminder of the FBI’s true face the other day in an interview with its former Deputy Assistant Director Terry Turchie on Fox’s Tucker Carlson Tonight. In a passing tangent largely unrelated to the rest of the interview, Turchie made the following shocking statement in relation to the ongoing Russiagate saga:

“And I think we can expect more of this, because quite honestly the electorate in some places is putting more and more progressives and self-described socialists in positions. And ironically, years ago, when I first got into the FBI, one of the missions of the FBI in its counterintelligence efforts was to try and keep these people out of government. Why? Because we would end up with massive dysfunction and massive disinformation and massive misinformation, and it seems to me that’s where we’re at today.”

Wow.

According to his LinkedIn profile, Turchie joined the FBI in July of 1972. COINTELPRO, the program in which leftist groups were actively infiltrated and undermined, officially ended in 1971, and Hoover had died in May of 1972. This was after “Hoover’s FBI” stopped being Hoover’s FBI, yet a “counterintelligence effort” was still very much alive and thriving to undermine the will of the electorate and prevent them from electing leftists to office.

This one admission, by itself, is in my opinion more than enough to justify the FBI’s total dissolution. Leaving aside any of their other malfeasance that I mentioned earlier, leaving aside the rest of their other documented malfeasance that I haven’t mentioned, this one admission by Turchie shows clearly that America’s secret police should cease to exist.

Think about it. How can anyone justify the FBI’s continued existence after such an admission? There is an extremely powerful branch of the US government which is known to have been actively undermining the democratic will of the electorate through covert means. Even if you very trustingly subscribe to the belief that the FBI no longer engages in any such practices to any extent (and that would be extremely naive), how can you justify keeping it in power knowing that it did? Where precisely in the FBI’s history is a clear, clean, unequivocal break from what it was doing then declared, documented and evidenced? For what reason was it not razed to the ground decades ago and any of its actual necessary functions transferred elsewhere?

Imagine if the Ku Klux Klan had successfully cleaned up its image in the ’90s or something. Now you’re seeing members of the KKK interviewed on CNN and MSNBC as respectable members of society, holding powerful political positions, treated like heroes, all under the same banner it held when it was lynching people of color a few decades prior. Would that not seem weird? Would you not say something like “Wait, why are we keeping that organization around? At best they’re probably just putting a nicer face on their previous toxic agendas, especially since any good intentions existing within it could simply be taken somewhere with a less horrific history.”

The only reason the FBI is being treated any differently is because it’s got such good PR, namely the entire political/media class.

Journalist Mark Ames documents a short-lived push by the Carter administration to “transform the FBI from an extralegal secret police agency to something legal and defined.” This feeble proposition to give the Bureau an actual charter to clearly define what it is, what it does, and where the confines of its operations are was the closest America ever came to putting any kind of limitations on the powers of its secret police force, and by the time Reagan rolled around it was long forgotten.

And now you’ve got this same evil institution essentially criminalizing the act of the executive branch pursuing good relations with a nuclear superpower, launching a secret counterintelligence investigation into whether a sitting president is a national security threat for his Russia policy. This cannot be leading anywhere good.

The FBI has too much power and far too unforgivable a history to be permitted to control the reigns of the nation with the most powerful military force in the history of civilization. Get rid of it and move in a healthy direction.

*  *  *

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Published:1/21/2019 3:15:32 PM
[Markets] Federal Reserve Confesses Sole Responsibility For All Recessions

Authored by David Haggith via The Great Recession blog,

In a surprisingly candid admission, two former Federal Reserve chairs have stated that the Federal Reserve alone is responsible for creating all recessions in the United States.

First, former Fed Chair Ben Bernanke said that

Expansions don’t die of old age. They get murdered.
MarketWatch

To clarify this statement, former Chair Janet Yellen placed the murder weapon in the Fed’s hands:

Two things usually end them... One is financial imbalances, and the other is the Fed.

Think that through, and you quickly realize that both of those things are the Fed. Is there anyone left standing who would not say the Fed’s quantitative easing in the past decade was the biggest cause of financial imbalances all over the world in history? Moreover, whose profligate monetary policies led to the Great Financial Crisis that gave us the Great Recession?

So, the Fed loads the gun with financial causes and then pulls the trigger. In fact, I think it would be hard to find a major financial imbalance in the US that the Fed did not have a hand in creating or, at least, enabling. Therefore, if those are the only two causes, then it is always the Federal Reserve that causes recessions by its own admission.

And, yet, those Fed dons look so pleased with themselves.

Yellen went on to say that when the Fed is the culprit, it is generally because the central bank is forced to tighten policy to curtail inflation and ends up overplaying its hand. (She didn’t mention that the Fed’s monetary policy may have a hand in creating financial imbalances.)

Exactly, nor did she mention that the inflation they were “forced” to curtail always happens because of financial imbalances the Fed created or enabled. That is why I call our expansion-recession cycles, rinse-and-repeat cycles. Therefore, the Fed is only forced by its own ill-conceived actions. First you have to create the imbalance, which causes the economy and stocks to inflate, then you have to pull the trigger to shoot that down by tightening into a recession, which the Fed always does:

Bernanke elaborated on Yellen’s point, accusing the central bank of, in essence, murder. It takes an aggressive act on the part of the monetary authority to bring an expanding economy to a halt and cause it to shift into reverse.

Yellen and Bernanke were speaking at the annual meeting of the American Economic Association in Atlanta earlier this month in the company of current Fed Chair Jerome Powell.

As I demonstrated in my two earlier articles this week (“Does Inverted Yield Curve Indicate Recession?” and “What is an inverted yield curve and what does it mean?“), the Fed carries out this act of econocide by getting the yield curve to invert via its forced interest changes. As shown in those articles, every recession has been immediately preceded by a Fed-created inversion of the yield curve — the Fed’s smoking gun.

The Fed Fix Is Almost In

As noted in those articles, today’s yield curve has already slipped into its penultimate inversion. First (on December third), three-year notes started paying more interest than five-year notes. (The five-year was at 2.83% interest, while the three-year hit just over that at 2.84%.) In essence, investors were betting the economy would be a tad better in five years than it would in three.

Within a matter of weeks, the three-year notes were paying more than seven-year notes. Then, just about Christmastime, they started paying more than eight-year notes, inverting the yield curve even further out. The orange recession indicator light comes on when they take the next step of paying more than ten-year notes; and above that we go full recessionary red! The first three came all within in a month, so the rest may come just as quickly.

In fact, we’re so close that one more rate increase by the Fed could pull the trigger. This is why Powell can be so reassuring about pulling back soon on targeted interest-rate increases. He knows he’s already operating with a hair trigger because of the Fed’s other tightening action in rolling bonds off of its balance sheet.

Like a skilled sharp-shooter, Powell recently said the Fed is “watching and waiting” before it pulls the trigger with its next rate increase. At the same time, he suggested his balance-sheet reduction won’t end for awhile (and, of course, the Fed knows that its balance sheet reduction is skewing the yield curve faster than the Fed’s targeted interest-rate increases.

I’ve said before that those interest-rate increases are now just playing verbal catch-up to what the balance sheet reduction is doing in the open market. In other words, the balance sheet reduction is pulling the Fed’s targeted interest rates up, regardless of what is says, so it is pressed to state it intends an increase just to keep up with the effects of balance-sheet reduction. Last summer the Fed tactic admitted this when…

The Fed raised the target range for its benchmark rate by a quarter point to 1.75 percent to 2 percent, but only increased the rate it pays banks on cash held with it overnight to 1.95 percent. The step was designed to keep the federal funds rate from rising above the target range. Previously, the Fed set the rate of interest on reserves at the top of the target range. -Bloomberg

In other words, the Fed had to change the way it calibrates some interest rates because other factors than their change in their stated target rate were driving rates up. In order to keep bank demand for Fed funds from pushing the rate above 2%, the Fed set its stated rate at 1.95% to create some headroom. That’s explained as…

Officials have said that, as they drain cash from the system by shrinking the balance sheet, a rise in the federal funds rate within their target range would be an important sign that liquidity is becoming scarce…. The increase appears to be mainly driven by another factor: the U.S. Treasury ramped up issuance of short-term U.S. government bills, which drove up yields on those and other competing assets, including in the overnight market.

And that is what is now happening, but they are still planning to keep tightening by reducing their balance sheet. What is not said there is that the major reason the US Treasury is ramping up its issuance of government bills is that the Fed’s unwind is forcing them to refinance maturing bills on the open market as the Fed now refuses to refi those bills. I’ve maintained for a couple of years that the unwind will drive up other interest rates, causing problems throughout the economy.

Gunsmoke And Mirrors

So, the Fed’s recent talk about reducing the number of rate increases in the Fed’s interest target is slight of hand because the Fed’s unwind is doing the heavy lifting here, driving up rates faster than the Fed changes its stated target rate. Powell assures everyone the Fed will slow down its interest-rate increases, even as the Fed pushes right ahead with its balance-sheet unwind, which is doing the most to invert the yield curve.

Powells only defense against concerns expressed about balance-sheet reduction was…

“We are looking carefully at that, and the truth is, we don’t know with any precision,” Fed Chairman Jerome Powell told reporters on Wednesday when asked about the increase. “Really, no one does. You can’t run experiments with one effect and not the other.”

Not too reassuring to hear the Fed Head say no one really has any idea what impact its balance-sheet unwind will have on other interest rates. Does the Fed not know, or does the Fed just not want to say what it does know?

For additional cover as to whether the yield-curve inversions the Fed creates will cause a recession this time as they did in all previous times, Yellen, protested, as I noted in an earlier article this week, that this time is different:

Now there is a strong correlation historically between yield curve inversions and recessions, but let me emphasize that correlation is not causation, and I think that there are good reasons to think that the relationship between the slope of the yield curve and the business cycle may have changed.

It’s not every day that the Fed admits total culpability for the death of every expansionary period. Nor that it admits that the inflation its expansionist monetary policies create force it to become the culprit. Nor that it routinely overplays its hand.

Apparently, the Fed Heads are so comfortable with all of this (hence the smarmy looks in their photos above) that the economic murderers can confess in broad daylight every murder they are responsible for with complete impunity, even as they tell you where the bodies are buried. However, because they still have their next economic massacre to commit right before your eyes and don’t want you to stop them, they wish to assure you that “we can’t possibly know what will happen” now or “this time is different. Things have changed.”

The words “I can’t know what will happen” when a gunslinger is twirling his cocked and loaded pistol with his finger on the trigger, should not give you comfort.

Perhaps all these confession now will enable them to smile even bigger when the slaughter is over, and they know they did it this time in broad daylight.

Of course, there is one major difference this time. In all previous times, the Fed didn’t have the most massive balance-sheet unwind pushing interest rates all around so it had to rely more on its conventional tool of incremental changes in the its targeted interest rate. The new existence of that big gun mean it can who you it is putting away the little gun to disarm you because it has a cannon pointing at you from just inside the woods to your left. Thus, Powell said disarmingly,

More rate hikes wasn’t a pre-set plan and the forecast of two moves was conditional on a “very strong outlook for 2019.” - MarketWatch

In other words, keep your eye on the rate hikes I keep talking about (the little gun), not on the big balance sheet reductions that we put on autopilot so we don’t have to talk about them. Like a great hunter, Powell said the Fed can be patient.

Some analysts believe the Fed’s runoff of its balance sheet is hurting financial markets and want the central bank to end the program.

Gee, ya think? A runoff that intends to force the US government to refinance an additional $2 trillion over the next 3-4 years on the open market might be hurting financial markets more than a quarter-point increase in the Fed’s interest target every few months?

One analyst who disagrees with Powell is Peter Boockvar, chief investment officer at Bleakley Advisory Group:

“It’s no coincidence that accidents begin to pick-up the deeper you get into tightening … QE inflated markets to very high valuations. It’s wishful thinking to believe QT isn’t going to have an impact.”

By shrinking its balance sheet, the Fed is draining the liquidity that sent stocks booming. - CNN

Some of the Fed’s colleagues at other central banks also agree and express concern about what this will do to them:

Last month, Irjit Patel, the governor of the Reserve Bank of India, pleaded with the Fed to slow plans to shrink its balance sheet. If the Fed doesn’t shift course, “a crisis in the rest of the dollar bond markets is inevitable,” he wrote in an op-ed in the Financial Times.

Other Fed members are just as aware of the Fed’s institutional murder rates as Bernanke and Yellen. St. Louis Fed President James Bullard told the Wall Street Journal this month that a recessionary risk is being telegraphed by what is now happening in the yield curve and that the Fed is causing the flattening of the curve toward inversion. So, these guys all appear to be well aware of what they are doing.

However, to maintain the distraction, Bullard also said,

In separate remarks to reporters …. he was open to a revisiting the balance sheet runoff but doesn’t think it is damaging markets as some argue. Bullard [said] that if the balance sheet runoff was impacting bond market as some suggest, then yields would be moving higher instead of the steady decline seen since November.

The latter would be happening, except that money has been pouring rapidly out of stocks and into bonds due to the rate increases the unwind created in September and October. What he ignores is the fact that rate increases were so substantial they sucked massive amounts of money out of the stock market in a flood of capital flight because all of a sudden treasury interest looked quite enticing. That, of course, pushed those rates down some in November.

So, “Nothing to see there, folks. Keep your eye on the little gun; and, oh, did we tell you that we have murdered every economic expansion in history?”

Who’s your daddy?

Now that we’ve heard the confessions from the murderers and have experienced the diversions that will allow the next murder to happen as much in plain sight as the confessions just happened, let’s look at the case from another angle: What has been keeping the stock market alive and hopping over the past decade?

Let me lay out evidence that it is clearly the Fed.

Exhibit A: What turned around the market’s major crash in 2009? The Fed’s QE1. Does anyone think the market would have turned around without that massive intervention? Was that intervention with hundreds of billions of dollars mere window-dressing, or was it the greatest financial intervention to a financial crisis the world had ever seen?

Exhibit B: What turned the market around the next time it “corrected” as soon as QE1 ended? Was it not instant QE2? More hundreds of billions of dollars?

Exhibit C: What saved the market when Republicans played roulette with the nation’s credit rating in the summer of 2011 and shot themselves in the foot politically when Standard & Poor’s gave the nation its first credit downgrade before Republicans even had the chance to let the nation default? Was it not the immediate promise of an ever bigger, indefinitely ongoing new kind of QE called Operation Twist, which morphed into QE3?

Exhibit D: Then, when markets tumbled in 2015 and 2016, because the Fed was backing off from monetary stimulus, their colleagues in other countries jumped in with their own QE. More than $5 trillion worth in 2016! All told, the world’s central banks have pumped in $15 trillion since then.

But now they are all stopping!

Exhibit E: The prosecution presents a full picture of all central-bank stock salvation:

The Fed may claim that it does not attempt to rescue markets and that it looks only at economic indicators, yet somehow every time the market took a major plunge in the graph above, the Fed was instantly on the scene with a new invention of monetary stimulus in massive doses. Of course, “correlation is not causation.” Correlation is pretty interesting, though, especially when it happens at every plunge, except the one at the top that is plunging much further than any other time on this graph … because one thing IS different: No one is stepping in with salvation this time.

If the Fed has been the salvation of the market again and again, lifting it higher and higher, what happens if the Fed and other CBs let the stock market drop? Do you think they won’t do that? The highest authorities in the Fed just told you they did it every other time. First, they create massive “financial instability,” as Yellen said, otherwise known as “bubbles,” which grow due to the Fed’s infinite capacity to create monetary stimulus. They let these grow until inflation finally “forces” them to tighten until they crash them.

The prosecution presents Exhibit F:

This one is the Fed and all its major partners in crime. When did stock markets start to plunge all over the world? Wasn’t it as soon as global QT started to reverse at the end of that graph in 2018? Ah, but “correlation is not causation.” Except that it kind of is when you keep finding correlation everywhere you turn.

If the defense wants to argue the US market is not utterly dependent on the Fed’s constant protection, let me ask, “What did the market do in September of 2018 when the Fed removed one little word from its market-soothing speeches? Accommodative. Just as it watched its balance sheet-reduction up to full rewind speed.” It took its biggest plunge by far in the entire ten-year recovery period. As nearly everyone was saying, nothing bad suddenly emerged in the economy. All that changed was the Fed to merely implying it would be less accommodative to market concerns as it moved to full unwind.

If you still think the Fed isn’t going to kill the economy this time, I have one more question for you: When was the last time the Fed raised rates in the middle of a major market “correction?” How about never. Yet, now it is raising rates and reducing money supply via balance-sheet reduction at the same time that it hints it is removing accommodation.

But balance-sheet reduction doesn’t matter, right?

“We don’t believe that our issuance [new bond to replace those rolling off the balance sheet] is an important part of the story of the market turbulence that began in the fourth quarter of last year. But, I’ll say again, if we reached a different conclusion, we wouldn’t hesitate to make a change,” Powell said. “If we came to the view that the balance sheet normalization plan — or any other aspect of normalization — was part of the problem, we wouldn’t hesitate to make a change.” - MarketWatch

In other words, “Don’t look at the big gun. Nothing to see there.” Said the people who have just told you that none of their expansions ever ended until they murdered it!

Does the Fed have motive?

Don’t ask me why the Fed will kill its own recovery. It is enough that it admits it always does. So, I’ll leave determining which of the many possible “why’s” up to you. Maybe the Fed will cop an insanity plea and say that even it doesn’t know why it does the things it does. Whatever their actual motive, this sure has the Fed’s unswerving M.O. all over it. It has their fingerprints and their multiple confessions of guilt.

Still, let me lay out a couple of motives that are popular among those many people attribute to the Fed just to show there are plenty of possible motives out there:

Maybe the Fed’s member banks, who own and run the Fed (as its only shareholders and as governing board members who have huge influence over who the additional government-appointed board members are), like to repossess things. That would be a motive.

Or maybe they want to create a new cashless, digital, global monetary system. That would be a motive.

Or maybe, if they can crash things as perennially as Japan has done for score or more of years, they can get permission to start buying stocks directly, and use their infinite money supply, as Japan, has done to take major ownership in all the stocks of the nation.

Numerous conspiracy theories spend entire books making a strong case for different motives. I won’t land on one, but will note that all that matters is that there are plenty of motives to choose from.

Sure, Yellen protested that “correlation isn’t causation,” but, on the other, she admitted causation by saying that, when the Fed is the culprit, it is generally because the central bank is forced to tighten policy to curtail inflation — inflation that only the Fed causes by creating trillions of dollars monetary stimulus. There only struggle this time to stay within their M.O. is that they have failed to create inflation in the general economy that they are supposed to govern. Maybe that is why they have pushed the expansion into the longest in history because they are obsessed with following their usual M.O., and inflation didn’t cooperate this time to “force” them to tighten into recession (their cover story).

So, we have multiple confessions of murder by known Fed ringleaders. We have numerous pieces of circumstantial evidence that support their confessions. We have many possible motives. And, even the fact that the Fed continued pushing expansion longer than it has with more and more rounds of QE can be explained by its M.O. How many times has the Fed said they don’t understand why they couldn’t get inflation to rise to their 2% target for years. They could hardly claim inflation concerns when everyone knew CPI was under the target they’ve always said they want. Now it’s there. So, everything is in place.

I rest my case.

Published:1/21/2019 2:42:41 PM
[Markets] The Wall Street Journal: Facebook’s WhatsApp limits ability to forward messages in fake-news crackdown Facebook Inc.’s WhatsApp is limiting users’ ability to forward messages across the platform, after criticism it has been used to spread misinformation and rumors, and sometimes stoke violence.
Published:1/21/2019 2:42:41 PM
[Markets] Iran Ready To "Eliminate Israel From The Earth"; IDF Trolls Tehran Over Twitter

The head of Iran's air force said on Monday that the Islamic Republic's pilots are looking forward to facing Israel, and will "eliminate it from earth" after Israeli airstrikes on alleged Iranian targets inside Syria killed 11 people, including four Syrian soldiers. 

Brigadier General Aziz Nasirzadeh, commander of the Islamic Republic of Iran Air Force (IRIAF) made the comments to the Young Journalist Club news agency following Israel's strike on munition storage facilities within Damascus International Airport, a military training camp and an Iranian intelligence site, according to The Independent

"The young people in the air force are fully ready and impatient to confront the Zionist regime and eliminate it from the Earth," said Nasirzadeh.

Israel claims it launched the strikes in retaliation for a surface-to-surface rocket fired on Sunday by Iran's Quds Force from within Syria at a ski resort in the Israeli-occupied Golan Heights, which was intercepted by Israeli air defenses. 

"That’s a civilian site and there were civilians there," said Israeli army spokesman Lt. General Jonathan Conricus Monday morning, adding "We saw that as an unacceptable attack by Iranian troops, not proxies in Syria." 

"In addition to that, the area from which the Iranians fired their missile is an area we have been promised that the Iranians would not be present in. We know it was not done in the spur of the moment, it was a premeditated attack."

The Israeli military said the sorties hit Iran’s “main storage hub in Syria” used to transport Iranian weapons to allies in Syria including Lebanese militant group Hezbollah.

Israel recently acknowledged carrying out hundreds of strikes in Syria over the last few years but has previously refrained from commenting for fear of triggering a reaction and being drawn into the deadly fighting in Syria, which is in the grips of an eight-year civil war. 

Monday’s announcement marked the first time they had reported strikes in real time and released detailed information since last May 2018, when Israel claimed to have struck almost all of Iran’s military infrastructure in Syria, following another rocket attack on its positions in the Golan. -The Independent

Israel said on Monday that Syria had ignored its warning over the upcoming strikes, so they were forced to target Syria's aerial defense batteries which fired "dozens" of surface-to-air missiles at Israel's planes. 

Israeli military release graphic of the targets in Syria their warplanes struck on Monday (Israeli army / handout )

"The [army] holds the Syrian regime responsible for everything taking place within Syria and warns the Syrian regime against targeting Israel or permitting it to be targeted," read a statement by the Israeli army. 

"Israel is determined to continue to prevent Iranians from building an independent war machine in Syria and is ready to take the risk of exchange of fire,” he told reporters in a briefing," said retired Israeli Maj. Gen Yaakov Amidror, who was Prime Minister Benjamin Netanyahu's national security adviser until 2013 - calling the airstrikes a signal to Iran about har far Israel is willing to go. 

"The more Iranians try to launch rockets into Israel the more severe will be the attack in response," he added. "It is about a strong signal to Iranians. We’re ready to escalate if you don’t stop."

The Israel Defense Force, meanwhile, trolled Iran over Twitter with a map of the Middle East showing an arrow to Syria labeled "where Iran is," and arrows over Iran which read "where Iran belongs." 

Published:1/21/2019 2:11:33 PM
[Markets] We Need A Martin Luther King Day Of Truth

Authored by Edward Curtin via OffGuardian.com,

As Martin Luther King’s birthday is celebrated with a national holiday, his death day disappears down the memory hole. Across the country – in response to the King Holiday and Service Act passed by Congress and signed by Bill Clinton in 1994 – people will be encouraged to make the day one of service. Such service does not include King’s commitment to protest a decadent system of racial and economic injustice or non-violently resist the U.S. warfare state that he called “the greatest purveyor of violence on earth.”

Government sponsored service is cultural neo-liberalism at its finest, the promotion of individualism at the expense of a mass movement for radical institutional change.

“Nothing in all the world is more dangerous,” warned Dr. King, “than sincere ignorance and conscientious stupidity.”

How true those words. For the government that honors Dr. King with a national holiday killed him. This is the suppressed truth behind the highly promoted day of service. It is what you are not supposed to know. It is what Thomas Merton, as quoted by James W. Douglass, called The Unspeakable:

It is the void that contradicts everything that is spoken even before the words are said; the void that gets into the language of public and officials declarations at the very moment when they are pronounced, and makes them ring dead with the hollowness of the abyss. It is the void out of which Eichmann drew the punctilious exactitude of his service.”

The word service is a loaded word; it has become a smiley face and vogue word over the past 35 years. Its use for MLK Day is clear: individuals are encouraged to volunteer for activities such as tutoring children, painting senior centers, or delivering meals to the elderly, activities that are good in themselves but far less good when used to conceal an American prophet’s radical message. After all, Martin Luther King’s work was not volunteering at the local food pantry with Oprah Winfrey cheering him on.

THE ASSASSINATION

King was not murdered because he had spent his heroic life promoting individual volunteerism. To understand his life and death – to celebrate the man – “it is essential to realize although he is popularly depicted and perceived as a civil rights leader, he was much more than that. A non-violent revolutionary, he personified the most powerful force for a long overdue social, political, and economic reconstruction of the nation.” Those are the words of William Pepper, the King family lawyer, from his comprehensive and definitive study of the King assassination, The Plot to Kill King, a book that should be read by anyone concerned with truth and justice.

Revolutionaries are, of course, anathema to the power elites who, with all their might, resist such rebels’ efforts to transform society. If they can’t buy them off, they knock them off. Fifty one years after King’s assassination, the causes he fought for – civil rights, the end to U.S. wars of aggression, and economic justice for all – remain not only unfulfilled, but have worsened in so many respects. And King’s message has been enervated by the sly trick of giving him a national holiday and then urging Americans to make it “a day of service.” The vast majority of those who innocently participate in these activities have no idea who killed King, or why. If they did, they might pause in their tracks, and combine their “service” activities with a teach-in on the truth of his assassination.

Because MLK repeatedly called the United States the “greatest purveyor of violence on earth,” he was universally condemned by the mass media and government that later – once he was long and safely dead and no longer a threat – praised him to the heavens. This has continued to the present day of historical amnesia.

Educating people about the fact that U.S. government forces conspired to kill Dr. King, and why, and why it matters today, is the greatest service we can render to his memory.

William Pepper’s decades-long investigation not only refutes the flimsy case against the alleged assassin James Earl Ray, but definitively proves that King was killed by a government conspiracy led by J. Edgar Hoover, the FBI, Army Intelligence, and the Memphis Police, assisted by southern Mafia figures.

THE TRIAL

This shocking truth is accentuated when one is reminded (or told for the first time) that in 1999 a Memphis jury, after a thirty day civil trial with over seventy witnesses, found the U.S. government guilty in the killing of MLK. The King family had brought the suit and Pepper represented them. They were grateful that the truth was confirmed, but saddened by the way the findings were buried by the media in cahoots with the government.

Pepper not only demolishes the government’s self-serving case with a plethora of evidence, but shows how the mainstream media, academia, and government flacks have spent years covering up the truth of MLK’s murder through lies and disinformation. Another way they have accomplished this is by convincing a gullible public that “service” is a substitute for truth.

But service without truth is a disservice to the life, legacy, and radical witness of this great American hero. It is propaganda aimed at convincing decent people that they are serving the essence of MLK’s message while they are obeying their masters, the very government that murdered him.

It is time to rebel against the mind manipulation served by the MLK Day of Service. Let us offer service, but let us also learn and speak the truth.

“He who lives with untruth lives in spiritual slavery,” King told us, “Freedom is still the bonus we receive for knowing the truth.”

Published:1/21/2019 1:42:03 PM
[Markets] 11 Dead After 2 Ships Catch Fire In Kerch Strait, One "Struck By A Blast"

At least 11 sailors have died after two ships caught fire while moving through the Kerch Strait separating Crimea from mainland Russia  - the location of the latest escalation in tensions between Russia and Ukraine in November - after one of them was apparently rocked by an explosion the Russian Maritime Agency said. One vessel was "allegedly struck by a blast" RT reported, which caused the fire that then spilled over to another ship, an official with the Russian Maritime and River Transport Agency said.

Clouds of black smoke could be seen billowing over a vessel engulfed by a blaze on YouTube footage, which shows the scene of the incident. Another ship can be seen floating nearby.

The fire reportedly broke out as the two ships were transferring fuel from one to the other. According to RT, approximately three dozen sailors managed to escape the burning ships by jumping into the sea but at least 11 people died in the incident and 12 have so far been rescued from the sea.

The crews of the affected ships included Turkish and Indian nationals, the emergency services said, adding that there were no Russian sailors. Turkey confirmed that 16 of its citizens were aboard the affected vessels.

Emergency services said that between eight and ten ships have been sent to the rescue and are picking up the sailors. The explosion might have been caused by a safety rules violation during the fuel transfer, according to some reports.

One of the ships was a liquefied natural gas carrier and another one was a tanker; both vessels were flying Tanzanian flags.

According to the director of the Crimean Sea Ports, the maritime traffic through the strait was not affected by the incident and navigation across Kerch remains open.

Published:1/21/2019 1:15:14 PM
[Markets] France fines Google nearly $57 million for first major violation of Europe’s tough privacy rules The country's top data-privacy agency said that Google failed to fully disclose to users how their personal information is collected and what happens to it. Published:1/21/2019 12:43:25 PM
[Markets] Skripal Story Just Got Weirder; First Responder Revealed As Chief Army Nurse; Steele "Link" Blamed On Russia

The case of poisoned double-agent Sergei Skripal just got weirder after it was revealed that the first responder to the scene was the Chief Nursing Officer for the British Army after he daughter spotted Skripal and his daughter collapsed on a bench at the Maltings shopping center in Salisbury on March 5 of last year. 

According to Spire FM, 16-year-old Abigail McCourt spotted the poisoned Russians while "out celebrating her brother's birthday," and then quickly alerted her mother - Alison McCourt. The two McCourts gave first aid to the Skripals until paramedics arrived. 

Colonel McCourt - who was decorated for her efforts to fight Ebola in Sierra Leone, proposed her daughter as a candidate for the Lifesaver Award at Spire FM's Local Hero Awards. 

"As a qualified nurse it was a fairly routine situation for me but my daughter was amazing. Her prompt actions, spotting them in difficulty, and the way she assisted me to put Yulia Skripal in the recovery position had a significant impact on the outcome of the two victims," said Alison of her daughter. 

The coincidence - kept under wraps for nearly a year, is sure to give skeptics plenty of new ammunition to refute the official narrative that Russia attempted to kill Skripal 10 years after the voluntarily gave him up in a spy exchange with the UK.

Initial reports in British media were that the first person to provide medical assistance during the Skripal incident was "an off-duty nurse who had worked on the Ebola outbreak in Sierra Leone."

Christopher Steele connection walked back

In an embarrassing walkback of a story from March 2018, The Telegraph now says that the Kremlin laid a "false trail" linking Sergei Skripal to Christopher Steele - the former MI6 spy who crafted the infamous anti-Trump "Steele Dossier" paid for by Hillary Clinton's campaign. 

In March, The Telegraph wrote: 

The Telegraph understands that Col Skripal moved to Salisbury in 2010 in a spy swap and became close to a security consultant employed by Christopher Steele, who compiled the Trump dossier. 

The British security consultant, according to a LinkedIn social network account that was removed from the internet in the past few days, is also based in Salisbury.

On the same LinkedIn account, the man listed consultancy work with Orbis Business Intelligence, according to reports. -Telegraph

On Sunday that entire connection - which implied that Skripal was somehow involved with the Steele Dossier, was blamed on Russia

Russian intelligence created a false trail linking the double agent Sergei Skripal to the former MI6 officer behind the Trump dossier before carrying out the Salisbury nerve agent attack, the Telegraph has been told.

Well-placed sources now believe that the plot to kill Col Skripal may have included a ‘black ops’ attempt to sow doubt on the veracity of the explosive dossier that claims Donald Trump received Kremlin backing.

The year before the attempted assassination of Col Skripal, a mysterious post on LinkedIn suggested his MI6 handler, who is not being named, worked as a “senior analyst” at Orbis Business Intelligence, the firm that produced the Trump dossier.

...

But a number of sources have told The Telegraph that the LinkedIn profile is false - if it ever properly existed at all - and that Skripal’s MI6 handler never worked for Orbis. 

It is now suspected that the LinkedIn profile was created by the GRU, the Russian military intelligence unit which tried to kill Col Skripal with novichok nerve agent. -Telegraph

"By creating this link, they are suggesting that MI6 are involved with the dossier or Skripal or both. It adds to the confusion and acts as a wedge between the White House and Downing Street. It is exactly the kind of operation the Russians would order to sow confusion," said the Telegraph's "well placed source." 

"An internet hyperlink to the LinkedIn page appeared in an obscure blog posting in January 2017 - more than a year before the Salisbury attack - but the actual LinkedIn page itself has never been visible," the Telegraph writes. 

In other words, The Telegraph wrote an entire story in March of last year based on nothing more than "an internet hyperlink to the LinkedIn page" without actually having viewed the profile now blamed on a Russian black op. 

But there was another possibility - one that is utterly ludicrous and now disproved -  that was none the less championed by conspiracy theorists. Namely, that the death of Col Skripal was not ordered by the Kremlin at all - but carried out by British agents to silence the former Russian intelligence officer. 

The reason was simple. Col Skripal - so the theory went - had helped provide information to Christopher Steele, a former senior MI6 officer, who authored an extraordinary dossier on Donald Trump, alleging that the soon-to-be president was effectively a puppet of Putin. The dossier claimed that the Kremlin had been “cultivating, supporting and assisting Trump for at least five years”. 

Oddly, however, a British spy named Pablo Miller was claimed by Russian media in 2007 as the MI6 agent who recruited Skripal in 1995. Miller apparently works (or worked) for Orbis - though it is unclear whether he is the same person noted in the original Telegraph report. 

So - the British Army's head nurse was the first one to provide assistance to the dying Russians, while Skripal's link to Christopher Steele is now thought to be part of a Russian plot to discredit the Steele Dossier. Fascinating. 

Published:1/21/2019 12:43:25 PM
[Markets] Should Retirees Worry About Bear Markets?

Authored by Lance Roberts via RealInvestmentAdvice.com,

Mark Hulbert recently wrote a piece suggesting “Retirees Should Not Fear A Bear Market.” To Wit:

“Don’t give up hope.

I’m referring to what many retirees are most afraid of: Running out of money before they die. An Allianz Life survey found that far more retirees are afraid of outliving their money than they are of dying—61% to 39%. This ever-present background fear is especially rearing its ugly head right now, given the bear market that too many came out of nowhere.

Retirement planning projections made at the end of the third quarter, right as the stock market was registering its all-time highs, now need to be revised.

The reason not to give up hope is that the stock market typically recovers from bear markets in a far shorter period of time than most doom and gloomers think. Consider what I found when measuring how long it took, after each of the 36 bear markets since 1900 on the bear market calendar maintained by Ned Davis Research…Believe it or not, the average recovery time was ‘just’ 3.2 years.”

Mark correctly used total return numbers in his calculations, however, while his data is correct the conclusion is not.

Here is why.

While Mark is discussing the recovery of bear markets (getting back to even) it is based on a “buy and hold”investing approach.

However, Mark’s error is that he is specifically discussing “retirees” which are systematically withdrawing capital from their portfolios, paying tax on those withdrawals (from retirement accounts) and compensating for adjustments to the cost of living (not to mention spiraling “health care” costs.)

These are the same problems which plague most of the “off the shelf” financial plans today:

  1. Faulty assumptions based on average historic rates of returns rather than variable rates of return, and;

  2. Not accounting for the current level of market valuations at the outset of the planning process.

To explain the problems with both Mark’s assumptions, and the vast majority of financial plans spit out of computer programs today, let’s turn to some previous comments from Michael Kitces.

“Given the impact of inflation, it’s problematic to start digging into retirement principal immediately at the start of retirement, given that inflation-adjusted spending needs could quadruple by the end of retirement (at a 5% inflation rate). Accordingly, the reality is that to sustain a multi-decade retirement with rising spending needs due to inflation, it’s necessary to spend less than the growth/income in the early years, just to build enough of a cushion to handle the necessary higher withdrawals later!

For instance, imagine a retiree who has a $1,000,000 balanced portfolio, and wants to plan for a 30-year retirement, where inflation averages 3% and the balanced portfolio averages 8% in the long run. To make the money last for the entire time horizon, the retiree would start out by spending $61,000 initially, and then adjust each subsequent year for inflation, spending down the retirement account balance by the end of the 30th year.”

Michael’s assumptions on expanding inflationary pressures later in retirement is correct, however, they don’t take into account the issue of taxation. So, let’s adjust Kitces’ chart and include not only the impact of inflation-adjusted returns but also taxation.

The chart below adjusts the 8% return structure for inflation at 3% and also adjusts the withdrawal rate up for taxation at 25%.

By adjusting the annualized rate of return for the impact of inflation and taxes, the life expectancy of a portfolio grows considerably shorter.

While inflation and taxes are indeed important to consider, those are not the biggest threat to retiree’s portfolios.

There is a massive difference between 8% “average” rates of return and 8% “actual” returns.

The Impact Of Variability

Currently, the S&P 500 (as of 1/18/19) is trading at 2,670 with Q4-2018 trailing reported earnings estimated to be $139.50. (S&P DataThis puts the 10-year average trailing P/E ratio of the S&P at a rather lofty 28.86x. 

We also know that forward returns from varying valuation levels are significantly varied depending on when you start your investing. As shown in the chart below, from current valuation levels, forward returns from the market have been much closer to 2% rather than 8%.

As evidenced by the graph, as valuations rise future rates of annualized returns fall. This should not be a surprise as simple logic states that if you overpay today for an asset, future returns must, and will, be lower.

Math also proves the same. Capital gains from markets are primarily a function of market capitalization, nominal economic growth plus the dividend yield. Using the Dr. John Hussman’s formula we can mathematically calculate returns over the next 10-year period as follows:

(1+nominal GDP growth)*(normal market cap to GDP ratio / actual market cap to GDP ratio)^(1/10)-1

Therefore, IF we assume that

  • GDP maintains, 4% annualized growth indefinitely

  • Which means recessions have been eliminated, AND

  • Current market cap/GDP stays flat at 1.25, AND

  • The current dividend yield remains at 2%:

We would get forward returns of:

(1.04)*(.8/1.25)^(1/30)-1+.02 = 4.5%

But there’s a “whole lotta ifs” in that assumption.

More importantly, if we assume that inflation remains stagnant at 2%, as the Fed hopes, this would mean a real rate of return of just 2.5%.

This is far less than the 8-10% rates of return currently promised by the Wall Street community. It is also why starting valuations are critical for individuals to understand when planning for the accumulation phase of the investment life-cycle.

Let’s take this a step further. For the purpose of this article, we went back through history and pulled the 4-periods where trailing 10-year average valuations (Shiller’s CAPE) were either above 20x earnings or below 10x earnings. We then ran a $1000 investment going forward for 30-years on a total-return, inflation-adjusted, basis.

At 10x earnings, the worst performing period started in 1918 and only saw $1000 grow to a bit more than $6000. The best performing period was actually not the screaming bull market that started in 1980 because the last 10-years of that particular cycle caught the “dot.com” crash. It was the post-WWII bull market that ran from 1942 through 1972 that was the winner. Of course, the crash of 1974, just two years later, extracted a good bit of those returns.

Conversely, at 20x earnings, the best performing period started in 1900 which caught the rise of the market to its peak in 1929. Unfortunately, the next 4-years wiped out roughly 85% of those gains. However, outside of that one period, all of the other periods fared worse than investing at lower valuations. (Note: 1993 is still currently running as its 30-year period will end in 2023.)

The point to be made here is simple and was precisely summed up by Warren Buffett:

“Price is what you pay. Value is what you get.” 

This idea becomes much clearer by showing the value of $1000 invested in the markets at both valuations BELOW 10x trailing earnings and ABOVE 20x. I have averaged each of the 4-periods above into a single total return, inflation-adjusted, index, Clearly, investing at 10x earnings yields substantially better results.

Not surprisingly, the starting level of valuations has the greatest impact on your future results.

But, most importantly, starting valuations are critical to withdrawal rates

When we adjust the spend down structure for elevated starting valuation levels, and include inflation and taxation, a much different, and far less favorable, financial outcome emerges – the retiree runs out of money not in year 30, but in year 18.

As John Coumarionos previously wrote:

“And, if you’re retired and withdrawing from your portfolio, the ‘sequence-of-return’ risk – the problem of the early years of withdrawals coinciding with a declining portfolio – can upend your entire retirement. That’s because a portfolio in distribution that experiences severe declines at the beginning of the distribution phase, cannot recover when the stock market finally rebounds. Because of the distributions, there is less money in the portfolio to benefit from stock gains when they eventually materialize again.

I showed that risk in a previous article where I created the following chart representing three hypothetical portfolios using the ‘4% rule’ (withdrawing 4% of the portfolio the first year of retirement and increasing that withdrawal dollar value by 4% every year thereafter). I cherry-picked the initial year of retirement, of course (2000), so that my graphic represents a kind of worst case, or at least a very bad case, scenario. But investors close to retirement should keep that in mind because current stock prices are historically high and bond yields are historically low. That means the prospects for big investment returns over the next decade are dim and that increasing stock exposure could be detrimental to retirement plans once again. In my example, decreasing stock exposure benefits the portfolio in distribution phase, and that could be the case for retirees now.”

As John correctly notes, there is a case for owning stocks in a retirement portfolio, just maybe not as much as your “run of the mill” financial plan suggests. To wit:

“Returns from cash and bonds may not keep up with inflation, after all. But stock returns might fall short too. And if stocks do lag, they probably won’t do so with the limited volatility that bonds tend to deliver, barring a serious bout of inflation. So, if you’re within a decade of retirement, it may be time to think hard about how much stock exposure is enough. The answer might be less than you think for a portfolio in distribution phase.”

Questions Retirees Need To Ask About Plans

Importantly, what this analysis reveals, is that “retirees” SHOULD be worried about bear markets.  Taking the correct view of your portfolio, and the risk being undertaken, is critical when entering the retirement and distribution phase of the portfolio life cycle.

More importantly, when building and/or reviewing your financial plan – these are the questions you must ask and have concrete answers for:

  • What are the expectations for future returns going forward given current valuation levels? 

  • Should the withdrawal rates be downwardly adjusted to account for potentially lower future returns? 

  • Given a decade long bull market, have adjustments been made for potentially front-loaded negative returns? 

  • Has the impact of taxation been carefully considered in the planned withdrawal rate?

  • Have future inflation expectations been carefully considered?

  • Have drawdowns from portfolios during declining market environments, which accelerates principal bleed, been considered?

  • Have plans been made to harbor capital during up years to allow for reduced portfolio withdrawals during adverse market conditions?

  • Has the yield chase over the last decade, and low interest rate environment, which has created an extremely risky environment for retirement income planning been carefully considered?

  • What steps should be considered to reduce potential credit and duration risk in bond portfolios?

  • Have expectations for compounded annual rates of returns been dismissed in lieu of a plan for variable rates of future returns?

 If the answer is “no” to the majority of these questions then feel free to contact one of the CFP’s in our office who take all of these issues into account. 

With debt levels rising globally, economic growth on the long-end of the cycle, interest rates rising, valuations high, and a potential risk of a recession, the uncertainty of retirement plans has risen markedly. This lends itself to the problem of individuals having to spend a bulk of their “retirement” continuing to work.

Two previous bear markets have devastated the retirement plans of millions of individuals in the economy today which partly explains why a large number of jobs in the monthly BLS employment report go to individuals over the age of 55.

So, not only should retirees worry about bear markets, they should worry about them a lot.

Published:1/21/2019 12:11:25 PM
[Markets] The Moneyist: This woman put $9,000 on credit cards for medical bills and later required open-heart surgery — here’s how she got through it Did her sibling bail her out? Or tell her to declare bankruptcy? Finally, an answer.
Published:1/21/2019 11:42:13 AM
[Markets] Visualizing The Jeff Bezos Empire In One Giant Chart

With a fortune largely tied to his 79 million Amazon shares, the net worth of Jeff Bezos has continued to rise.

Most recently, as Visual Capitalist's Jeff Desjardins points out, the Amazon founder was even able to surpass Bill Gates on the global wealth leaderboard with $137 billion to his name – however, this ascent to the very top may be extremely short-lived.

On January 9th, 2019, Jeff Bezos announced on Twitter that he was divorcing MacKenzie Bezos, his wife of 25 years. While the precise ramifications of the news are not yet clear, it’s anticipated that MacKenzie Bezos could end up with a considerable portion of shares in Amazon as a result.

There is much to be decided as the world’s wealthiest couple splits their assets – but for now, here is a list of what Jeff Bezos owns today.

THE JEFF BEZOS EMPIRE IN 2019

Courtesy of: Visual Capitalist

The obvious centerpiece to the Jeff Bezos Empire is the 16% ownership stake in Amazon.com.

However, beyond that, there is a wide variety of other investments and acquisitions that Jeff Bezos has made through Amazon or his other investment vehicles. These range from household names to more secretive endeavors, and are worth looking at to truly understand his assets and fortune.

AMAZON.COM

Amazon makes acquisitions and investments that relate to the company’s core business and future ambitions. This includes acquisitions of Whole Foods ($13.7 billion in 2017), Zappos.com ($1.2 billion in 2009), PillPack ($1 billion in 2018), Twitch.tv ($970 million in 2014), and Kiva Systems ($780 million in 2012).

This also includes investments in everything form failed dot-com company Kozmo.com (2000) to Twilio, which successfully IPO’d in 2016.

BEZOS EXPEDITIONS

Bezos Expeditions manages Jeff Bezos’ venture capital investments. Over the years, this venture arm has put money into Twitter, Domo, Juno Therapeutics, Workday, General Fusion, Rethink Robotics, Business Insider, MakerBot, and Stack Overflow.

More recent investments include GRAIL, a startup that recently raised over $900 million to cure cancer before it happens, as well as EverFi, an edtech startup.

JEFF BEZOS

Jeff Bezos also invests money on a personal level. He was an angel investor in Google in 1998, and has also put money in Uber and Airbnb. (Note: these last two companies are listed on the Bezos Expeditions website, but on Crunchbase they are listed as personal investments.)

NASH HOLDINGS LLC

Nash Holdings is the private company owned by Bezos that bought The Washington Post for $250 million.

BEZOS FAMILY FOUNDATION

The BFF is run by Jeff Bezos’ parents, and is funded through Amazon stock. It focuses on early education, and has also made an investment in LightSail Education’s $11 million Series B round.

BLUE ORIGIN

Finally, it’s also worth noting that Jeff Bezos is the founder of Blue Origin, an aerospace company that is competing with SpaceX in mankind’s final frontier.

Note: This article and infographic were originally published in June 20, 2017. Both have been updated as of January 11, 2019 to include more up-to-date acquisitions and investments.

Published:1/21/2019 11:42:13 AM
[Markets] Arctic Blast Brings Dangerously Cold Wind Chills To Northeast 

The coldest air of the year and possibly the Winter 2018-2019 season has descended southward toward the East Coast, can create life-threatening situations for those who lose power and cannot heat their homes.

Wind chill warnings and advisories have been posted by the National Weather Service from the Midwest into the mid-Atlantic, upstate New York and New England.

"After a strong winter storm impacted the East this weekend, cold air has spilled in behind this system. Temperatures Monday morning were in the single digits above and below zero across New England with teens above zero as far south as North Carolina. This, combined with gusty winds is making it feel even colder. As such, wind chill advisories and wind chill warnings are in effect across the Northeast as it will feel below zero through the Martin Luther King Jr. holiday. This will have an impact on the ski resort industry, with some mountains electing to close due to the adverse weather conditions," reported Meteorologist and owner of Empire Weather LLC., Ed Vallee.

Wind chills were below zero Monday morning in New York City, Boston, and Philadelphia. Interior locations such as Buffalo, New York, and Burlington, Vermont also experienced wind chills in the 20s below zero.

Subzero wind chills were even reported as far south as Asheville, North Carolina.

Monday's highs are likely to hold the low teens along the Interstate 95 corridor that stretches from the Baltimore–Washington metropolitan area to Boston.

Although this arctic blast is expected to only last until late Tuesday in most locations, it signals the start of frigid conditions to end the month for the Northeast.

NOAA's 6- to 10-day weather model illustrates portions of the central and eastern states are expected to see below-average temperatures Jan. 26 to Jan. 30.

Models are also indicating that the next shot of arctic air could arrive into the Midwest starting late this week.

For more color on just how cold it is this Monday, Wildcat Mountain Ski Area located on Wildcat Mountain near Jackson, New Hampshire, is closed today due to "extreme cold & high winds. Temps predicted to be -15 to -20 below at the summit, w/winds 35 - 50 mph + gusts to 60 mph. Unbearable!"

Published:1/21/2019 11:10:56 AM
[Markets] Weekend Sip: This Californian craft beer finds its Germanic smoky side San Francisco brewer offers a sip with a hint of campfire.
Published:1/21/2019 11:10:56 AM
[Markets] Put Up or Shut Up Time for the Stock Market After the Rally Put Up or Shut Up Time for the Stock Market After the RallyWhat a rally After a furious Christmas eve to a now month-long rally, the stock market must now decide what to do:  break up through the downtrend or test the lows and make this look like a Published:1/21/2019 10:42:50 AM
[Markets] Writing Professor: Grading Based On Quality Is Racist

Authored by Jon Street and Ronb Shimshock via Campus Reform,

American University in Washington, D.C. is hosting an event on Feb. 1 on "antiracist" grading with a professor who serves as director of a writing center which argues that American grammar is a "racist," "unjust language structure."

The seminar, titled, "Grading Ain't Just Grading: Rethinking Writing Assessment Ecologies Towards Antiracist Ends," will be led by University of Washington-Tacoma professor Asao Inoue, who previously published an essay titled, "A Grade-less Writing Course that Focuses on Labor and Assessing," in which he argues in favor of "dispens[ing] almost completely with judgments of quality when producing course grades."

"I argue that a productive way to design and teach a first-year writing course is to conceive of it as labor – and calculate course grades by labor completed – and dispense almost completely with judgments of quality when producing course grades," Inoue writes in an essay summary on Academia.edu.

"This is my ideal writing course, and allows me to cultivate a more critical, democratic community. It shares responsibility and negotiates most of the work in the course with students, as well as the terms by which that work is done," he adds.

"Finally, it operates from an assumption about assessing writing (in all its forms) that allows students to democratically address difference and see acts of assessing as acts of reading, critical judgment, and writing."

The Feb. 1 event will consist of one "plenary session," titled, "The Language Standards That Kill Our Students: Grading Ain't Just Grading." There will also be three separate "breakout sessions," entitled "Creating Antiracist Writing Assessment Ecologies in Writing Courses," "Rethinking Standards of Writing Intensive Course Rubrics," and "Problem-Posing the Nature of Judgement in Writing Intensive Courses." 

Inoue serves as both a professor at UW Tacoma, as well as the director of the school's writing center. A poster in the writing center claims that American grammar is a "racist," "unjust language structure," The Daily Caller News Foundation reported.

“Linguistic and writing research has shown clearly for many decades that there is no inherent ‘standard’ of English,” the poster says. “Language is constantly changing. These two facts make it very difficult to justify placing people in hierarchies or restricting opportunities and privileges because of the way people communicate in particular versions of English.”

“We promise to emphasize the importance of rhetorical situations over grammatical ‘correctness’ in the production of texts,” the poster continues. “We promise to challenge conventional word choices and writing explanations.”

In August, Campus Reform reported on a similar situation at Davidson College in North Carolina, in which one literature professor allowed students to assign their own grades.

“At the end of the semester, if the student completed the specific work they said they would, at the satisfactory level, they receive the grade they planned to receive,” Davidson Professor Melissa Gonzalez wrote in an email to students. 

Gonzalez cited research saying that a single letter grade cannot accurately represent the "quality" of a "multidimensional product." 

“Using the contract method over time has allowed us to see to the root of our discomfort: conventional grading rests on two principles that are patently false: that professionals in our field have common standards for grading, and that the ‘quality’ of a multidimensional product can be fairly or accurately represented with a conventional one-dimensional grade,” the paper states.

American University declined to comment for this article.

Published:1/21/2019 10:42:50 AM
[Markets] Stocks subdued as Chinese growth hits weakest since '90 BANGKOK (AP) — World stocks were subdued Monday after China reported its slowest economic expansion in 30 years and the International Monetary Fund cut its forecasts for global growth this year. Published:1/21/2019 10:10:37 AM
[Markets] 1,500 Private Jets To Descend On Davos This Week, Up 50% From Last Year

Some would call it ironic, others hypocritical but whatever your level of cynicism, here are the facts: as its top global risks for 2018 and 2019 in terms of likelihood, this year's billionaire boondoggle at the World Economic Forum in Davos listed "extreme weather conditions", i.e. global warming...

SS

... and yet, according to Air Charter Service, no less than 1,500 private jet flights will land in Davos over the five days of its duration: a 50% increase in both private jets and toxic environmental emissions compared to last year, when roughly 1,000 private jets descended upon Davos.

Here are some more details about how these titans of industry with hearts oh so bleeding for the environment and the carbon content of earth's atmosphere - as long as their own carbon footprint is ignored of course - travel.

As Andy Christie, Private Jets Director at Air Charter Services says, "the global interest in the event led us to analyse the private jet activity over the past five years of WEF. Davos doesn’t have its own airfield and, whilst we have several clients who fly into the town by helicopter, the four main airfields that private jet users attending the forum use are Zürich, Dübendorf, St. Gallen-Altenrhein and St. Moritz.

According to WingX figures the average number of aircraft movements – arrivals and departures – for those four airports over the rest of January will be over 70 per day. "Working with WingX, we looked at private jet activity at those airports over the six days of each WEF week since 2013 – from one day before the event to one day after" Christie said. "Last year was the busiest year for private jets so far, showing an 11% increase on 2017, with more than 1,300 aircraft movements. If we see a similar increase this year, we could be looking at almost 1,500 aircraft movements over the six days."

“The week of the forum is unlike any other busy private jet event, such as the Super Bowl or Champions’ League final – it’s unique for the industry in that we receive bookings from a number of our offices around the world, rather than just the one or two offices in the region where the event is being held. We have had bookings from as far as our operations in Hong Kong, India and the US – no other event has the same global appeal.

Now that we know they'll be coming, this is what they'll be arriving in: expensive heavy jets proved to be the most popular aircraft type last year, with Gulfstream GVs and Global Expresses both being used more than 100 times each. Christie adds: "With the length of some of the journeys, these slightly larger aircraft would have been needed, but with such wealthy individuals attending, they can afford to use such aircraft from wherever they were coming – as well as the element of larger aircraft being seen as a status symbol."

Indeed they can, which is why all those fawning journalists present at Davos and attending any of the numerous "save the planet" panels, remember: whatever you do, don't ask how these glorious crusaders for the environment arrived in Davos.

Finally, here are slink to the personal jets of some of the world's richest and most powerful.

Published:1/21/2019 10:10:36 AM
[Markets] Watch Live: May Unveils Brexit "Plan B" As Rebel MPs Plot A Mutiny

Update: With May expected to begin speaking any minute, the BBC's Deputy Political editor has some updates on what May's expected to say:

* * *

After days of increasingly fraught - and ultimately fruitless - 'cross party' talks, Prime Minister Theresa May will offer a motion to move ahead with her "Plan B" Brexit deal, which is widely expected to mostly resemble "Plan A", with a few minor tweaks. On Tuesday, the Commons voted down May's deal by a historic 230 vote margin, the most crushing defeat endured by a British government since the 1920s. But May's hope that the defeat would help bring the EU27 to the table has been dashed. The bloc's leaders have affirmed that, while they might be willing to make adjustments to the political statement setting out a framework for the trade deal that is expected to be negotiated during the post-Brexit Day transition period.

According to Reuters, the proposals that May is expected to bring before Parliament on Tuesday will focus on winning more concessions from the EU. May will make a statement in parliament at 1530 GMT (10:30 am ET), where she is expected to put forward a motion on her proposed next steps on Brexit.

"It is clear already that a significant number of colleagues have expressed concerns around the backstop and that is one of the areas that we are going to be looking at," May’s spokesman told reporters.

However, a 'cross party' group of rebel MPs who are reportedly plotting to seize power from May's government with an amendment that, if passed, would defy centuries of precedent could throw a wrench in the works.

May's remarks before Parliament will be broadcast live below:

Published:1/21/2019 9:40:41 AM
[Markets] A Call To Reinvestigate American Assassinations

Via ConsortiumNews.com,

On the occasion of Martin Luther King Jr. Day, a group of over 60 prominent American citizens is calling upon Congress to reopen the investigations into the assassinations of President John F. KennedyMalcolm XMartin Luther King Jr., and Senator Robert F. Kennedy.

Signers of the joint statement include Isaac Newton Farris Jr., nephew of Reverend King and past president of the Southern Christian Leadership Conference; Reverend James M. Lawson Jr., a close collaborator of Reverend King; and Robert F. Kennedy Jr. and Kathleen Kennedy Townsend, children of the late senator. The declaration is also signed by numerous historians, journalists, lawyers and other experts on the four major assassinations. 

Other signatories include G. Robert Blakey, the chief counsel of the House Select Committee on Assassinations, which determined in 1979 that President Kennedy was the victim of a probable conspiracy; Dr. Robert McClelland, one of the surgeons at Parkland Memorial Hospital in Dallas who tried to save President Kennedy’s life and saw clear evidence he had been struck by bullets from the front and the rear; Daniel Ellsberg, the Pentagon Papers whistleblower who served as a national security advisor to the Kennedy White House; Richard Falk, professor emeritus of international law at Princeton University and a leading global authority on human rights; Hollywood artists Alec BaldwinMartin SheenRob Reiner and Oliver Stone; political satirist Mort Sahl; and musician David Crosby.

JFK: November 22, 1963.

The joint statement calls for Congress to establish firm oversight on the release of all government documents related to the Kennedy presidency and assassination, as mandated by the JFK Records Collection Act of 1992. This public transparency law has been routinely defied by the CIA and other federal agencies. The Trump White House has allowed the CIA to continue its defiance of the law, even though the JFK Records Act called for the full release of relevant documents in 2017.

The group statement also calls for a public inquest into “the four major  assassinations of the 1960s that together had a disastrous impact on the course of American history.” This tribunal – which would hear testimony from living witnesses, legal experts, investigative journalists, historians and family members of the victims – would be modeled on the Truth and Reconciliation hearings held in South Africa after the fall of apartheid. This American Truth and Reconciliation process is intended to encourage Congress or the Justice Department to reopen investigations into all four organized acts of political violence.

Signers of the joint statement, who call themselves the Truth and Reconciliation Committee, are also seeking to reopen the Robert F. Kennedy assassination case, stating that Sirhan Sirhan’s conviction was based on “a mockery of a trial.” The forensic evidence alone, observes the statement, demonstrates that Sirhan did not fire the fatal shot that killed Senator Kennedy – a conclusion reached by, among others, Dr. Thomas Noguchi, the Los Angeles County Coroner who performed the official autopsy on RFK.

The joint statement — which was co-written by Adam Walinsky, a speechwriter and top aide of Senator Kennedy — declares that these

Four major political murders traumatized American life in the 1960s and cast a shadow over the country for decades thereafter. John F. KennedyMalcolm XMartin Luther King Jr. and Robert F. Kennedy were each in his own unique way attempting to turn the United States away from war toward disarmament and peace, away from domestic violence and division toward civil amity and justice. Their killings were together a savage, concerted assault on American democracy and the tragic consequences of these assassinations still haunt our nation.”

The Truth and Reconciliation Committee views its joint statement as the opening of a long campaign aimed at shining a light on dark national secrets. As the public transparency campaign proceeds, citizens across the country will be encouraged to add their names to the petition. The national effort seeks to confront the forces behind America’s democratic decline, a reign of secretive power that long precedes the recent rise of authoritarianism. “The organized killing of JFK, Malcolm, Martin, and RFK was a mortal attack on our democracy,” said historian James W. Douglass, author of JFK and the Unspeakable: Why He Died and Why It Matters (2010).

“We’ve been walking in the valley of the dead ever since. Our campaign is all about recovering the truth embodied in the movement they led. Yes, the transforming, reconciling power of truth will indeed set us free.”

The Truth and Reconciliation Committee’s Calls for Action:

MLK Jr.: April 4, 1968 (Wikimedia Commons)

*  We call upon Congress to establish continuing oversight on the release of government documents related to the presidency and assassination of President John F. Kennedy, to ensure public transparency as mandated by the JFK Records Collection Act of 1992. The House Committee on Oversight and Government Reform should hold hearings on the Trump administration’s failure to enforce the JFK Records Act.

*  We call for a major public inquest on the four major assassinations of the 1960s that together had a disastrous impact on the course of American history: the murders of John F. Kennedy, Malcolm X, Martin Luther King Jr. and Robert F. Kennedy. This public tribunal, shining a light on this dark chapter of our history, will be modeled on the Truth and Reconciliation process in post-apartheid South Africa. The inquest — which will hear testimony from living witnesses, legal experts, investigative journalists, historians and family members of the victims — is intended to show the need for Congress or the Justice Department to reopen investigations into all four assassinations.

* On Martin Luther King Jr. Day, we call for a full investigation of Reverend King’s assassination. The conviction of James Earl Ray for the crime has steadily lost credibility over the years, with a 1999 civil trial brought by Reverend King’s family placing blame on government agencies and organized crime elements. Following the verdict, Coretta Scott King, the slain leader’s widow, stated: “There is abundant evidence of a major, high-level conspiracy in the assassination of my husband.” The jury in the Memphis trial determined that various federal, state and local agencies “were deeply involved in the assassination … Mr. Ray was set up to take the blame.” Reverend King’s assassination was the culmination of years of mounting surveillance and harassment directed at the human rights leader by J. Edgar Hoover’s FBI and other agencies.

*  We call for a full investigation of the Robert F. Kennedy assassination case, the prosecution of which was a mockery of a trial that has been demolished by numerous eyewitnesses, investigators and experts — including former Los Angeles County Coroner Dr. Thomas Noguchi, who performed the official autopsy on Senator Kennedy. The forensic evidence alone establishes that the shots fired by Sirhan Sirhan from in front of Senator Kennedy did not kill him; the fatal shot that struck RFK in the head was fired at point–blank range from the rear. Consequently, the case should be reopened for a new comprehensive investigation while there are still living witnesses — as there are in all four assassination cases.

A Joint Statement on the Kennedy, King and Malcolm X Assassinations and Ongoing Cover-ups:

1. As the House Select Committee on Assassinations concluded in 1979, President John F. Kennedy was probably killed as the result of a conspiracy.

2. In the four decades since this Congressional finding, a massive amount of evidence compiled by journalists, historians and independent researchers confirms this conclusion. This growing body of evidence strongly indicates that the conspiracy to assassinate President Kennedy was organized at high levels of the U.S. power structure, and was implemented by top elements of the U.S. national security apparatus using, among others, figures in the criminal underworld to help carry out the crime and cover-up.

RFK: June 5, 1968.

3. This stunning conclusion was also reached by the president’s own brother, Attorney General Robert F. Kennedy, who himself was assassinated in 1968 while running for president – after telling close aides that he intended to reopen the investigation into his brother’s murder if he won the election.

4. President Kennedy’s administration was badly fractured over his efforts to end the Cold War, including his back-channel peace feelers to the Soviet Union and Cuba and his plan to withdraw U.S. troops from Vietnam after the 1964 presidential election.

5. President Kennedy has long been portrayed as a Cold War hawk, but this grossly inaccurate view has been strongly challenged over the years by revisionist historians and researchers, who have demonstrated that Kennedy was frequently at odds with his own generals and espionage officials. This revisionist interpretation of the Kennedy presidency is now widely embraced, even by mainstream Kennedy biographers.

6. The official investigation into the JFK assassination immediately fell under the control of U.S. security agencies, ensuring a cover-up. The Warren Commission was dominated by former CIA director Allen Dulles and other officials with strong ties to the CIA and FBI.

7. The corporate media, with its own myriad connections to the national security establishment, aided the cover-up with its rush to embrace the Warren Report and to scorn any journalists or researchers who raised questions about the official story.

8. Despite the massive cover-up of the JFK assassination, polls have consistently shown that a majority of the American people believes Kennedy was the victim of a conspiracy — leading to the deep erosion of confidence in the U.S. government and media.

Malcolm X: February 21, 1965.

9. The CIA continues to obstruct evidence about the JFK assassination, routinely blocking legitimate Freedom of Information requests and defying the JFK Records Collection Act of 1992, preventing the release of thousands of government documents as required by the law.

10. The JFK assassination was just one of four major political murders that traumatized American life in the 1960s and have cast a shadow over the country for decades thereafter. John F. Kennedy, Malcolm X, Martin Luther King Jr. and Robert F. Kennedy were each in his own unique way attempting to turn the United States away from war toward disarmament and peace, away from domestic violence and division toward civil amity and justice. Their killings were together a savage, concerted assault on American democracy and the tragic consequences of these assassinations still haunt our nation.

Published by Spartacus Educational.

Published:1/21/2019 9:11:15 AM
[Markets] 2018 Proved Investors Wrong About This "Dangerous" Investment -- Again Despite minor losses, this much-maligned asset class still topped the stock market. Published:1/21/2019 8:42:21 AM
[Markets] "Probably Nothing..."

Please be advised, the following two charts may not be good for your wealth...

The almost unprecedented surge in stocks off the Mnuchin Massacre lows that bracketed Xmas Day has reinvigorated investors, commission-takers, and asset-gatherers worldwide in some Pavlovian belief that all is well in the world once again and it's just a matter of time before wealth is back at record highs and retirement walks along sandy beaches are being advertised on TV.

Sadly, as the following two charts show... there's no 'there', there.

While investors wish that three weeks of gains for the Stoxx Europe 600 meant that the market was getting ready for a stellar earnings season? Here’s the reality: neither investors nor analysts are expecting much good news from European companies...

In fact, European profit downgrades exceeded upgrades by the most since 2011.

We can see what happens when stocks attempt to "know better" than the earnings estimates.

“Market sentiment on earnings is cautious and fourth-quarter results are widely expected to disappoint,” said Emmanuel Cau, head of European equity strategy at Barclays Plc in London.

“Fourth-quarter estimates have been lowered and the sharp p/e de-rating of 2018 lowers the bar for positive surprises, but we believe that full-year 2019 estimates are still too high and will see further downgrades."

And US markets are no cleaner a dirty shirt to pin your hopes on as forward earnings expectations have plummeted (and continue to plummet) despite the v-shaped recovery in stock prices...

So, hey, BTFD, why not? Everyone else is doing it... after all, the slump in earnings expectations is "probably nothing."

Published:1/21/2019 8:42:21 AM
[Markets] IMF Slashes Global GDP Forecast To 3 Year Low

Just as it warned it would several days ago, as part of its latest quarterly economic outlook report the IMF just slashed its forecast for 2019 global GDP to just 3.5% from 3.7% as of October, its lowest forecast in three years, while warning that trade tensions pose further downside risks to global growth.

In its second growth downgrade in three months, the IMF blamed softening demand across Europe and recent stock market volatility, and while its US GDP forecast remained somewhat surprisingly unchange, still seeing a solid 2.5% in 2019 GDP growth, the IMF took a machete to its German GDP forecast, which the IMF now sees growth only 1.3% this year, down 30%, or 0.6% from its forecast last October. The Monetary Fund blamed soft consumer demand and weak factory production after the introduction of stricter emission standards for cars was behind the shift. To be sure, recent German economic data has been disastrous, and confirmed the sharp slowdown in the economy, and it will be up to Q1 data to confirm or deny whether a German recession has arrived.

Despite seeing sharp slowdowns to other key European economies, including Italy, where it cited weak demand and higher sovereign borrowing costs, and France, where the so-called Yellow-Vest protests have hurt the economy...

... the overall outlook was somewhat more upbeat than some had feared especially as many investors openly fear a U.S-led slowdown taking hold, the fund left its projections for the U.S. and China unchanged and even anticipates a pickup in worldwide expansion to 3.6 percent next year.

Nonetheless, risks "tilt to the downside" said the IMF just hours after China revealed the slowest expansion since 2009 last quarter. It will set the tone for this week’s World Economic Forum meeting in Davos, Switzerland.

"The global growth forecast for 2019 and 2020 had already been revised downward in the last WEO, partly because of the negative effects of tariff increases enacted in the United States and China earlier that year" the report said.

"The further downward revision since October in part reflects carry over from softer momentum in the second half of 2018—including in Germany following the introduction of new automobile fuel emission standards and in Italy where concerns about sovereign and financial risks have weighed on domestic demand—but also weakening financial market sentiment as well as a contraction in Turkey now projected to be deeper than anticipated."

“It is important to take stock of the many rising risks,” said Gita Gopinath, the fund’s new chief economist.

The IMF also said that "a range of triggers beyond escalating trade tensions could spark a further deterioration in risk sentiment with adverse growth implications, especially given the high levels of public and private debt. These potential triggers include a “no-deal” withdrawal of the United Kingdom from the European Union and a greater-than-envisaged slowdown in China."

Among the threats cited in the report were more trade tariffs, a renewed tightening of financial conditions, a “no deal” Brexit and a deeper-than-anticipated slowdown in China. And while some of the key issues the IMF flagged in Europe may be temporary, the IMF said that they came amid a backdrop of global trade policy uncertainty and concerns about China’s outlook.

"The possibility of tensions resurfacing in the Spring casts a shadow over global economic prospects,” the IMF said, which also predicted that global trade will grow by 4.0% in 2019 and remain unchanged in 2020, a 0.1% cut from its prior forecast. As recently as 2017, the IMF predicted global trade would grow 5.3%.

In addition to slashing Europe's GDP prospects, the IMF also cut Mexico’s GDP by up to half a percentage point, while admitting that the slump in Venezuela may be deeper than previously anticipated.

While the IMF's U.S. forecast was unchanged at 2.5% in 2019, it said growth in the world’s biggest economy will cool to 1.8% in 2020 as stimulus from tax cuts fades and the economy responds to higher Federal Reserve interest rates.

Finally, as for China, the IMF still expects GDP to grow 6.2% in 2019 after 6.6% in 2018 - the lowest since 1990 - and to continue slowing due to the trade war and the government’s failing attempts to reduce systemic leverage.

Published:1/21/2019 8:14:19 AM
[Markets] NewsWatch: U.S. stock futures fall in shortened session as China data reinforces global slowdown fears U.S. stock futures fall Monday in a shortened session, and with regular trading close in honor of the Martin Luther King Jr. Day holiday. China economic data weighed on investors.
Published:1/21/2019 8:14:19 AM
[Markets] The 'Gilets Jaunes' Are Unstoppable: "Now, The Elites Are Afraid"

Authored by Christophe Guilluy via Spiked-Online.com,

The gilets jaunes (yellow vest) movement has rattled the French establishment. For several months, crowds ranging from tens of thousands to hundreds of thousands have been taking to the streets every weekend across the whole of France. They have had enormous success, extracting major concessions from the government. They continue to march.

Back in 2014, geographer Christopher Guilluy’s study of la France périphérique (peripheral France) caused a media sensation. It drew attention to the economic, cultural and political exclusion of the working classes, most of whom now live outside the major cities. It highlighted the conditions that would later give rise to the yellow-vest phenomenon. Guilluy has developed on these themes in his recent books, No Society and The Twilight of the Elite: Prosperity, the Periphery and the Future of Francespiked caught up with Guilluy to get his view on the causes and consequences of the yellow-vest movement.

spiked: What exactly do you mean by ‘peripheral France’?

Christophe Guilluy: ‘Peripheral France’ is about the geographic distribution of the working classes across France. Fifteen years ago, I noticed that the majority of working-class people actually live very far away from the major globalised cities – far from Paris, Lyon and Toulouse, and also very far from London and New York.

Technically, our globalised economic model performs well. It produces a lot of wealth. But it doesn’t need the majority of the population to function. It has no real need for the manual workers, labourers and even small-business owners outside of the big cities. Paris creates enough wealth for the whole of France, and London does the same in Britain. But you cannot build a society around this. The gilets jaunes is a revolt of the working classes who live in these places.

They tend to be people in work, but who don’t earn very much, between 1000€ and 2000€ per month. Some of them are very poor if they are unemployed. Others were once middle-class. What they all have in common is that they live in areas where there is hardly any work left. They know that even if they have a job today, they could lose it tomorrow and they won’t find anything else.

spiked: What is the role of culture in the yellow-vest movement?

Guilluy: Not only does peripheral France fare badly in the modern economy, it is also culturally misunderstood by the elite. The yellow-vest movement is a truly 21st-century movement in that it is cultural as well as political. Cultural validation is extremely important in our era.

One illustration of this cultural divide is that most modern, progressive social movements and protests are quickly endorsed by celebrities, actors, the media and the intellectuals. But none of them approve of the gilets jaunes. Their emergence has caused a kind of psychological shock to the cultural establishment. It is exactly the same shock that the British elites experienced with the Brexit vote and that they are still experiencing now, three years later.

The Brexit vote had a lot to do with culture, too, I think. It was more than just the question of leaving the EU. Many voters wanted to remind the political class that they exist. That’s what French people are using the gilets jaunes for – to say we exist. We are seeing the same phenomenon in populist revolts across the world.

spiked: How have the working-classes come to be excluded?

Guilluy: All the growth and dynamism is in the major cities, but people cannot just move there. The cities are inaccessible, particularly thanks to mounting housing costs. The big cities today are like medieval citadels. It is like we are going back to the city-states of the Middle Ages. Funnily enough, Paris is going to start charging people for entry, just like the excise duties you used to have to pay to enter a town in the Middle Ages.

The cities themselves have become very unequal, too. The Parisian economy needs executives and qualified professionals. It also needs workers, predominantly immigrants, for the construction industry and catering et cetera. Business relies on this very specific demographic mix. The problem is that ‘the people’ outside of this still exist. In fact, ‘Peripheral France’ actually encompasses the majority of French people.

spiked: What role has the liberal metropolitan elite played in this?

Guilluy: We have a new bourgeoisie, but because they are very cool and progressive, it creates the impression that there is no class conflict anymore. It is really difficult to oppose the hipsters when they say they care about the poor and about minorities.

But actually, they are very much complicit in relegating the working classes to the sidelines. Not only do they benefit enormously from the globalised economy, but they have also produced a dominant cultural discourse which ostracises working-class people. Think of the ‘deplorables’ evoked by Hillary Clinton. There is a similar view of the working class in France and Britain. They are looked upon as if they are some kind of Amazonian tribe. The problem for the elites is that it is a very big tribe.

The middle-class reaction to the yellow vests has been telling. Immediately, the protesters were denounced as xenophobes, anti-Semites and homophobes. The elites present themselves as anti-fascist and anti-racist but this is merely a way of defending their class interests. It is the only argument they can muster to defend their status, but it is not working anymore.

Now the elites are afraid. For the first time, there is a movement which cannot be controlled through the normal political mechanisms. The gilets jaunes didn’t emerge from the trade unions or the political parties. It cannot be stopped. There is no ‘off’ button. Either the intelligentsia will be forced to properly acknowledge the existence of these people, or they will have to opt for a kind of soft totalitarianism.

A lot has been made of the fact that the yellow vests’ demands vary a great deal. But above all, it’s a demand for democracy. Fundamentally, they are democrats – they want to be taken seriously and they want to be integrated into the economic order.

spiked: How can we begin to address these demands?

Guilluy: First of all, the bourgeoisie needs a cultural revolution, particularly in universities and in the media. They need to stop insulting the working class, to stop thinking of all the gilets jaunes as imbeciles.

Cultural respect is fundamental: there will be no economic or political integration until there is cultural integration. Then, of course, we need to think differently about the economy. That means dispensing with neoliberal dogma. We need to think beyond Paris, London and New York.

Published:1/21/2019 7:40:36 AM
[Markets] Europe Markets: Slow annual growth for China pulls European markets down European markets fell on Monday, after China announced its economy had expanded at the slowest annual pace since 1990
Published:1/21/2019 7:40:35 AM
[Markets] S&P Futures Slide As Trade Pessimism Returns

It has been an overnight session of two different narratives, with Asian markets rising on Chinese economic data where despite the biggest annual drop in GDP since 1990 (which boosted hopes for more stimulus), Beijing goalseeked a slightly better than expected retail sales and industrial production December print...

... while European bourses and US equity futures dipped on a late Sunday report from Bloomberg pouring cold water on US-China trade talks, and according to which the two sides have so far made "little progress" on the issue any deal Trump strikes with China may ultimately be judged on: ending what the U.S. has dubbed as decades of state-coordinated Chinese theft of American intellectual property. BBG added that this stood in contrast to movement on other fronts that has lifted stocks in recent sessions, including a report on Friday that China offered a highly unrealistic path to reducing its trade surplus to zero by 2024.

As a result, emerging-market currencies weakened and stocks erased gains as traders assessed potential road blocks in U.S.-China trade talks later this month. The yuan weakened as the U.S. and China negotiators were said to remain far apart over the key issue of intellectual property, with the next round of talks scheduled for Jan. 30-31, even as the Shanghai Composite rose 0.6% to close above 2,600, while the Nikkei was fractionally in the green, rising 0.3% to 20,719 and Australia was also green.

Chinese optimism did not carry over to Europe, however, where the Stoxx 600 index was on course for its first drop in five days, tracking S&P 500 futures lower in muted volumes due to the MLK market closure in the US. That said, European stocks trimmed early losses, with Stoxx 600 hitting session high, still down 0.2%, with telecom, utilities and banks shares leading declines, while airlines rallied. 

European telecom companies were the first sector to give up 2019 gains, with the Stoxx 600 Telecommunications Index falling as much as 1.5%, making it Monday’s biggest sector decliner in Europe and erasing this year’s gains after slightly negative reports on several large carriers. The sector is now down 0.6% on the year, the first industry group (but certainly not the last) in negative territory for the period, with Deutsche Telekom leading declines with a 2.4% drop after a Berenberg downgrade; Orange, Vodafone and Telecom Italia all dropped as well.

Earlier in the session, Germany report that PPI rose 2.7% Y/Y in Dec, missing expectations of 2.9% and far below November's 3.3% print as Europe's inflationary impulse appears to be fading.

S&P 500 futures dropped as much as 0.5% and hit a session low around 5am, although they have since posted a modest rebound and were down 8.5 points last.

Monday's muted start was in stark contrast to last week's rally, when risk assets extended gains amid positive manufacturing numbers and signs the U.S. and China were closing in on a trade truce (even though many of these were officially denied). However, as Bloomberg notes, the "picture is complex", as reports on intellectual property paint a less optimistic view on the outlook for talks, while data on Monday confirmed China’s economy expanded at the slowest pace since the global financial crisis.

In FX, the pound erased a loss before Theresa May returns to Parliament to explain what she’s going to do next on Brexit. On Sunday, the U.K. prime minister ditched cross-party talks and was set to try to get her failed deal through Parliament with votes of Conservatives and her Northern Irish allies. Elsewhere, the dollar was steady, while bonds in Europe were mixed. The yen rose versus all its G-10 peers as global risks, including a lack of progress on the key U.S.-China trade issue of intellectual property, underpinned demand while Treasuries didn’t trade due to the MLK holiday.

Top Overnight News

  • Theresa May briefed her Cabinet on Sunday evening that there was little prospect of cross-party Brexit talks yielding a workable alternative plan to the one that Parliament overwhelmingly rejected last week. Instead, according to two people who were on the conference call between May’s most senior ministers, she said she would seek changes to the Irish backstop section of the deal she’s negotiated with the European Union
  • European Union governments disagree over how long they think the U.K. should delay Brexit, with some pushing for an extension of as much as a year, diplomats said
  • China’s economy expanded at the slowest pace since the global financial crisis, as a domestic financial clean-up, weakening global demand and trade conflict with the U.S. all dampened momentum
  • According to people close to the discussions, the U.S. and China have so far made little progress on the issue any deal Trump strikes with China may ultimately be judged on: ending what the U.S. has dubbed as decades of state- coordinated Chinese theft of American intellectual property
  • The No. 3 House Democrat on Sunday offered a path for a deal to end the almost month-long partial government shutdown, focused on a permanent solution for so-called “Dreamers” rather than the three-year reprieve offered by President Donald Trump
  • Administration officials are planning for President Donald Trump’s second summit with North Korean leader Kim Jong Un to take place in Vietnam, said people familiar with the plans

Asian equity markets began the week higher as the region followed suit to the optimism seen last Friday amongst the US majors after reports China is to offer concessions to eliminate the US trade imbalance, but with gains capped as participants digested a slew of Chinese data including 2018 GDP which was at the slowest growth in 28 years as expected. ASX 200 (+0.2%) and Nikkei 225 (+0.2%) were both positive from the open as they benefitted from the US-China trade optimism, but then pulled-back from their highs heading into the Chinese data and after US Trade Representative Lighthizer noted there was little progress made with China regarding intellectual property theft. Elsewhere, Hang Seng (+0.4%) and Shanghai Comp. (+0.4%) had a relatively tepid open on caution prior to the key data releases and after the PBoC skipped liquidity operations, although Chinese markets later breathed a sigh of relief from the inline GDP numbers, as well as better than expected Industrial Production and Retail Sales data.

Major European equities are mostly in the red [Euro Stoxx 50 -0.2%] as sentiment is dictated by China’s 2018 GDP printing, as expected, the slowest growth in 28 years. FTSE MIB (-0.6%) is the underperforming index, weighed on by Telecom Italia (-1.9%) after the Co’s proposal to confer all network assets into a separate company has been opposed by the communications regulator. Meanwhile, UK’s FTSE 100 (+0.3%) outperforms on currency effects and as the Pound awaits PM May’s Brexit “Plan B”. Sectors are similarly in the red, with underperformance seen in Telecom names; where the aforementioned Telecom Italia is amongst those weighing on the sector. Other notable movers include William Hill (-2.6%) after the Co. state their full year operating profit for 2018 is expected to decrease from 2017’s level. Separately, Henkel (-5.3%) are towards the bottom of the Stoxx 600 after guiding FY19 EPS lower to mid-single digits.

In FX, the DXY is little changed and closer to the top of a 96.200-380 range following a relatively rangebound Asia-Pac session, with little reaction to the confirmation by USTR Lightihzer regarding little progress in intellectual property issues in US-Sino trade talks, while US President Trump dismissed the WSJ report about US mulling to lift China tariffs to move forward dialogue. Liquidity in the markets will likely be thin as US participants are away on MLK day, while State-side data remains scarce as the US government has been shut for almost a month.

  • GBP, EUR – More angst for the Pound as PM May heads to the Commons later (around 15:30 GMT) to pitch her so-called “Plan B” with little expected in regard to a realistic strategy. Downing Street denied weekend reports that the Premier is looking to tweak the Good Friday agreement with Ireland to break the Brexit deadlock, while the Irish European Foreign Affairs Minister stated Ireland will not take part in bilateral talks and dialogue between EU and the UK, in turn pouring cold water on the Handelsblatt report from last week that the EU are ready to make further concessions on the backstop if the initiative comes from Ireland. Going back to May’s statement, there were reports over the weekend that MPs are to ambush the Premier with amendments aimed at stopping a no-deal scenario. Two amendments to be aware of are the Cooper and Grieve amendments, the former is aimed at giving parliament power to extend Article 50 while the latter gives parliament the power to hold “indicative votes” on Brexit options (such as a Norway or Canada-style).  GBP/USD current resides nearer to the bottom of a 1.2831-1.2900 range, below its 100 DMA at 1.2891 and around its 200 HMA at 1.2844. Meanwhile, the EUR remains firmer, albeit marginally as EUR/USD straddles around its 50 DMA at 1.1379 and closer to the middle of a 1.1361-1.1400 range ahead of the ECB interest rate decision on Thursday, while EUR 1.2bln in option expiries rest at strike 1.1400 for today’s NY cut.
  • JPY, CHF – Mixed trade for the “safe-haven” currencies with the Yen slightly firmer upon the release of Chinese GDP which printed the slowest annual growth in almost three-decades, though this was widely expected by analysts amid the ongoing US-China trade disputes. USD/JPY resides in the middle of a 109.50-80 range, while the absence of US participants will drain liquidity. Elsewhere, further suspicious activity in the weakening Franc as EUR/CHF stabilises nearer to the top of a 1.1300-1.1350 range and similarly USD/CHF closer the top of the intraday range with speculation of potential SNB intervention taking place.

In commodities, Brent (-0.1%) and WTI (Unch%) recouped most of the initial losses, though prices remain below USD 63/bbl and USD 54/bbl; as the risk tone is directed by the slowest GDP growth in 28 years from China. Separately, China produced 3.86mln BPD for December which is a 2.85% increase Y/Y; however, 2018 domestic output decreased to 3.8mln BPD vs. Prev. 3.85mln BPD. Friday’s Baker Hughes Rig Count showed total decreased by 25 to 1050; with oil rigs decreasing by 21 to the lowest level in since May 2018. Gold (-0.2%) is in the red but trading within a narrow USD 4/oz range, largely due to a lack of catalyst in the dollar as it is a US market holiday. Elsewhere, China’s primary aluminium output increased for the second month to a record in high in December of over 3mln tonnes; in contrast China’s daily average steel output in December fell to the lowest level since March, due to weaker profit margins.

DB's Jim Reid concludes the overnight wrap

So far this year the market has shaken off its cast from December and is rehabilitating well. It’s a packed week though with lots to test the recovery and before we preview it we’ve already had the first test with China releasing all important data this morning. The good news is that there were no huge surprises with Q4 GDP printing in line with expectations at 6.4% (vs. 6.5% in Q3). That said, it confirms the lowest quarterly rate of growth in China since Q1 2009 (when it was also +6.4%) while the 2018 GDP growth rate of 6.6% is the lowest since 1991. Meanwhile the December activity indicators also out in China this morning were broadly in line. Retail sales printed at +8.2% yoy (vs. +8.1% expected) and fixed asset investment at +5.9% ytd yoy (vs. +6.0% expected) with industrial production (+5.7% yoy vs. +5.3% expected) the biggest positive surprise.

Markets in Asia are up across the board to kick off the week with Chinese bourses leading the way. The Shanghai Comp and CSI 300 are +0.68% and +0.69% respectively while the Hang Seng (+0.34%), Nikkei (+0.34%) and Kospi (+0.08%) have posted more modest gains. The CNY (-0.17%) is a touch weaker after that data along with most other EM currencies while US equity futures are down -0.30%. A Bloomberg story out early this morning suggesting that trade negotiations between the US and China – specifically over accusations of IP theft by China - are failing to make progress appears to be impacting sentiment this morning too. A reminder that China Vice Premier Liu He is travelling to the US on January 30th - 31st for trade negotiations. We should note that US equity and bond markets will be closed today on account of the Martin Luther King Jr. holiday. So it should quieten down as the day progresses.

Even after the China numbers we have a busy week with the world’s most powerful and influential people (plus me) at Davos. So expect lots of headlines (hopefully not involving me). Outside of this, we see U.K. PM May present her alternative Brexit plan today, the ECB and BoJ policy meetings (Thursday and Wednesday), global flash PMIs (Thursday) and earnings season starting to get busier. The ongoing partial government shutdown (31 days and counting today) in the US should also be a talking point with certain US data releases continuing to be delayed as a result and more worries about what it might do to Q1 growth.

Going through these in a little more detail, in terms of Brexit it’s an important week (how many times have we said that) as PM May is due to present her Plan B to Parliament today ahead of a vote on January 29th. The latest is that there isn’t really any latest but lots of behind the scenes activity. TheTimes and various other media outlets last night reported after a cabinet meeting yesterday that May’s tactic seems to have moved from hopes of cross party agreements to getting a deal that the Tories and the DUP can coalesce around. That really involves the backstop and further negotiations with the EU/Ireland. There’s no sign that this will be forthcoming and could be disappointing to the market.

However the Sunday Times earlier reported that we could again be set for more unprecedented procedural dramas in the days ahead. Leaked emails they obtained show that “Dominic Grieve, the former attorney-general, has been in secret communications with Colin Lee, the clerk of bills, with the explicit intention of suspending Britain’s departure from the European Union”. So, while we’re no nearer to a breakthrough the odds of no Brexit might be edging ever so slightly higher from a low base. Related to this it seems likely that an amendment will be put to the next bill that asks for a second referendum. If so it will be interesting to see how the vote for such an amendment would go cross parties. An interesting 8 days lays ahead. Overall it feels like the U.K. Parliament will somehow ensure that a no-deal Brexit is unlikely but that the breakthrough continues to be as illusive as ever. We should add that Sterling has traded broadly flat overnight however Bloomberg is reporting that PM May briefed her Cabinet last night suggesting that cross party Brexit talks had yielded little. The story suggests that the PM will instead seek changes to the Irish backstop to secure enough support from the DUP and pro-Brexit Tory members.

Elsewhere, tomorrow sees the World Economic Forum in Davos officially get underway with the theme of this year's Forum being "Globalisation 4.0: Shaping a New Architecture in the Age of the Fourth Industrial Revolution". Please let me know if you or anyone from your office want to attend my slots on Wednesday (globalisation) and Thursday (Will robots take your job?).

The flash PMIs on Thursday could be the most market moving event of the week. We'll get the manufacturing PMI for Japan, and manufacturing, services and composite readings in Europe and the US. For Europe the composite Euro Area reading is expected to rise 0.3pts to 51.4 broken down by the manufacturing and services rising 0.1pts and 0.3pts respectively.

Any slight rise could be a big deal as the problem with the European PMIs is that their falls have now been long standing and consistent (albeit from very high levels just over a year ago). For example, the Eurozone and German manufacturing PMIs have both been sequentially down 11 months out of the last 12. Equity and credit markets remain cheap to PMIs but the problem so far is that PMIs haven’t stabilised. This will be a big test. So, this is probably the highlight of the week.

Onto the ECB and there's fairly low expectations around the policy meeting on Thursday. The ECB is in a bit of a wait and see mode for now ahead of the next meeting in March when policy makers will then get the added benefit of new economic projections. Potentially important things to keep an eye on however include an acknowledgement of risks to the outlook tilting to the downside and comments around reassessing the impacts of TLTRO - both of which were acknowledged as talking points from the minutes of the December meeting. Also given Draghi’s hint last time out that the ECB are aware of the damage to the banking system of persistent negative rates it will be interesting if he now expands upon that. On this it was interesting to read a piece by Mark Wall on Friday looking at net interest income of the four major economic sectors in Europe pre and post the GFC. Since the GFC, non-financial corporates and governments have seen theirs improve whereas households and financials have seen theirs deteriorate. It should be a zero-sum game at economy wide level but perhaps it’s gone too far inter-sector wise. That partly explains the funk the European banking sector is in and may even be a small part of explaining why populism has grown. To restore balance, policy at some point might have to take from the government and corporates and give to consumers and the banks. Anyway the report can be seen here.

Elsewhere in central bank world, the BoJ is also expected to be a bit of a non-event on Wednesday. Our Japanese economists expect the BoJ to vote to maintain its current policy stance and anticipate downward revisions to inflation forecasts for FY18 and FY19 in the outlook report by 0.1 and 0.2 percentage points respectively. In the view of our colleagues none of the conditions they deem necessary for monetary policy normalization – stable core inflation above 1%, stronger policy side effects, government declaration of end of deflation – have been realized at this point. In addition, the economic outlook is unlikely to be reduced to an extent that would demand further easing. In sum, our colleagues estimate the probability of further easing this year at around 10%.

Meanwhile the ongoing partial government shutdown in the US continues to complicate the timing of economic data releases with a decent backlog now built up. Our US economists estimate that to date the impact on real GDP growth for Q1 is approximately -0.2 to -0.3 percentage points assuming the government reopens by the end of this week. However if it lasts for the entire quarter, it could subtract around a full percentage point. Significantly the lack of timely data releases is increasing uncertainty for the Fed to get a better picture of how Q1 growth is tracking and this will continue until the BEA reopens. Friday's new home sales and durable goods orders fall under this category while the backlog includes retail sales, trade data, housing starts and building permits amongst others. However we will get the Richmond Fed and Kansas Fed manufacturing reports on Wednesday and Thursday respectively which will be worth watching in light of other soft regional Fed surveys of late.

As for earnings, we're due to get quarterly reports from 59 S&P 500 companies this week including Johnson & Johnson and IBM on Tuesday, United Technologies, Proctor & Gamble and Ford on Wednesday, Starbucks, Intel and American Airlines on Thursday and AbbVie on Friday. UBS (Tuesday) and Ericsson (Friday) are the highlights in Europe. It's still early days in earnings season however for the US with about 10% of the S&P 500 having reported, 80% have beaten earnings expectations and 55% have beaten sales expectations. The full day by day week ahead is at the end as usual.

Turning to a recap of last week, the S&P 500 advanced +2.87% (+1.32% on Friday) on positive trade headlines and earnings reports. On the former, a Wall Street Journal article said that Treasury Secretary Mnuchin is arguing for removal of tariffs on China and a Bloomberg News article claimed that China has offered to buy additional US products in an effort to close the trade deficit. There were various denials from the White House but markets want to believe there is no smoke without fire. Equity gains were broad-based, with the DOW and NASDAQ also advancing +2.96% and +2.66% (+1.38% and +1.03% on Friday), respectively. Banks outperformed, as fourth quarter results from major US banks showed declining FICC revenues but overall strength and a more positive Q1 outlook, with an index of bank stocks up +7.57% (+1.56% Friday). Banks in Europe also gained +2.83% (+2.11% Friday) while the STOXX 600 advanced +2.25% (+1.80%). In Asia, the Nikkei and Shanghai Composite rallied +1.50% and +1.65% (+1.29% and +1.42% Friday), respectively. The VIX index slid a bit more to 17.8 (-0.4pts on the week and -0.3pts Friday), closing at a six-week low.

The positive risk sentiment pushed Treasury yields a bit higher, with 10-year yields up +8.4bps to 2.784% (+3.4bps Friday), while bund yields rose +2.4bps (+2.0bps Friday). Peripheral spreads rallied, with Italian and Spanish spreads to bunds down -12.3bps and -9.8bps (-3.4bps and -1.7bps Friday), respectively. The dollar strengthened +0.70% (+0.28% Friday) as US economic data mostly steadied. Initial jobless claims fell, industrial production surprised to the upside, though regional Fed surveys were mixed and consumer sentiment deteriorated. Credit continued its strong start to the year, with US and EU HY cash spreads narrowing -22bps and -19bps (-10bps and -8bps Friday), respectively. The US side was helped by another strong week for oil, as WTI crude prices rose +4.28% (+3.32% Friday), which has supported the HY energy sector. US HY energy credit is -128bps tighter this year with the overall market -92bps tighter.

Published:1/21/2019 7:10:06 AM
[Markets] U.S. stock futures fall in shortened session as China data reinforces global slowdown fears U.S. stock futures fall Monday in a shortened session, and with regular trading close in honor of the Martin Luther King Jr. Day holiday. China economic data weighed on investors. Published:1/21/2019 7:10:06 AM
[Markets] London Markets: FTSE 100 inches up after China data; May to outline latest Brexit proposal London markets were up on Monday, as China announces its economy had grown by 6.6% in 2018 and investors wait for Prime Minister Theresa May to outline her latest Brexit proposal to parliament
Published:1/21/2019 7:10:06 AM
[Markets] Where US Crude Oil Could Head Next Week Broader Market Supported the Energy Portfolio(Continued from Prior Part)Oil’s implied volatility On January 17, US crude oil’s implied volatility was 35.5%, which was ~23.2% below its 15-day average. Usually, a lower implied volatility might Published:1/21/2019 6:41:07 AM
[Markets] Stocks mixed as Chinese economy slows to weakest since '90 BANGKOK (AP) — World stocks were subdued Monday after China reported that its economy expanded by 6.6 percent in 2018, its slowest pace since the slump that followed the crackdown on protests centered on Tiananmen Square in 1989. Published:1/21/2019 6:11:54 AM
[Markets] The Conversation: 3 smart ways Trump can disrupt health care and drive down costs Start by letting nurses and pharmacists do some of what doctors do now.
Published:1/21/2019 5:11:32 AM
[Markets] The World's Most Geopolitically Charged Pipeline

Authored by Tim Daiss via Oilprice.com,

Russia’s proposed pipeline to bring more gas from Russian fields into Europe via an undersea pipeline to Germany seems unable to shake both geopolitical maneuvering as well as headline-grabbing quotes from both sides of the divide.

On Thursday, Wolfgang Ischinger, chairman of the Munich Security Conference, and a seasoned diplomat said Germany should finish the Russian-backed Nord Stream 2 gas pipeline despite U.S. opposition and growing domestic concerns, but future energy projects should be coordinated by the EU.

He added that the initial “birth defect” of the $11 bn pipeline project was the fact that European treaties had allowed the German government to deem the project as purely commercial. He also added, (what U.S. government officials have been claiming for quite some time, but most EU officials have been denying) that it was clear such a large project clearly had a political nature, particularly given Russia’s annexation of the Crimea region of Ukraine in 2014 and other actions in recent years.

According to a Reuters report yesterday, Ischinger cautioned against abandoning the project as it neared its completion date of late 2019, citing German foreign policy’s focus on consistency and sustainability.

“Saying ‘forget it’ now would not be good German foreign policy.”

The $11 billion gas pipeline will stretch some 759 miles (1,222 km), running on the bed of the Baltic Sea from Russian gas fields to Germany, bypassing existing land routes over Ukraine, Poland and Belarus. It would double the existing Nord Stream pipeline’s current annual capacity of 55 bcm and is expected to become operational by the end of next year.

Geopolitically charged pipeline

The Nord Stream 2 pipeline has also been a point of contention, perhaps even on a personal level, between Trump and Germany as well. In a televised meeting with reporters and NATO Secretary-General Jens Stoltenberg before a NATO summit in Brussels last year, Trump said it was “very inappropriate” that the U.S. was paying for European defense against Russia while Germany, the biggest European economy, was supporting gas deals with Moscow. Russia, for its part and unsurprisingly, deems the pipeline as a purely commercial venture.

Richard Grenell, the U.S. ambassador to Germany stoked a media firestorm in the country earlier this week after he told German companies involved in the Nord Stream 2 project that they could face sanctions if they continued with the plan that is already far advanced. German media group and broadcaster Deutsche Welle (DW) said that “Grenell's latest move remains highly unusual and is likely to prompt fresh tensions between Washington and Berlin.”

Though Trump has also been criticized for politicizing the pipeline, both of his predecessors Barack Obama and George W. Bush also opposed the pipeline amid security concerns. And at the end of the day, given Russian President Vladimir Putin’s unorthodox and even aggressive moves during his two stints as president for a total of some 15 years, these security concerns are founded.

Moreover, there is a growing, but often silent group inside Russia that disapproved of Putin’s geopolitical actions that has brought multiple sanctions on the country and considerable economic hardship. As a young, lower level manager for a well-established Russian energy company told me last year at a conference in Vietnam, “hey don’t blame all Russians for Putin’s actions, the guy has been president since I was in grade school. We can’t control what he does…”

Nord Stream 2 likely to proceed on schedule

Yet, going forward it seems probable that the pipeline will be built on schedule, all the while prolonging Europe’s reliance on Russia’s decades-old gas monopoly in Europe. The way forward, for some EU countries already tried of Russian interference and geopolitical hegemony using the gas weapon in the region, including Poland and several Baltic states, will be to procure more U.S.-sourced LNG, as well as from Qatar and other players. To this end, however, LNG is currently and will be in the future at a decided pricing disadvantage compared to cheaper Russian pipeline gas.

Finally, Germany has also indicated recently, likely bowing to pressure from Trump, that it will expand its LNG infrastructure, including signing more LNG deals with U.S. producers. While this will not be enough to nullify the enormous stakes and risks of an operational Nord Stream 2 pipeline, it will at least offer marginal diversity of supply.

Published:1/21/2019 4:11:05 AM
[Markets] Which Stock and Bond Markets Close for Martin Luther King Jr. Day The stock and bond markets in the U.S. will be closed on Monday, Jan. 21 in observance of Martin Luther King Jr. Day. A corporate earnings season that kicked off with (GS) (GS) and other banks reporting strong results has helped. Through Friday’s close, the Dow Jones Industrial Average had gained almost 6% so far in January, while the S&P 500 was up about 6.5% and the Nasdaq Composite had added almost 8% in value. Published:1/21/2019 4:11:05 AM
[Markets] Outside the Box: These 3 leading economic indicators show no recession is coming Watch the Federal Reserve’s Senior Loan Officers’ Survey as well as the yield curve and jobless claims.
Published:1/21/2019 4:11:04 AM
[Markets] World’s wealthiest saw their fortunes increase by $2.5 billion a day in 2018: Oxfam A fresh report on wealth inequality from Oxfam reveals the world’s wealthiest saw their riches shoot up in 2018.
Published:1/21/2019 3:39:20 AM
[Markets] The Wealth Of The 12 Richest Davos Billionaires Has Increased By $175 Billion In Ten Years

It's almost time for the annual Davos boondoggle where the world's richest and most powerful financiers, politicians, artists and celebrities fly in on their private jets while surrounding by bodyguards and sit down (before partying among ultra exclusive DJs) to discuss the world's ills (which they created) such as the omni-present "global warming" (the type which apparently ignores the carbon emissions from private jets) and which can only be solved by paying a major bank (say Goldman Sachs) billions in carbon credit commissions, not to mention social upheaval and populist anger (the type which bodyguards are so skilled at neutralizing)  and where not surprisingly nationalism once again ranks as the biggest threat  risk to attempts to impose a globalist world order.

In other words, it is "A Reunion For People Who Broke The World" where a hotdog back in 2015 cost 38 Swiss Francs.

Which incidentally may have something to do with the reason why populism and nationalism remain the biggest fears for the world's "globalist" elite. Well, that and the fact that as Bloomberg notes, said elite is "richer than ever."

According to Bloomberg calculations, in the decade spanning the year right after the financial crisis, a staple of the Davos billionaire crowd such as David Rubenstein has more than doubled his fortune since 2009. JPM CEO Jamie Dimon has more than tripled his net worth. And Stephen Schwarzman has increased his wealth six-fold.

Considering the economic and political tumult of the past decade, from Lehman Brothers to Brexit to Donald Trump, to some - such as Bloomberg's Tom Metcalf and Simon Kennedy (whose billionaire employer Michael Bloomberg has grown tired with Davos and is launching his own rival version of the World Economic Forum), "it’s a remarkable" that the fortunes of a dozen 2009 Davos attendees have soared by a combined $175 billion (except for George Soros who has lost 61% of his net worth).

... even as household wealth for the lower and middle-classes has declined.

A counterpoint: in light of the $16 trillion in assets purchased by the world's central banks, it is neither "remarkable" nor surprising that the world's richest have only gotten richer in the past decade, nor is it remarkable - or in need of an explanation that involves Russian hacking - that as global resentment at the increasingly concentrated wealth of an ultra powerful cabal comprising a handful of people has hit unprecedented levels, the outcomes were Brexit, Trump's election and the Yellow Vest protest movement in France. Just as it is not a coincidence that neither Donald Trump, nor Theresa May or Emanuel Macron will be present in Davos this year.

Meanwhile, the anger and resentment - or "nationalism" as the Davos crowd calls it - at the ultra-rich is only set to grow: the data illustrate the ever-widening gap between the true haves — those in the 0.1% — and the have-nots of a global economy; using UBS and PwC data, global billionaire wealth has grown from $3.4 trillion in 2009 to $8.9 trillion in 2017.

Meanwhile, the rest of the world has gotten poorer (especially when indexing for the true rate of inflation).

What Bloomberg gets right is that "central bank actions to fight the financial crisis—record low interest rates and bond-buying programs—have underpinned this ballooning wealth by driving up the prices of stocks and other assets."

“Ten years ago, ironically at the lows of the market, what you wanted to own was capital and if you did own capital you did incredibly well,” said Michael Hartnett, Bank of America Corp.'s chief investment strategist.

And yet, somewhat amusingly, instead of focusing their anger on the Fed and the world's central banks, the world's population (which for the most part is unable to comprehend the nuances of creating $16 trillion in reserves out of thin air) and financial punditry is focusing on the political divide that followed the election of Trump, or the Brexit vote, when instead they should have been analyzing what events made Trump and Brexit possible in the first place.

Then again, so many financial journalists work for either one billionaire (Michael Bloomberg) or another (the Economist is partially owned by the Agnelli and Rothschild families) that one can see a certain conflict of interest there.

For those with minimal or no assets, it’s been a more challenging decade. Wages have stagnated and while equity markets have risen, fewer U.S. adults are invested in the stock market than in 2009. Compensation for chief executive officers in America’s largest firms is now 312 times the annual average pay of the typical worker, compared with about 200 times in 2009, 58 times in 1989 and 20 times in 1965, according to a 2018 report by the Economic Policy Institute.

Yet while some of the most prominent politicians are now eager to avoid the stigma of being seen at a place where only the world's richest hobnob while eating CHF 38 hotdogs, others have no such qualms. Case in point, Jamie Dimon is returning to Davos with JPMorgan larger and more profitable than ever. Blackstone's Steve Schwarzman "recognizable in his tan winter coat over suit" has built his private equity giant into the world’s largest alternative asset manager with $457 billion of assets as of Sept. 30, 2018, up from $95 billion at the end of 2008.

Meanwhile, lest some assume that the top 0.01% are suddenly worried about their image and are willing to skip this epic boondoggle, Davos remains as popular as ever. The forum, which this year bears the perfectly apt title of "Globalization 4.0", is expected to host 3,000 people. Among other events, George Soros this year is hosting a dinner at which he will speak and Dimon's JPMorgan is throwing a cocktail party. Bill Gates will be present again, as will billionaire Carlyle Group co-founder Rubenstein, who hosts a show on Bloomberg Television (and whose fortune has doubled over the past decade).

What is also amusing are the soundbites across the years, such as this one from Ken Rogoff at the 2009 meeting: “Everyone I spoke to says it’s the grimmest Davos they’ve ever been to. The mood has been very depressed." The intervening years have given attendees plenty of reasons for cheer. Business owners and financiers have benefited from the longest bull market in history while the benefits from an era of cheap money and recent U.S. tax cuts have largely flowed to the wealthy.

As a result, the world - when measured by its Gini coefficient - has never been more unequal.

But the most hilarious irony of every single Davos meeting, is that virtually every year in the past decade the agenda has repeatedly flagged inequality as one of the chief risks to a stable society. So what happened next? Why the global economy’s bifurcation has only quickened, with the rich getting even richer, yet so very eager to "complain" all about it during next year's Davos meeting.

“The financial crisis was the kind of event that shakes things out, but it didn’t happen 10 years ago,” said Anand Giridharadas, author of ‘Winner Takes All: The Elite Charade of Changing the World.’ “The same rigging that caused the crisis ensured the losses were socialized.

And speaking of the "rigging that caused the crisis", it was these billionaires that were behind it and instead of discussing ways to prevent their mistakes from leading to another global financial crisis, all they care about is how to perpetuate the divergence, even as they "lament" it year after year, before departing in their private jets after a few epic parties... at which point they proceed to complain about global warming.

* * *

Some wonder if amid the growing backlash against the globalist establishment, the Davos pow-wow has peaked. Over the past year, Bank of America CIO Mochael Hartnett said he has detected a transition in which “Joe Six Pack” will benefit relatively more as central banks withdraw easy money, populist politicians win at the ballot box and nationalism tops globalization.

“Wall Street has done worse lately while Main Street has done better,” he said. “You’re going to be in that world for the foreseeable future and I can only see that world accelerating.”

Well, he was right... until the S&P hit 2,400 at which point the withdrawal of the so-called easy money ended and the Fed once again hinted that the easy money would flow because - at the end of the day - it is the dozen or so billionaires listed above who matter when it comes to monetary and fiscal policies, not the billions who make less than a dozen dollar per day.

In short: nothing will change.

 

Published:1/21/2019 3:39:20 AM
[Markets] Asian markets advance on optimism over China-US trade BANGKOK (AP) — Shares in Asia rose Monday, extending gains on Wall Street last week. Buying enthusiasm has been spurred by renewed hopes for progress on resolving the trade standoff between the U.S. and China. Shares rose in Shanghai and Hong Kong despite news that China's economy grew at its slowest pace in three decades last year. Published:1/21/2019 3:09:01 AM
[Markets] Capital Confidential: Whispers from the U.K.’s business and politics worlds For the first time in years, one of Europe’s best-known deal makers will be missing the World Economic Forum’s annual meeting in Davos
Published:1/21/2019 3:09:01 AM
[Markets] Bannon's "Movement" Breaks Europe's Centrist Balance Amid Crisis Of Confidence

With the globalist elites gathering in Davos for their annual mutual masturbation propaganda-fest, there is a growing threat to their dominance led by former Trump strategist Steve Bannon that threatens to upset not just the centrist balance in Europe but fuel revolts worldside.

As Bloomberg's Joshua Green and Richard Bravo report,  Steve Bannon had a front-row seat to see Belgium’s liberal-led government disintegrate last month after delivering a fiery, anti-migration speech to local lawmakers just hours earlier.

President Donald Trump’s former adviser is now eying Spain as the next domino to fall in his drive to disrupt European integration.

Belgium joins two other European Union members operating without a full government and at least six others that have recently undergone no-confidence votes. Many of them have fallen prey to anti-EU parties that used minority leverage in their national parliaments. In Spain, the nationalist group Vox had an unexpectedly strong regional showing last month and could help to unseat the Socialist government.

“This populist-nationalist revolt is a worldwide phenomenon,’’ Bannon said in a Dec. 21 interview in his Washington home.

“Belgium is the latest example of this,’’ he said, adding that Spain will be a “big focus” this year.

Europe’s Populist Realignment

This year’s European Parliament elections come as populists, many of them euroskeptics, control or prop up 10 of the EU’s 28 member governments.

Source: Bloomberg reporting

Note: As of Jan. 8, 2019. Parties on both the left and right were defined as populist with the help of academic experts. Most, but not all, parties are also nationalist.

The waning popularity of French President Emmanuel Macron and Chancellor Angela Merkel has raised doubts about a Franco-German reform push to further integrate the 28-nation EU. Bannon sees this as a prime opportunity to rally euroskeptic parties ahead of European Parliament elections in May, and carry out on a continent-wide level what’s already happening in some individual countries.

“The energy is on the side of the populist-nationalist parties and the people who back them up,’’ Bannon said.

“Further integration is at a dead stop. Now they’re fighting simply to keep the EU as it is today.’’

Immigration Rifts

Belgium’s fragile governing coalition fractured last month after Prime Minister Charles Michel’s administration lost the support of the right-wing New Flemish Alliance, which opposed Brussels’ support for a non-binding United Nations agreement on migration. This was the same UN pact that Bannon denounced in a speech to Flemish lawmakers -- along with right-wing French firebrand Marine Le Pen and Czech politician Radim Fiala -- the night the government faltered.

The UN’s Global Compact on Migration committed signatories to increase cooperation on the international movement of peoples, and opposition, spearheaded by Trump, united populist and right-wing parties across the globe. Governments from Slovakia to Estonia and Chile faced backlashes over the accord, which the UN says neither encourages illegal immigration nor forces countries to change their admission policies.

Bannon would like to use his Brussels-based group The Movement -- a loose alliance of nationalist parties -- to replicate this “command by negation” strategy in other countries and in the EU itself ahead of bloc-wide elections in May. Bannon doubts that these like-minded parties will be able to win a majority in the EU Parliament, but will aim to get at least a third of the seats as a means to block centrist momentum.

Domino Theory

“The leaders of this globalist movement in Europe are in decline,’’ Mischael Modrikamen, the founder of the Movement with Bannon and the leader of Belgium’s right-wing People’s Party, said in a Jan. 11 interview in his Brussels home.

“Merkel is paying for her will to open up her borders to the migrants. Macron is paying for his contempt to ordinary people. For Michel, it’s a full catastrophe.’’

The strategy has already played out in Belgium. Sweden doesn’t have a government after the electoral gains by the nationalist Sweden Democrats, a party with neo-Nazi roots. Latvia’s traditionally center-right government has failed three times to create a coalition since populist parties increased their representation in October’s elections. And nationalist or populist parties are already in charge of the governments in Italy, Poland, the Czech Republic, Hungary and Greece.

Spanish Prime Minister Pedro Sanchez took power in 2018 with support from the left-wing populists of Podemos but is now struggling to pass his budget and could be forced to call an early election this year.

“There’s a rising tide of euroskepticism across the continent,” Bannon said. “This is a historic moment.”

Published:1/21/2019 2:38:52 AM
[Markets] 'Why Can't They Take The Bus?' - Davos Locals Furious As Limos Clog Streets

We couldn't imagine a struggle that better symbolizes the burgeoning conflict between the globalist "Davos Man", who has flourished in the years since the financial crisis (largely because central banks helped transform it into a dip to buy), and regular, working people than the one highlighted this weekend by Bloomberg News in a report about the simmering anger locals feel toward the wealthy MOUs who flock to their mid-tier ski town for a few days every January to revel in the excesses of the stratified world these outsiders helped to create.

Davos locals are growing increasingly frustrated with the traffic congestion that the conferences attendees (it's expected to draw 3,000 guests this year, the largest crowd in its history) and their limos bring to the town, with the 11,000 residents wondering why they can't just take public transportation like Swiss central bankers and government ministers do?

Davos

Full-time residents of the town are baffled by why anyone traveling to Davos would choose to wear leather shoes, leaving them prone to slip and fall on the ice, instead of snow boots.

"People wear leather dress shoes and then use the limousines because they don’t want to slip on the ice," said Ladina Alioth, a teacher and mother of three recently elected to the local legislature. She’s proud to host the WEF and but says last year it was too disruptive. "I wear boots and pack the shoes I wear indoors - why can’t they do that too?"

The four-day annual meeting on Magic Mountain kicks off on Jan. 22. Once the crowds head home, the Davos mayor’s office asks citizens what they want done better. Limos topped the 2018 complaints.

In a sense, these complaints might seem like biting the hand that feeds. After all, the WEF is a boon to local businesses and generates an estimated 2 million francs ($2 million) in tax revenue for the town. But that hasn't stopped the townspeople from resisting an increase in security for the conference that would likely lead to even more congestion.

But given that many of the most important events associated with the conference - that is, the exclusive parties and cocktail receptions - are held far from down town Davos, where the conference takes place, having a car at one's beck and call seems appealing.

The nexus of activity is town’s conference center, but parties and cocktail receptions take place farther afield, including the Intercontinental Hotel, a 40-minute walk away. The WEF’s guide for attendees includes information on local transport options and advice to bring “comfortable, warm shoes.” It also provides shoe grips for snow.

"Over the last several years, the amount of private cars and traffic in Davos has increased significantly," said Soumitra Dutta, a professor at Cornell and a regular attendee who takes a WEF-organized bus from Zurich airport. "I am not surprised that local residents are not pleased with the congestion."

While the city bus regularly plies the main drag of Promenade (transport is free), a delegate’s agenda packed full with meetings, seminars, lunches and evening parties can make a car appealing. Uber is also offering its services for the week.

Though there is one group of locals who see the rise in automobile traffic as an unmitigated positive: Swiss car-service owners. Though they're not the only slice of the local business community that benefits from the conference.

A private car from the Zurich airport to Davos can cost up to 1,500 francs, compared with 50 francs for a first-class train ticket. But often taking the train is quicker.

Round-the-clock on-call car service for the duration of the conference can cost as much as 20,000 francs.

Luxury does have its price: Traveling to Davos with a hired car from Zurich airport costs about 800 francs to 1,500 francs, with only marginal - if any - time saving over the train. A first-class rail ticket is only about 50 francs, though you have to change trains. The WEF ’Round the clock service during the WEF, including pickup and drop-off at Zurich airport, can cost 20,000 francs.

"The people of Davos complain, but they also earn a lot," said Joerg Grossmann, who owns a limo service in Zurich that sends about 35 cars to the Forum. It may look "very excessive, but it also offers people flexibility and security," he said, explaining that some insurance companies even require that one be on-hand.

In response to the complaints, this January authorities are building a temporary train station just below the conference center. Mayor Tarzisius Caviezel says he hopes that will get more people onto public transport.

Trucks dropping off material to build temporary pavilions and transform shops on the main street into corporate lounges added to last year’s traffic mess. In 2018 there were 23 pop-up spaces, more than double the number just five years earlier. To rein them in, the mayor has introduced new permits and banned sites from redecorating overnight.

For what it's worth, the WEF says it has taken these concerns "to heart" and has held meetings with authorities to address them.

The WEF says it takes residents’ concerns to heart and has held meetings with authorities to address them.

Managing director Alois Zwinggi has sympathy for those who might not feel comfortable using public transport, but says it’s also the Forum’s job to raise awareness: “Welcome to Switzerland. You can take the train, you can take the bus, you won’t get lost.”

But perhaps the anger felt by Davos residents isn't solely a reaction to the elites' behavior during the conference. Maybe - just maybe - it stems from a deeper sense of injustice.

Because, as Bloomberg pointed out in a separate piece, the average Davos billionaire has seen their wealth multiply since the financial crisis, as the gap between the wealthiest 0.1% and the rest of the world grows ever wider.

Data from UBS and PwC Billionaires Insights reports show that global billionaire wealth has grown from $3.4 trillion in 2009 to $8.9 trillion in 2017.

[…]

“Ten years ago, ironically at the lows of the market, what you wanted to own was capital and if you did own capital you did incredibly well,” said Michael Hartnett, Bank of America Corp.'s chief investment strategist.

And as the world becomes increasingly unequal, even these seemingly minor perceived slights can take on a whole new significance.

Published:1/21/2019 2:08:15 AM
[Markets] US Blunders Have Made Russia The Global Trade Pivot

Authored by Mathew Maavak via ActivistPost.com,

The year 2019 had barely begun before news emerged that six Russian sailors were kidnapped by pirates off the coast of Benin. It was perhaps a foretaste of risks to come. As nations reel from deteriorating economic conditions, instances of piracy and other forms of supply chain disruptions are bound to increase.

According to the International Maritime Bureau (IMB), 107 cases of piracy were noted during the first half of 2018 vis-à-vis 87 throughout 2017.  The 2018 tally included 32 cases in Southeast Asian waters and 48 along African shores – representing 75% of the total. To put this figure into perspective, Asian behemoths India and China – despite their vast shorelines – recorded only 2 cases of piracy each during the study period. Russia had none. In terms of hostages taken, the IMB tally read 102 in H1 2018 vs 63 in H1 2017.

Piracy adds to shipping and retail costs worldwide as security, insurance and salaries are hiked to match associated risks in maritime transport. Merchant vessels will also take longer and costlier routes to avoid piracy hotspots.

United Nations Office on Drugs and Crime (UNODC) report in 2016 sums up the perils ahead:

As over 90% of global trade is carried out by sea, the economic effects of maritime crime can be crippling. Maritime crime includes not only criminal activity directed at vessels or maritime structures, but also the use of the high seas to perpetrate transnational organized crimes such as smuggling of persons or illicit substances.  These forms of maritime crime can have devastating human consequences.

Indeed, cases of human trafficking, organ harvesting, and the smuggling of illicit substances and counterfeit goods are proliferating worldwide in tandem with rising systemic debt and suspect international agendas.

Australia offers a case in point. While it fantasizes over a Quad of allies in the Indo-Pacific – to “save Asians from China” – criminal elements from Hong Kong, Malaysia to squeaky-clean Singapore have been routinely trafficking drugs, tobacco and people right into Sydney harbour for years,  swelling the local organised crime economy to as much as $47.4 billion (Australian dollars presumably) between 2016 and 2017.

With criminal elements expected to thrive during a severe recession, they will likely enjoy a degree of prosecutorial shielding from state actors and local politicians. But this is not a Southeast Asian problem alone; any superpower wishing to disrupt Asia-Europe trade arteries – the main engine of global growth – will have targets of opportunity across oceans and lands.  The US-led war against Syria had not only cratered one potential trans-Eurasia energy and trade node, it served as a boon for child traffickingorgan harvesting and slavery as well. Yet, it is President Bashar al-Assad who is repeatedly labelled a “butcher” by the Anglo-American media.

Ultimately, industries in Asia and Europe will seek safer transit routes for their products. The inference here is inevitable: the greatest logistical undertaking in history – China’s Belt and Road Initiative (BRI) – will be highly dependent on Russian security umbrella, particularly in Central Asia. Russia also offers an alternative transit option via the Northern Sea Route, thereby avoiding any potential pan-Turkic ructions in Central Asia in the future.

Russo- and Sinophobia explained?

In retrospect, Washington’s reckless policies post-Sept 11 2001 seem aimed at disrupting growing synergies between Asia and Europe. This hypothesis helps explain the relentless US-led agitprops against Russia, China and Iran.

When the gilet jaunes (yellow vest) protests rocked France weeks ago, it was only a matter of time before some pundits blamed it on Russia. US President Donald J. Trump cheered on; just as “billionaire activist” George Soros celebrated the refugee invasion of Europe and the Arab Spring earlier.  If the yellow vest contagion spreads to the Western half of Europe, its economies will flounder. Cui bono? A Russia that can reap benefits from the two-way BRI or Arctic trade routes or a moribund United States that can no longer rule roost in an increasingly multipolar world?

Trump’s diplomatic downgrade of the European Union and his opposition to the Nord Stream 2 gas pipeline matches this trade-disruption hypothesis, as do pressures applied on India and China to drop energy and trade ties with Iran.  Washington’s trade war with Beijing and recent charges against Huawei – arguably Asia’s most valuable company – seem to fit this grand strategy.

If China concedes to importing more US products, Europe will bear the consequences. Asians love European products ranging from German cars to Italian shoes and Europe remains the favourite vacation destination for its growing middle class. Eastern European products and institutions are also beginning to gain traction in Asia. However, these emerging economies will suffer if their leaders cave in to Washington’s bogeyman fetish.

Even if Europe is somehow taken out of the trade equation, greater synergy between the RIC (Russia, India and China) nations may be enough – at least theoretically – to pull their nations through anticipated global volatilities ahead.

In the meantime, as the US-led world crumbles, it looks like Russia is patiently biding its time to become the security guarantor and kingmaker of Asia-Europe trade.  A possible state of affairs wrought more by American inanity rather than Russian ingenuity...

Published:1/21/2019 1:09:43 AM
[Markets] Asian markets advance on optimism over China-US trade Buying enthusiasm has been spurred by renewed hopes for progress on resolving the trade standoff between the U.S. and China. Shares rose in Shanghai and Hong Kong despite news that China's economy grew at its slowest pace in three decades last year. Published:1/21/2019 12:38:50 AM
[Markets] "The Goal Is To Automate Us" - Welcome To The Age Of Surveillance Capitalism

Shoshana Zuboff’s new book is a chilling exposé of the business model that underpins the digital world. Observer tech columnist John Naughton explains the importance of Zuboff’s work and asks the author 10 key questions...

‘Technology is the puppet, but surveillance capitalism is the puppet master.’ Photograph: Getty Images

Via The Guardian,

We’re living through the most profound transformation in our information environment since Johannes Gutenberg’s invention of printing in circa 1439. And the problem with living through a revolution is that it’s impossible to take the long view of what’s happening. Hindsight is the only exact science in this business, and in that long run we’re all dead. Printing shaped and transformed societies over the next four centuries, but nobody in Mainz (Gutenberg’s home town) in, say, 1495 could have known that his technology would (among other things): fuel the Reformation and undermine the authority of the mighty Catholic church; enable the rise of what we now recognise as modern science; create unheard-of professions and industries; change the shape of our brains; and even recalibrate our conceptions of childhood. And yet printing did all this and more.

Why choose 1495? Because we’re about the same distance into our revolution, the one kicked off by digital technology and networking. And although it’s now gradually dawning on us that this really is a big deal and that epochal social and economic changes are under way, we’re as clueless about where it’s heading and what’s driving it as the citizens of Mainz were in 1495.

That’s not for want of trying, mind. Library shelves groan under the weight of books about what digital technology is doing to us and our world. Lots of scholars are thinking, researching and writing about this stuff. But they’re like the blind men trying to describe the elephant in the old fable: everyone has only a partial view, and nobody has the whole picture. So our contemporary state of awareness is – as Manuel Castells, the great scholar of cyberspace once put it – one of “informed bewilderment”.

Which is why the arrival of Shoshana Zuboff’s new book is such a big event. Many years ago – in 1988, to be precise – as one of the first female professors at Harvard Business School to hold an endowed chair she published a landmark book, The Age of the Smart Machine: The Future of Work and Power, which changed the way we thought about the impact of computerisation on organisations and on work. It provided the most insightful account up to that time of how digital technology was changing the work of both managers and workers. And then Zuboff appeared to go quiet, though she was clearly incubating something bigger. The first hint of what was to come was a pair of startling essays – one in an academic journal in 2015, the other in a German newspaper in 2016. What these revealed was that she had come up with a new lens through which to view what Google, Facebook et al were doing – nothing less than spawning a new variant of capitalism. Those essays promised a more comprehensive expansion of this Big Idea.

And now it has arrived – the most ambitious attempt yet to paint the bigger picture and to explain how the effects of digitisation that we are now experiencing as individuals and citizens have come about.

The headline story is that it’s not so much about the nature of digital technology as about a new mutant form of capitalism that has found a way to use tech for its purposes. The name Zuboff has given to the new variant is “surveillance capitalism”. It works by providing free services that billions of people cheerfully use, enabling the providers of those services to monitor the behaviour of those users in astonishing detail – often without their explicit consent.

“Surveillance capitalism,” she writes, “unilaterally claims human experience as free raw material for translation into behavioural data. Although some of these data are applied to service improvement, the rest are declared as a proprietary behavioural surplus, fed into advanced manufacturing processes known as ‘machine intelligence’, and fabricated into prediction products that anticipate what you will do now, soon, and later. Finally, these prediction products are traded in a new kind of marketplace that I call behavioural futures markets. Surveillance capitalists have grown immensely wealthy from these trading operations, for many companies are willing to lay bets on our future behaviour.”

While the general modus operandi of Google, Facebook et al has been known and understood (at least by some people) for a while, what has been missing – and what Zuboff provides – is the insight and scholarship to situate them in a wider context. She points out that while most of us think that we are dealing merely with algorithmic inscrutability, in fact what confronts us is the latest phase in capitalism’s long evolution – from the making of products, to mass production, to managerial capitalism, to services, to financial capitalism, and now to the exploitation of behavioural predictions covertly derived from the surveillance of users. In that sense, her vast (660-page) book is a continuation of a tradition that includes Adam Smith, Max Weber, Karl Polanyi and – dare I say it – Karl Marx.

Viewed from this perspective, the behaviour of the digital giants looks rather different from the roseate hallucinations of Wired magazine. What one sees instead is a colonising ruthlessness of which John D Rockefeller would have been proud. First of all there was the arrogant appropriation of users’ behavioural data – viewed as a free resource, there for the taking. Then the use of patented methods to extract or infer data even when users had explicitly denied permission, followed by the use of technologies that were opaque by design and fostered user ignorance.

And, of course, there is also the fact that the entire project was conducted in what was effectively lawless – or at any rate law-free – territory. Thus Google decided that it would digitise and store every book ever printed, regardless of copyright issues. Or that it would photograph every street and house on the planet without asking anyone’s permission. Facebook launched its infamous “beacons”, which reported a user’s online activities and published them to others’ news feeds without the knowledge of the user. And so on, in accordance with the disrupter’s mantra that “it is easier to ask for forgiveness than for permission”.

When the security expert Bruce Schneier wrote that “surveillance is the business model of the internet” he was really only hinting at the reality that Zuboff has now illuminated. The combination of state surveillance and its capitalist counterpart means that digital technology is separating the citizens in all societies into two groups: the watchers (invisible, unknown and unaccountable) and the watched. This has profound consequences for democracy because asymmetry of knowledge translates into asymmetries of power. But whereas most democratic societies have at least some degree of oversight of state surveillance, we currently have almost no regulatory oversight of its privatised counterpart. This is intolerable.

And it won’t be easy to fix because it requires us to tackle the essence of the problem – the logic of accumulation implicit in surveillance capitalism. That means that self-regulation is a nonstarter.

“Demanding privacy from surveillance capitalists,” says Zuboff, “or lobbying for an end to commercial surveillance on the internet is like asking old Henry Ford to make each Model T by hand. It’s like asking a giraffe to shorten its neck, or a cow to give up chewing. These demands are existential threats that violate the basic mechanisms of the entity’s survival.”

The Age of Surveillance Capital is a striking and illuminating book. A fellow reader remarked to me that it reminded him of Thomas Piketty’s magnum opus, Capital in the Twenty-First Century, in that it opens one’s eyes to things we ought to have noticed, but hadn’t. And if we fail to tame the new capitalist mutant rampaging through our societies then we will only have ourselves to blame, for we can no longer plead ignorance.

Ten questions for Shoshana Zuboff: ‘Larry Page saw that human experience could be Google’s virgin wood’

John Naughton: At the moment, the world is obsessed with Facebook. But as you tell it, Google was the prime mover.

Shoshana Zuboff: Surveillance capitalism is a human creation. It lives in history, not in technological inevitability. It was pioneered and elaborated through trial and error at Google in much the same way that the Ford Motor Company discovered the new economics of mass production or General Motors discovered the logic of managerial capitalism.

Surveillance capitalism was invented around 2001 as the solution to financial emergency in the teeth of the dotcom bust when the fledgling company faced the loss of investor confidence. As investor pressure mounted, Google’s leaders abandoned their declared antipathy toward advertising. Instead they decided to boost ad revenue by using their exclusive access to user data logs (once known as “data exhaust”) in combination with their already substantial analytical capabilities and computational power, to generate predictions of user click-through rates, taken as a signal of an ad’s relevance.

Operationally this meant that Google would both repurpose its growing cache of behavioural data, now put to work as a behavioural data surplus, and develop methods to aggressively seek new sources of this surplus.

The company developed new methods of secret surplus capture that could uncover data that users intentionally opted to keep private, as well as to infer extensive personal information that users did not or would not provide. And this surplus would then be analysed for hidden meanings that could predict click-through behaviour. The surplus data became the basis for new predictions markets called targeted advertising.

Sheryl Sandberg, says Zuboff, played the role of Typhoid Mary, bringing surveillance capitalism from Google to Facebook. Photograph: John Lee for the Guardian

Here was the origin of surveillance capitalism in an unprecedented and lucrative brew: behavioural surplus, data science, material infrastructure, computational power, algorithmic systems, and automated platforms. As click-through rates skyrocketed, advertising quickly became as important as search. Eventually it became the cornerstone of a new kind of commerce that depended upon online surveillance at scale.

The success of these new mechanisms only became visible when Google went public in 2004. That’s when it finally revealed that between 2001 and its 2004 IPO, revenues increased by 3,590%.

JN: So surveillance capitalism started with advertising, but then became more general?

SZ: Surveillance capitalism is no more limited to advertising than mass production was limited to the fabrication of the Ford Model T. It quickly became the default model for capital accumulation in Silicon Valley, embraced by nearly every startup and app. And it was a Google executive – Sheryl Sandberg – who played the role of Typhoid Mary, bringing surveillance capitalism from Google to Facebook, when she signed on as Mark Zuckerberg’s number two in 2008. By now it’s no longer restricted to individual companies or even to the internet sector. It has spread across a wide range of products, services, and economic sectors, including insurance, retail, healthcare, finance, entertainment, education, transportation, and more, birthing whole new ecosystems of suppliers, producers, customers, market-makers, and market players. Nearly every product or service that begins with the word “smart” or “personalised”, every internet-enabled device, every “digital assistant”, is simply a supply-chain interface for the unobstructed flow of behavioural data on its way to predicting our futures in a surveillance economy.

JN: In this story of conquest and appropriation, the term “digital natives” takes on a new meaning…

SZ: Yes, “digital natives” is a tragically ironic phrase. I am fascinated by the structure of colonial conquest, especially the first Spaniards who stumbled into the Caribbean islands. Historians call it the “conquest pattern”, which unfolds in three phases: legalistic measures to provide the invasion with a gloss of justification, a declaration of territorial claims, and the founding of a town to legitimate the declaration. Back then Columbus simply declared the islands as the territory of the Spanish monarchy and the pope.

The sailors could not have imagined that they were writing the first draft of a pattern that would echo across space and time to a digital 21st century. The first surveillance capitalists also conquered by declaration. They simply declared our private experience to be theirs for the taking, for translation into data for their private ownership and their proprietary knowledge. They relied on misdirection and rhetorical camouflage, with secret declarations that we could neither understand nor contest.

Google began by unilaterally declaring that the world wide web was its to take for its search engine. Surveillance capitalism originated in a second declaration that claimed our private experience for its revenues that flow from telling and selling our fortunes to other businesses. In both cases, it took without asking. Page [Larry, Google co-founder] foresaw that surplus operations would move beyond the online milieu to the real world, where data on human experience would be free for the taking. As it turns out his vision perfectly reflected the history of capitalism, marked by taking things that live outside the market sphere and declaring their new life as market commodities.

We were caught off guard by surveillance capitalism because there was no way that we could have imagined its action, any more than the early peoples of the Caribbean could have foreseen the rivers of blood that would flow from their hospitality toward the sailors who appeared out of thin air waving the banner of the Spanish monarchs. Like the Caribbean people, we faced something truly unprecedented.

Once we searched Google, but now Google searches us. Once we thought of digital services as free, but now surveillance capitalists think of us as free.

JN: Then there’s the “inevitability” narrative – technological determinism on steroids.

SZ: In my early fieldwork in the computerising offices and factories of the late 1970s and 80s, I discovered the duality of information technology: its capacity to automate but also to “informate”, which I use to mean to translate things, processes, behaviours, and so forth into information. This duality set information technology apart from earlier generations of technology: information technology produces new knowledge territories by virtue of its informating capability, always turning the world into information. The result is that these new knowledge territories become the subject of political conflict. The first conflict is over the distribution of knowledge: “Who knows?” The second is about authority: “Who decides who knows?” The third is about power: “Who decides who decides who knows?”

Now the same dilemmas of knowledge, authority and power have surged over the walls of our offices, shops and factories to flood each one of us… and our societies. Surveillance capitalists were the first movers in this new world. They declared their right to know, to decide who knows, and to decide who decides. In this way they have come to dominate what I call “the division of learning in society”, which is now the central organising principle of the 21st-century social order, just as the division of labour was the key organising principle of society in the industrial age.

JN: So the big story is not really the technology per se but the fact that it has spawned a new variant of capitalism that is enabled by the technology?

SZ: Larry Page grasped that human experience could be Google’s virgin wood, that it could be extracted at no extra cost online and at very low cost out in the real world. For today’s owners of surveillance capital the experiential realities of bodies, thoughts and feelings are as virgin and blameless as nature’s once-plentiful meadows, rivers, oceans and forests before they fell to the market dynamic. We have no formal control over these processes because we are not essential to the new market action. Instead we are exiles from our own behaviour, denied access to or control over knowledge derived from its dispossession by others for others. Knowledge, authority and power rest with surveillance capital, for which we are merely “human natural resources”. We are the native peoples now whose claims to self-determination have vanished from the maps of our own experience.

While it is impossible to imagine surveillance capitalism without the digital, it is easy to imagine the digital without surveillance capitalism. The point cannot be emphasised enough: surveillance capitalism is not technology. Digital technologies can take many forms and have many effects, depending upon the social and economic logics that bring them to life. Surveillance capitalism relies on algorithms and sensors, machine intelligence and platforms, but it is not the same as any of those.

JN: Where does surveillance capitalism go from here?

SZ: Surveillance capitalism moves from a focus on individual users to a focus on populations, like cities, and eventually on society as a whole. Think of the capital that can be attracted to futures markets in which population predictions evolve to approximate certainty.

This has been a learning curve for surveillance capitalists, driven by competition over prediction products. First they learned that the more surplus the better the prediction, which led to economies of scale in supply efforts. Then they learned that the more varied the surplus the higher its predictive value. This new drive toward economies of scope sent them from the desktop to mobile, out into the world: your drive, run, shopping, search for a parking space, your blood and face, and always… location, location, location.

The evolution did not stop there. Ultimately they understood that the most predictive behavioural data comes from what I call “economies of action”, as systems are designed to intervene in the state of play and actually modify behaviour, shaping it toward desired commercial outcomes. We saw the experimental development of this new “means of behavioural modification” in Facebook’s contagion experiments and the Google-incubated augmented reality game Pokémon Go.

Democracy has slept, while surveillance capitalists amassed unprecedented concentrations of knowledge and power

- Shoshana Zuboff

It is no longer enough to automate information flows about us; the goal now is to automate us. These processes are meticulously designed to produce ignorance by circumventing individual awareness and thus eliminate any possibility of self-determination. As one data scientist explained to me, “We can engineer the context around a particular behaviour and force change that way… We are learning how to write the music, and then we let the music make them dance.”

This power to shape behaviour for others’ profit or power is entirely self-authorising. It has no foundation in democratic or moral legitimacy, as it usurps decision rights and erodes the processes of individual autonomy that are essential to the function of a democratic society. The message here is simple: Once I was mine. Now I am theirs.

JN: What are the implications for democracy?

SZ: During the past two decades surveillance capitalists have had a pretty free run, with hardly any interference from laws and regulations. Democracy has slept while surveillance capitalists amassed unprecedented concentrations of knowledge and power. These dangerous asymmetries are institutionalised in their monopolies of data science, their dominance of machine intelligence, which is surveillance capitalism’s “means of production”, their ecosystems of suppliers and customers, their lucrative prediction markets, their ability to shape the behaviour of individuals and populations, their ownership and control of our channels for social participation, and their vast capital reserves. We enter the 21st century marked by this stark inequality in the division of learning: they know more about us than we know about ourselves or than we know about them. These new forms of social inequality are inherently antidemocratic.

At the same time, surveillance capitalism diverges from the history of market capitalism in key ways, and this has inhibited democracy’s normal response mechanisms. One of these is that surveillance capitalism abandons the organic reciprocities with people that in the past have helped to embed capitalism in society and tether it, however imperfectly, to society’s interests. First, surveillance capitalists no longer rely on people as consumers. Instead, supply and demand orients the surveillance capitalist firm to businesses intent on anticipating the behaviour of populations, groups and individuals. Second, by historical standards the large surveillance capitalists employ relatively few people compared with their unprecedented computational resources. General Motors employed more people during the height of the Great Depression than either Google or Facebook employs at their heights of market capitalisation. Finally, surveillance capitalism depends upon undermining individual self-determination, autonomy and decision rights for the sake of an unobstructed flow of behavioural data to feed markets that are about us but not for us.

This antidemocratic and anti-egalitarian juggernaut is best described as a market-driven coup from above: an overthrow of the people concealed as the technological Trojan horse of digital technology. On the strength of its annexation of human experience, this coup achieves exclusive concentrations of knowledge and power that sustain privileged influence over the division of learning in society. It is a form of tyranny that feeds on people but is not of the people. Paradoxically, this coup is celebrated as “personalisation”, although it defiles, ignores, overrides, and displaces everything about you and me that is personal.

‘The power to shape behaviour for others’ profit or power is entirely self-authorising,’ says Zuboff. ‘It has no foundation in democratic or moral legitimacy.’

JN: Our societies seem transfixed by all this: we are like rabbits paralysed in the headlights of an oncoming car.

SZ: Despite surveillance capitalism’s domination of the digital milieu and its illegitimate power to take private experience and to shape human behaviour, most people find it difficult to withdraw, and many ponder if it is even possible. This does not mean, however, that we are foolish, lazy, or hapless. On the contrary, in my book I explore numerous reasons that explain how surveillance capitalists got away with creating the strategies that keep us paralysed. These include the historical, political and economic conditions that allowed them to succeed. And we’ve already discussed some of the other key reasons, including the nature of the unprecedented, conquest by declaration. Other significant reasons are the need for inclusion, identification with tech leaders and their projects, social persuasion dynamics, and a sense of inevitability, helplessness and resignation.

We are trapped in an involuntary merger of personal necessity and economic extraction, as the same channels that we rely upon for daily logistics, social interaction, work, education, healthcare, access to products and services, and much more, now double as supply chain operations for surveillance capitalism’s surplus flows. The result is that the choice mechanisms we have traditionally associated with the private realm are eroded or vitiated. There can be no exit from processes that are intentionally designed to bypass individual awareness and produce ignorance, especially when these are the very same processes upon which we must depend for effective daily life. So our participation is best explained in terms of necessity, dependency, the foreclosure of alternatives, and enforced ignorance.

JN: Doesn’t all this mean that regulation that just focuses on the technology is misguided and doomed to fail? What should we be doing to get a grip on this before it’s too late?

SZ: The tech leaders desperately want us to believe that technology is the inevitable force here, and their hands are tied. But there is a rich history of digital applications before surveillance capitalism that really were empowering and consistent with democratic values. Technology is the puppet, but surveillance capitalism is the puppet master.

Surveillance capitalism is a human-made phenomenon and it is in the realm of politics that it must be confronted. The resources of our democratic institutions must be mobilised, including our elected officials. GDPR [a recent EU law on data protection and privacy for all individuals within the EU] is a good start, and time will tell if we can build on that sufficiently to help found and enforce a new paradigm of information capitalism. Our societies have tamed the dangerous excesses of raw capitalism before, and we must do it again.

While there is no simple five-year action plan, much as we yearn for that, there are some things we know. Despite existing economic, legal and collective-action models such as antitrust, privacy laws and trade unions, surveillance capitalism has had a relatively unimpeded two decades to root and flourish. We need new paradigms born of a close understanding of surveillance capitalism’s economic imperatives and foundational mechanisms.”

For example, the idea of “data ownership” is often championed as a solution. But what is the point of owning data that should not exist in the first place? All that does is further institutionalise and legitimate data capture. It’s like negotiating how many hours a day a seven-year-old should be allowed to work, rather than contesting the fundamental legitimacy of child labour. Data ownership also fails to reckon with the realities of behavioural surplus. Surveillance capitalists extract predictive value from the exclamation points in your post, not merely the content of what you write, or from how you walk and not merely where you walk. Users might get “ownership” of the data that they give to surveillance capitalists in the first place, but they will not get ownership of the surplus or the predictions gleaned from it – not without new legal concepts built on an understanding of these operations.

Another example: there may be sound antitrust reasons to break up the largest tech firms, but this alone will not eliminate surveillance capitalism. Instead it will produce smaller surveillance capitalist firms and open the field for more surveillance capitalist competitors.

So what is to be done? In any confrontation with the unprecedented, the first work begins with naming. Speaking for myself, this is why I’ve devoted the past seven years to this work… to move forward the project of naming as the first necessary step toward taming. My hope is that careful naming will give us all a better understanding of the true nature of this rogue mutation of capitalism and contribute to a sea change in public opinion, most of all among the young.

Published:1/20/2019 11:11:24 PM
[Markets] Asia Markets: Asian markets rise despite slower economic growth in China Shares in Asia rose Monday, extending gains on Wall Street last week. Buying enthusiasm has been spurred by renewed hopes for progress on resolving the trade standoff between the U.S. and China. Shares rose in Shanghai and Hong Kong early Monday despite news that China’s economy grew at its lowest pace in three decades last year.
Published:1/20/2019 11:11:24 PM
[Markets] The Margin: Patriots are the early Super Bowl favorites against Rams The New England Patriots are in the Super Bowl — again — and pulled off their second comeback of the night after winning Sunday’s AFC championship
Published:1/20/2019 10:39:06 PM
[Markets] Israel Announces Sustained Strikes On Damascus; Syria Fires Back In Major Escalation

It's the first time that Israel has ever announced strikes against Iran inside Syria and in real time. Moments after a massive wave of rockets were fired on Damascus, activating Syrian anti-air defenses Sunday night, the Israeli Defense Forces (IDF) announced: "We have started striking Iranian Quds targets in Syrian territory. We warn the Syrian Armed Forces against attempting to harm Israeli forces or territory."

Sustained Israeli attack on Damascus overnight Sunday, via local Syrian sources. 

This is unprecedented given that in every other among the dozens of prior recent Israeli attacks on Syria, the IDF has never acknowledged responsibility so quickly and certainly not while they are ongoing, usually declining to confirm or deny after the event.

Twelve hours prior the IDF said its Iron Dome Aerial Defense System intercepted a Syrian rocket fired into the northern Golan Heights after Israel launched a prior rare daylight raid on Syria on the “international airport, southwest of Damascus,” according to Syrian military officials. In what marks a major escalation, it appears Damascus responded to that attack with what Israeli media has called an "intentionally fired offensive surface-to-surface attack."

The Israeli intercept of that inbound Syrian surface-to-surface missile was caught on dramatic video, per The Times of Israel:

The interception of the incoming Syrian projectile was seen over Mount Hermon, Israel’s tallest peak, which was full of visiting skiers, following a stormy period that dusted the mountain with snow.

Israel's Sunday night attack has involved dozens of strikes reportedly from F-16 jets flying over Lebanon targeting locations in and around southern Damascus. Syria’s Pantsir and Buk air defense missile systems have reportedly shot down an unknown number of inbound Israeli rockets according to early unconfirmed video. 

Israel also reportedly launched multiple cruise missiles during the sustained assault. Local Syrians have described prolonged sustained explosions both overhead and on the ground, but it remains unclear how many Israeli rockets actually made it past Syrian defenses.

The IDF has warned Syria not to respond, which appears to be unheeded as Israeli media is reporting that anti-air defenses have been activated by inbound Syrian rockets over northern Israel and the Golan Heights

As of 1:45 AM Beirut time Al-Masdar News reports the following

The Israeli Defense Forces (IDF) unleashed a massive attack on the Damascus countryside at 1:05 A.M. (local time), tonight, hitting a number of targets in and around the town of Al-Kisweh.

According to a military source, Israeli jets were first spotted over Jabal Sheikh-Golan Heights area; they would then fire several missiles towards Al-Kisweh.

The Syrian military then activated their air defense units, but were unable to stop all the missiles that were fired at the Damascus countryside.

The reported added, "The Israeli Air Force is now launching another wave of strikes on Damascus, with some reports claiming they are hitting targets near the Damascus International Airport." 

Strikes appeared to have subsided an hour or more after they began, and are reported to have included in total over 40 rockets launched in four waves. 

developing...

Published:1/20/2019 10:39:06 PM
[Markets] "Elon Wants This Fat P*ssy": Azealia Banks Posts Text Message Flame War With Grimes

Just a couple of days ago we posted that subpoenas could be forthcoming for Elon Musk's ex-girlfriend, Grimes, and Musk’s one time houseguest Azealia Banks, as part of an investor lawsuit against Musk for last summer's "funding secured" fiasco. We said in the post that the discovery process in the case could lead to interesting information as to what was going on behind the scenes, and in the mind of the parties involved, during the time Musk is alleged to have committed securities fraud.

It now looks like we may not even need to wait – according to an unverified Twitter account (and semi-confirmed circumstantially by statements made on Banks' Instagram) Azealia Banks allegedly recently posted conversations of text messages between her and Grimes from the summer of 2018. Upon examining these alleged text messages it appears as though Banks and Grimes had a massive falling out in August 2018 that led to a text message flame war. 

The texts show Grimes allegedly calling Banks a "narc" and Banks leading on that Elon Musk might be interested in her instead of Grimes. Banks calls Grimes a "sore loser" and later tells her she doesn't "even have bone marrow". 

After being called fat, Banks allegedly tells Grimes she smells "like a roll of nickels" and that she's "not enough woman" for a man like Musk. "Elon is way out of your league," Banks says. "He wants me...bad," she continues. 

After Grimes allegedly pokes Banks with a food joke, Banks follows up by informing her that "Elon wants this fat pussy". She tells Grimes she needs "an IV and a tan" as well as "some breast implants, lip fillers and a burger". 

"You're a basic white woman," Banks allegedly says to Grimes. "I am by nature - superior to you, dear," she continues, before Grimes finally ends the conversation. "Sweet narc dreams," Grimes says to Banks, who signs off by saying "OK you brittleboned methhead". 

Though we were not able to verify these texts from Banks' instagram at the time we published this, we were able to locate a post in her IG story that seems to allude to the fact that they had been taken down. 

If you couldn't wait for discovery in this lawsuit before, we can’t imagine how you’re feeling about it now. The strange Tesla saga continues - and it feels like it's only going to get stranger.

Published:1/20/2019 10:08:42 PM
[Markets] The Ratings Game: Apple has its problems but the App Store isn’t one of them, says Bernstein Apple Inc. shares have lost more than a quarter of their value over the past three months, amid concerns about iPhone sales, China demand, and trade-war headwinds, but Bernstein analyst Toni Sacconaghi said there’s at least one issue that investors shouldn’t be worried about.
Published:1/20/2019 9:38:23 PM
[Markets] Asian markets advance on optimism over China-US trade BANGKOK (AP) — Shares in Asia rose Monday, extending gains on Wall Street last week. Buying enthusiasm has been spurred by renewed hopes for progress on resolving the trade standoff between the U.S. and China. Shares rose in Shanghai and Hong Kong early Monday despite news that China's economy grew at its lowest pace in three decades last year. Published:1/20/2019 9:38:22 PM
[Markets] Why "Democratic Vote Harvesting" Will Be The Biggest Topic Of 2020

During last November's midterm elections, California Republicans in several districts watched election night victories melt into losses thanks to a tactic employed by Democrats called "ballot harvesting," which allows anyone to go door-to-door and collect mail-in ballots on behalf of voters. 

Illegal in many states, the practice flipped the Republican stronghold of Orange County completely blue after an unprecedented 250,000 vote-by-mail drop-offs were counted according to the San Francisco Chronicle. 

As 2020 approaches, Democrats in Congress want to apply several California voting laws across the country via their "For The People Act," or H.R.1, which would require all 50 states to adopt automatic voter registration based on federal databases - such as those on food stamps. It also mandates looser rules governing provisional ballots, two weeks of early voting, prohibits restrictions on voting by mail, and limits the ability for states to remove voters from rolls. 

Absent from H.R.1 is vote harvesting, however as the Wall Street Journal notes in a recent Op-Ed, "give Democrats time." 

***

Via the Wall Street Journal

Harvesting Democratic Votes
Liberals want to impose the California voting model on all 50 states

Democrats in Congress are making election reform their top legislative priority, and we’ve criticized it as a majority protection act. To understand why, consider that Democrats are trying to do for the country what they’ve done with election laws in California.

The Golden State is where Republican candidates went to bed on election night in November with leads in most of their competitive House races, only to lose in the ensuing weeks of vote counting. In Orange County, Young Kim was poised to become the first Korean-American woman in Congress, with a sizable lead on Election Day over her Democratic opponent. She lost by three percentage points. Republican Rep. Mimi Walters’s 6,074-vote lead on Nov. 6 turned into an 11,866-vote loss to Democrat Katie Porter.

The GOP wipeout came after the Democrats who dominate Sacramento passed laws aimed at greasing their voting machine. The project started in 2015 when California became the second state after Oregon to move to automatic voter registration.

Can’t be bothered to register? California does it for you, automatically adding to its rolls any person who has any interaction with its Department of Motor Vehicles. The system is already a threat to ballot integrity, with the DMV acknowledging in September it had incorrectly registered 23,000 voters.

In 2016 California passed the Voter’s Choice Act, which allows counties to mail every voter a ballot. Lots of Californians use mail voting, though previously they had to request it. Now ballots arrive automatically, whether voters want one or not. Thirteen million California voters received ballots in the mail last year, compared to about nine million in 2014.

The biggest score for Democrats is a separate 2016 law pushed heavily by unionsthat legalized what’s known as ballot harvesting. This allows any person—union activists, canvassers, community organizers, campaign staff—to show up at homes and collect mail ballots on behalf of voters.

California law also allows counting mail ballots postmarked or delivered on Election Day, as well as same-day registration and liberal use of provisional ballots. This year the Democratic vote totals piled up long after the polls closed. Fred Whitaker, chairman of the Orange County GOP, has estimated that an extraordinary 250,000 mail-votes were dropped off on Election Day thanks to harvesting.

All of this is carefully designed to enhance Democratic turnout. Media stories have detailed a sophisticated operation that pinpointed Democratic voters and deployed volunteers to harvest door-to-door. Republicans struggled to get conservatives to hand ballots over to strangers, and Democrats can’t be blamed for better organization.

But California law also creates opportunity for fraud and coercion. Voters in a 2017 special election for an open seat in the California state Assembly reported activists harassed them at their doors to fill out ballots for specific candidates and hand them over.

This creates opportunities for harvesters to “help” voters complete their ballots, or even pay to finish them, and it’s easy for the unscrupulous to lose ballots they think may go for the wrong candidate. This is why ballot harvesting is illegal in many states, or at least limited to drop-offs by family members.

House Democrats are now moving to impose much of this on the other 49 states. Their For the People Act, or H.R.1, would require all states to adopt automatic voter registration based on names in state and federal agency databases. This means anyone receiving federal food stamps in, say, Ohio, would be automatically registered to vote.

The bill also requires states to allow same-day and online voter registration. It mandates looser rules on provisional ballots, requires every state to provide two weeks of early voting, prohibits restrictions on mail voting, and limits states’ ability to remove voters from rolls. Oh, and it will require that the United States Postal Service deliver ballots for free. Vote harvesting isn’t in H.R.1 but give Democrats time.

All this is an affront to the American tradition of letting states set their own election rules. Few states have automatic registration, on the principle that voting is voluntary. Even liberal Slate magazine, in suggesting that the House bill would “Save American Democracy,” acknowledged that some of the bill might not survive Supreme Court scrutiny.

California has become a one-party state, and Democrats have used their dominance to make it even harder for Republicans to compete. Now they want to use their new House majority to do the same for the rest of America. The Senate can stop them for now, but look out in 2021.

Appeared in the January 19, 2019, print edition.

Published:1/20/2019 9:08:18 PM
[Markets] Illinois' Lethal Combination: Rising Property Taxes & Stagnant Incomes

Authored by Ted Dabrowski and John Klingner via WirePoints.com,

A lethal combination of rising property taxes and stagnant incomes has forced many Illinoisans to rethink their relationship with their state. More than 1.5 million net residents have already fled the state since 2000 – and you can’t blame others for thinking about joining them.

Property taxes have become punitive in Illinois. We’ve written about how these taxes have destroyed the equity in people’s homes across the state. Many families have done the math, and whether they’re in the struggling south suburbs of Chicago or the affluent North Shore, they’ve decided to leave Illinois behind.

The traditional method for measuring the burden of property taxes is to look at a household’s property tax bill and compare it to a home’s value. Under this method, Illinoisans pay the highest property taxes in the nation. At 2.7 percent, Illinoisans pay far more than residents in neighboring states – twice more than those in Missouri and three times more than residents in Indiana.

That fact is outrageous on its own.

But to really understand the pain that these taxes inflict on Illinoisans, it’s important to compare property tax bills to household incomes. After all, those bills are paid straight from people’s earnings.

The unfortunate reality is that Illinois incomes have been stagnant for years – and falling when you consider the impact of inflation.

Between 2000 and 2017, Illinois median household incomes increased just 34 percent, far short of inflation. In contrast, household property tax bills are up 105 percent, according toIllinois Department of Revenue data.

The net result: Property tax bills per household have grown three times faster than household incomes since 2000.

That means more of Illinoisans’ hard-earned incomes are going toward property taxes and less towards groceries, college tuition, and retirement savings. In 2017, 6.73 percent of household incomes went toward property taxes, up from 4.3 percent in 2000.

That’s a 55 percent increase in the effective tax rate.

The detailed data is below:

Property taxes, county by county

Residents of Lake County pay the highest property taxes in Illinois when measured as a percentage of household incomes. In 2000, Lake County residents paid 6.5 percent of their household incomes toward property taxes. Today, residents pay 9.1 percent. That’s a 40 percent increase. The average Lake County property tax bill is now over $7,500 per household.

Meanwhile the residents of the other collar counties and Cook pay more than 7 percent of their incomes to property taxes, with average bills ranging from $4,500 to $6,200 a year.

Overall, the collar counties pay the highest taxes as a percent of income in the state. But it’s not just the Chicago suburbs that are taking a hit. Taxpayers statewide have seen their taxes rise.

In fact, most of the counties that have had the biggest tax growth, in percentage terms, are found downstate. Hardin County residents, though they pay low rates, have seen them jump 97 percent since 2000. Residents in Pulaski County, have seen their rates go up by 78 percent.

Cook County comes next at 75 percent, but after that it’s all deep downstate again: Calhoun (70 percent), Greene (66 percent), Jersey (65 percent), and Pope County (62 percent).

Taxes too high

Any way you cut it, Illinoisans are being punished by property taxes.

That’s prompted some, including new Gov. J.B. Pritzker, to propose a reduction in property taxes by increasing income taxes.

But that would do Illinoisans no good. Illinoisans already pay the nation’s 6th-highest rates when you lump all state and local taxes together.

Shifting them around won’t help when the total tax bill is too high to begin with. What Illinoisans need is tax cut, not a tax shift.

Published:1/20/2019 8:39:51 PM
[Markets] Brits don’t like Theresa May’s Brexit deal. But they still admire her grit.   There was the head-spinning, cross-party, total defeat of the prime minister’s Brexit deal. Then the inglorious rescue of her government. At the center of the chaos, May still stands. Scholars of British politics cannot quite believe it. No leader before has survived such a parliamentary drubbing, described by many as “the worst in history.” But May has. How? Published:1/20/2019 8:09:34 PM
[Markets] China GDP Slowest In A Decade But Retail Sales, Industrial Production Bounce

After downbeat headlines over US-China trade talks, and following China's greatest liquidity injection ever (over 1.1 trillion yuan last week) after weak Chinese macro data in the last few months (including the collapse of China trade data), all eyes were on tonight's avalanche of China economic data.

The Q3 bounce in macro data was extremely weak...

And yuan has oddly strengthened...

Despite constant easing by fiscal and monetary authorities...

After the weakest trade data since 2016, which reflects an end to export front-loading and the start of payback effects...

China just injected a record 1.16 trillion yuan into the financial system... (yea trillion with a 't')

We've had no shortage of warning signs in recent weeks and months that the slowdown was becoming more broad based, including the official manufacturing PMI dipped below 50 into contractionary territory for the first time since March 2016.

China's car sales, for example, declined last year for the first time in more than two decades.

Here's another sign that China's economy is slowing: GDP in the southern manufacturing hub of Shenzhen grew at 7.5 percent in 2018, Xinhua reported Friday. That compared with a growth rate of 8.8 percent in 2017, and 9.1 percent in 2016.

So what does tonight hold?

  • China Retail Sales YoY BEAT +8.2% (+8.1% exp)

  • China Industrial Production YoY BEAT +5.7% (+5.3% exp)

  • China Fixed Asset Investment YoY  MISS +5.9%(+6.0% exp)

  • China Property Investment YoY SLOWED +9.5% YoY

  • China Surveyed Jobless Rate WORSENED 4.9%

And last but not least the big one:

  • China GDP YoY SLOWED +6.4% (+6.4% exp)

And visually...

These figures at first glance should alleviate concerns that China's slowdown would continuously get worse, although the question of course will be how reliable these figures are, but they do suggest that China's efforts to support growth are already starting to have some effect.

There was no dramatic impact as yet in markets.

The question is - is good new, bad news? We have already seen how unsuccessful China's easing efforts have been in stimulating any economic rebound... and the PBOC explicitly stated last week that there will be no blanket easing policies.

But, what really matters is China's credit impulse and its lagged effect on the economy and market... and it just hit a new cyclical low...

China will set its 2019 growth target officially at the annual gathering of the legislature in March, known as the National People's Congress. Reuters has reported that the plan is a range of 6 to 6.5%. But, as Bloomberg's Chris Anstey notes, many economists would applaud if China abandoned the target entirely. In the past it has been faulted for giving officials the incentive of pursuing growth regardless of cost -- leading to a build-up of bad loans and under-performing assets, weighing down on productivity and ultimately hurting the economy.

Of course, much like in the US, regardless of today's numbers, the story has already moved on. That's because the trade talks will determine whether or not there's another dose of tariffs or other barriers to investment. They will also dictate any near term reforms that China will need to push through to sate the trade hawks in Washington.

Published:1/20/2019 8:09:33 PM
[Markets] May Proposes Revisions To Good Friday Agreement As Cross-Party Brexit Talks Fail

Surprise, surprise.

According to multiple reports in the British press, Theresa May's "cross party" talks meant to find a workable resolution to the impasse over her Brexit deal have been a complete and utter failure - largely due to Labour leader Jeremy Corbyn's refusal to even participate.

So, after carefully surveying her options, May has briefed her senior cabinet ministers about her new plan...which, as fate would have it, isn't much different from her original plan: Find a workaround to the controversial Irish Backstop that could win over rebel Tory MPs and the DUP - the 10-member party from Northern Ireland that props up May's government.

But with less than two months before Brexit Day and the dream of revoking Article 50 looking increasingly implausible (largely because it would require the assent of the EU27, whose leaders have been coy in their comments on the subject. But what's potentially worse for May is that restive MPs who are growing increasingly anxious about a 'no deal' outcome have reportedly formed a 'cross-party alliance' to try and throw out centuries of Parliamentary precedent and allow a minority of MPs to seize control of Commons business from May. They would reportedly use this power  to definitively rule out the possibility of 'No Deal' and call for Article 50 to be extended.

May

During the above-mentioned call with her senior ministers, the only thing that was agreed upon was that winning over Labour would be a waste of time.

When asked whether May had a specific plan, she effectively affirmed that she didn't, saying only that a solution would be found only by "doing something" on the backstop, according to the Daily Telegraph.

On Sunday night, Mrs May held a conference phone call with her Cabinet. One Cabinet minister said the outcome of the call was "essentially one more heave on the backstop."

Mrs May is said to have told them her plan was to do "something" on the backstop. Asked if it was something specific or just "anything", she is said to have told them "the latter".

All of this, as Bloomberg reported, is bad news for investors in British assets.

The risk is that the EU has repeatedly ruled out re-opening the divorce deal it took 18 months to negotiate. May’s stance is bad news for investors who have been hoping that cross-party talks would yield a Brexit policy that keeps closer ties to the bloc.

However, during her talk with her cabinet, May did bring up one novel idea, though, like her plan to invoke the "unicorn" solution of using technology that may or may not actually exist as a workaround for imposing a hard border with Northern Ireland, this too sounds like more  of a pipe dream than anything approximating a workable solution.

May's idea? Amend the 20-year-old Good Friday accord to include an explicit commitment not to ever allow a hard border to return between Northern Ireland and Ireland.

One of the proposals under consideration is rewriting the 1998 accord to assure Ireland that the UK is committed to no hard border on the island after the UK leaves the European Union in March.

Ministers believe that adding some text into the agreement would serve as a way of avoiding having to commit the UK to the backstop.

The plan is likely to prove highly controversial and would require the consent of all the parties involved in Northern Ireland.

Senior EU sources said it was a non starter while even UK Government sources were "sceptical" that it would work. The fact it is even being considered underlines the political crisis now facing the Prime Minister. 

May is expected to unveil her "Plan B" Brexit deal on Monday. But with the EU27 refusing to reopen negotiations, most expect May's "Plan B" to simply be Plan A with a few minor tweaks.

The prime minister has repeatedly insisted that she won't try to "run out the clock" on negotiations. But if the EU27 refuses to assent to a delay of Brexit Day, and refuses to reopen negotiations, it looks like May will have little choice but to either cave to all of Labour's demands - remaining in the single market and customs union among them, which would be anathema to pro-Leave Tories - or revert to her original strategy: Go all-in on "Project Fear" and hope MPs come to their senses in an eleventh-hour vote on the withdrawal agreement.

Published:1/20/2019 7:37:11 PM
[Markets] Hedge Fund CIO: "The Media Has Embraced Ocasio-Cortez Smelling Impressions, Clicks, Blood, Money"

Submitted by Eric Peters, CIO of One River Asset Management

The US government remained shut. But pollsters carried on. 81% of Likely Democratic Voters favor a Green New Deal, focused on climate change, income inequality and racial injustice -- 63% of Republicans are opposed, Independents are evenly divided. 59% of voters support raising the marginal tax rate on the richest Americans to 70%. Democrats overwhelming support the tax hike, with 71% in favor. And even 45% of Republicans back the 70% tax. As the pendulum is just now starting its long arc back toward greater equality.

“Oh? What’s that? The majority of Americans respect when you break down reasonable policy proposals that are designed to combat runaway income inequality and help fund priorities they value most?” tweeted Alexandria Ocasio-Cortez (AOC) in response to the poll showing the majority of Americans favor a 70% top marginal tax rate.

“What we see, overall, is that the vast majority of Americans know that income inequality is one of the biggest issues of our time,” continued the 29yr old freshman Congresswoman, Champion of Millennials.

“This is a policy that is already popular and it’s time that we embrace working Americans and it’s time that the Democratic Party fights in a full-throated manner for the working class in the United States and to not support a marginal tax rate is to really just allow runaway wealth and inequality to persist,” said AOC, as she went viral, terrifying opponents, invigorating supporters.

The media embraced her, smelling impressions, interactions, clicks, blood, money. You see, as fun as it is to fight amongst ourselves over fences, the real conflict is over America’s vast economic pie, how we divide it, how we spend it.

And when viewed that way, the great battle that emerges is not Democrat versus Republican - that’s just a distraction, distortion, diversion - the real battle is between capital and labor, the wealthy versus everyone else.

The Washington Post estimated the revenue raised over a decade from a 70% top marginal tax rate on those earning $10mm+ could almost fully fund a tuition-free public college plan, forgive over half of US student debt, or nearly pay for a $1trln infrastructure plan.

And a Rasmussen poll found that, if the 2020 presidential race was between Donald J. Trump and Alexandria Ocasio-Cortez – unknown until a few months ago - 43% of Likely US Voters would vote for DJT, while 40% would vote for AOC.

Published:1/20/2019 7:08:10 PM
[Markets] Mortgage Stress Test Blamed For 25% Collapse In British Columbia Home Sales

Home sales in British Columbia, Canada's westernmost province, collapsed in 2018 is mostly correlated to the mortgage stress test that started in January 2018, which decreased buyers’ purchasing power.

The B.C. Real Estate Association (BCREA) reported Tuesday that a total of 78,345 homes were sold on B.C.’s Multiple Listing Service (MLS) in 2018, a massive drop of 24.5% from the 103,758 units sold in 2017.

“B.C. home sales fell below the 10-year average of 84,800 units in 2018,” said Cameron Muir, BCREA’s chief economist. “The sharp decline in affordability caused by the B20 mortgage stress test is largely to blame for decline in consumer demand last year.”

The slowdown in home sales is a government measure to cool the Greater Vancouver's bubbly housing market that will take full effect in 2019, setting the stage for further declines.

Numerous provincial policies, combined with the federal stress test have clamped down on the buying power of borrowers, leading to a possible near-term top in the housing market.

Despite this rapid slowdown, the average sale price of all homes in the province was the same price versus the previous year, edging up +.40% to $712,508 – an increase of roughly $3,000.

The slight upward trajectory in prices masks the topping activity that was spotted in early 2018. Sales prices continued rising to record levels until late spring, and since, have been declining gradually, as fewer luxury homes sold.

The province experienced the most significant slowdown in sales activity in Greater Vancouver (-30.4%) followed by the Fraser Valley (-26.3%). The only region within the province to see an annual jump in home sales was the Northern region, which saw a rise of 10.2% over 2017. All areas saw a slight year-over-year increase in the average home sale price, but momentum is undoubtedly waning.

The BCREA also reported on December 2018’s housing stats. A total of 3,497 were sold on the province’s MLS in December, down 39.1% from December 2017.

The average price in the province in December was $695,647, a drop of 5.2% compared with December 2017.

The BCREA added, “Total active residential listings were up 33.3% to 27,615 units in December, the highest December inventory since 2014 when 33,995 active residential listings were recorded.”

Despite the significant sales activity slowdown last year, it seems inventory is now flooding the market with declining demand, a move that could send the industry in turmoil by summer. These are the markings of a real estate top. If you live in the British Columbia region, prepare for an economic storm.

Published:1/20/2019 6:37:41 PM
[Markets] The Yellow Vest Movement Has Gone Global

The Yellow Vest anti-government movement started in France on November 17, when over 300,000 people across France protested a carbon tax on fuel that French President Emmanuel Macron touted as evidence of France's leadership when it comes to mitigating climate change. 

The Yellow Vest protests quickly evolved into a general anti-government movement - with hundreds of thousands of angry French citizens taking to the streets for ten straight weeks of mostly peaceful protests marked with pockets of violence, looting and mayhem. 

What's more - the movement has gone worldwide - with perhaps the most notable protests outside France taking place in Belgium, where Brussels riot cops have dealt with week after week of protesters blocking oil depot and throwing hard objects at them. 

On December 8, Belgians attempted to breach a riot barricade while calling for the resignation of Prime Minister Charles Michel, resulting in around 100 arrests

And while most of the protests outside of France happened last month, this is a good list to note where discontent is mounting. 

  • Bulgaria: Yellow Vests began protesting the same weekend as the French movement - coming out in force on November 16 to protest in front of parliament and demand the resignation of the government. 
  • Canada: Yellow Vest protests have taken place in more than a dozen cities across Canada - largely campaigning against the carbon price, Canada's participation in the UN's Global Compact for Safe, Orderly and Regular Migration, the Trudeau administration and other issues
  • Croatia: Croatians came out in force on December 15, gathering in Ban Jelacic Square. 

  • Egypt: An Egyptian A lawyer was arrested and jailed for 15 days after he posted a picture of himself wearing a Yellow Vest in support of the French protests. 
  • Finland: Finns came out in force in mid-December as well, gathering in front of Parliament in opposition to the UN's Global Migration pact. 
  • Germany: Marching in solidarity with the French, German Yellow Vests similarly came out against the UN migration pact
  • Iraq: Yellow Vests demonstrated in Basra, Iraq on December 5 to protest poor job opportunities among other things. They were reportedly fired upon with live ammunition by police. 

  • Israel: Yellow Vests held a rally at the Azrieli Centre Mall in Tel Aviv on December 14. 

  • Italy: There have been several ongoing Yellow Vest protests in Italy over the last several months, with some protesting the government's hard-line stance against illegal migrants, and other pro-government activists protesting against the EU. In January, Italy's ruling government came out in support of the Yellow Vest movement, which AFP noted was "extremely rare for European leaders to back anti-government protesters in a fellow member state." 
  • Netherlands: The Dutch joined the party at the beginning of December, blocking roads, roundabouts and tollbooths
  • Pakistan: Hundreds of engineers came out in December to protest government services and pay

  • Poland: Polish Yellow Vests protested in November and December, blocking the A2 motorway outside of Warsaw, demanding compensation for pigs they were required to slaughter, as well as the import of unlabeled Ukrainian agricultural products. 
  • Portugal: On 21 December 2018, a "Coletes Amarelos" or "Yellow Vest" rally was held under the slogan "Vamos Parar Portugal", roughly translating to "Let's Bring Portugal to a Halt".

  • Russia: Yellow Vests protested right before Christmas in Moscow's Hyde Park against increased parking fees. "I’m a driver with 20 years of experience, and I can understand that the authorities want to free the city and make it accessible to pedestrians," said resident Tamara Papuashvili, adding " it's just a disgrace. You can use the metro, but there are more and more people there, it just cannot cope."

  • Serbia: Civil rights organisation "Združena akcija Krov nad glavom" began using yellow vests in its protests to show solidarity with the French protesters, as well as opposition to high fuel prices. Serbians have protested for six weeks in a row

  • Taiwan: The Tax and Legal Reform League which has been protesting against high taxes since 2016 organized a yellow vest march on December 19

  • Tunisia: A derivative group, the Gilets Rouges (Red Vests), called for protests over the ailing economy. 
  • United Kingdom: UK Yellow Vests are mostly right wing, pro-Brexit groups who have held rallies in London and other UK cities. 

Conspicuously absent from the list? The United States

Published:1/20/2019 6:06:33 PM
[Markets] The Wall Street Journal: TSA bolsters staffing at major airports as absences rise amid shutdown The Transportation Security Administration has sent extra staff to airports in major cities as it faces its highest level of absences since the partial government shutdown began last month.
Published:1/20/2019 5:36:44 PM
[Markets] How Sending Out Food Stamp Benefits Early Could Cause Another Problem In A Few Weeks

Authored by Daisy Luther via The Organic Prepper blog,

As I’ve written before, the government shutdown is a perfect demonstration of our politicians participating in partisan showmanship, with poor people as the victims of their theater. As individual states desperately attempt to take care of the people depending on them by sending out food stamp benefits early, the theater in Washington DC continues, completely unconcerned about the havoc being wrought.

Regardless of your thoughts about people who are on government assistance, it’s incontrovertible that people are seeing the rug yanked out from under their feet quite suddenly. Here are some numbers:

That’s a whole lot of Americans who are dealing bigtime stress right now.

Food stamp benefits are going out early.

A number of states are issuing food stamp benefits early due to the government shutdown. They’re doing this over concern that if the shutdown continues, they won’t be able to issue the payments in February.

But the early payment comes with a sobering warning. A press relief from the state of Michigan said:

For food assistance clients, Michigan will begin issuing February benefits on Saturday, Jan. 19. Clients who don’t receive their benefits on that date should receive the funds the following week. That means the 1.2 million Michigan residents who receive food assistance will have benefits to feed their families in February even if the partial federal government shutdown continues.

The early food assistance benefits are not additional benefits and there will be no food assistance payments in February. MDHHS strongly encourages families to budget the funds they receive in January so they can meet their food needs through the entire month of February. (source)

Another warning, more bluntly worded, came from an official in Pennsylvania.

Carmen Rodriguez, a Camden County Freeholder and Liaison to the Department of Health and Human Services, has a warning for anyone who uses the government’s Supplemental Nutrition Assistance Program, or SNAP. She says don’t blow through the money.

“It is very important for people to understand that this is an early payment. You are not going to get more money later,” Rodriguez said.

“This is you getting your February allotment for Food Stamps today.” (source)

So, to be perfectly clear, many people who receive food assistance are getting an early payment that must see them through until March, at which time officials hope the shutdown will have ended and things will go back to normal. That’s a 6-week time period that people will need to cover with a payment that really isn’t that big. (If you’re curious how much money people are getting on food benefits, I found this calculator. )

Read this article for tips on buying food to get you through an extended period of tough times.

School lunch programs are also being hard hit

About the saddest thing I’ve seen so far regarding the shutdown is the fact that school lunch programs are now rationing out food to the kids. This is a big problem for some children whose only meal of the day comes from the school cafeteria. 29.7 million children eat meals that are funded by the National School Lunch Program, which is funded by the USDA.

Add to this the fact that even more kids now qualify for free lunches because their parents are furloughed from government jobs.

A school district in North Carolina took to Facebook to announce that their lunch program was now conserving food through “minimum levels.”

Due to the Federal Government Shutdown, lunch menus in Vance County Schools have been revised to a minimum level to conserve food and funding.

Starting the week of January 21, minimum level means: one main dish, bread, two vegetables, one fruit and milk.
No fresh produce will be included, except at elementary schools as part of the Fresh Fruit & Vegetable Program. This program will be decreased to two days each week. (source)

My hope is that if this continues, the schools will set up some kind of way to accept food donations for hungry kids. I know that nobody wants to see children going without at least one balanced meal per day.

What to do if you’re affected

If you are affected by the government shutdown in some way, you’re going to need to make some changes to get through this situation. With the folks in Washington playing an elaborate game of Chicken, there’s no telling how long this sh*tshow will continue.

This article provides detailed information on how to feed your family during difficult times. So if you’re without a paycheck or trying to make your benefits stretch, the advice there may help you a lot. In situations like this, remember that nothing is guaranteed – you have to make anything you buy stretch as far as possible.

There are also instructions in the article on how to get my PDF, The Flat Broke Cookbook: Thrifty Meals & Shopping Tips for Tough Times, for FREE (no questions asked) if you’ve found yourself in a bad situation.

You’re going to have to tighten up your budget, change your eating habits, and be creative to get through this. And hopefully, once it’s over, you’ll have gained some new tools to help you get better prepared for a similar situation in the future. Because regardless of how much the folks in DC say they’re there to help you, they are only there to help themselves. This will happen again and one day, eventually, the benefits and government jobs simply won’t be coming back.

Keep in mind that if this shutdown continues, there will be a trickledown effect. Businesses in Washington, DC are already seeing their revenue drop because no one has the money to eat out or shop. State and county jobs that are federally funded will soon be affected. This is not going to stop with only the people who are federal government employees or who are on welfare.

If you’re in a position to help your neighbors, now would be a great time to do so.

Published:1/20/2019 5:36:44 PM
[Markets] Jamaica's 37-Company Exchange Was 2018's Best Performing Stock Market

The Jamaican stock exchange, unknown to most of the world and which is open for trading only three and a half hours a day, was 2018's best performing stock market.

The exchange - which started 50 years ago, by Edward Seaga, a Jamaican Harvard graduate who worked as a record producer in the 1950s and 1960s - saw its main index up 29% during 2018, the most among 94 national benchmarks according to Bloomberg . Over the last five years, Jamaica's impressive market returns are even more pronounced: Jamaican stocks are up almost 300%, more than quadrupling the next national benchmark and outperforming the S&P 500 nearly seven times.

The blistering ascent of the local stock market took place despite real growth in Jamaica averaging less than 1% over the last four years; in 2018, growth in Jamaica was expected to come in at 1.7%. However, the small size of the local market has kept it relatively insulated from the broader economy, and helped Jamaican equities move as quickly as they have. As a result, the total value of the 37 stocks on the main index is less than $11 billion.

And now, capital is starting to trickle into Kingston as it tries to reinvent itself as a financial hub. Paul Simpson, a 36-year-old banker and investor in Kingston told Bloomberg:  “Clearly, capital goes where it’s comfortable. To see capital coming here means people must be comfortable." That, or they are simply hoping to recreate past returns.

The floor of the Jamaican stock exchange

The financial industry in the country is located mostly in the neighborhood of New Kingston. It isn’t a tourist destination like Negril and it isn't impoverished, like Trench Town. Instead, it’s an area where you’ll find Porsche dealerships and Starbucks.

Similar to China, over the past decade, the country's financial sector assets have tripled and its number of financial institutions have multiplied by a factor of eight.

It gets better: the World Bank now ranks Jamaica as the sixth best nation for ease of starting a business. Economist Uma Ramakrishnan, the IMF’s Jamaica mission chief said that "If I could hold a megaphone and tell investors now’s the time, I’d do it."

Still, before US hedge funds start arriving with dreams of massive alpha, the limitations of local stocks are pronounced, especially when one considers the small size of the market. Additionally, the shares available to the public are limited as many of the companies are mostly owned by large institutions and conglomerates. Like with Japanese government bonds, it is commonplace for some stocks not to trade for days and the number of unchanged stocks on a daily basis often outnumbers both gainers and losers.

In other words, in a world desperate for liquidity, Jamaica may not be your best bet.

Which is also why the managing director of the exchange, Marlene Street Forrest, is working on improving its logistics. Trades now settle in two days instead of three to comply with international standards and the exchange is looking to introduce market making this year. Margin accounts and short selling are both also on the agenda for the coming year  - yes, there is no way to short stocks right now, and in a throwback to more normal times there are no HFTs or ETFs (there are no Jamaican stocks in U.S. ETFs, even those tracking “frontier” countries such as Kazakhstan, Sri Lanka, and Vietnam, the most emerging of the emerging markets).

Still, the market is growing: there are 20 new IPOs scheduled for this year, and while the exchange evolving, as things often go in the islands, it's doing it at its own pace. 

“We ensure that we are going to get it right before we move,” Street Forrest said. 

Published:1/20/2019 5:07:11 PM
[Markets] The News About Fake News Is Fake

Authored by Raul Ilargi Meijer via The Automatic Earth blog,

In the last few days I was looking around for stories that could illustrate what fake news actually is, and I had a nice collection, but then last night Robert Mueller of all people clarified what exactly fake news is better than I could have. At first the BuzzFeed crew that was caught staring straight into the headlights has a feeble response (what exactly was untrue in our article?), but was silenced by the WaPo of all publications: Mueller’s team said every bit of the article was false.

And still I wonder if people now understand better what fake news is. Which I think has a lot to do whit the fact that the term was monopolized by a section of US media as meaning things that had to do with Trump, more or less exclusively. That way, when Trump accused these same media of publishing fake news, they knew their loyal readers wouldn’t believe him.

But in reality they’ve been at it ever since Trump entered US politics, and they dug in ever deeper into their anti-Donald trenches, first for political reasons, later for profit (nothing sells like Trump in America today). And in the process, especially since they published umpteen pieces a day on the topic, they had to use unproven and biased allegations and innuendo. There was never enough real news to go around to feed the monster they created. That’s how we got Russiagate.

Still, of course, like me, you want to know how fake news is recognized, how ‘experts’ tell it apart from real news. Well, despair no more. An actual professor researched it, and was quoted by the New York Times last week, which doesn’t publish fake news, it says. I got to say, personally, I found this highly enlightening.

Older People Shared Fake News on Facebook More Than Others in 2016 Race

The authors were careful in defining “fake news,” a term that has been weaponized by many, including President Trump, to dismiss real news they dislike. “Reasonable people disagree about where to draw the line and we were very conscious of those issues,” Professor Guess said.

As a result, they assembled a limited list of sites that reliably published fake content, based on various sources, including reporting from BuzzFeed News. As best the researchers could tell, the list did not include any websites associated with Russian disinformation efforts, according to Professor Guess. The Facebook and survey data came from a group of about 3,500 people whom the authors tracked during the 2016 election in order to better understand the role social media played in political discourse.

They found that Republicans and those who identified as “very conservative” tended to share the most news from questionable sources. But that tendency may have less to do with ideology and more to do with what those articles said: Users tend to share stories they agree with and the fake news sites were disproportionately pro-Trump, the authors said.

So the researchers distinguish fake news from real news, but they don’t tell us -or the NYT doesn’t- what methods they use to tell the two apart. They do tell us that what Trump calls fake news is merely real news he dislikes. It’s funny how people say that so easily, and never think they themselves might do just that.

“..a limited list of sites that reliably published fake content..” sounds intriguing, but not convincing. That this list partly comes from BuzzFeed is hilarious in view of Mueller’s indictment of BuzzFeed’s article about Trump instructing Michael Cohen to lie. Other than that, the article doesn’t really say much. But luckily Quentin Fottrell, personal finance editor at MarketWatch, elaborates (free advice: Quentin, stick to your trade!)

His article caught my eye because whereas the NYTimes piece talked about older people sharing more fake news, Quentin adds that it’s about Republican older people. And that I find hard to believe. At least without proof; I wouldn’t want to jump to such conclusions based on fake news. Let’s see how far I can get:

Why Republican Baby Boomers Are More Likely To Share #Fakenews On Facebook

So why are Republican baby boomers more likely to share fake news on Facebook? One theory: As they didn’t grow up with technology, they may be more susceptible to being fooled.

That one sentence says a lot about this entire ‘study’. It even sounds fake to me. Because while I can see the “less exposed to tech” issue to an extent, I see no reason why Republican baby boomers would be fooled more easily by technology than their Democrat peers.

[..] Andrew Guess, an associate professor at Princeton University, and his colleagues disseminated an online survey to 3,500 people in three waves throughout the 2016 campaign. Of the respondents, 1,331 in the initial wave agreed to share their Facebook profile data, which allowed researchers to analyze the age and political affiliations of those people who were more likely to spread fake news.

The results showed that 90% of these users actually did not share misleading or fake articles and only 8.5% shared one or more fake news articles. A plurality, 18%, of the Facebook users who shared the fake stories were both self-identified Republicans and over the age of 65, the authors concluded, and these individuals shared nearly seven times as many fake news articles as respondents in the youngest age group, ranging in age from 18 to 29.

I had to look at this a few times. Here’s what I think it says:

  • They ‘studied’ 3,500 people in 3 waves, of which the initial one was larger than 1,331 people, since that is the segment of the first wave who shared their Facebook data (we assume not all did).

  • 90% of these 1,331, or 1,198 people, shared nothing at all (no fake news).

  • 8.5% of the 1,331, or 114 people, did share fake news stories. 18% of those 114 (so 18% of 8.5%), or 20 people, were self-identified Republicans over the age of 65.

  • Therefore 20 people out of 3,500, or 0.57%, were older Republicans who shared fake news (as it was defined by the survey). There are probably even more people in that target group suffering from dementia than the 0.57% who shared fake news. So what are we looking at here?

  • You could argue that it’s really 20 people out of 1,331, but that’s still only 1.5%. Meaningless.

  • These 20 people shared 7 times as many fake news pieces as young people. That may be true, but they also shared more than 99.43% of people their own age. Does this still mean anything at all to you?

Quentin delights us with some more data;

Another possible explanation: Older Americans may have felt particularly passionate and entrenched in their political views and, therefore, ideological. For instance, the most ideological members of Congress shared news stories on their Facebook pages more than twice as often as moderate legislators between Jan. 2, 2015, and July 20, 2017, according to a 2018 Pew Research Center study, which examined all official Facebook posts created by and for members of Congress in this period.

If you ask me, it’s peculiar to make statements about politics that heap ordinary Americans together with politicians, but at least that paragraph doesn’t say Republicans are more likely than others to [fill in your preference]. But then we’re off to the races again:

[..] What’s more, baby boomers are more likely to be conservative and ideological, according to data crunched by Pew. “In both 2015 and 2016, about one in 10 baby boomers identified as conservative Republicans— the highest percentages dating back to 2000,” researchers Shiva Maniam and Samantha Smith wrote for Pew. “In both years, conservative Republicans made up the largest single partisan and ideological group among boomers.”

Wait. The logic here is that baby boomers are more likely to be conservative and ideological because 1 in 10 baby boomers say they’re conservative Republicans. But that means 9 out of 10 does not. This doesn’t even make a single sliver of sense. Yo, Quentin (and professor Guess), we need some help here.

To be fair, older Republicans share more news in general, and fake news gets caught up in the mix. Members of Congress with very conservative or very liberal voting records both shared news links in about 14% of all their posts, but members with more moderate ideology scores shared links to news stories in just 6% of their posts, Pew found.

That starts out with older Republicans in general and then seamlessly veers into members of Congress from both sides of the aisle, with either very conservative or very liberal voting records. Not fully self-contradictory, but darn close.

There may also be a political explanation: A trickle-down effect from the president’s own remarks about the liberal media. Older Republicans could feel more emboldened by Trump’s comments and, as a result, assume stories that support their causes are accurate.

That’s the first time I explicitly read Quentin saying that fake news is linked to Trump. But other than that, there is no sign that older Democrats don’t feel ’emboldened’ by DNC or Hillary or Pelosi comments just as much as Republicans do by Trump. Quentin and professor Guess only pretend to make a point, but there’s nothing there.

The president has doubled down of late on the view that the mainstream media’s negative coverage of his administration is rooted in bias. “The media also has a responsibility to set a civil tone and to stop the endless hostility and constant negative and often times false attacks and stories,” Trump said last year.

“Confirmation bias” helps outlandish theories and reports gain traction on social media. And that, psychologists say, is where fake news comes in.

Since there is nothing that indicates one political side is more prone to confirmation bias than the other, fake news will necessarily also occur on both sides. Why you would have psychologists define fake news I don’t know. Oh, and I think that Trump comment makes a lot of sense.

With so much noise on social media, how can people distinguish between rumor and reality? Psychologists say people develop defense mechanisms to cope with an uncertain world early in life, but this also draws people to information that seems to confirm their own beliefs and world views and to ignore reports or opinions that contradict their perceptions.

“At its core is the need for the brain to receive confirming information that harmonizes with an individual’s existing views and beliefs,” said Mark Whitmore, an assistant professor of management and information systems in Kent State University’s business school. “In fact, one could say the brain is hard-wired to accept, reject, miss-remember or distort information based on whether it is viewed as accepting of or threatening to existing beliefs.”

Older Americans may be less likely to question authority

However, many people effectively rationalize the irrational in order to avoid going against values and ideas they were taught by their parents. “Children’s learning about make-believe and mastery becomes the basis for more complex forms of self-deception and illusion into adulthood,” Eve Whitmore said. When people are faced with absurd and conflicting messages, her husband added, “It becomes easier to cling to a simple fiction than a complicated reality.”

[..] Ultimately, however, it may come down to our trust in the internet, rather than institutions or belief systems. “People who have grown up with the internet have experienced things that are not necessarily truthful. They have had experiences on social media or they have witnessed friends dealing with false information, which has made them more skeptical about what they read versus the baby boomers who did not grow up with the internet and have, therefore, limited experience.”

Remember, the article’s headline is “Why Republican Baby Boomers Are More Likely To Share #Fakenews On Facebook”. And then it does absolutely nothing to make that point, but instead goes a very long way to proving that ALL baby boomers do that. Either one of which, first of all, you don’t prove by talking 20 people out of a sample of 3,500, but moreover, secondly, your entire article -strongly- appears to deny.

And do we know what fake news is now, are we any closer to that? Not that I can see. And there’s no way I can say it all in one go, so I’ll get back to this topic. But not before thanking Robert Mueller for defining fake news in his own way. It must have cost him, and the FBI and DOJ, some genuine heartache, but in the end he couldn’t let the entire avalanche of media and Democrats run with such an overtly fake piece of ‘news’. There were calls for Congressional investigations based on it, for crying out loud.

Speaking of which, crying out loud might be what you expect BuzzFeed to do now, but don’t count on it: they got a ton of free publicity, and that’s all the entire fake news cycle has been based on from the start. And if it didn’t kill the New York Times or CNN, why would it kill BuzzFeed? It’s a growth industry. And credibility is overrated.

Published:1/20/2019 4:36:35 PM
[Markets] Don’t buy a classic car if you plan to resell it to make a tidy profit Want to sell your vintage automobile? You better make these expensive changes first.
Published:1/20/2019 4:36:35 PM
[Markets] "It Feels Apocalyptic" - A Letter From Zimbabwe, Where The Country Remains In Total Shutdown

Zimbabwe is once again at the brink of economic collapse, making a mockery of President Emmerson Mnangagwa’s claim that the country is open for business.

As Bloomberg reports,  many shops and factories have shut their doors because of a lack of customers and those that continue to trade are open to haggling over prices to secure hard currency. At an appliance shop in the capital, Harare, a salesman whispers that a Whirlpool Corp. washing machine priced at about $5,000 if paid for electronically will sell for $1,500 in cash, while at a nearby electrical warehouse, a $600 invoice is whittled down to $145 for payment in dollar bills.

But, as OilPrice.com's Tsvetana Paraskova reports, Zimbabwe is on a three-day nationwide strike and protests are erupting in the streets after the government of the southern African country doubled fuel prices, making gasoline sold in Zimbabwe the most expensive gasoline in the world. 

Via Namibia Economist blog,

We are now in our third day of complete shutdown throughout the whole of Zimbabwe.

Banks are closed, schools are closed, roads are closed in and out of the main towns and transport systems have shut down.

There are no newspapers to be bought, the Internet has been shut down by the government and everything is at a complete standstill.

People are too afraid to move around as a result of the burning of vehicles by vigilante groups and the complete dearth of any updated information or warnings due to the total social media blackout. This means that no WhatsApp messages or photos can be sent, no one can access Facebook or Messenger, and the situation is very tense.

In some centres it almost feels apocalyptic. We have heard gunfire, and before the Internet was closed down, saw pictures of dead and wounded people. It is unclear how many people have died but before the media blackout, it was reported that there had been five deaths and more than 200 people had been arbitrarily arrested.

Elements of the police and military are also involved in ensuring that there is a complete shutdown. People in civilian dress armed with AK-47 rifles have been seen in some areas. It is clear that these are military personnel.

Amnesty International has condemned the military crackdown and has called on the Zimbabwean authorities to ensure restraint by security forces and respect the public’s right to protest.

Zimbabwe Lawyers for Human Rights reported prior to the blackout that they had received reports of soldiers and police breaking into homes in townships overnight and assaulting suspected demonstrators.

Contacts in the diplomatic corps and the political opposition are also completely in the dark, along with the rest of us.

This morning I spoke to Nelson Chamisa, leader of the opposition Movement for Democratic Change (MDC) Alliance, and it is clear that no one knows what is going on because the entire country has been effectively silenced.

I have also spoken to lawyers regarding the arrest once again of Pastor Evan Mawarire who inadvertently triggered the highly successful #ThisFlag social media protest action in April 2016 because he could no longer afford to pay school fees. This led to his arrest on trumped up charges and his high profile court case. Since then, his activities have been under constant surveillance.

Police officers arrive at his flat this morning in central Harare and took him to the Law and Order section, charging him under a false charge of incitement to commit public violence.

The crisis was precipitated on Sunday (January 13) by President Emmerson Mnangagwa when he announced a shock increase of 200 percent in the fuel price – this in a country with more than 90 percent unemployment and where the struggle to survive escalates daily. Mr Mnangagwa promptly left the country for Russia and has not returned. Reports say that he has gone there to “discuss Russian assistance to modernise the military”.

Right now the situation remains eerie and uncertain. If this goes on for much longer, the humanitarian crisis will escalate. We cannot buy food because the shops are all closed and transport systems have closed down. Most of the hospitals are without essential medicines and also staff because doctors and nurses can’t even get to work.

This is an unprecedented situation in Zimbabwe and internationally. Even in wartime Europe, the people could get newspapers, transport systems operated, retail outlets were still open and people could communicate.

I cannot send you an e-mail or a photograph – it is a very weird situation.

The only thing we can do at this point is to ask for your prayers as we face this time of escalating fear and uncertainty.

Ben Freeth

Executive Director

Mike Campbell Foundation

Harare, Zimbabwe

Published:1/20/2019 4:06:46 PM
[Markets] NewsWatch: Economy is hitting more turbulence, but the shutdown leaves investors partly in the dark The longer the month-old partial government shutdown drags on, the harder it gets to figure out what the heck is going on in the economy.
Published:1/20/2019 4:06:46 PM
[Markets] Ocasio-Cortez Refuses To Condemn Anti-Semitism Within Women's March As Top Dems Cut Ties

Alexandria Ocasio-Cortez has been in Congress for less than a month, and she's already mastered one of the most vital skills for any career politician: Taking allegations of homophobia/bigotry/racism and turning them right back around on the accuser.

When asked about allegations of anti-Semitism levied at the some of the founders of the Women's March movement in a stunning clip from an interview at Saturday's Women's March, "Democratic Socialist" Ocasio-Cortez refused to renounce her feminist allies, and instead tried to shift the conversation to allegations of anti-semitism in the Trump administration (which has been an outspoken ally of Israel and antagonist of both Iran and ISIS).

When asked about hateful comments made by Women's March co-chair Tamika Mallory, who called described Nation of Islam leader Louis Farrakhan the "GOAT" during an appearance on "The View" (Farrakhan has a history of making anti-Semitic comments that stretches back decades, and recently provoked controversy by saying he was "anti-termite" when discussing his criticisms of the Jewish people), Ocasio-Cortez said she believed it was important to "center this conversation" before immediately launching an attack on Trump.

"I think that concerns of anti-semitism with this current administration and the White House are absolutely valid."

In a nod to her belief in "intersectional" feminism, Ocasio-Cortez said we need to make sure we're protecting the Jewish community and "all who feel vulnerable in this moment" - implying that the Trump Administration is responsible for present feelings of unease in the Jewish community (rather than, say, the aggressive pro-Palestine, anti-Zionism that's in vogue right now among members of the American left).

 "We need to make sure that we are protecting the Jewish community and all who feel vulnerable in this moment," she added. "....it's so important to recognize why all these women are coming together...to make sure the rights of all women are protected and advanced. And so I know in my heart that all of the New Yorkers that are coming down here and downtown are coming in that spirit and not in the other spirit."

Watch the clip below:

As the Daily Wire's @RealSaavedra pointed out, Ocasio-Cortez has refused to condemn the march even as top Democrats and the DNC have distanced themselves from the organization and its founders, and several regional Women's March events that took place on Saturday also explicitly renounced any association with the national organization.

Saavedra also shared this video of Mallory implying that all Jews are white supremacists.

And this video of Ocasio-Cortez ignoring a question shouted by activist Laura Loomer, who asked the Rep. why she stood with people who openly supported the terrorist group Hamas.

Ocasio-Cortez won't condemn the Women's March founders or Hamas, but it's President Trump - who has a Jewish daughter, Jewish son-in-law, Jewish grandkids and a close relationship with the (Jewish) Prime Minister of Israel, and who recently moved the US embassy to Jerusalem, fulfilling a long-standing promise made by American presidents to the Jewish state, who is the real anti-semite. In other words, the logic behind this is roughly equivalent to a Kindergartener's chants of "I am rubber, you are glue - whatever you say bounces off me and sticks to you." 

Published:1/20/2019 3:36:35 PM
[Markets] Mutual Funds Weekly: Jack Bogle was the greatest investor who never managed money Investors may never see another Jack Bogle. Indeed, they may not have to, because he achieved so much for them.
Published:1/20/2019 3:06:15 PM
[Markets] Doug Casey On The Government Shutdown: "Nobody Is Looking At The Important Thing Here"

Via CaseyResearch.com,

The U.S. government is shut down.

It has been for 28 days now – making it the longest government shutdown in U.S. history by a wide margin. And there’s no telling when it will come to an end.

So it shouldn’t come as a surprise that the media’s having a field day with this. But I can’t help but wonder if this is as big of a deal as people are making it out to be. So I got Doug Casey on the phone to see what he thinks...

Justin: Doug, the U.S. government shutdown is now 28 days old. Are you surprised it’s lasted this long?

Doug: I’m not surprised, but I’m definitely pleased. There have been a number of shutdowns in the past. Sixteen days under Obama. Twenty-one days under Bill Clinton. Five separate shutdowns on Jimmy Carter’s watch. This one, like its antecedents, is no more than a tempest in a toilet bowl – just a nuisance for a small segment of the population. A proper shutdown would include the IRS [laughs].

In this case, the shutdown is because Trump isn’t getting the $5.7 billion he wants for his wall. But this begs the question… should there even be a wall? My answer is “no,” for a number of both practical and philosophical reasons. Keeping illegal aliens out is a good idea. But it would happen naturally if just two things were done.

Point number one, get rid of the welfare benefits that draw the wrong kind of people. During the 19th century, and up to the 1930s, there were absolutely no welfare benefits for immigrants – or anybody else, for that matter. As a result, you attracted opportunity seekers.

Point number two, all U.S. property should be privately owned. Including streets, sidewalks, and parks. That way if they can’t support themselves, or make an arrangement with somebody who will, they would simply have no place to sleep.

No welfare?! No unowned property where vagrants can loiter?! It sounds heartless. But I have no doubt that people like Congresswoman Ocasio-Cortez, New York’s Mayor DeBlasio, and thousands of other generous public servants would feed, clothe, and shelter them at their own expense.

But in today’s world, the public doesn’t want less government. They want much, much more. Polls show most Millennials favor socialism. So we can look forward to a paradise for the workers and peasants in the new future.

However I’m afraid nobody is looking at the important thing here.

Justin: And what would that be?

Doug: Some rather basic principles. Our topic is not why this shutdown occurred. It’s whether or not the shutdown is a good thing or a bad thing. To answer that question we have to decide to what extent the federal government is necessary. Everybody assumes that it’s always been there, and has always been the behemoth it now is. The average American not only confuses the government with the country – they’re actually two different things – but sees Washington, DC as a fixture in the cosmic firmament.

Let me make what some may feel is an outrageous statement: There’s nothing the government does that couldn’t and wouldn’t be done – vastly cheaper and better – by profit-seeking entrepreneurs. Further, a large part of what the government does is not just unnecessary, but destructive. And wouldn’t be done at all in a free market.

So, let’s look at a few departments that have been affected by this shutdown, and see how important they are to the conduct of life in the United States. Obviously this isn’t even scratching the surface. A proper discussion would take years. But it’s worth taking a few minutes here because the average American – forget about the average European – hasn’t even considered the concept.

My view is optimistic and hopeful. Basically, all the departments that have been shut down should actually be abolished wholesale. They serve no useful purpose. If they are useful, they should be privatized.

The National Aeronautics and Space Administration [NASA] is an excellent example of this. Right now, 95% of its employees have been furloughed.

And I’m all for NASA in principle, or at least what it does. I’m a big fan of space exploration. But even though NASA is full of competent, high-IQ people, it’s run like the post office, or a DMV, or the military. It’s degenerated into a typical cost-plus government bureaucracy.

SpaceX, Blue Origin, and many other companies are proving that the private sector can do anything that NASA does – faster, cheaper, and better. Why? Because they’re not constrained by politics. They necessarily have to operate in a sustainable, efficient, innovative way. Because they’re doing it for profit. Which means they’re trying to create capital, not consume it.

Apart from that, the U.S. government is manifestly bankrupt. Soon enough, it won’t even be able to pay the interest on its debt, forget about science projects. That’s going to happen over the next couple of decades. NASA will be left high and dry – last in line for whatever funds there are.

NASA, and similar government enterprises, should be privatized. Either taken public in an IPO, perhaps with most shares distributed to all U.S. citizens, and its employees. Or sold to some company with an interest in space. That would turn it from a cash consuming liability into an asset.

Justin: What federal agencies would be better if taken over by the private sector?

Doug: The United States Department of Agriculture [USDA]. It has about 100,000 employees and spends about $140 billion a year. Those are amazing numbers, considering that only 1 to 2% of the U.S. population works in agriculture. Its useful functions – crop reporting, bio research and such – should be privatized. Of course all crop subsidies, price controls, planting limits, and the like should be abolished. They basically put farmers – especially politically well-connected ones – on welfare. And create distortions in the market.

The Department of Homeland Security should be abolished. In particular the Transportation Security Administration [TSA], one of their many divisions.

If airline security is necessary – if it actually makes sense to screen people before they get on planes – it should be the job of the airlines, not the government. Airlines shortsightedly offloaded the responsibility and cost of maintaining security to the taxpayer. But the costs should be reflected in the cost of flying. Air travelers who actually use this service – if that’s what it is – should pay for it. But it’s probably not necessary in today’s world of secured cabins.

What kind of middle-aged people – 60,000 of them – are willing to wear costumes and go through the dirty laundry of their fellow citizens, and interrogate them, for $15 an hour? It’s ridiculous and degrading theater.

Speaking of flying, the FAA [Federal Aviation Administration] should be privatized. In particular its critical Air Traffic Control division, which is always a generation or two behind in its technology. That’s not going to improve, because funding from a bankrupt government will be increasingly sparse.

*  *  *

Tomorrow, we’ll share part 2 of our conversation, where Doug and I look at what the shutdown could mean for the National Park System as well as the Department of Defense. If you enjoy these discussions, you’ll definitely want to get your hands on our book: Totally Incorrect 2. It’s Doug’s most controversial book yet… as well as a vital guide for surviving the changes happening in America today. This book isn’t available anywhere else right now. Learn how to get your copy right here.

Published:1/20/2019 3:06:15 PM
[Markets] Smart Glasses, Neural Computers, Self-Driving Cars: What's "The Next Big Thing" After Smartphones

If the recent slump in Apple stock has proven one thing, it is that the smartphone is no longer "the next big thing". But as we enter a new year, one in which Apple shareholders expect much more innovation from Tim Cook than just more buybacks, that leaves one important question not only for investors, but also for entrepreneurs: what, exactly, is the "next big thing" going to be?

The Wall Street Journal recently tried to answer this question, laying out four startups that they see as potentially usurping not only the popularity, but the profit potential of what smartphones once did for companies like Apple and Samsung. The first company they talked about was Magic Leap. They make augmented reality glasses and their investors include Alphabet Inc. and Saudi Arabia‘s main wealth fund. Their product, bug-eye like glasses, has only been released to software developers so far.

The glasses lay images over the real world similar to some smartphone augmented reality products that have been developed. So far, they have been designed specifically for use by gamers and neurosurgeons. The company has raised $2.4 billion and carries a valuation of $6.4 billion.

A company called Focals by North has raised $140 million for their glasses, priced at $999. Their glasses - a throwback to Google's ill-fated Google Glass - have the capability to display text messages, driving directions and other simple items by using hologram like images beamed into the eyes of the wearer. 

On the smaller side, Paradromics is a company that has only raised $25 million. The startup is looking into the burgeoning industry of brain/computer interfaces, where an electronic device actually reads the neurons firing in the user's brain and tries to translate them into information that can be processed by a computer. Like Magic Leap, these types of startups are primarily focused on the medical field to begin with. Paradromics aims to build a device the size of a nickel that connects to the cortex and can control prosthetic limbs or help blind people see. While these uses are years away, there is optimism that the technology could evolve.

Finally, the obvious: the smart car. Many people believe that the autonomous vehicle is going to be the next digital platform. In fact, we just wrote an article  about how cars will soon be collecting data on their drivers and sending that back to their parent companies, where it can be sold. While companies like Tesla and Waymo are focused on retrofitting current vehicles to become autonomous vehicles, start up Zoox, which has raised $790 million and is valued at $3.2 billion, is trying to build an autonomous vehicle from the ground up. In fact, the vehicle may not even include a steering wheel.

Regardless, with the recent reality check for Apple shareholders and the saturation of smartphones being pushed to the limit - there is no question that the race to evolve technologically is officially on. 

Published:1/20/2019 2:37:26 PM
[Markets] A Satirical Dream: Trump's 2019 State Of The Union Address

Authored by Doug “Uncola” Lynn via TheBurningPlatform.com,

Mr. Speaker, Mr. Vice President, Members of Congress, the First Lady of the United States, and my fellow Americans:

It’s been another year since your president has stood before you to, once again, deliver yet another State of the Union address.

Tonight, however, will not be the standard fare.  Instead of half-truths and false optimism, I am going to set aside all that in order to say what I believe is true.

Dear citizens, we now stand a crossroads and we must choose.  We must choose if we are to move forward and deal with the real problems facing our nation, or to progress as a country of corruption; whether to return to our roots as an honorable republic – a nation of laws,  or to continue our decline into lawlessness and the abyss.

Slightly more than two years ago, I was elected by patriotic Americans to make our nation great again. Through the votes of those Americans, we defeated a corrupt globalist puppet who has served at the whim of a global banking elite set on world domination.

Former President Dwight Eisenhower warned  of an ever growing military industrial complex and John F. Kennedy identified secret societies operating as asystem which has conscripted vast human and material resources into the building of a tightly knit, highly efficient machine that combines military, diplomatic, intelligence, economic, scientific and political operations” and in ways that were “repugnant in a free and open society”.

There is a quote often attributed to one of our nation’s founders and earliest presidents, Thomas Jefferson, which states:

Banking institutions are more dangerous to our liberties than standing armies. If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, banks and corporations will deprive the people of all property until their children wake-up homeless on the continent their fathers conquered.

And another quote most commonly attributed to a founding father of international finance, Mayer Amschel Rothschild, who said:

Permit me to issue and control the money of a nation, and I care not who makes its laws

Now, whether or not these exact quotes were, in fact, said by these men, they still reflect certain truths throughout history.

In our own nation, what began over one century ago, with the establishment of the Federal Reserve in 1913, through the dishonest weights and measures of Fractional Reserve Banking, has decimated the purchasing power of our currency, and through exponentially-grown debt has, indeed, enslaved our nation’s children on the land of our ancestors.

Moreover, by means of banker subsidized wars around the world and a sinister agenda of global conquest through what is known as the Hegelian Dialectic, sovereign nation states are now held hostage by a small but powerful cabal in control of the Bank of International Settlements.

These banking elites are beholden only to themselves as they seek to establish what they have called a New World Order.

Since the assassination of John F. Kennedy and followed by the Nixon Shockthat removed America’s currency from the gold standard, thus began the decline of our nation’s manufacturing base, as military engagements were openly, and covertly, executed around the globe.

Furthermore, over the past four decades, our educational system was subverted in order to dumb down our citizenry, and governmental welfare programs were expanded until now, today, the majority of American citizens have been lulled into a contented slumber via phony prosperity, faux money, fake news and an arbitrarily immoral code of political correctness.

Through the financial acquisition and consolidation of the nation’s media outlets and entertainment venues, and via the steady barrage of consistent and hypnotic electronic programming, the globalists have hypnotized a majority of American voters to abandon their vigilance to our founding principles; and our borders.

Affirmation of rights derived from natural law, honesty, morality, self-reliance, equality of opportunity, fiscal responsibility, and limited government has now, through the degrading indoctrination of Cultural Marxism, been subordinated to counterfeit concerns over bathroom rights, skin color, and genitalia.

Before the globalists can destroy America, they must first eradicate our identity.  And, this, my fellow Americans, goes to the very heart of our current gridlock in our nation’s capital which has resulted in our longest government shutdown in history.

Can a nation exist without borders?  The answer to that question is, of course, “no”; because borders are necessary to geographically separate ideologically disparate countries of separate peoples and from each respective nation’s code of laws, economic system, and currency.

But you see, this is not in the best interest of the global financial elite who desire one world order.  If one looks to history they will see how slavery is rooted in economics, and this, dear citizens, is what they, who would be our rulers, desire.

Whether delivered by crony capitalism, communism, collectivism, leftism, socialism, or by any other name, it’s always the same:  An elite few who deceive the useful idiots within any population with promises of utopia and equality; yet always resulting in a short-lived wicked paradise for those select few and, invariably, delivered by means of poverty, death, and despair.

I stand before you tonight, not as a politician, but as your president; a former international businessman envisioning a multilateral world of sovereign nations cooperating through fair trade and mutual respect for law and order. I seek to reestablish American liberty, her traditions of innovation and excellence; a beautiful city, shining.

But, my political opponents – those who favor globalism, seek only power and control through centralization, regulations, and unjust laws designed to stifle individual achievement, autonomy, liberty, and the pursuit of happiness.

Today, my fellow Americans, the wall on our southern border is a line in the sand between those who stand with me and those who desire global hegemony.  For, you see, out of the chaos of a world in turmoil, the international elite seek to establish order.

One world under them. A world without borders.

Senator Chuck Schumer has recently stated that a wall won’t work while lamenting my proposed $5.7 billion of taxpayer funds.  He also called me a liar because I have said Mexico will pay for the wall.  So I ask you, my fellow Americans, do you believe Chuck actually cares about your money?

If he did, he would realize that Mexico will pay for the wall by keeping their citizens in their own country instead of on America’s welfare rolls.

Besides, if Senator Schumer, Nancy Pelosi, the Democrats, and their globalist handlers, truly believed a great big, glorious wall on our southern border wouldn’t work, they’d allow me to build it.  Then, if it was ineffective, they could use the failure against me in 2020. But that’s not happening.  Do you know why? It’s because they all know a wall will work in assuring America’s sovereignty.  That’s why.

The Bible’s First book of Kings, in chapter three, tells of two prostitutes who recently birthed children. When one woman’s baby died, she stole the other mother’s child.  When the matter was taken up with King Solomon, he instructed the women to cut the sole surviving baby in half. Of course, the child’s real mother spoke up first to prevent that madness.  In so doing, Solomon knew it was the real mother who spoke first and who had the child’s best interests at heart.

This story speaks to motives and to honor.

I seek to protect America’s borders in order to secure the future of America’s children.  Yet, Chuck Schumer, Nancy Pelosi, other Democrats, and their globalist handlers, are willing to sacrifice the United States, and her progeny, for the sake of playing politics and power games.

And what do I mean when I say these politicians are serving their globalist “handlers”?  Well, follow the money; and where the money is, there is power.

In the aftermath of September 11, 2001, and the passing of the Patriot Act, the Global Technocrats have ceaselessly constructed an online framework of gatedoors and checkpoints ranging from facial recognition software, social media censorship, and a dystopian panopticon of total surveillance.

Even as whistleblowers like Edward Snowden revealed the violations of American’s Fourth Amendment rights as, over the same period of time, law enforcement agencies were militarized all across this land.

Just as technological breakthroughs in computing and the proliferation of “smart” communication and entertainment devices gave rise to government spying, it was not a very large leap of understanding to see how easy it would be too blackmail and control not only citizens, but government administrators, politicians, officials, and even judges around the globe:

Is it any wonder why border laws are not enforced throughout the wealthy “democratic” nations of the world?  Or why U.S. politicians pass legislation against the will of those who voted for them?  Or why Chief Justice John Roberts passed the unconstitutional Obamacare mandate by calling it a tax?

Dear citizens, I now fully understand Senator Chuck Schumer’s warning to me in his MSNBC interview on January 3rd, 2017 when he said:

Let me tell you, you take on the intelligence community, they have six ways from Sunday to get back at you.

Today’s modern manifestation of George Orwell’s INGSOC party, led by loyal uniparty U.S. Democrats and Neocon Republicans, have sought to control private lives, consolidate power, and restrict personal freedoms by weaponizing healthcare, welfare, FISA Courts, illegal immigration, anti-gun initiatives, and they’ve even made Vladimir Putin into a modern day incarnation of Orwell’s imaginary and infamous scapegoat, Emmanuel Goldstein.

Today, the same people who have accused me of being homophobic, zenophobic, and islamophobic – have embraced a fraudulent special counsel investigation by which they now see imaginary Russians hiding in the shadows of every corner.

From the time I announced my candidacy for President of the United States, I was ridiculed by the political establishment, Hollywood, and the Corporate Mainstream Media.  When it appeared that I could win, the U.S. Intelligence Agencies, under President Obama, spied on my campaign and set up members of my team for a grand scheme of entrapment arranged by former CIA Director, and perjurist, John Brennan; even as corrupt high-ranking officials in the FBI, like James Comey, arranged for Hillary Clinton’s crimes to be swept under the political rug.

This phony Russian election hacking narrative then, in turn, provided cover for the Elite Powerbrokers to censor the free internet, allowed Barrack Obama to sign into law a “Countering Disinformation And Propaganda Act”, let former National Security Advisor Susan Rice feloniously unmaskofficials in my administration, and forced my newly –appointed National  Security Advisor, Mike Flynn, to resign; even as my new Attorney General, Jeff Sessions, was intimidated into recusing himself from the Russia investigation.

Sessions’ recusal, of course, led to Deputy Attorney General Rod Rosenstein to appoint his former FBI co-conspirator, Robert Mueller, to investigate me.

Over the last two years of my administration, the Russia investigation has dominated the headlines of media corporations owned by international financial elite, and comprising ninety percent of all news media outlets throughout our nation.

We now know today the phony Russian dossier was fake opposition research paid for by Hillary Clinton’s 2016 Presidential Campaign.

Still, two years later, the investigation continues.  And consider what has occurred over the last two years:  Every time news stories broke regarding what has become known as Spygate, Crossfire Hurricane, FISA Abuse, Fusion GPS, or the phony Russian Dossier – Mueller and Rosenstein would, in response, indict innocent Russians who would never see the inside of a courtroom, arrest my private attorney, or indict someone else affiliated with me like Carter Page, Paul Manafort, General Flynn, and others.

On February 16, 2018 Mueller and Rosenstein charged thirteen Russian nationals and three Russian groups for meddling in U.S. elections. In that press conference, Rosenstein said the indictment contained NO allegations of collusion by members of my campaign or my administration.  Rosenstein also assured the nation there was NO “determination that elections were influenced as a result of Russian activities”.

But, two days later, when conservative radio talk show host, Rush Limbaugh, appeared on Fox News Sunday with Chris Wallace, on February 18, 2018, and conflated the Russian Investigation with President Obama’sspying on my campaign, what happened next?

Two days after that, special counsel Mueller charged the son-in-law of a Russian oligarch who was an acquaintance of someone who once did business with someone who once chaired my campaign for a few months.

Innuendo, accusations, headlines and sound bites. Move, countermove. Punch and counter punch.

On April 3rd, 2018 reports of an August 2017 memo surfaced in the media showing illegal collusion between Deputy Attorney General Rod Rosenstein and Special Counsel Robert Mueller.  The violation of special counsel law was in Rosenstein’s intentionally vague court filing with no specifics of facts to be investigated.  In essence, the memo revealed Rosenstein gave Mueller a blank check to investigate me illegally, and endlessly.  At the time, there were those in the media calling for both Rosenstein and Mueller to terminate the investigation.

So what happened next?

Less than a week later, in a manner unprecedented in all of American history, the FBI raided the office and residence a sitting president’s personal attorney.

On June 7th, 2018 a top senate intelligence staffer was charged in a leak case where a New York Times reporter’s records were seized.  The very next day, in another vain attempt to add marginal credibility to his floundering quest, Special Counsel Robert Mueller filed a fresh witness tampering indictment against my former campaign chair Paul Manafort and Russian citizen Konstantin Kilimnik.

Innuendo, accusations, headlines and sound bites. Move, countermove. Punch and counter punch.

That same month, after the release of Inspector General Michael Horowitz’s report on Hillary Clinton’s e-mail investigation, five FBI officials were revealed to have colluded against me but none of their illicit actions were said to have been politically motivated. This, even though one of the agents exclaimed “viva le resistance”  after my election win. That agent was later hired by special counsel Robert Mueller.

On the same day the Inspector General’s report was released, New York’s attorney general sued the Donald J. Trump Foundation, myself, and others, in order to dissolve the foundation for “persistent illegal conduct” over more than a decade.

Innuendo, accusations, headlines and sound bites. Move, countermove. Punch and counter punch.

Also the very next day after the FBI’s “den of thieves” were revealed in the IG Report, my former Campaign Chair, Paul Manafort, had his house arrest revoked and was sentenced to prison  for alleged witness tampering.

Innuendo, accusations, headlines and sound bites. Move, countermove. Punch and counter punch.

And on it goes; even after it was revealed that U.S. Deputy Attorney General, Rod Rosenstein, abused the power of his office by threatening to subpoena the calls and texts of Congress in order to obstruct the Legislative Branch’s constitutionally mandated oversight of the DOJ and FBI.

In July of 2018, in an effort to divert publicity away from the Capitol Hill testimony of disgraced FBI agent Peter Strzok, and to subvert my efforts toward peace with Russia, Deputy Attorney General Rod Rosenstein announced the Mueller Investigation’s single indictment of Twelve Russian intelligence officers for alleged election hacking in 2016.

Innuendo, accusations, headlines and sound bites. Move, countermove. Punch and counter punch.

Even though by August of 2018, it had become clear Obama’s former CIA Director John Brennan was the mastermind behind Spygate and many more media outlets were reporting it was Hillary Clinton and U.S. intelligence officials who colluded with Russians and others to entrap me.

Even though a former FBI agent who “is ashamed of what the FBI has become” found it “absolutely preposterous”  that Deputy Director Rod Rosenstein was still in his position knowing that he signed off on the final FISA application to spy on me; especially in light of my then Attorney General having to recuse himself from the case.

So I ask you tonight, my fellow Americans: 

Why is Hillary Clinton’s payment to Fusion GPS not under investigation by Mueller and Rosenstein?

Why has the Federal Bureau of Investigation and Department of Justice downplayed, and even covered-up, Mrs. Clinton’s illegal use of private servers when she was President Obama’s Secretary of State, and the obstruction of justice involved with her illegally deleted e-mails?

Why hasn’t former President Obama, former Secretary State Hillary Clinton, former FBI director Robert Mueller and former attorney general Eric Holder been called into account yet regarding the Uranium One scandal Why?  Especially when it involved the sale of a large percentage of America’s uranium deposits to Russia, the same country for which these same criminals have accused me of collusion.

It is because they believe themselves to be above the law.

These same criminals who created ISIS to destabilize the middle-east and create a mass migration crisis designed to destabilize the western nations of the northern hemisphere.  All of these criminals are puppets on strings pulled by those now creating anarchy so as to sift the nations into a New World Order.

The elite bankers have sown seeds of economic chaos, including the subprime mortgage crisis a decade ago, only to be bailed out; which, in effect, transferred their debts onto the backs of the American taxpayers.  Debts, I might add, which were incurred as result of these same banker’s malicious malfeasance and greed.

My dear citizens, it is also these same bankers who plan to become the founding fathers of the new and improved centralized and cashless world system.

This is why we’ve seen eight Federal Reserve interest rate hikes since my election in 2016.

The International Financial elite WANT the American economy to collapse.  In fact, they NEED it to collapse, because out of chaos comes order.

This also explains why the globalists are now lusting after the guns of law-abiding American citizens.

My fellow Americans, the globalists cannot allow you to defend yourselves against the tyranny of the state. It’s because this would inhibit their plans of establishing their New World Technocracy.

In his 1991 book, “Behold a Pale Horse”, former United States Naval Intelligence Briefing Team member William Cooper warned of a secret initiative by our Central Intelligence Agency.  In this sinister plan, described by Cooper near three decades ago, a project called “Orion” was revealed whereby drugs and hypnosis were to be used on mental patients coerced into shooting children in schools. The plan was to inflame the antigun lobby and cause middle class Americans to beg their government “protectors” into obliterating the 2nd Amendment.

– Cooper, Milton William. (1991). “Behold a Pale Horse”, Light Technology Publications, page 225

And, look what’s happened since that time.  So many school shootings; and always occurring in similar ways.

First, there is some sort of an active drill, either scheduled or ongoing, and then shots are fired.

Within hours, the murderer is reported to be extremely troubled, if not insane, under psychiatric care and on psychotropic drugs, as several people claim they all “saw it coming”, or, in some instances, saying they are completely surprised that the person they knew could massacre so many.

Next, prophetic postings placed prior on social media by the shooter are revealed. Of course, these are never discovered until it’s too late.  Most commonly, an AR-type or similar semi-automatic will have been used with the necessary large-capacity magazines.  This is because both semi-automatics and large-capacity magazines are highly coveted targets in the sites of the politicians and globalists hiding behind their own armed security on Capitol Hill and at the United Nations.

And finally, we all know what happens next: The political establishment types like Chuck Schumer, Nancy Pelosi, and others, all circle like methamphetamine -addled chickens clucking about “doing something” so “it never happens again”.

My fellow Americans, don’t be fooled. This has happened according to plan and right on schedule.

In the aftermath of the Sandyhook shooting in Newtown, Connecticut, President Obama issued 23 executive actions and proposed 19 legislative actions.  After the Virginia Tech shooting new rules were passed that allowed the Social Security Administration to provide information to the gun background check system of people with “mental disabilities”. After Vegas and Parkland, it was bump-stocks.

Do you see a pattern?

But even more sinister is how the captive media will use these types of crisis events to change the national conversation away from the Democratic Party embarrassments that perform poorly in focus group polling and in the media.

For example, immediately prior to the midterm elections last fall, Brett Kavanuagh’s Supreme Court nomination process revealed the Democrats as lying rats and fools. That was when the captive media quickly switched channels to show the slow-motion Latin American invasion.  But when that backfired as well, what happened next?  An anti-semitic white nationalist shot up a synagogue in Pittsburgh and a Republican, with “Make America Great Again” stickers on his white van, was arrested for mailing explosive devices to my most prominent political opponents.

REALLY, people?  REALLY?

Well, my point is that many Americans today are very gullible.  And predictable too. Or at least the loony liberals who swallow ersatz pretense more vigorously than starving vegans ingurgitating Tofurky on Thanksgiving.

So what happened next?  Of course, the Democrats won the House and here we are now with the longest government shutdown in American history.

Certainly, these insane loons would have had much more difficulty winning if not for the never-ending propaganda spewed forth by the captive media, the bias of Google searches, and the censorship of social media platforms.

But you see, my dear Americans, it’s no different than the way the Russian election-hacking lies have been propagandized over the real collusion of Spygate, Crossfire Hurricane, and FISA abuse.  The captive crony capitalist corporations ceaselessly shill their divisive deception around the world twice while the truth ties its shoes and gets slandered as fake news.

But in spite of all that, I am still here representing those who voted for me; and, even, those who didn’t vote for me.

This is why on Saturday, January 19, 2019 I announced my BRIDGE Act which included two offers to the Democrats in exchange for the $5.7 billion in funds for a border wall. First, I proposed an extension of DACA protections for Dreamers, who were brought to the U.S. illegally as children, and, secondly, I offered to extend the legal status of Temporary Protected Status holders.

Dear citizens, as you know, House Speaker Nancy Pelosi has said this was not a good faith effort on my part.

So, in turn, I ask you, my fellow Americans:  What are they offering? What have they brought to the negotiation table in good faith?

Nothing. Only more of the same.

As I stand before you now, in this majestic chamber, speaking on your behalf, addressing your concerns, your hopes, and your dreams – know that your nation is at a crossroads.

Since becoming your president, we’ve rapidly and radically changed the federal judiciary including two, soon to be three, new Supreme Court justices.  We’ve passed tax reform, repealed the individual mandate, and made progress in deregulation in spite of congressional gridlock.  We’ve cut government waste, defeated ISIS, and withdrew from the horrible and unfair Paris Climate Accord.

Over the last year alone, in 2018, we’ve replaced NAFTA with the U.S.-Mexico-Canada Trade Deal, ended Obama’s terrible Iran Nuclear agreement, confronted China, increased minority jobs, raised middle class wages, and achieved record oil production.

I have gone forward with a courageous vision and an honorable mission:  To make America great again for all Americans.

With the help of those in the United States Senate, we’ve appointed judges who’ll interpret the Constitution as it was written, and we’ve added more circuit court judges than anyone believed possible.

I’ve defended our Second Amendment and have acted to protect religious liberties.

I’ve made real efforts toward immigration reform – towards ending chain migration and the visa lottery.  And, now, I’m standing strong against the globalist powerbrokers who seek to deny patriotic Americans their wall; a more-than-symbolic line in the sand against southern invaders seeking to make the Democratic Party, and also Islam, great again.

Yes, ranchers have found Islamic prayer rugs on our southern border. This means while TSA agents are fondling your children at airport security gates, men with backpacks are entering this country unchecked, at the invitation of Democratic Party leaders like Chuck Schumer and Nancy Pelosi.

We need a wall on our southern border and, yes, it is a matter of national security.

So, my fellow Americans, I stand here, on your behalf, against those escaping their own shithole countries, in order to turn America into a shithole country like the ones they just left behind.

I stand against a Mainstream Media spewing enough shameless propaganda to cause George Orwell to blush in his grave.

I stand against Democrats and Neocon Republicans, alike, who daily lick the boots of their elite globalist masters while governing against the will of liberty-loving Americans.

I stand against those who are coming for your guns.

I stand against those who would kill your children, as well as other children around the world, in order to consign America to the ash heap of history; and for no other reasons than to satisfy their insatiable greed and lust for power.

I stand for the peace and harmony of the world’s sovereign nations.

Winning will not be easy. On the contrary, it will be hard.  Very hard.

To be sure, it will soon become even more difficult because it’s always darkest before the dawn.

Let the sunlight shine into the dark.  Right now, in this very moment, I am authorizing the release to the general public, all FBI and DoJ documentation having to do with the Russian investigation.

Let all of those on earth see how the bankers nearly stole the world.

My Fellow Americans:  It’s not over.  We’re just getting started.

Be assured the globalists will crash America’s economy prior to the next presidential election in 2020.  They will blame my trade policies and tax reforms.  But it will be the result of Fed tightening.  It’s always the Fed.  It’s always the bankers.

America will never be defined by the greed of international financiers, corporate oligarchs, servile politicians, or a slavish media.

You know who you are. Stay proud. Stay in the fight.

We will not lose.

By God almighty, we will not fail.

Thank you, and God bless America.

Published:1/20/2019 2:06:32 PM
[Markets] 3 Things to Watch in the Stock Market This Week Starbucks, Procter & Gamble, and Johnson & Johnson shareholders have a lot to look forward to this week. Published:1/20/2019 1:35:46 PM
[Markets] "Coming Soon" - The Retest

Authored by Sven Henrich via NorthmanTrader.com,

Bulls not only returned to the scene of the crime, they trampled all over it by re-entering the consolidation range of October – December. Bottom decelerations are made daily and with a Fed busy signaling patience and positive China trade war headlines juicing markets almost daily now volatility has again been crushed and the panic of December is long forgotten.

Last week I suggested: “For now markets have still room higher as many charts are not anywhere near overbought on the daily or weekly time frames, but this rally has not yet been tested”.

And that’s the key phrase here: This rally has not been tested and it’s my premise that it will. On Friday I outlined some reasons why it will in Stay Alert and today I’ll dig a bit deeper as to the technical reasons why this rally will get tested. Whether this test will end up being a technical retrace, a full retest, or even new lows is way too early to determine, but let’s look at the charts for evidence.

Firstly, why is it way too early to call a confirmed long term bottom?

Consider the context of where all this bottom calling is taking place: Below the 200MA. Since most if us have probably forgotten what evolving bear markets look like here’s a historical clue: The most vicious counter rallies take place from steep drops below the 200MA:

During evolving bear markets steep drops below the 200MA have historically resulted in aggressive counter rallies that ended near or at a retest of the 200MA. In this context what we are witnessing here is consistent with that historic script.

During the period between the 2009 lows and the 2018 top steep drops below the 200MA were saved by central bank intervention. Nevertheless the retests of the 200MA proved initial resistance before moving higher.

Given this history a truly confirmed bottom would need to see a move above the 200MA and a successful retest of that MA before a new bull market phase can be confirmed. Something like this:

Hence, from my perch, it is way too soon to be calling anything here.

What this rally has done so far is successfully ticked off several check boxes, mainly MA reconnects, some gap fills and an approaching of previously broken trend lines.

Example $NDX:

Recall that the action in 2018 has inflicted severe technical damage on markets and the current presumption that this damage no longer matters may be premature.

Even recent strength with transports for example is taking place below its broken trend line:

And looking at the larger market structure is still falls inside the historical topping script:

So what’s the evidence that a retest of some sort is coming?

Firstly let’s note that the oversold conditions of December are increasingly producing overbought conditions now.

Take $NYHILO:

From 1 to 60 in a straight line. We’ve seen a similar move during the 2016 lows, but then a retest emerged which was ultimately a buy as central banks stepped in in a big way. We’ve not had a retest of any sort yet, but technically it would not surprise.

$BPNDX has now approached its highest RSI readings since the last summer:

And it’s reaching these overbought readings while still being below the 200MA and while approaching its broken trend line as outlined earlier. Just saying.

An aggressive move off of oversold conditions is not unusual. $USHL also provides notable historical context:

Deep negative runs in $USHL tend to produce aggressive counter rallies that bring $USHL back to positive, in many cases however only very temporarily before a retest or new lows emerge. This rally has now achieved this. A slight positive reading. It has room higher still, but a renewed turn toward negative is consistent with major counter rallies. Even during the big bull run we saw such turns in 2011 and 2015/2016.

Also of note: $XVG equal weight has reached its breakdown zone and could prove to be major resistance:

Speaking of resistance:

$SPX has approached its monthly 5EMA a previous bastion of support:

$SPX is also now within a stone’s throw of the weekly 50MA and the .618 fib:

And $SPY is approaching the infamous monthly 15MA we’ve discussed in The Big Question:

So you see bulls have proven absolutely nothing so far. The proof would be a sustained break above all of these levels. As of now we’ve seen an aggressive counter rally below the 200MA. Congrats. It looks great, but remains entirely consistent with the historic script.

Yet bears need new lows and currently are far from them. Indeed the road to new lows is paved with lots of support scenarios and hence the evolution of the next retest will be key to evaluate.

Indeed, given the steepness of the current advance one could even imagine a massive bullish play, a potential inverse of sorts. Here’s an illustrative example:

Such a scenario could make sense if any retrace stops near what is the current .382 fib based on Friday’s close and the trend line support confluence, say around 2540 in the current setting:

Note $SPX has trend line resistance just ahead, the 2 hour RSI is now overbought and $VIX is at trend line support, a confluence of factors that also suggests that a pullback of size is coming.

There is of course a big problem with the potential inverse scenario and that is this:

$SPX has been forming an ever narrowing rising wedge and has left multiple open gaps below. Given now overbought conditions with massive resistance ahead this wedge pattern is at high risk of breaking to the downside.

And now it gets interesting. While markets have been busy crushing the $VIX my better half Mella has been spotting a potential very ominous pattern on the $VXX.

In December she spotted the rising wedge in $VXX  suggesting a big market rally was coming:

Now she’s highlighting a steep descending wedge suggesting a return in volatility to come:

Bottomline: Bulls have proven nothing. The coast is not clear until a successful retest break above the daily 200MA and the monthly 15MA.

Technically markets have followed a historical script with an aggressive counter rally below the 200MA working off historic oversold conditions and have now run into key resistance with further strong resistance above while producing overbought conditions on several key indicators. The combined picture suggests a test of this rally to come. The nature of this test (retrace or full retest) will determine whether this ultimately resolves bullish with a sustained move above the 200MA or sets up for new lows still to come. Plenty of reasons to remain on Alert.

*  *  *

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Published:1/20/2019 1:35:46 PM
[Markets] Docs Prove US Is Training UAE Pilots To Bomb Yemen As Pentagon Denies Involvement

Newly released Pentagon documents confirm that the United States' role in the Saudi coalition bombing of Yemen has long been much deeper than previously acknowledged by defense officials. In fact they show that the repeated Pentagon line that the US is “not a participant in the civil war in Yemen nor are we supporting one side or the other,” as was stated just last month by Gen. Joseph Dunford, chairman of the Joint Chiefs of Staff, is a flat lie to shield the public from the truth.

The new government documents, obtained from Air Forces Central Command via FOIA and published days ago by national security reporter Nick Turse reveal the US has been training the Saudi-UAE coalition pilots conducting the air war over Yemen, which has resulted in tens of thousands of civilian deaths, as documented by the UN and other international monitoring organizations.

Coalition jets, file photo

This even as the Pentagon attempted to appease Congressional critics last November by announcing it would cease aerial refueling of coalition aircraft conducting airstrikes in Yemen. It was further found out that due to "accounting errors" the fuel was being provided to the Saudis and Emirates free of charge, or rather it was being shouldered by the unknowing American taxpayer. 

According to Turse's report on the files he unearthed, they reveal the following:

“Escorted 6 UAE F-16s to RED FLAG” — reads a December 2017 Air Force document referring to an advanced aerial combat training exercise held for U.S. and allied pilots — “assisted 150 airmen in challenging ex[ercise] to prepare for combat ops in Yemen.” The document goes on to detail additional support provided by the U.S. Air Force’s Air Warfare Center at Al Dhafra Air Base in the United Arab Emirates.  “Unit fighter personnel advanced the UAE’s F-16 fighter pilot training program; 3 pilots flew 243 instructor sorties/323 hrs that created 4 new instructors & 29 combat wingmen who immediately deployed for combat operations in Yemen.”

William Hartung, the director of the Arms and Security Project at the Center? ?for? ?International? ?Policy. “Training pilots who go on to bomb civilian targets in Yemen is yet another U.S. form of complicity in a brutal war that has gone on for far too long,” says Hartung.  “If the Trump administration is serious about getting Saudi Arabia and the UAE to negotiate in good faith for peace in Yemen, they should cut off training and other forms of military support until they play their part in ending the war.”" data-reactid="45" type="text">The US has been an integral part of the Saudi coalition's war in Yemen since it began in 2015 through things like logistics, intelligence sharing and selection of targets, and aerial refueling, but this latest revelation now fully confirms US forces are actually playing a lead part in the whole operation, while providing a fig leaf of deniability by not putting its own pilots into combat, instead training UAE pilots. 

William Hartung, the director of the Arms and Security Project at the Center? ?for? ?International? ?Policy. “Training pilots who go on to bomb civilian targets in Yemen is yet another U.S. form of complicity in a brutal war that has gone on for far too long,” says Hartung.  “If the Trump administration is serious about getting Saudi Arabia and the UAE to negotiate in good faith for peace in Yemen, they should cut off training and other forms of military support until they play their part in ending the war.”" data-reactid="45" type="text">But amazingly the Pentagon has stood firm in its denials even after the internal Air Force command documents came to light. A Central Command spokesperson told Yahoo News when asked to comment on the damning military files that it has not “conducted exercises with members of the [Saudi-led coalition] to prepare for combat operations in Yemen.”

William Hartung, the director of the Arms and Security Project at the Center? ?for? ?International? ?Policy. “Training pilots who go on to bomb civilian targets in Yemen is yet another U.S. form of complicity in a brutal war that has gone on for far too long,” says Hartung.  “If the Trump administration is serious about getting Saudi Arabia and the UAE to negotiate in good faith for peace in Yemen, they should cut off training and other forms of military support until they play their part in ending the war.”" data-reactid="45" type="text">And a separate CENTCOM official repeated the denial when asked for clarification in light the documents' contents: “As we said before in our statement, we do not conduct exercises with members of the [Saudi-led coalition] to prepare for combat operations in Yemen,” Lt. Col. Josh Jacques said.

William Hartung, the director of the Arms and Security Project at the Center? ?for? ?International? ?Policy. “Training pilots who go on to bomb civilian targets in Yemen is yet another U.S. form of complicity in a brutal war that has gone on for far too long,” says Hartung.  “If the Trump administration is serious about getting Saudi Arabia and the UAE to negotiate in good faith for peace in Yemen, they should cut off training and other forms of military support until they play their part in ending the war.”" data-reactid="45" type="text">US military planners have long seen the grinding war against Shia Houthi rebels in Yemen as essentially a proxy war against Iran, which requires Washington to coordinate with its gulf Arab allies to thwart Tehran's actions in the theater. However, since the Saudi killing of journalist Jamal Khashoggi the coalition's actions have come under greater scrutiny by both the media and public. One UK monitoring group said of the death toll resulting from coalition airstrikes: “We estimate the number killed to be 56,000 civilians and combatants between January 2016 and October 2018," with the total figure between 70,000 and 80,000 victims.

William Hartung, the director of the Arms and Security Project at the Center? ?for? ?International? ?Policy. “Training pilots who go on to bomb civilian targets in Yemen is yet another U.S. form of complicity in a brutal war that has gone on for far too long,” says Hartung.  “If the Trump administration is serious about getting Saudi Arabia and the UAE to negotiate in good faith for peace in Yemen, they should cut off training and other forms of military support until they play their part in ending the war.”" data-reactid="45" type="text">Despite this in recent months the White House and State Department have reaffirmed the US commitment to the Yemen war. In addition to "scorched earth" constant airstrikes, the impoverished country has suffered devastating famine, severe food shortage, and a cholera epidemic — all factors behind what the U.N. has dubbed "the world's worst humanitarian crisis." In comments late last year, a top State Department official quoted by Reuters said a US pullout from the Saudi coalition would send "a wrong message".

Published:1/20/2019 1:04:58 PM
[Markets] Inside Mueller's Decision To Refute Trump-Cohen BuzzFeed Story

Last week, special counsel Robert Mueller's office took the rare step of issuing a public statement refuting serious allegations by BuzzFeed News that President Trump had directed his lawyer, Michael Cohen, to lie to Congress about the timing of discussions during the 2016 US election over a possible Trump Tower project in Moscow. 

Prior to publication, BuzzFeed approached Mueller's spokesman, Peter Carr, notifying him that he had a colleague had "a story coming stating that Michael Cohen was directed by President Trump himself to lie to Congress about his negotiations related to the Trump Moscow project," according to the Washington Post, citing copies of their emails provided by BuzzFeed

"Importantly, the reporter made no reference to the special counsel’s office specifically or evidence that Mueller’s investigators had uncovered," writes the Post

Mueller's office told BuzzFeed, "We'll decline to comment." 

Hours later, the Trump-Cohen story was published - alleging that Cohen had "told the special counsel that after the election, the president personally instructed him to lie," and that Mueller's team had learned of the order "through interviews with multiple witnesses from the Trump Organization and internal company emails, text messages, and a cache of other documents."

According to the special counsel's office - this was a lie

People familiar with the matter said after BuzzFeed published its story — which was attributed to “two federal law enforcement officials involved in an investigation of the matter” — the special counsel’s office reviewed evidence to determine if there were any documents or witness interviews like those described, reaching out to those they thought might have a stake in the case.

They found none, these people said. That, the people said, is in part why it took Mueller’s office nearly a day to dispute the story publicly. In the interim, cable news outlets and other media organizations, including The Washington Post, dissected its possible implications — even as their reporters were unable to independently confirm it. -WaPo

Meanwhile, the explosive story kicked off a ferocious news cycle in which the word "impeachment" was mentioned hundreds of times by primarily anti-Trump networks.

With the impeachment snowball careening down a mountain of fake news, Mueller's office began discussing a rare step they had never taken before; publicly disputing the BuzzFeed report. President Trump, of course, immediately jumped on the news.  

Within 24 hours of the story’s publication, the special counsel’s office issued a statement doing just that. Trump, who has called the media the “enemy of the people,” on Saturday pointed to the special counsel’s assertion as evidence of what he sees as journalists’ bias against him. -WaPo

"I think that the BuzzFeed piece was a disgrace to our country. It was a disgrace to journalism, and I think also that the coverage by the mainstream media was disgraceful, and I think it’s going to take a long time for the mainstream media to recover its credibility," said Trump on Saturday. "It’s lost tremendous credibility. And believe me, that hurts me when I see that."

BuzzFeed, meanwhile, stands by its report. 

"As we’ve reconfirmed our reporting, we’ve seen no indication that any specific aspect of our story is inaccurate. We remain confident in what we’ve reported, and will share more as we are able," said spokesman Matt Mittenthal. 

According to "people familiar with the matter," Carr told others in government that he would have "more vigorously discouraged the reporters from proceeding with the story had he known it would allege Cohen had told the special counsel Trump directed him to lie - or that the special counsel was said to have learned this through interviews with Trump Organization witnesses, as well as internal company emails and text messages." 

Before BuzzFeed published their report, Carr sent journalist Jason Leopold a partial transcript of Cohen's plea hearing in which he admitted lying to Congress about when conversations within Trump's inner circle about the Trump Tower Moscow project actually ended. Cohen lied and said that the conversations ended in January 2016 when in fact the discussions continued through June. 

Carr, people familiar with the matter said, hoped Leopold would notice that Cohen had not said during the hearing that Trump had explicitly directed him to lie. But Leopold, who co-authored the story with reporter  Anthony Cormier, told the spokesman he was not taking any signals, and Carr acknowledged the point. -WaPo

Trump attorney Rudy Giuliani, meanwhile, told Meet The Press on Sunday that the discussions likely went up to the 2016 election.

Hours before the BuzzFeed story was published, a Trump Organization lawyer spoke with a BuzzFeed reporter - telling him that the story was flawed and should be scrutinized further. Mittenthal of BuzzFeed said "We trust our sources over the organization still run by Donald Trump’s family. That organization is directly implicated in the allegations related to the Trump Tower Moscow project, and refused to speak on the record for our story."

BuzzFeed refutes the special counsel's debunking, stating: "Our high-level law enforcement sources, who have helped corroborate months of accurate reporting on the Trump Tower Moscow deal and its aftermath, have told us otherwise. We look forward to further clarification from the Special Counsel in the near future."

Published:1/20/2019 12:35:41 PM
[Markets] Shutdown Woes Show How Overgrown Government Has Become

Authored by Graham Noble via Liberty Nation,

The fact that a government shutdown can have a real impact on our economy proves just how pervasive it has become.

If certain pundits, journalists, and politicians are to be believed, the United States is about to fall into a third-world state of disrepair and the economy will quickly collapse. The end time, it seems, is upon us. All this because parts of the federal government have been functioning at less than full bureaucratic capacity for 27 days.

The very hysteria and indignation that followed this partial shutdown highlights the sad fact that many people have come to view government as not only vital to every aspect of human society, but it’s most important institution. That anyone is even talking about the impact of the shutdown on the U.S. economy demonstrates how sprawling and pervasive the federal government has become.

Government Spends Too Much Money On Itself

The United States has the largest economy of any country in the world, dwarfing that of China, which now has the second-largest. As an aside to those who believe Russia represents anything close to an existential threat to the U.S., Russia’s is the world’s twelfth-largest, with a GDP that comes in around one-tenth of America’s. The point, though, is that when a partial government shutdown has any significant effect upon such an enormous economy, that government is far too big and is spending far too much money, just on operating costs – never mind what it spends on actually running federal programs.

Democrats, for whom a government shutdown is the worst thing that can ever happen, apparently, are busy appearing on cable news shows, painting grim pictures of all the things the government is currently not doing. Even if they were being honest – which is not the case, in many respects – it seems that the world continues to turn and Americans are going about their business with a few inconveniences. The well-compensated federal workers who have been furloughed will get back-pay when the shutdown eventually ends. In some cases, the private sector has stepped in to pick up the slack and there is, of course, nothing the government can do that the private sector cannot do.

What Defines A Real Crisis?

Thousands of migrants from Central America are massing just over the southern border, at the mercy of criminals, rapists, and those who traffic in humans and drugs. These people have been made false promises and are now homeless and vulnerable to anyone wishing to do them harm – which often turns out to be their fellow countrymen. This, according to Democrats, is not a crisis – but a few government agencies temporarily scaling back their operations is. This is a snapshot of the leftist mentality: The health and welfare of the government itself are more important than that of actual human beings.

Shutdown Is Not All Bad News

One anonymous Trump administration official sees the shutdown as an opportunity. The Daily Caller published an op-ed written by this individual, who describes how the deep state is working furiously to cripple the Trump agenda and how so many federal workers, knowing it is extremely difficult to get fired, do as little work as possible. “80 percent [of the federal employees known to the op-ed’s author] feel no pressure to produce results,” he or she writes. “If they don’t feel like doing what they are told, they don’t.”

“Most of my career colleagues actively work against the president’s agenda. This means I typically spend about 15 percent of my time on the president’s agenda and 85 percent of my time trying to stop sabotage, and we have no power to get rid of them. Until the shutdown.”

The official goes on to point out that, during the shutdown, most federal agencies are actually functioning more efficiently since the lack of funding means that only essential employees are at work. This unnamed writer – whose identity is known to The Daily Caller – suggests senior government officials can use the now extended shutdown to refocus, reprioritize, and “weed out the saboteurs.”

Ultimately, no-one will starve to death or meet any other form of untimely end as a direct result of the shutdown. The nation continues normal activity, albeit with some extra-long flight delays. The federal government itself continues to function in its usual, dysfunctional way. The only people who are really freaking out over the shutdown are Democratic politicians and other leftists who cannot imagine life without the constant overbearing interference of the almighty administrative state.

Published:1/20/2019 12:06:45 PM
[Markets] America's wealthy aren't acting like they believe we've seen the market bottom: Survey The stock market has started 2019 strong with major indexes rebounding from correction levels, yet bearishness among wealthy investors has increased in January, according to a survey from E-Trade Financial. Americans with more than $1 million in a brokerage account they self-manage are less confident in the economy and potential for market gains this quarter than they were during the volatile fourth quarter. January has gotten off to a strong start for the stock market, and the last day of trading this week contributed to renewed market optimism with headlines that the U.S. and China are moving closer to resolving their trade differences. Published:1/20/2019 11:35:14 AM
[Markets] Liberals Love FBI For Anti-Trump Crusade, Yet Agency Actively Avoided Hiring "Progressives" For Years

While the left in America has largely thrown their support behind the FBI over its years-long investigation of Donald Trump, one former official admitted to Fox News' Tucker Carlson that the agency actively worked to keep "progressives" out of the organization

While discussing congressional investigations into Donald Trump's alleged Russian ties, former Deputy Assistant Director of Counterterrorism, Terry Turchie, disclosed that part of his "mission" at the FBI was to keep "progressives" and "socialists" out of the agency. 

"The electorate in some places is putting more and progressives and self-described socialists in positions," said Turchie. "And, ironically, years ago – when I first got into the FBI – one of the missions of the FBI in its counterintelligence efforts was to try to keep these people out of government."

Why? 

"Because we would end up with massive disfunction, and massive disinformation and massive misinformation. And it seems to me that's where we're at today"

"Neoliberal centrist Democrats have portrayed the FBI as the Resistance™?, while its former leaders are openly boasting of how they waged counterintelligence campaigns against the left," noted journalist Ben Norton. 

Others suggested that the FBI's mission, "for decades" has been using covert operations against domestic political groups since its inception using COINTELPRO.

In this case, according to Turchie, the FBI itself has been "infiltrated" by progressives. 

Published:1/20/2019 11:35:14 AM
[Markets] And The Most Politically-Biased Profession Is...

Curious to know what industries attract more liberals vs. conservatives? 

Nonpartisan polling firm Crowdpac analyzed federal campaign-contribution records going back to 1980 - scoring individual donors on where they fall on the political spectrum based on which candidates the gave money to, reports Business Insider

According to CEO and cofounder Steve Hilton, the donation information "is the heart of the Crowdpac data model" since its "research shows that campaign contributions are the best predictor of how a candidate will behave in office." 

Hilton explained that Crowdpac's main goal is to provide people "good objective, nonpartisan information about the candidates on their ballot in a simple form that they can understand."

The company believes this will help "boost the number of small donors and reduce the influence of big money in politics."

As part of its analysis, Crowdpac is able to break down where various professions fall on the political spectrum. It provided that data to Business Insider. -Business Insider

Here's the view from 10,000 feet: 

Who knew - entertainers and academics are the most liberal, while miners and farmers are the most conservative. The middle of the graphic takes a bit of explaining; "the "purple" professions that appear in the middle of the spectrum aren't really bipartisan. They're actually extremely polarized: Rather than having a large number of donors with middle of the road politics, they're largely split, with a big liberal group on one side and a similarly sized large conservative group on the other"

Breaking it down further - liberal to conservative:

Polarized Professions:

While the above industries range from biased to a mixed bag, the following industries are sharply polarized - having a large number of donors at both ends of the spectrum. 

While real estate and finance had a solid conservative lean, donors from the world of hedge funds and private capital split along ideological lines, with large groups on both sides of the spectrum: -BI

Published:1/20/2019 11:04:32 AM
[Markets] NewsWatch: Trump wants $5.7 billion for border wall, extends for 3 years plan for ‘dreamer’ and Temporary Protected Status immigrants President Trump on Saturday offered in a televised address protections from deportation for some undocumented immigrants in the U.S. in exchange for $5.7 billion to build the southern border wall.
Published:1/20/2019 11:04:32 AM
[Markets] Graham: US-Saudi Ties Can't Move Forward Until Crown Prince MbS "Dealt With"

Via Middle East Eye,

After meeting with Turkish President Recep Tayyip Erdogan, US Senator Lindsey Graham said on Saturday that relations between the United States and Saudi Arabia cannot move forward until Saudi Crown Prince Mohammad bin Salman is "dealt with".

Graham, who has taken a prominent role in speaking out over the death in October of the Saudi journalist Jamal Khashoggi, made the remarks in Ankara a day after holding talks with Erdogan.

Riyadh, which initially denied knowledge of Khashoggi's disappearance, then offered contradictory explanations, has described the assassination as a "rogue operation," though the CIA has concluded that bin Salman (MBS) almost certainly signed off on the mission.

"The relationship between the US and Saudi Arabia cannot move forward until Crown Prince Mohammad bin Salman is dealt with," the Republican senator said, without being more specific. 

Graham also said Congress will reintroduce sanctions against those involved in the killing of Khashoggi.

After leaving Saudi Arabia, Khashoggi became a US resident and wrote opinion columns for the Washington Post, which were often critical of the crown prince.

The journalist, who was also a contributor to Middle East Eye, was murdered by a team of 15 Saudi hitmen on 2 October, shortly after entering the kingdom's consulate in Istanbul.

Saudi officials have said bin Salman knew nothing of Khashoggi's killing.

US sanctions

Saudi authorities have said, without providing proof, that the 15-man team sent from the kingdom was put together by the deputy head of the General Intelligence Directorate, Ahmed al-Asiri, whom the king fired along with royal adviser Saud al-Qahtani.

Earlier this month, the trial of 11 Saudis suspected of involvement in Khashoggi's murder opened, with the kingdom's public prosecutor saying that the death penalty has been recommended for five of them.

The US imposed economic sanctions on 17 Saudi officials in November for their alleged role in Khashoggi's killing.

The Senate voted in December to move ahead with a resolution to end US military support for the Saudi-led coalition in the war in Yemen, and politicians vowed to push for sanctions against the kingdom in the new year. 

In November, a Saudi source told MEE that US Secretary of State Mike Pompeo personally handed Riyadh's rulers a plan to help them overcome the pressure heaped on them by the assassination's exposure and its botched cover-up.

Turkey, on whose soil the murder took place and whose authorities leaked gruesome details of the killing to the media, has decried the kingdom's lack of transparency and lack of cooperation over the case.

Despite being fired, Qahtani is reportedly still advising the crown prince.

Syria withdrawal

Graham also said on Saturday that he hoped US President Donald Trump would slow the withdrawal of troops from Syria until Islamic State (IS) is destroyed. 

Trump announced last month that IS had been defeated in Syria and he would pull US forces out of the country. 

The president's decision unleashed a war of words between Ankara and Washington, amid US fears of a Turkish offensive against the Kurdish People's Protection Units (YPG), a US-backed force that has been fighting IS.

Graham said he believed US Chief of Staff Joseph Dunford was working on a plan with Turkey to move YPG elements away from the Turkish border.

"I would hope that President Trump would slow the withdrawal until we truly destroy ISIS," said Graham, using an alternative acronym for IS.

He warned any hasty pullout could lead to a "nightmare" scenario for Israel because of increasing Iranian influence in the war-torn country and for Turkey because of its national security concerns.

A bomb attack this week claimed by IS killed two US soldiers and two US civilians working for American forces in northern Syria, along with several other bystanders.

Published:1/20/2019 10:35:18 AM
[Markets] US, North Korea Choose Vietnam As Location For Second Summit

Days after confirming that a second summit between North Korean leader Kim Jong Un and President Trump would take place in late February (after a breakthrough in talks in Washington between Mike Pompeo, Trump and North Korea's former spy chief), Bloomberg has reported that a tentative location has been decided: Hanoi, the capital of Vietnam.

The meeting will likely take place in Hanoi, the capital of the still-nominally-Communist nation, but Danang, the site of the 2017 APEC meeting and Ho Chi Minh City have also been discussed.

Trump

The agreement to host the second summit came after a 90-minute White House meeting between the president and Kim Yong Chol, who is now one of the North Korean leader’s top aides. Kim had previously met Friday with Secretary of State Michael Pompeo at a Washington hotel. A previous meeting between the two men, which had been expected in November, was canceled after talks between the two countries hit an impasse over North Korea's demands that the US agree to a gradual schedule of sanctions relief.

Trump and Kim held their first meeting in Singapore in June 2018, and said soon after that they would like to meet again. Since then, Kim has held three historic meetings with his South Korean counterpart Moon Jae In, and a possible end to the Korean War has been discussed.

To be sure, while the summit is good optics for both sides, analysts doubt that a breakthrough on denuclearization can be reached unless the US abandons its position that there will be no sanctions relief until the North has completely denuclearized.

Published:1/20/2019 10:05:29 AM
[Markets] Next Avenue: These are the 3 biggest financial risks of retirement Most people have no plan for how to distribute assets to provide a dependable income stream in retirement.
Published:1/20/2019 10:05:29 AM
[Markets] The Conversation: One secret to fatter restaurant tips: a touch of gold Gold makes people feel wealthier and a restaurant seem fancier.
Published:1/20/2019 9:36:49 AM
[Markets] BookWatch: How ‘Badass’ author Jen Sincero went from living in a garage to being rich Five tips to get rich, Sincero-style.
Published:1/20/2019 9:07:20 AM
[Markets] Trump Slams "Radical Democrat" Pelosi - "They Don't See Drugs & Crime, They Only See 2020"

President Trump wasn't thrilled with Democrats' decision to reject his 'reasonable' offer to secure the $5.7 billion in border wall funding in exchange for a three-year extension of protections for the so-called "Dreamers". And he's making his displeasure with Democratic leader Nancy Pelosi, with whom has has been feuding almost non-stop since the shutdown began, known in a Sunday morning twitter rant the likes of which we haven't seen in some time.

First, Trump accused Pelosi of turning down his offer before he even had the chance to speak, accusing her of attaching more importance to political considerations than "crime & drugs."

He then accused her of behaving "so irrationally & [going] so far left that she has now officially become a "Radical Democrat" - language Trump has used to describe newly inaugurated members of the House of Representatives, including Bronx Democrat Alexandria Ocasio-Cortez, a self-professed "Democratic Socialist."

And he closed with another swipe about Pelosi's demand that he postpone the State of the Union speech - she technically "disinvited" him because she controls half of Congress -saying he would "get back to you soon". This, of course, suggests that he may be toying with the idea of delaying the speech, given that the shutdown is about to enter its fifth week.

We now await a tweet demanding that Democrats either return to the bargaining table - or the president is going to put in action plans to use his emergency powers to start building the wall.

Published:1/20/2019 9:07:20 AM
[Markets] The Hidden Revelation

Authored by Sven Henrich via NorthmanTrader.com,

The current government shutdown (the longest in history) comes with a hidden revelation: Millions of Americans are financially unprepared for the next economic downturn. Worse, they are highly vulnerable with few protections.

10 years after the financial crisis the economic recovery has left millions behind with little to no savings and the government shutdown serves as a preview for what will happen once unemployment rises.

Within just a few weeks into the government shutdown people are struggling to cope. We hear of stories of people turning to food banks to feed their families during the shutdown. We hear stories of people who are in dire straights because they can’t get loans and of people who can’t pay their mortgages as payments come due. That’s not even a month into the shutdown.

Why do a few weeks of no pay turn into a crisis for many families? Simple: Nearly 80% of Americans live paycheck to paycheck. That’s a problem when you have little to no savings. In fact it’s akin to playing financial Russian roulette.

And the problem is terrifyingly pervasive. According to a recent GoBankingRates surveyonly 21% of Americans have more than $10,000 in savings with nearly 60% having less than $1,000 in savings:

This savings free game of complacency works as long as people have a steady paycheck coming in and as long as rates stay low. But they are not staying low even though the Fed may stay patient again this year as they have proclaimed in recent days.

As a matter of fact the cost of carrying debt, especially the revolving credit card type have exploded higher since the Fed started slowing raising rates. Think I’m exaggerating? How about this: Interest rates on credit cards by commercial banks are now as high as they were in 2000:

How far can families go if one or two income earners lose their jobs? With nearly 60% of Americans having less than $1,000 in savings and the next 15% having less than $5,000 I submit: Not very far.

The current unemployment rate is at decades long lows. That’s the good news and as long as it stays this low the open wound of economic vulnerability of millions of Americans can stay at bay.

But here’s the problem: Every economic cycle ends despite the rosy attestations of those that wish to keep confidence high. There is zero history that suggests that extreme low unemployment can be maintained for an extended period of time:

Indeed it is precisely at the end of an economic cycle that low unemployment rates tend to reverse rather suddenly.

And when they do recessions soon follow and generally tend to produce unemployment rates between 6%-10%. The data shows most Americans will be in dire straights during the next recession.

The current government shutdown exposes this vulnerability. Fortunately for those currently affected by the shutdown they have back pay to look forward to when the shutdown ends. The future unemployed will not have any such certainty and with little to no savings to fall back on they are playing with fire betting on the 2nd longest expansion to continue indefinitely.

America has added record debt over the past 10 years while financing its recovery with low rates, yet all this spending has done little for the wealth of the general population, rather most are left woefully unprepared for when the recovery ends.

*  *  *

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Published:1/20/2019 8:36:27 AM
[Markets] The Rise And Fall Of The American Downtown

Every city's down town is different. Some function as commercial hubs where many travel to shop and work, but where few would want to live. In some cities, down town areas struggle with high crime rates following decades of urban flight that have left ramshackle buildings and dilapidated homes in their wake.

PS

And just as the specific features of every urban center are different, the manner in which they recovered from the housing crisis has been different, too. And one way to explore these differences is too look at how real-estate prices in down town areas relative to the surrounding city. In a recent study, analysts at Property Shark examined the spread between the median home sale price in downtown areas vs. the city as a whole, which they described as a key indicator to measure the progress of gentrification as younger Americans continue to favor hip urban centers. Their analysis looked at a decades’ worth of home-price data in 34 of the largest  US cities, plus Manhattan and Brooklyn, to suss out just how much more expensive it is to live in a down town area.

What they found is hardly surprising: Since the crisis, the recovery in urban home prices in down town areas has typically outpaced the recovery in the surrounding area. However, there are a few notable exceptions where the reverse is true, and the spread between down town home prices and those in the surrounding area has actually compressed.

PropertyShark

PropertyShark's analysts outlined four broad categories based on the change in the downtown-broader city home-price spread: There are cities like Charlotte, NC, where the spread has widened considerably since the crisis, cities like Minneapolis where the spread has been steadily decreasing, and cities like Las Vegas where living down town has consistently been cheaper than the surrounding area and cities like Boston and Chicago, where living down town has long been far pricier than finding a home in an outlying area.

While Manhattan has typically been the epicenter for pricey down town real estate, in 2018, Chicago emerged as the city with the widest gap between downtown media sales price and the broader city.

Chicago

And while gentrification has pushed thousands of people out of their neighborhoods in New York City, elsewhere, the forces of gentrification have offered some welcome relief for homeowners. Take Detroit, where rapid price growth in downtown real estate in recent years has helped assist a revival of the city.

Detroit

Interestingly enough, San Francisco, one of the priciest real-estate markets in the country, has seen the spread fluctuate wildly over the past ten years, sometimes by as much as $500,000 a year.

San Francisco

But outside of San Francisco, downtown real estate in California cities tends to be on the cheaper side, with Los Angeles the largest city in the country where down town real estate is cheaper than the surrounding area, largely because of exclusive celebrity packed neighborhoods.

Bakersfield

Property Shark has published an interactive database that allows readers to view the change in price spreads over time. Readers can find it here.

Published:1/20/2019 8:04:36 AM
[Markets] NewsWatch: Trump wants $5.7 billion for border wall, extends for 3 years plan for ‘dreamer’ and Temporary Protected Status immigrants President Trump on Saturday offered in a televised address protections from deportation for some undocumented immigrants in the U.S. in exchange for $5.7 billion to build the southern border wall.
Published:1/20/2019 8:04:36 AM
[Markets] Europe's New-Generation Nuclear Plants Stagger Over The Start Line

Authored by Henry Edwardes-Evans via Platts' "The Barrel" blog,

Years late and massively over-budget, Europe’s first EPR nuclear plants in Finland and France are on the verge of “energizing”, as the sector jargon goes...

Barring last-minute glitches, this will be the final act in what must be the longest-running construction saga in the region.

Finland’s 1993 vote to reject plans for a fifth reactor was one of the first stories I covered as a trainee.

Readers of Power in Europe were already bored witless by all the back-and-forth on the topic when, in 2002, the government changed its mind and the project was waved through.

It was another six years before construction of the new-generation, pressurized water reactor began.

Now, ten years late and two-and-a-half times over budget, TVO’s Olkiluoto-3 EPR is set to spark up in 2019 ahead of full operation in 2020.

Meanwhile a mere eight years late and, at Eur10.5 billion, three times over budget, EDF’s Flamanville 3 EPR in Normandy, northern France is also due to deliver first power in summer 2019.

Even when complete, there is a cloud hanging over this project due to “anomalies” found in its reactor pressure vessel head, potentially requiring replacement within a few short years. Not a great start to a 60-year operational life.

For Finland, commissioning of O-3 will go a long way to erasing the country’s multi-year electricity supply deficit, freeing up Norwegian and Swedish hydro resource. For France, operational scrutiny will be intense as EDF seeks to prove the design and build a case for further units.

However late, these baseload behemoths are going to be welcome additions to Europe’s volatile power markets.

For the year just passed, over 15 GW of conventional thermal plant closed across Europe, offset by just 3 GW of gas plant adds. Meanwhile 24 GW of wind and solar were installed.

Hefty net closures in recent years mean that Italy, Finland, Hungary and Lithuania go into 2019 reliant on imports.

Under harsh winter conditions Austria, Belgium, Slovakia and Slovenia are equally dependent.

This is ahead of a slew of more determined energy transition actions by European governments, phasing out big chunks of coal and nuclear plant in the early to mid-2020s.

Platts Analytics sees 65 GW of net coal and nuclear closures over next seven years, nearly double the level of closures seen over the last seven years.

The coal closures are front-loaded in the period, with heavy losses across Germany, the UK and Spain before end-2020, ahead of total phase-outs in France (2022), the UK (2025) and the Netherlands (2030).

Nuclear reductions start to hit home with 10 GW of German capacity closed by 2022, followed by removal of 6 GW of Belgian capacity by 2025, and the loss of 4.3 GW in the UK between 2024-2026.

So it’s better late than never for these EPRs. EDF will be keeping everything crossed, meanwhile, that Hinkley Point C offers less drama as it sets out on its own construction journey. Let’s hope some cub reporter is not still writing about it in 2029 . . .

Published:1/20/2019 7:34:11 AM
[Markets] Smithsonian Map Shows US Military Operating In Over 40% Of World's Countries

Smithsonian Magazine this month published a stunning map detailing just how expansive the post-9/11 "war on terror" has become, demonstrating that contrary to the common assumption that it's "winding down" more than 17 years later, it actually continues to grow and has now spread to more than 40% of the world's countries

This includes American military and support personnel engaged in ongoing missions in 80 nations on six continents, according to Brown University’s Costs of War Project at the Watson Institute for International and Public Affairs, which has recently calculated that since 2001 the US has spent $5,900,000,000,000 on war, mostly in places like Afghanistan, Iraq, Syria, Pakistan, and Yemen  where US military operations have become more or less permanent, with no consideration of ending them under any circumstances.

The map creators for The Smithsonian culled information from foreign government sources, published and unpublished reports, military websites and geographical databases, as well as foreign embassies and interviews with journalists and academics, according to Smithsonian.com.

And the authors of the study even note they were "conservative" in their numbers concerning US military and State Dept. personnel engaged in the "terror war" throughout the globe as of 2019. 

The map demonstrates the following:

We found that, contrary to what most Americans believe, the war on terror is not winding down—it has spread to more than 40 percent of the world’s countries. The war isn’t being waged by the military alone, which has spent $1.9 trillion fighting terrorism since 2001. The State Department has spent $127 billion in the last 17 years to train police, military and border patrol agents in many countries and to develop antiterrorism education programs, among other activities.

The authors also noted that US counter-terror operations abroad "are likely more extensive than this map shows," especially as this is merely based on non-classified information. 

The timing of the map's publication this month is interesting given Secretary of State Mike Pompeo's "Force For Good" speech in Cairo on Jan. 10, wherein he lauded the US military as a "liberating" and progressive force for good for the Middle East: "For those who fret about the use of American power, remember this: America has always been and always will be a liberating force, not an occupying power. We've never dreamed of domination in the Middle East," he said. 

The US has over 800 formal military bases in 80 countries, “a number that could exceed 1,000 if you count troops stationed at embassies and missions and so-called ‘lily-pond’ bases, with some 138,000 soldiers stationed around the globe,” a study in the Nation last year found. Via The American Vagabond

Pompeo asserted the US has never been "an empire-builder or an oppressor," and noted at one point that "when the mission is over, when the job is complete, America leaves."

But based on the above map, the now global American military machine doesn't appear to be pulling back anytime soon, but will likely only continue its pattern of expansion, especially as the relatively young AFRICOM finds fresh conflicts on the African continent following the 2011 NATO war to oust Libyan leader Muammar Gaddafi.

Meanwhile...

Published:1/20/2019 7:06:59 AM
[Markets] Economic Calendar - Top 5 Things to Watch This Week Investing.com - Trade rhetoric could hang over the market in the coming week, as investors watch further developments surrounding the ongoing trade spat between the U.S. and China. Published:1/20/2019 6:04:40 AM
[Markets] Second Referendum: Beware The Deception Around A "No Deal" Brexit

Authored by Steven Guinness,

Engaging in double speak has become a routine means of communicating amongst politicians. Whilst obfuscation is used to confuse the public and distort their understanding of events (notably Brexit), occasionally a granule of truth winds its way into the narrative which serves to offer a more accurate picture of where members of parliament stand on an issue.

Brexit has dominated political discourse in the UK ever since the original referendum on Britain’s membership of the EU was announced three years ago. Most recently, we have seen an attempt by Conservative party ‘rebels‘ to remove Prime Minister Theresa May from office fail, the withdrawal agreement negotiated by May’s government comprehensively rejected by MP’s, and a subsequent vote of no confidence in the government defeated.

What these events have done is solidify the impression that parliament is at an ‘impasse‘ over Brexit. But as I have argued in previous articles, what this ‘impasse‘ is actually doing is creating the necessary conditions for a second referendum (a ‘people’s vote‘) to become a reality. Gradually all other options are withering away to leave going back to the ballot box as the only remaining solution. A referendum therefore assumes the appearance of being an organic occurrence rather than a premeditated outcome.

Here is how a referendum could find itself in the statute book in the next few weeks:

The next significant parliamentary event is Monday, January 21st, when Theresa May will make a statement to parliament outlining a ‘plan B‘ for how she proposes to gain approval for a revised version of her defeated withdrawal agreement. Whilst it is unknown what she will suggest, it is a safe assumption that it will exacerbate rather than quell division amongst MP’s.

The key aspect to whatever Theresa May puts before parliament is that it will be amendable, meaning MP’s can table amendments to the plan in an attempt to influence the next steps in the Brexit process. One of those amendments is expected to call for a second referendum. Conservative MP Sarah Wollaston, a supporter of the People’s Vote campaign, is due to table the amendment.

For it to be successful, three things need to happen.

Firstly, the Speaker of the House of Commons, John Bercow, is responsible for determining which amendments are selected for debate. Bercow, a supporter of the EU, has previously accepted amendments that allow parliament to assume more control over the legislative direction of Brexit. Thus it would come as no surprise if he chose an amendment that called for a second referendum.

Secondly, for the amendment to pass through the House of Commons, it would need to command the support of Jeremy Corbyn’s Labour party. Corbyn’s preference has been for a general election rather than a second Brexit referendum. But the defeat of his no confidence motion in the government has eliminated this option. Back in September last year, the Labour party voted to keep the prospect of a second vote ‘on the table‘ should attempts at forcing a general election fail. Now that they have, it is likely that Labour will soon adopt a ‘People’s Vote‘ as official party policy.

Thirdly, to gain a majority in the House, the amendment would require around twenty disgruntled Conservative ‘remainers‘ to support it. Again, this appears increasingly likely.

January the 29th is when MP’s will vote on Theresa May’s ‘plan B‘. It represents the first opening for a referendum to be called. If we surmise that over the next few weeks a second vote will officially be in the works, it would then become about what question parliament would put to the British people. This is the area in which politicians have been practising to deceive.

A proportion of MP’s are openly demanding that Theresa May rule out a no deal exit from the EU. One of them is Labour’s Chuka Umunna. Seen as the leading political figure behind the People’s Vote campaign, Umunna has consistently communicated via Twitter that to prevent no deal from happening, parliament must ‘extend Article 50 and give Brexit back to the people‘.

If you are wondering at this point what Umunna recommends asking the UK electorate a second time round, the answer might surprise you. Speaking to Sky News presenter Sophy Ridge this month, he advocated for the option of remaining in the EU, and also for a ‘hard‘ Brexit:

I do think you have to have an option that would please the likes of Peter Bone (Conservative supporter of Brexit), that is a hard Brexit so to speak.

Those two choices, in some way, shape or form, would need to be presented to the British people.

For some time now the term ‘hard Brexit‘ has been perceived as the UK dropping out of the EU with no withdrawal agreement in place.

Umunna is not a lone voice in advocating for a ‘hard‘ Brexit option. Over the months, former Prime Minister Tony Blair has called for a ‘clean break‘ choice on a future ballot paper, as have Gina Miller (founder of Best for Britain) and Conservative MP Justine Greening.

The Independent’s ‘Final Say‘ campaign also endorses a no deal option, whether parliament approves a withdrawal deal or not.

Then there is the man who conceived Article 50, Lord Kerr. Kerr recently appeared on LBC radio where, in regards to what the public could vote on, he told presenter James O’Brien:

Do they want the deal, do they want no deal crash out or do they want our existing deal with the European Union?

Kerr and Umunna are not strangers to each other. They shared a platform together back in November 2017 – on behalf of the anti Brexit group Open Britain – where Kerr proclaimed that Article 50 was reversible and that Britain could change it’s mind on Brexit at any stage prior to withdrawal.

The European Court of Justice have since ruled that the UK can revoke Article 50 unilaterally, but would still require the approval of all twenty seven member states in order to extend the deadline beyond March 29th.

Ask those calling for a ‘People’s Vote‘ their perspective on a no deal outcome, and they will tell you how it would be the height of irresponsibility. An eventuality that the House of Commons should in no way countenance. Why, then, does Chuka Umunna and company wish to see this option dismissed by MP’s, but presented as part of a referendum? It is a question that no broadcaster has thought to raise.

It should be obvious that by endorsing a ‘hard‘ Brexit option, it intensifies the risk of no deal rather than mitigates it.

The People’s Vote campaign continues to promote that the only way to prevent leaving the EU without an agreement is to consult the public. This is nonsense if we consider that in the event of a referendum, the electorate will likely be granted the option of leaving on World Trade Organisation terms. Sections of MP’s would view this option as reckless, but in my view the argument that ‘hard Brexiteers‘ need to have their voice heard in a referendum would win enough support.

As noted previously, Lord Kerr is on the Executive Committee of the Trilateral Commission, whereas Chuka Umunna is a member of the European Council on Foreign Relations. What we are witnessing are representatives of globalist institutions frequenting both sides of the argument. On one hand they have successfully managed to implant into people’s consciousness that no deal would be disastrous, yet on the other have advocated that those same people should have the choice of engineering said disaster.

In the background as ever are the Bank of England. This week governor Mark Carney addressed the Treasury Select Committee and expressed how the recent rise in the value of sterling ‘would appear to reflect some expectation that the process of resolution would be extended and that the prospect of no-deal may have been diminished‘. Carney was quick to point out, however, that this was not his opinion, rather it was ‘the market’s initial take‘.

With the World Economic Forum meeting in Davos next week, I would expect warnings over a ‘disorderly Brexit‘ to be re-emphasised as the potential for a second referendum gains ground.

Unfortunately, as campaigners hyper focus on securing a remain option for a future vote, they continue to perpetuate the belief that a ‘People’s Vote‘ would kill off any prospect of a ‘hard‘ Brexit. The danger of this misguided logic should now be self evident.

Published:1/20/2019 6:04:39 AM
[Markets] The Week Ahead – Brexit, the ECB, China GDP Numbers and Trade in Focus It’s not just China’s economy that the markets are concerned with. An end to the government shutdown and more progress on trade talks is needed. Published:1/20/2019 3:33:36 AM
[Markets] Is The Violent Dismemberment Of Russia Official US Policy?

Authored by Erik D'Amato via The Ron Paul Institute for Peace & Prosperity,

If there’s one thing everyone in today’s Washington can agree on, it’s that whenever an official or someone being paid by the government says something truly outrageous or dangerous, there should be consequences, if only a fleeting moment of media fury.

With one notable exception: Arguing that the US should be quietly working to promote the violent disintegration and carving up of the largest country on Earth.

Because so much of the discussion around US-Russian affairs is marked by hysteria and hyperbole, you are forgiven for assuming this is an exaggeration. Unfortunately it isn’t. Published in the Hill under the dispassionate title “Managing Russia’s dissolution,” author Janusz Bugajski makes the case that the West should not only seek to contain “Moscow’s imperial ambitions” but to actively seek the dismemberment of Russia as a whole.

Engagement, criticism and limited sanctions have simply reinforced Kremlin perceptions that the West is weak and predictable. To curtail Moscow’s neo-imperialism a new strategy is needed, one that nourishes Russia’s decline and manages the international consequences of its dissolution.

Like many contemporary cold warriors, Bugajski toggles back and forth between overhyping Russia’s might and its weaknesses, notably a lack of economic dynamism and a rise in ethnic and regional fragmentation. But his primary argument is unambiguous: That the West should actively stoke longstanding regional and ethnic tensions with the ultimate aim of a dissolution of the Russian Federation, which Bugajski dismisses as an “imperial construct.”

The rationale for dissolution should be logically framed: In order to survive, Russia needs a federal democracy and a robust economy; with no democratization on the horizon and economic conditions deteriorating, the federal structure will become increasingly ungovernable...

To manage the process of dissolution and lessen the likelihood of conflict that spills over state borders, the West needs to establish links with Russia’s diverse regions and promote their peaceful transition toward statehood.

Even more alarming is Bugajski’s argument that the goal should not be self-determination for breakaway Russian territories, but the annexing of these lands to other countries. “Some regions could join countries such as Finland, Ukraine, China and Japan, from whom Moscow has forcefully appropriated territories in the past.”

It is, needless to say, impossible to imagine anything like this happening without sparking a series of conflicts that could mirror the Yugoslav Wars. Except in this version the US would directly culpable in the ignition of the hostilities, and in range of 6,800 Serbian nuclear warheads.

So who is Janusz Bugajski, and who is he speaking for?

The author bio on the Hill’s piece identifies him as a senior fellow at the Center for European Policy Analysis, a Washington, D.C. think-tank. But CEPA is no ordinary talk shop: Instead of the usual foundations and well-heeled individuals, its financial backers seem to be mostly arms of the US government, including the Department of State, the Department of Defense, the US Mission to NATO, the US-government-sponsored National Endowment for Democracy, as well as as veritable who's who of defense contractors, including Raytheon, Bell Helicopter, BAE Systems, Lockheed Martin and Textron. Meanwhile, Bugajski chairs the South-Central Europe area studies program at the Foreign Service Institute of the US Department of State.

To put it in perspective, it is akin to a Russian with deep ties to the Kremlin and arms-makers arguing that the Kremlin needed to find ways to break up the United States and, if possible, have these breakaway regions absorbed by Mexico and Canada. (A scenario which alas is not as far-fetched as it might have been a few years ago; many thousands in California now openly talk of a “Calexit,” and many more in Mexico of a reconquista.)

Meanwhile, it’s hard to imagine a quasi-official voice like Bugajski’s coming out in favor of a similar policy vis-a-vis China, which has its own restive regions, and which in geopolitical terms is no more or less of a threat to the US than Russia. One reason may be that China would consider an American call for secession by the Tibetans or Uyghurs to be a serious intrusion into their internal affairs, unlike Russia, which doesn’t appear to have noticed or been ruffled by Bugajski’s immodest proposal.

Indeed, just as the real scandal in Washington is what's legal rather than illegal, the real outrage in this case is that few or none in DC finds Bugajski’s virtual declaration of war notable.

But it is. It is the sort of provocation that international incidents are made of, and if you are a US taxpayer, it is being made in your name, and it should be among your outrages of the month.

Published:1/19/2019 11:06:48 PM
[Markets] NYC's Housing-Market Weakness Spreads From Manhattan To The Outer Boroughs

Throughout vast swaths of New York City, members of the city's vast middle class work force can barely afford even a modest apartment. Yet for years after the post-crisis housing market recovery began, that reality did little to slow down the rise in home valuations as foreign capital and rock bottom interest rates fueled a buying frenzy, pushing rents ever-higher. But after citywide rents peaked in 2014, the NYC housing market, particularly the most expensive areas of Manhattan, has started to soften.

But whereas only a few quarters ago that weakness was largely confined to the top tiers of the city's housing market, the pressure on sellers to lower their asks has swiftly spread. Now, in almost every neighborhood in Manhattan and in nearly every one of Brooklyn's trendiest neighborhoods, more than one-fifth of sellers have been forced to lower their asks - sometimes substantially so - as mortgage rates rise and global growth begins to slow.

NYC

Here's more from Bloomberg:

In almost every Manhattan neighborhood, at least a fifth of the listings got a price cut in the last three months of 2018, data from StreetEasy show. The biggest share was in the East Village, where 33 percent of homes were offered for less.

Inventory is piling up across the city, and that’s good news for buyers in search of a bargain. For sellers with dreams of making a big profit, it’s time for a reality check.

"What we’re seeing right now is a lot of folks being forced to adjust their expectations," said Grant Long, senior economist at StreetEasy. "We expect that prices are going to have to come down even more for it to make sense for a lot of buyers who are in the market."

In Brooklyn, 21 percent of listings in trendy Williamsburg were reduced. The share was 22 percent in nearby Greenpoint, and 39 percent in Fort Greene.

Unsurprisingly, one exception to the trend of price declines in trendy neighborhoods is Queens' Long Island City, soon to be the host of Amazon's new HQ2 (or one of them, at least). Only 12% of sellers in LIC had to lower their expectations.

SN

LIC

As we pointed out earlier, the softness in NYC is having a knock-on effect on markets outside of NYC: In tony Greenwich, Conn., home sales plunged during Q4 as buyers who were forced to lower the ask on their NYC apartments cut their budget for homes in Greenwich. And with brokers warning about the looming impact of Trump's SALT elimination, sellers who are holding out for a better price might soon wish they had sold sooner.

Published:1/19/2019 10:32:50 PM
[Markets] Visualizing The Snowball Of Global Government Debt

Over the last five years, markets have pushed concerns about debt under the rug.

But, while economic growth and record-low interest rates have made it easy to service existing government debt, Visual Capitalist's Jeff Desjardins points out that it’s also created a situation where government debt has grown in to over $63 trillion in absolute terms.

The global economic tide can change fast, and in the event of a recession or rapidly rising interest rates, debt levels could come back into the spotlight very quickly.

THE DEBT SNOWBALL

Today’s visualization comes to us from HowMuch.net and it rolls the world’s countries into a “snowball” of government debt, colored and arranged by debt-to-GDP ratios. The data itself comes from the IMF’s most recent October 2018 update.

Courtesy of: Visual Capitalist

The structure of the visualization is apt, because debt can accumulate in an unsustainable way if governments are not proactive. This situation can create a vicious cycle, where mounting debt can start hampering growth, making the debt ultimately harder to pay off.

Here are the countries with the most debt on the books:

Note: Small economies (GDP under $10 billion) are excluded in this table, such as Cabo Verde and Barbados

Japan and Greece are the most indebted countries in the world, with debt-to-GDP ratios of 237.6% and 181.8% respectively. Meanwhile, the United States sits in the #8 spot with a 105.2% ratio, and recent Treasury estimates putting the national debt at $22 trillion.

LIGHT SNOW

On the opposite spectrum, here are the 10 jurisdictions that have incurred less debt relative to the size of their economies:

Note: Small economies (GDP under $10 billion) are excluded in this table, such as Timor-Leste and Solomon Islands

Macao and Hong Kong – both special administrative regions (SARs) in China – have virtually zero debt on the books, while the official country with the lowest debt is Brunei (2.8%).

Published:1/19/2019 10:01:50 PM
[Markets] "The People" Know What They Want And Just Might Get It – Good And Hard

Authored by James George Jatras via The Strategic Culture Foundation,

A survey of nations in what was once known quaintly as the Free World shows some of them engaged in what could best be described as a cold civil war.

Such a condition is inherently unstable. One possible future is one where the cold conflict becomes hot with unforeseeable consequences. Another is that one side successfully represses the other before violence reaches a certain threshold.

Now before we go any further, let’s make one thing clear. Whatever the country and its specific ills, we can be sure that Vladimir Putin is the culprit. According to Stephen Collinson of CNN (“Another good day for Putin as turmoil grips US and UK”):

‘In London, Theresa May on Tuesday suffered the worst defeat in the modern parliamentary era by a prime minister, as lawmakers shot down her Brexit deal with the European Union by a staggering 432 votes to 202.

‘The United States, meanwhile, remains locked in its longest-ever government shutdown, which is now entering its 26th day, is nowhere near ending and is the culmination of two years of whirling political chaos sparked by President Donald Trump.

‘It's hard to believe that two such robust democracies, long seen by the rest of the world as beacons of stability, have dissolved into such bitter civic dysfunction and seem unmoored from their previous governing realities. [ … ]

‘The result is that Britain and the United States are all but ungovernable on the most important questions that confront both nations.

‘That's music to Putin's ears.

‘The Russian leader has made disrupting liberal democracies a core principle of his near two-decade rule, as he seeks to avenge the fall of the Soviet empire, which he experienced as a heartbroken KGB agent in East Germany.

‘Russia has been accused of meddling in both the Brexit vote and the US election in 2016 -- the critical events that fomented the current crisis of the West.’

It isn’t exactly clear how the “meddling” of which the coryphaeus of the Kremlin is merely “accused” managed to entice Theresa May into botching (or sabotaging) Brexit talks or to embolden Donald Trump into finally standing his ground on his top campaign pledge. Even Collinson admits that folks in the US and UK may have had something to do with the ruckus: “Supporters of Trump in the US and Brexit in Britain see their revolts as uprisings against distant or unaccountable leaders who no longer represent them or share their values.”

Harrumph! Why should anyone care what the great unwashed think about accountability or values? What matters, say “skeptics” like Collinson, is that the proles’ getting uppity might be “deeply corrosive to the international political architecture that has prevailed for over 70 years.” Let’s get our priorities straight!

While Britain and the US are entertaining distractions, the current main feature is the jacquerie going on in France. To be sure, many wonder if les gilets jaunes are a genuine, grassroots rebellion of ordinary Frenchmen, or some kind of Astroturf comparable to “color revolutions” that western governments and their accomplices like George Soros have sponsored in many countries. While there is some evidence of agents provocateurs (the expression is French, after all) working for the Emmanuel Macron regime – can we start using that word now, like “Assad regime,” “Putin regime,” etc.? – and minor involvement of groups like Antifa committing vandalism with an aim to discredit the yellow vests, the definitive attestation of authenticity was pronounced by world-class poseur and shill for plutocracy and warmongering, Bernard-Henri Lévy: “It’s a real social movement, but it’s one driven by sad, mortifying, and destructive forces.”

Any movement Lévy calls sad, mortifying, and destructive – that’s French for “deplorable” – can’t be all bad, especially with some monarchists involved. It’s rather ironic, though, given that barely a year ago some were comparing vain little Macron to Napoleon.

What is perhaps most detestable to bien pensants like Collinson and Lévy is that the social basis of the yellow vests is readily identifiable. They’re who we used to call simply French working people. As geographer Christopher Guilluy describes in Spiked:

‘Paris creates enough wealth for the whole of France, and London does the same in Britain. But you cannot build a society around this. The gilets jaunes is a revolt of the working classes who live in these places.

‘They tend to be people in work, but who don’t earn very much, between 1000€ and 2000€ per month. Some of them are very poor if they are unemployed. Others were once middle-class. What they all have in common is that they live in areas where there is hardly any work left. They know that even if they have a job today, they could lose it tomorrow and they won’t find anything else.

‘Not only does peripheral France fare badly in the modern economy, it is also culturally misunderstood by the elite. … One illustration of this cultural divide is that most modern, progressive social movements and protests are quickly endorsed by celebrities, actors, the media and the intellectuals. But none of them approve of the gilets jaunes. Their emergence has caused a kind of psychological shock to the cultural establishment. It is exactly the same shock that the British elites experienced with the Brexit vote and that they are still experiencing now, three years later.

‘The Brexit vote had a lot to do with culture, too, I think. It was more than just the question of leaving the EU. Many voters wanted to remind the political class that they exist. That’s what French people are using the gilets jaunes for – to say we exist. We are seeing the same phenomenon in populist revolts across the world. [ … ]

‘The Parisian economy needs executives and qualified professionals. It also needs workers, predominantly immigrants, for the construction industry and catering et cetera. Business relies on this very specific demographic mix. The problem is that ‘the people’ outside of this still exist. In fact, ‘Peripheral France’ actually encompasses the majority of French people. [ … ]

Think of the ‘deplorables’ evoked by Hillary Clinton. There is a similar view of the working class in France and Britain. They are looked upon as if they are some kind of Amazonian tribe. The problem for the elites is that it is a very big tribe.

‘The middle-class reaction to the yellow vests has been telling. Immediately, the protesters were denounced as xenophobes, anti-Semites and homophobes. The elites present themselves as anti-fascist and anti-racist but this is merely a way of defending their class interests. It is the only argument they can muster to defend their status, but it is not working anymore.

‘Now the elites are afraid. For the first time, there is a movement which cannot be controlled through the normal political mechanisms. The gilets jaunes didn’t emerge from the trade unions or the political parties. It cannot be stopped. There is no ‘off’ button. Either the intelligentsia will be forced to properly acknowledge the existence of these people, or they will have to opt for a kind of soft totalitarianism.’

Unfortunately, “soft totalitarianism” is not out of the question, whether in France or other countries in which populism threatens to upend the elites’ neoliberal gravy train and all the social and moral baggage that comes with it. Guilluy sees the revolt in France as beyond control by the “normal political mechanisms.” That may be true, at least in France, at least for now.

But the US may be another story. At the end of this week all Washington was atwitter with an alleged bombshell (relax, in the US legacy media every other story is a “bombshell,” especially if it involves dirt on Trump) that former Trump attorney, “fixer,” and alleged literal bagman Michael Cohen had actually been instructed by his erstwhile client to commit perjury. Unlike much else thrown at Trump, this story (reported in Buzzfeed, which by total coincidence played a key early role in publicizing the US-UK Deep’s State’s “dirty dossier”) would constitute an impeachable crime. In an extraordinary move, Grand Inquisitor Robert Mueller released a statement through a spokesman indicating the report was “not accurate” but not specifying in what regard. As of this writing Buzzfeed stands by the story and asked for clarification by Mueller’s office, which may or may not be forthcoming.

Whatever the fate of this report, make no mistake: there will be more of the same, an endless parade of themThe fact that such reports might turn out not to be true makes little difference. Their existence is sufficient to keep Trump constantly on the defensive pending his removalone way or another.

Elizabethtown College Professor Emeritus Paul Gottfried describes how grandees of the GOP are already getting set to restore the status quo ante in collusion with their nominal Democrat adversaries once the interloper is gone:

‘… in the next few years, a working alliance will develop between regular Democrats—particularly New Democrats from red states—and the milquetoast Republican establishment. … Such an alliance would reflect electoral reality, as the Right seems to be growing weaker, not stronger, since the election of Trump two years ago. The ever ambitious Mitt Romney fired on his party’s leader prematurely, but his political instincts may be right after all. The GOP is likely to move leftward because that’s where a majority of the voters are, and if this happens to Trump’s detriment, Romney will hope to pick up the pieces. Neoconservatives and much of the authorized conservative movement would no doubt welcome the Utah senator or someone like him as the kind of “conservative” they could work with were he to run for the presidency.

‘If the elections since 2018 have shown anything, it’s this: blue electoral areas have remained quite solid, while traditionally red ones, even in the Deep South, are up for grabs. That’s because the party perceived as being further to the left has benefited from its growing coalition. If there’s another explanation, I can’t seem to find it. It would not be unusual to have two national parties that are recognizably on the left contending for power. The parties now running the major Western European countries are all to the left of our present GOP.

‘In a possible alliance, the GOP, as the ideologically and electorally weaker side, will readily cooperate with establishment Democrats. They will undoubtedly find such shared concerns as confronting Putin “the thug” and supporting the Likud Party in Israel. They should have no trouble reaching an agreement on giving amnesty to all non-criminal illegal immigrants once Trump is no longer on the scene.

‘There is no reason to think that this political shift won’t continue. We are looking at a process that’s been brought about by college educators, the culture industry, the mass media, and mass immigration, and the momentum may be extremely hard to reverse or even to stop. America’s future won’t necessarily be British Columbia’s, whose provincial legislature features only parties of the left and which hasn’t elected a conservative to a provincial office since the early 1990s.’

The celebrated Sage of Baltimore, H. L. Mencken observed that “Democracy is the theory that the common people know what they want, and deserve to get it good and hard.” This begs the question, though, of who the “common people” are. In contrast to France, where Guilluy’s “peripheral France” is still a majority of the French population, US elites in both parties are looking to the day when America’s “deplorables” are a minority (which we already may be) that will continue to shrink. Anyone who might object to ethnic and moral replacement is clearly a racist and “white supremacist,” comparable to France’s “xenophobes, anti-Semites and homophobes.” In the not too distant future, Guilluy’s “normal political mechanisms” may be more than sufficient to handle what’s left of a disappearing America.

If Trump is going to build that Wallhe’d better do it damn fast.

Published:1/19/2019 9:32:59 PM
[Markets] Hong Kong Housing Market Enters Correction Territory

After notching its longest streak of declining prices since at least 2016, what was formerly the world's hottest housing market has officially entered correction territory, as a single interest rate hike by monetary authorities (which prompted HSBC, one of the most active banks in the region, to raise its prime lending rate) has gone a long way toward offering some badly needed relief for prospective homebuyers in the city's middle class.

HK

According to Bloomberg, secondary home prices in Hong Kong have shed 9.8% from their August peak to hit their lowest level since February 2018.

Housing

Though one broker quoted by Bloomberg carefully insisted that, while "correction" was an appropriate word to describe what is happening in the market, calling it a "collapse" would be a bridge too far.

"You can say it’s a correction with a 10 percent drop in prices, though it’s not a collapse," said Patrick Wong, a real estate analyst with Bloomberg Intelligence.

Particularly because a looming vacancy tax trade-war related volatility suggest that the market still has another 5% to 10% to go until it bottoms out (then again, considering that Hong Kong is the world's most expensive housing market, a chasm between bids and asks could push it even lower, particularly as anxious government officials actively try to pull the rug out from under robust prices.

Various factors have combined to put downward pressure on home values, from worsening sentiment due to volatile markets and the U.S.-China trade war, to interest-rate rises and a looming vacancy tax. Prices still probably have about 5 to 10 percent further to drop, Wong said.

The dip has been welcomed by would-be home buyers trying to get on the property ladder as well as government officials concerned about affordability. The question is how long the softness will last, particularly considering demand is still strong and there are growing signs the U.S. Federal Reserve may pause its upward trajectory.

For what it's worth, Citigroup has prices bottoming in the next two months as buyers swoop in to take advantage of relatively good deals; Morgan Stanley expects prices to rise 2% this year for similar reasons.

Published:1/19/2019 9:01:55 PM
[Markets] The US Military Is Winning... No, Really, It Is!

Authored by Nick Turse via TomDispatch.com,

A Simple Equation Proves That the U.S. Armed Forces Have Triumphed in the War on Terror...

4,000,000,029,057. Remember that number. It’s going to come up again later.

But let’s begin with another number entirely: 145,000 -- as in, 145,000 uniformed soldiers striding down Washington’s Pennsylvania Avenue. That’s the number of troops who marched down that very street in May 1865 after the United States defeated the Confederate States of America. Similar legions of rifle-toting troops did the same after World War I ended with the defeat of Germany and its allies in 1918. And Sherman tanks rolling through the urban canyons of midtown Manhattan? That followed the triumph over the Axis in 1945. That’s what winning used to look like in America -- star-spangled, soldier-clogged streets and victory parades.

Enthralled by a martial Bastille Day celebration while visiting French President Emmanuel Macron in Paris in July 2017, President Trump called for just such a parade in Washington.  After its estimated cost reportedly ballooned from $10 million to as much as $92 million, the American Legion weighed in. That veterans association, which boasts 2.4 million members, issued an August statement suggesting that the planned parade should be put on hold “until such time as we can celebrate victory in the War on Terrorism and bring our military home.” Soon after, the president announced that he had canceled the parade and blamed local Washington officials for driving up the costs (even though he was evidently never briefed by the Pentagon on what its price tag might be).

The American Legion focused on the fiscal irresponsibility of Trump’s proposed march, but its postponement should have raised an even more significant question: What would “victory” in the war on terror even look like? What, in fact, constitutes an American military victory in the world today? Would it in any way resemble the end of the Civil War, or of the war to end all wars, or of the war that made that moniker obsolete? And here’s another question: Is victory a necessary prerequisite for a military parade?

The easiest of those questions to resolve is the last one and the American Legion should already know the answer. Members of that veterans group played key roles in a mammoth “We Support Our Boys in Vietnam” parade in New York City in 1967 and in a 1973 parade in that same city honoringveterans of that war. Then, 10 years after the last U.S. troops snuck out of South Vietnam -- abandoning their allies and scrambling aboard helicopters as Saigon fell -- the Big Apple would host yet another parade honoring Vietnam veterans, reportedly the largest such celebration in the city’s history. So, quite obviously, winning a war isn’t a prerequisite for a winning parade.

And that’s only one of many lessons the disastrous American War in Vietnam still offers us. More salient perhaps are those that highlight the limits of military might and destructive force on this planet or that focus on the ability of North Vietnam, a “little fourth-rate” country -- to quote Henry Kissinger, the national security advisor of that moment -- to best a superpower that had previously (with much assistance) defeated Nazi Germany and Imperial Japan at the same time. The Vietnam War -- and Kissinger -- provide a useful lens through which to examine the remaining questions about victory and what it means today, but more on that later.

For the moment, just remember: 4,000,000,029,057, Vietnam War, Kissinger.

Peace in Our Time... or Some Time... or No Time

Now, let’s take a moment to consider the ur-conflict of the war on terror, Afghanistan, where the U.S. began battling the Taliban in October 2001. America’s victory there came with lightning speed. The next year, President George W. Bush announced that the group had been “defeated.” In 2004, the commander-in-chief reported that the Taliban was “no longer in existence.” Yet, somehow, they were. By 2011, General David Petraeus, then commander of U.S. forces in Afghanistan, claimed that his troops had “reversed the momentum of the Taliban.” Two years later, then-commander General Joseph Dunford spoke of “the inevitability of our success” there.

Last August, President Trump unveiled his “Strategy in Afghanistan and South Asia.” Its “core pillar” was “a shift from a time-based approach to one based on conditions”; in other words, the “arbitrary timetables” for withdrawal of the Obama years were out. “We will push onward to victory with power in our hearts,” President Trump decreed. “America’s enemies must never know our plans or believe they can wait us out.”

The president also announced that he was putting that war squarely in the hands of the military. “Micromanagement from Washington, D.C., does not win battles,” he announced. “They are won in the field drawing upon the judgment and expertise of wartime commanders and frontline soldiers acting in real time, with real authority, and with a clear mission to defeat the enemy.” The man given that authority was General John Nicholson who had, in fact, been running the American war there since 2016. The general was jubilant and within months agreed that the conflict had “turned the corner” (something, by the way, that Obama-era Secretary of Defense Leon Panetta also claimed -- in 2012).

Today, almost 17 years after the war began, two years after Nicholson took the reins, one year after Trump articulated his new plan, victory in any traditional sense is nowhere in sight. Despite spending around $900 billion in Afghanistan, as the Special Inspector General for Afghanistan Reconstruction determined earlier this year, “between 2001 and 2017, U.S. government efforts to stabilize insecure and contested areas in Afghanistan mostly failed.” According to a July 30, 2018, report by that same inspector general, the Taliban was by then contesting control of or controlled about 44% of that country, while Afghan government control and influence over districts had declined by about 16% since Nicholson’s predecessor, General John Campbell, was in command.

And that was before, last month, the Taliban launched a large-scale attack on a provincial capital, Ghazni, a strategically important city, and held it for five days, while taking control of much of the province itself. Finally driven from the city, the Taliban promptly overran a military base in Baghlan Province during its withdrawal. And that was just one day after taking another Afghan military base. In fact, for the previous two months, the Taliban had overrun government checkpoints and outposts on a near-daily basis. And keep in mind that the Taliban is now only a fraction of the story. The U.S. set out to defeat it and al-Qaeda in 2001. Today, Washington faces exponentially more terror groups in Afghanistan -- 21 in all, including an imported franchise from the Iraq War front, ISIS, that grew larger during Nicholson’s tenure.

Given this seemingly dismal state of affairs, you might wonder what happened to Nicholson. Was he cashiered? Fired, Apprentice-style? Quietly ushered out of Afghanistan in disgrace? Hardly. Like the 15 U.S. commanders who preceded him, the four-star general simply rotated out and, at his final press conference from the war zone late last month, was nothing if not upbeat.

“I believe the South Asia Strategy is the right approach. And now we see that approach delivering progress on reconciliation that we had not seen previously,” he announced. “We've also seen a clear progression in the Taliban's public statements, from their 14 February letter to the American people to the recent Eid al-Adha message, where [Taliban leader] Emir Hibatullah acknowledged for the first time that negotiations will, quote, ‘ensure an end to the war,’ end quote.”

In the event that you missed those statements from a chastened Taliban on the threshold of begging for peace, let me quote from the opening of the latter missive, issued late last month:

“This year Eid­ al­-Adha approaches us as our Jihadi struggle against the American occupation is on the threshold of victory due to the help of Allah Almighty. The infidel invading forces have lost all will of combat, their strategy has failed, advanced technology and military equipment rendered useless, [the] sedition and corruption­-sowing group defeated, and the arrogant American generals have been compelled to bow to the Jihadic greatness of the Afghan nation.”

And those conciliatory statements of peace and reconciliation touted by Nicholson? The Taliban says that in order to end “this long war” the “lone option is to end the occupation of Afghanistan and nothing more.”

In June, the 17th American nominated to take command of the war, Lieutenant General Scott Miller, appeared before the Senate Armed Services Committee where Elizabeth Warren (D-MA) grilled him on what he would do differently in order to bring the conflict to a conclusion. “I cannot guarantee you a timeline or an end date,” was Miller’s confident reply.

Did the senators then send him packing? Hardly. He was, in fact, easily confirmed and starts work this month. Nor is there any chance Congress will use its power of the purse to end the war. The 2019 budget request for U.S. operations in Afghanistan -- topping out at $46.3 billion -- will certainly be approved.

#Winning

All of this seeming futility brings us back to the Vietnam War, Kissinger, and that magic number, 4,000,000,029,057 -- as well as the question of what an American military victory would look like today. It might surprise you, but it turns out that winning wars is still possible and, perhaps even more surprising, the U.S. military seems to be doing just that.

Let me explain.

In Vietnam, that military aimed to “out-guerrilla the guerrilla.” It never did and the United States suffered a crushing defeat. Henry Kissinger -- who presided over the last years of that conflict as national security advisor and then secretary of state -- provided his own concise take on one of the core tenets of asymmetric warfare: “The conventional army loses if it does not win. The guerrilla wins if he does not lose.” Perhaps because that eternally well-regarded but hapless statesman articulated it, that formula was bound -- like so much else he touched -- to crash and burn.

In this century, the United States has found a way to turn Kissinger’s martial maxim on its head and so rewrite the axioms of armed conflict. This redefinition can be proved by a simple equation:

0 + 1,000,000,000,000 + 17 +17 + 23,744 + 3,000,000,000,000 + 5 + 5,200 + 74 = 4,000,000,029,057

Expressed differently, the United States has not won a major conflict since 1945; has a trillion-dollar national security budget; has had 17 military commanders in the last 17 years in Afghanistan, a country plagued by 23,744 “security incidents” (the most ever recorded) in 2017 alone; has spent around $3 trillion, primarily on that war and the rest of the war on terror, including the ongoing conflict in Iraq, which then-defense secretary Donald Rumsfeld swore, in 2002, would be over in only “five days or five weeks or five months,” but where approximately 5,000 U.S. troops remain today; and yet 74% of the American people still express high confidence in the U.S. military.

Let the math and the implications wash over you for a moment. Such a calculus definitively disproves the notion that “the conventional army loses if it does not win.” It also helps answer the question of victory in the war on terror. It turns out that the U.S. military, whose budget and influence in Washington have only grown in these years, now wins simply by not losing -- a multi-trillion-dollar conventional army held to the standards of success once applied only to under-armed, under-funded guerilla groups.

Unlike in the Vietnam War years, three presidents and the Pentagon, unbothered by fiscal constraints, substantive congressional opposition, or a significant antiwar movement, have been effectively pursuing this strategy, which requires nothing more than a steady supply of troops, contractors, and other assorted camp followers; an endless parade of Senate-sanctioned commanders; and an annual outlay of hundreds of billions of dollars. By these standards, Donald Trump’s open-ended, timetable-free “Strategy in Afghanistan and South Asia” may prove to be the winningest war plan ever. As he described it:

“From now on, victory will have a clear definition: attacking our enemies, obliterating ISIS, crushing al-Qaeda, preventing the Taliban from taking over Afghanistan, and stopping mass terror attacks against America before they emerge.”

Think about that for a moment. Victory’s definition begins with “attacking our enemies” and ends with the prevention of possible terror attacks. Let me reiterate: “victory” is defined as “attacking our enemies.” Under President Trump’s strategy, it seems, every time the U.S. bombs or shells or shoots at a member of one of those 20-plus terror groups in Afghanistan, the U.S. is winning or, perhaps, has won. And this strategy is not specifically Afghan-centric. It can easily be applied to American warzones in the Middle East and Africa -- anywhere, really.

Decades after the end of the Vietnam War, the U.S. military has finally solved the conundrum of how to “out-guerrilla the guerrilla.” And it couldn’t have been simpler. You just adopt the same definition of victory. As a result, a conventional army -- at least the U.S. military -- now loses only if it stops fighting. So long as unaccountable commanders wage benchmark-free wars without congressional constraint, the United States simply cannot lose. You can’t argue with the math. Call it the rule of 4,000,000,029,057.

That calculus and that sum also prove, quite clearly, that America’s beleaguered commander-in-chief has gotten a raw deal on his victory parade. With apologies to the American Legion, the U.S. military is now -- under the new rules of warfare -- triumphant and deserves the type of celebration proposed by President Trump. After almost two decades of warfare, the armed forces have lowered the bar for victory to the level of their enemy, the Taliban. What was once the mark of failure for a conventional army is now the benchmark for success. It’s a remarkable feat and deserving, at the very least, of furious flag-waving, ticker tape, and all the age-old trappings of victory.

Published:1/19/2019 8:31:32 PM
[Markets] Extremely Disturbing Footage Of Deadly Mexico Pipeline Explosion Surfaces

Extremely disturbing footage of the aftermath of a giant fireball that burst from an illegal gasoline pipeline tap near a small town north of Mexico City has surfaced online.

As we reported earlier, at least 66 people have been confirmed dead after a geyser of gasoline ignited at the site of the illegal tap, instantly engulfing the surrounding area in flames.

Reports from the scene described piles of charred bodies so badly burned that responders struggled to separate and identify the individuals.

In the video, people are seen throwing themselves on the grass and in water to try and extinguish the flames.

The horrific incident took place as locals had gathered around a ruptured Pemex pipeline to collect the fuel that was spilling out. The company blamed the fire on thieves drilling into the pipe.

 

 

 

 

 

Published:1/19/2019 8:01:51 PM
[Markets] BofA Sees 3 Paths For The Market: Stairs, Escalator, Roller-Coaster

Among the most memorable events of 2018 is that one of closest correlations across major asset classes - that between stocks and bonds - broke down, prompting Deutsche Bank strategist Torsten Slok to exclaim that "something is wrong."

"What is safe to say is that there is something driving equities lower, which is not impacting rates. Or there is something keeping long rates high, which is not impacting equities," Slok mused in a note in late December, discussed here.

Slok also predicted that anyone expecting this divergence to collapse shortly may be disappointed since the breakdown of the positive correlation between stocks and bond yields may not just be a temporary problem as the federal government is projected to notch annual trillion dollar deficits for a “very long time, prompting traders to demand even higher bond yields in the future regardless if stocks underperform.

And yet, the breakdown of the bond/equity correlation appears to already be over because as Bank of America observes in its latest weekly Rates report, this dynamic once again changed in the last two months as markets repriced the growth outlook and equity markets sold off, the belly of the curve (5y-7y) led the Treasury market rally, in sharp contrast to the first three quarters of 2018. As a result, 5y-30y curve became increasingly directional with equity markets during risk-off moves (Chart 2).

What prompted this "renormalization" in one of the historically stongest market correlations?

According to BofA, the heart of the concern is global growth. As a result, headlines on central bank dovishness and trade talk progress only provide temporary relief and are discounted by rates investors. By the same logic, investor risk appetite may only be altered materially when US and China data stand on solid footing.

This change in risk appetite has been reflected in flow data as shown in Chart 3 above. Over the course of the Q4 risk-off move, mutual fund flows shifted from the front-end to the long end, similar to the behavior in January 2016. As such, until the market receives new information on growth outlook, for better or worse, Bank of America notes that both the Fed and the markets may need to be patient.

Which brings us to the key question that needs to be answered to determine future asset returns heading into 2019, namely "how much" and "how fast" the US economy is going to slow down, as opposed to the "if" question.

Unfortunately, according to Bank of America, we have to be patient to get a clearer sense of the above question but the next few weeks will be critical as Q4 earnings are released from corporate America and January data start to come in.

As a result, BofA sees three paths for the market:

  • The stairs scenario: while there have been scary prints in global data, there is still a possibility that the US economy is weathering the global slowdown just fine. At least some of the most reliable indicators for predicting a recession are still far from stress levels. The flipside is that if what we've seen so far is a bad dream, the pause that the Fed is currently engineering may be short lived once we are back on track later this year. In this case, supply pressure would have a much bigger impact than in 2018, and a belly led sell-off could reverse the long end steepening we've seen, and the supply pressure could really kick in; the result would be a rerun of the late summer of 2018 when rising yields sparked an equity slump.
  • The escalator scenario: Irrespective of the ongoing sharp bull market rally in stocks, BofA believes that it is increasingly likely that the markets will experience a more volatile H1. As discussed above, while the rest of the world has been dealing with growth roadblocks all of last year, asset prices in the US only re-priced recently. Meanwhile, according to time-zone analysis from BofA, the Treasury rally since Q4 2018 showed that almost the entire 50bp move in 10y UST was done during US hours, reflecting domestic investors pricing in a weaker growth outlook. The silver lining is that while data continues to be sluggish, markets and sentiment were able to at least push central bankers and politicians to be more accommodative, leaving the outlook for H2 a little brighter (for now).
  • The roller-coaster scenario: the economy would be a mess in this case, which however is far from reality at least based on recent data; should this scenario materialize the simple call would be to buy bonds no questions asked.

And since the observations above reflect the views of BofA's rates team, they conclude that without new information on data, earnings, and policies, both rates and curves are likely to stay range-bound, adding that of the scenarios list above, the first one would cause the most positioning pain as investors unwind 5y-30y curve steepeners and short vol positions in the front end (the Fed is not only willing to be patient, they are also willing to be flexible). Scenario two is the most likely according to BofA, with rates continuing to follow risky assets, with the belly leading the moves.

Eventually, as more economic data emerges and solidifes the case for either an accelerating slowdown or a rebound, the Fed will have to react. As long as the Fed is on hold, BofA is confident that the time for a structural steepener is not ripe, and even though steepeners were the trade in vogue in recent weeks, 2y-10y has remained relatively flat. The bank further notes that "the recent 5y-30y steepening is a reflection of growth concerns and haven bid, rather than the beginning of a cutting cycle. "

Finally, if the economic climate improves and the hiking cycle resumes, while stocks will likely resume their slide, the 5y-30y should continue to flatten; alternatively, if the economy hits a brick wall and there is a need for the Fed to cut rates, 2y-10y curve catch up to 5y-30y.

Published:1/19/2019 7:32:21 PM
[Markets] Will Globalists Sacrifice The Dollar To Get Their 'New World Order'?

Authored by Brandon Smith via Alt-Market.com,

Trade is a fundamental element of human survival. No one person can produce every single product or service necessary for a comfortable life, no matter how Spartan their attitude. Unless your goal is to desperately scratch an existence from your local terrain with no chance of progress in the future, you are going to need a network of other producers. For most of the history of human civilization, production was the basis for economy. All other elements were secondary.

At some point, as trade grows and thrives, a society is going to start looking for a store of value; something that represents the man-hours and effort and ingenuity a person put into their day. Something that is universally accepted within barter networks, something highly prized, that is tangible, that can be held in our hands and is impossible to replicate artificially. Enter precious metals.

Thus, the concept of “money” was born, and for the most part it functioned quite well for thousands of years. Unfortunately, there are people in our world that see economy as a tool for control rather than a vital process that should be left alone to develop naturally.

The idea of “fiat money”, money which has no tangibility and that can be created on a whim by a central source or authority, is rather new in the grand scheme of things. It is a bastardization of the original and much more stable money system that existed before that was anchored in hard commodities. While it claims to offer a more “liquid” store of value, the truth is that it is no store of value at all.

Purveyors of fiat, central banks and globalists, use ever increasing debt as a means to feed fiat, not to mention the hidden tax of price inflation. When central bankers get a hold of money, it is no longer a representation of work or value, but a system of enslavement that crushes our ability to produce effectively and to receive fair returns for our labor.

There are many people today in the liberty movement that understand this dynamic, but even in alternative economic circles there are some that do not understand the full picture when it comes to central banks and fiat mechanisms. There is a false notion that paper currencies are the life blood of the establishment and that they will seek to protect these currencies at all costs. This might have been true 20 years ago or more, but it is not true today. Things change.

The king of this delusion is the US dollar. As the world reserve currency it is thought by some to be “untouchable”, a pillar of the globalist structure that will be defended for many decades to come. The reality, however, is that the dollar is nothing more than another con game on paper to the globalists; a farce that they are happy to sacrifice in order to further their goals of complete centralization of world trade and therefore the complete centralization of control over human survival.

That is to say, the dollar is a stepping stone for them, nothing more.

The real goal of the globalists is an economic system in which they can monitor every transaction no matter how small; a system in which there is eventually only one currency, a currency that can be tracked, granted or taken away at a moment's notice. Imagine a world in which your “store of value” is subject to constant scrutiny by a bureaucratic monstrosity, and there is no way to hide from them by using private trade as a backstop. Imagine a world in which you cannot hold your money in your hand, and access to your money can be denied with the push of a button if you step out of line. This is what the globalists really desire.

Some people might claim that this kind of system already exists, but they would be fooling themselves. Even though fiat currencies like the dollar are a cancer on free markets and true production, they still offer privacy to a point, and they can still be physically allocated and held in your hand making them harder to confiscate. The globalists want to take a bad thing and make it even worse.

So, the question arises – How do they plan to make the shift from the current fiat paper system to their “new world order” economy?

First and foremost, they will seek a controlled demolition of the dollar as the world reserve currency. They have accomplished this in the past with other reserve currencies, such as the Pound Sterling, which was carefully diminished over a period of two decades just after WWII through the use of treasury bond dumps by France and the US, as well as the forced removal of the sterling as the petro-currency. This was done to make way for the US dollar as a replacement after the Bretton Woods agreement in 1944.

The dollar did not achieve true world reserve status, though, until after the gold standard was completely abandoned by Nixon in the early 1970's, at which point a deal was struck with Saudi Arabia making the dollar the petro-currency. Once the dollar was no longer anchored to gold and the world's energy market was made dependent on it, the fate of the US economy was sealed.

Unlike Britain and the sterling, the US economy is hyper-dependent on the dollar's world reserve status. While Britain suffered declining conditions for decades after the loss, including inflation and high interest rates, the US will experience far more acute pain. A complete lack of adequate manufacturing capability within US borders has turned our nation into a consumer based society rather than a society of producers. Meaning, we are dependent on the demand for our currency as a reserve in order to enjoy affordable goods from outside sources (i.e. other manufacturing based countries).

Add to this lack of production ability the fact that for the past decade the Federal Reserve has been pumping trillions of dollars into financial markets around the globe. This means trillions of dollar held overseas only on the promise that those dollars will be accepted by major exporters as a universal store of value. If faith in that promise is lost, those trillions could come flooding back into the US through various channels, and the buying power of the currency would crumble.

There is a delusion within the American mainstream that even if such an event were to occur, the transition could be handled with ease. It's fantastical, I know, but never underestimate the cognitive dissonance of people blinded by bias.

The rebuilding of a production base within the US to offset the crisis of losing the world reserve currency would take many years; perhaps decades. And this is in the best case scenario. With a plummeting currency and extreme price inflation, the cost of establishing new production on a large scale would be immense. While local labor might become cheap (in comparison with inflation), all other elements of the economy would become very expensive.

In the worst case scenario there would be complete societal breakdown likely followed by an attempted totalitarian response by government. In which case, forget any domestically funded economic recovery. Any future recovery would have to be funded and managed from outside the US. And here is where we see the globalist plan taking shape.

The banking elites have hinted in the past how they might try to “reset” the global economy. As I've mentioned in many articles, the globalist run magazine The Economist in 1988 discussed the removal of the dollar to make way for a global currency, a currency which would be introduced to the masses by 2018. This introduction did in fact take place as The Economist declared it would. Blockchain and digital currency systems, the intended foundation of the next globalist monetary structure, received unprecedented coverage the past two years.  They are now a part of the public consciousness.

Here is how I believe the process will unfold:

The 2008 crash in credit and housing markets led to unprecedented stimulus by central banks, with the Federal Reserve leading the pack as the greatest source of inflation. This program of bailouts and QE stimulus conjured an even bigger bubble, which many alternative analysts have dubbed “the everything bubble”.

The growing “everything bubble” encompasses not just stock markets or housing, but auto markets, credit markets, bond markets, and the dollar itself. All of these elements are now tied directly to Fed policy. The US economy is not only addicted to stimulus measures and near-zero interest rates; it will die without them.

The Fed knows this well. Chairman Jerome Powell hinted at the crisis that would evolve if the Fed ever cut off stimulus, unwound its balance sheet and hiked rates in the October 2012 Fed minutes.

Without constant and ever expanding stimulus measures, the false economy will implode. We are already seeing the effects as the Fed cuts tens-of-billions per month in assets from its balance sheet and hikes interest rates to their “neutral rate of inflation”. Auto markets, housing markets, and credit markets are in reversal, and stocks are witnessing the most instability since the 2008 crash. All of this was triggered by the Fed simply exerting incremental rate hikes and balance sheet cuts.

It is also important to note that almost every US stock market rally the past several months has taken place while the Fed's balance sheet cuts were frozen.  For example, for the past two-and-a-half weeks the Fed's assets have only dropped by around $8 billion; this is basically a flatline in the balance sheet.  It should not be surprising given this pause in cuts (in tandem with convenient stimulus measures by China) that stocks spiked through early to mid-January.

That said, Fed tightening will start again, either by rate hikes, asset cuts, or both at the same time. The Fed's purpose is to create a crisis. The Fed's goal is to cause a crash. The Fed is a suicide bomber that does not care what happens to the US system.

But what about the dollar, specifically?

The Fed's tightening policies do not only translate to crisis for US stocks or other markets. I see three primary ways in which the dollar can be dethroned as the world reserve.

1) Emerging economies have become addicted to Fed liquidity over the past ten years. Without continued access to the Fed's easy money, nations like China and India are beginning to seek out alternatives to the dollar as a world reserve. Contrary to the popular belief that these countries would “never” be able to decouple from the US, the process has already begun. And, it is the Fed that has actually created the necessity for emerging markets to seek out other sources of liquidity besides the dollar.

2) Donald Trump's trade war is yet another cover event for the loss of reserve status. I would note that the primary rationale for tariffs was to balance the trade deficit.  The trade deficit with China has done the opposite and is continually expanding each month.  This suggests much higher tariffs on China would be required to reduce the imbalance.

It must also be understood that the trade deficit with China has long been part of a larger agreement.  China is one of the largest buyers of US debt in the world and has continued to utilize the dollar as the world reserve currency.  If the trade war continues through this year, it is only a matter of time before China, already seeking dollar alternatives as the Fed tightens liquidity, will start using its US treasury and dollar holdings as leverage against us.

Bilateral agreements between multiple nations that cut out the dollar are being established regularly today. If China, the largest exporter/importer in the world, stops accepting the dollar as the world reserve, or if they start accepting other currencies in competition, then numerous other nations will follow their lead.

3) Finally, if the war of words between Trump and the Fed becomes something more, then this could be used by the establishment to undermine faith in US credit.  If Trump seeks to shut down the Fed entirely, the globalists are handed yet another perfect distraction for the death of the dollar. I can see the headlines now - The “reset” could then be painted as a “rescue” of the global economy after the “destructive actions of populists” who “bumbled into fiscal destruction” because they were blinded by an “obsession with sovereignty” in a world that “requires centralization to survive”.

The specifics of the shift to a global currency are less clear, but again, we have hints from the globalists. The Economist suggests that the US economy will have to be taken down a few pegs, and that the IMF would step in as the arbiter of forex markets through its SDR basket system. This plan was echoed recently by globalist Mohamed El-Erian in an article he wrote titled “New Life For The SDR?”. El-Erian also suggests that a global currency would help to combat the “rise of populism”.

The Economist notes that the SDR would only act as a “bridge” to the new global currency. Paper currencies would still exist for a time, but they would be pegged to the SDR exchange rates. Currently, the dollar is only worth around .71 SDR's. In the event of the loss of world reserve status, expect this exchange rate to drop significantly.

As the global crisis deepens the IMF will suggest a “reset” to a more manageable monetary framework, and this framework will be based on blockchain technology and a cryptocurrencywhich the IMF has likely already developed. The IMF hints at this outcome in at least two separate white papers recently published which herald a new age in which crypto as the next phase of evolution for global trade.

I predict according to the current pace of the trade war, Fed liquidity tightening and de-dollerization that threats to the dollar's world reserve status will hit the mainstream by 2020.  The process of "resetting" the global monetary system would likely take at least another decade to complete.  The globalist preoccupation with their "Agenda 2030" sustainable development initiatives suggests a decade long timeline.

Without ample resistance, the introduction of the cashless society will be presented as a natural and even “heroic” response by the globalists to save humanity from the “selfishness” of destructive nationalists. They will strut across the world stage as if they are saviors, rather than the villains they really are.

*  *  *

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Published:1/19/2019 7:02:34 PM
[Markets] Johns Hopkins, Bristol-Myers Face $1 Billion Suit For Infecting Guatemalan Hookers With Syphilis 

A federal judge in Maryland said Johns Hopkins University, pharmaceutical company Bristol-Myers Squibb and the Rockefeller Foundation must face a $1 billion lawsuit over their roles in a top-secret program in the 1940s ran by the US government that injected hundreds of Guatemalans with syphilis, reported Reuters.

Several doctors from Hopkins and the Rockefeller Foundation were involved in the government program, as well as four executives from Bristol-Myers' predecessors, Bristol Laboratories and the Squibb Institute, according to the complaint.

"The overall purpose of the study was to test out whether antibiotics could be used to prevent syphilis and other sexually transmitted infections before its symptoms appeared in someone who was exposed to them. So the researchers initially recruited sex workers with syphilis to have sex with prisoners.

Later on, they directly infected volunteers without their informed consent or knowledge of what was really happening.

In many cases, though, infected people were left untreated. In total, 83 deaths were linked to the study, though it’s not entirely certain whether the infections were the direct cause (That said, late-stage syphilis is often fatal)," reported Gizmodo.

In a January 3 decision, US District Judge Theodore Chuang denied the defendants’ argument that a recent Supreme Court decision shielding foreign businesses from lawsuits in US courts over human rights abuses abroad also applied to domestic firms absent Congressional authorization.

Chuang’s decision was a big victory for 444 victims (all mostly dead) and their relatives suing over the experiment.

The experiment was concealed until a professor at Wellesley College in Massachusetts discovered the files in 2010.

Chuang said lawsuits against US businesses under the federal Alien Tort Statute were not “categorically foreclosed” by the Supreme Court decision last April 24 in Jesner v Arab Bank Plc covering foreign corporations.

He said the “need for judicial caution” was “markedly reduced” where US businesses were defendants because there was no significant threat of diplomatic tensions from foreign governments.

The federal judge said letting the Guatemala case proceed would “promote harmony” by giving foreign plaintiffs a chance at a remedy in the American court system.

“Johns Hopkins expresses profound sympathy for individuals and families impacted by the deplorable 1940s syphilis study funded and conducted by the U.S. government in Guatemala,” the university said in a statement. “We respect the legal process, and we will continue to vigorously defend the lawsuit.”

Hopkins, Bristol-Myers, and the Rockefeller Foundation and their lawyers did not immediately respond to Reuters' requests for a statement.

Paul Bekman, a lawyer for the 444 Guatemalans, said his clients would proceed with discovery, including the exchange of decades-old documents.

An earlier decision found no statute of limitations arguments could be made since the plaintiffs did not learn about the experiment until 2010. 

Infecting Guatemalan hookers with sexually transmitted diseases was one of many eugenic programs the US government conducted during the 1940s and Post–World War II era. Now the academic institutions and corporations involved in these horrific government experiments are being served with massive lawsuits that could be financially devastating. 

Published:1/19/2019 6:31:44 PM
[Markets] "Modern Monetary Theory" Is a Joke That's Not Funny

Authored by Michael Strain, op-ed via Bloomberg.com,

Yes, a government that issues its own currency can pay its bills. But piling up debt for no urgent reason is lunacy...

If you follow the debates over U.S. economic policy, you had probably heard of modern monetary theory well before freshman Democratic Representative Alexandria Ocasio-Cortez spoke favorably about it earlier this month.

If you thought from the start that the whole idea sounded like lunacy, you were right, even if it’s possible to admit some sliver of sympathy for it. So why is MMT, as it is known for short, generating such intense interest now?

First, let’s start with the confusion over what it is. The answer seems to depend on which advocate of MMT is being asked. It is sometimes a theory of money. MMT is also being discussed in the context of a political program to justify huge increases in social spending. Finally, there is its role as a prescription for macroeconomic policy.

Even as just an economic theory, it is not settled or fully developed. This makes engaging with it challenging — even, at times, frustrating.

The bedrock observation of MMT is correct: Any government that issues its own currency can always pay its bills. This observation allows policy makers to show less concern about the budget deficit than is typically the case.

In fact, MMT is growing in prominence precisely because of its relative lackof concern about the size of the deficit. In the years immediately after the Great Recession, which started in December 2007, this aspect of MMT stood in favorable contrast to the position of fiscal-policy centrists and many Republican politicians who called for significant reductions in the deficit at a time of very high unemployment.

Today, when some are continuing to question commonly held views about fiscal policy, the thrust of MMT - the deficits matter a lot less than its critics would have you believe — is attractive to many solid economists. (Though I am not yet sold on their arguments.)

In my reading, this is about all that can be said favorably regarding modern monetary theory. As a political program, the observation that a government issuing its own fiat currency can’t involuntarily default — an observation with which mainstream economists largely agree — has been used to advocate for extremely expensive spending policies, including a universal jobs guarantee and single-payer health care. There’s no need, some MMT advocates argue, to let paying for these proposals through tax increases get in the way of enacting them; government can just increase the deficit.

In a short review of MMT, the economist Stan Veuger (my colleague at the American Enterprise Institute) notes that on its face this is not all that different from current policies that deliver benefits today and costs tomorrow, including the deficit-financed 2017 tax cuts. But that’s more of a criticism of this approach to legislating than a justification for MMT.

Political progressives like Ocasio-Cortez who are showing sympathy for MMT are also being short-sighted. If we further loosen the shackles tax revenue has placed on federal spending, then Democrats may get Medicare for All the next time they control the government. But, in turn, when the GOP is next in the White House, what might it do with its newfound fiscal freedom?

Both parties claim to care about the deficit, but once in power they often act as if they care more about putting their preferred policies in place, whether these are tax cuts in the case of conservatives or new spending programs in the case of liberals. Further loosening political constraints on deficits is reckless, no matter which party is doing it.

But it is in its ideas about macroeconomic policy that MMT fully earns its place on the fringe.

The theory understands that the economy is constrained by real limits on its inputs to production. If you push its advocates hard enough they will admitthat at some point all that spending could send the economy into a bout of damaging inflation.

But they quickly dismiss that risk, in part by pointing to the lack of inflation in advanced economies in the recent past and by appeals to vague thought experiments.

So what does MMT have to say about inflation when it does materialize? Since under MMT the central bank is responsible for financing government programs through printing money, it falls to the institution with authority over tax and budget policy — the U.S. Congress — to make sure prices are stable by raising taxes and moving the budget deficit into surplus. As part of a series of columns last year for Bloomberg Opinion, leading MMT exponent Stephanie Kelton called on fiscal policy, not the Federal Reserve, to manage the business cycle.

But it is extremely difficult to imagine Congress responding to an overheating economy by legislating tax increases. If anything, the opposite is easier to imagine: When households are being hit with price increases, the natural inclination of an elected representative might be to increase their disposable income by lowering taxes, not raising them.

It is precisely this dynamic — the occasional need for the institution in charge of price stability to inflict short-term pain for long-term benefit — that justifies in large part the political independence of central banks.

Veuger, who is largely critical of MMT, points out that its advocates may envision an independent fiscal authority, though even on this their views are hard to decipher.

But tax policy changes the way income is distributed across households — the after-tax income of high-earning households is reduced, and households to which income is redistributed see increases — and Veuger argues that for this reason it should not be conducted by an agency that is independent of politics.

Monetary policy also has distributional implications. For example, low interest rates are good for borrowers but bad for savers. But given that the U.S. already heavily redistributes income through the tax code, Veuger is right that we should avoid the turmoil that would be created by handing tax policy over to a new, independent agency.

We typically think of inflation as being generated from an overheating economy with excess demand. But prices can also rise because it has become more expensive for businesses to produce goods and services. For example, this situation could occur if the price of oil were to increase rapidly — the economy could experience stagnation and inflation at the same time.

In this scenario, MMT seems to call for tax increases in order to restrain inflation. But the economy is already slowing. Raising taxes
would only make a downturn worse, increasing unemployment and further slowing the economy.

Modern monetary theory is seductive in its promises and, occasionally, in its observations. But if enacted it could cause great harm to the U.S. economy. Like Medusa, it may seem beautiful. But if you look it in the eye you will turn to stone. 

Published:1/19/2019 6:02:33 PM
[Markets] Why investors are starting to pay attention to the government shutdown Investors might not be able to ignore a partial U.S. government shutdown if it continues much longer, analysts say. Published:1/19/2019 5:30:28 PM
[Markets] Market Extra: Why investors are starting to pay attention to the government shutdown Investors might not be able to ignore a partial U.S. government shutdown if it continues much longer, analysts say.
Published:1/19/2019 5:30:28 PM
[Markets] Marshawn Lynch On Trump: "That Motherf***er Says A Lot Of Sh*t"

After a lull of more than a year, the feud between President Trump and Oakland Raiders running back Marshawn Lynch has been brought back to life.

During an appearance on HBO's "Real Time With Bill Maher", the football player most famous for winning a Superbowl with the Seattle Seahawks and coining the phrase "Beast Mode" offered a few choice criticisms of President Trump, becoming the latest celebrity to pile on the president since the shutdown began.

Ask about Trump's accusations that Lynch behaved unpatriotically by sitting for the national anthem (before returning to his feet for the Mexican national anthem), Lynch didn't mince words.

“That motherf---er say a lot of shit,” Lynch told host Maher during the program.

“But at the end of the day,” Lynch continued,  “you call me unpatriotic but you come to the neighborhood where I'm from and you'll see me take the shirt off my back and give it to someone in less need, what would you call that?”

After Lynch's controversial act in November 2017, Trump blasted him in a tweet.

Lynch had previously captured headlines by wearing a shirt that read "Everybody vs. Trump".

Maher has repeatedly made his show a platform for critics of the president...though he has also occasionally taken shots at Trump's former campaign rival, Hillary Clinton.

Published:1/19/2019 5:30:28 PM
[Markets] ‘Nobody like you has ever done it’: How a high school dropout became president of the San Francisco Federal Reserve Mary C. Daly is on a mission to get more kids into college — to change their lives and the fate of the U.S. economy Published:1/19/2019 5:02:09 PM
[Markets] This Is The Reason Smart TVs Are So Cheap 

A significant reason why a smart TV, or perhaps a new 65-inch 4K smart TV with HDR capability, can be purchased for about $500, is because some manufacturers are harvesting data from users.

Vizio’s Chief Technology Officer, Bill Baxter, outlined the strategy to The Verge during the Consumer Electronics Expo in Las Vegas, Nevada last Monday.

"This is a cutthroat industry. It's a 6% margin industry," Baxter said. "The greater strategy is I really don't need to make money off of the TV. I need to cover my cost."

More specifically, electronic manufacturers like Vizio have figured out that they can sell smart TVs at, or around cost, and concentrate on data harvesting and post-purchase monetization.

As Baxter put it: "It's not just about data collection. It's about post-purchase monetization of the TV."

He explained there are several ways to monetize smart TVs: "You sell some movies, you sell some TV shows, you sell some ads, you know."

Baxter said, without the additional forms of revenue, consumers would be paying higher premiums for smart TVs. "We'd collect a little bit more margin at retail to offset it."

Listen to the full interview here 

Vizio TVs, have the ability, with user opt-in, track anything that is on the TV, what the company calls “automatic content recognition.” That data used to be sold off to third-party data aggregators, but after the Federal Trade Commission and New Jersey slapped the company with a multi-million dollar fine in 2017. 

Legal documents from the case reportedly show that Vizio installed software on 11 million smart TVs to track viewing habits without consumers' knowledge.

Now, Vizio keeps the data but sells targeted advertising in a platform model like Google and Facebook.

So you must be wondering how much data is Vizio collecting from smart TVs?

Well, the Verge’s editor-in-chief, Nilay Patel, tweeted that a connected VIZIO P-Series Class 4K HDR Smart TV pings a server over 500,000 times a week or nearly once every second, much more than the typical device.

Vizio is watching you...

Published:1/19/2019 5:02:08 PM
[Markets] Decentralization Is The Solution To The Government Shutdown Problem

Authored by Ryan McMaken via The Mises Institute,

The partial shutdown with the federal government has helped, perhaps more than any other recent political event, to illustrate some of the biggest problems that come with centralizing an ever-larger number of government activities within a single, centralized institution.

Were the US government more decentralized, we'd not now be facing a nationwide systemic failure that has continues to cripple the private sector in many ways.

Held Hostage by a Shuttered Regulatory State

The federalization of resources and regulatory power over the past century has created a situation in which numerous industries depend on licensing and regulatory approval from federal regulators to function. And yet, thanks to the shutdown, these industries can do little when facing a federal government that imposes mandates, but won't provide the agency "services" necessary to allow agencies to function under those mandates.

For example, As The Washington Post has reported , those areas where the federal government has a large regulatory footprint — such as Alaska — are at the mercy of politicians thousands of miles away.

Most (61 percent) of Alaska is government land managed by five different federal agenciesaccording to the congressional Research Service. The state’s main industries, including fishing, tourism and oil and gas, all depend on the day-to-day actions of federal workers and regulators.

The fisheries have so far avoided major disruption, despite a few close calls. Most boats are still getting by on licenses and inspections which occurred before the shutdown.

But time is running out. Major commercial boats are required to carry onboard observers to monitor their catch. But when they return from a trip, those observers must be debriefed by the National Marine Fisheries Service — and it’s not holding debriefings during the shutdown.

Alaska is an extreme example, but other states that also have sizable federal ownership of land (which includes most western US states) are also affected. Nationwide, states with coastal states that depend on the smooth-functioning of federal regulation of fisheries and natural resources affected as well.

And it doesn't end with natural resources. With the Tax and Trade Bureau shut down , breweries can't ship beer. That leaves an entire industry up in the air, and small craft brewers are affected the most. As the shutdown continues, more of these workers can expect their paychecks to eventually dry up due to a lack of revenue.

Meanwhile, the FTC, the SEC, and the FCC are all partially shut down .

Some anti-government activists might look at this and say, "great, we don't need those agencies anyway!" But here's the problem: although those agencies' staff members may be staying home, that doesn't mean the private sector is no longer subject to the mandates and regulations those agencies oversee. Private companies still must obtain all the usual licenses and regulatory approvals from federal agencies. It's jsut that federal agencies are no longer available to make approvals or answer questions.

That's hardly something to celebrate.

In short, all the usual federal roadblocks exist to stymie the private sector. Except now, there are even fewer ways to get around those roadblocks. What's even worse is that this problem is nationwide.

Were these regulatory powers and agencies decentralized out of the hands of the federal government, of course, we wouldn't be looking at a nationwide problem. Were a single state to experience a "shutdown" — something that is extremely rare at the state level, by the way — we wouldn't now be facing a nationwide problem in which whole industries are facing crippling regulatory bottlenecks. Problems would be limited to single states. And those states that were prone to shutdowns or other regulatory bottlenecks would see an exodus of industry and capital.

Nor would we be facing a situation in which 800,000 federal employees — nationwide — are currently unpaid. This is a problem that has been made much larger in scope by the centralization of government power.

The Federal Government Has Too Many Issues on Its Plate

Another reason to decentralize is to end a situation in which government shutdowns are more likely due to the broad scope and complexity of the federal budget and federal responsibilities.

In the United States, the federal government's prerogatives have expanded over the past century to include everything from old-age pensions, to highways, to health care regulation, to farming subsidies, and much more. This has all been added on top of the more traditional federal prerogatives of foreign policy. It's only natural then that the likelihood of shutdowns would increase as the number of areas for political conflict increases.

After all, the current shutdown does not come out of only a dispute over of a border wall. It is a larger issue that stems from the fact that the Democrats want to use the wall's potential funding for a myriad of other uses. And, the larger the federal government has grown, the possible targets for government spending has grown ever larger.

Moreover, even the issue of building border walls was not always a federal issue. Prior to the late nineteenth century, state governments were the governments that dealt with the issue of limiting migrants in-flows. Although some conservatives now create ornate legal arguments in attempts to prove immigration — a separate issue from naturalization — has always been a job of the federal government, the actual historical experience makes it clear the federalization of immigration policy is itself a later innovation.

So, we're now left with a federal government where the president and the legislature can argue endlessly over every little thing under the sun. If it's the federal government's job to control and fund everything from cancer research to national parks, then it's only matter of time until we endure a political impasse over one of the countless issues being discussed.

Nor is it just the scope of issues. The sheer size and scope of the United States is itself problematic. The US is so large, and culturally and demographically diverse, that significant disagreements over how federal prerogatives ought to be used are inevitable. A less fragile and more responsive system grows out of a decentralized political system that allows for diversity in policies that affect travel, education, poverty relief, and more. If education policy, for instance, is decided at the state level, then we can be sure we'll never see a federal shutdown over funding of schools. It simply becomes a non-issue at the federal level.

The Solution Lies in Decentralization

The solution lies in removing from the federal government its authority over such a wide range of issues, and to allow diversity and localism in government. This naturally includes welfare programspublic landsairport securitylaw enforcementmilitary land forcesimmigration, and the regulatory state.

As it is, American governmental institutions — being so dependent on federal funding and regulatory oversight — are now fragile, bloated, unresponsive, and prone to political bottlenecks. We now see this at work. 

The problems we now encounter with the shutdown ought to placed squarely at the feet of those who have called endless for ever greater levels of federal control over state and local communities, while centralizing both financial and regulatory power under within a single institution. Not everything needs to turn into a nationwide systemic problem when the federal government encounters a political impasse. We ought to take steps now to limit the damage the feds can do.

Published:1/19/2019 4:31:50 PM
[Markets] Trump extends temporary immigrant protections in exchange for $5.7B for wall Trump extends temporary immigrant protections in exchange for $5.7B for wall Published:1/19/2019 4:31:50 PM
[Markets] This Is The One Chart Every Trader Should Have "Taped To Their Screen"

After a year of tapering, the Fed’s balance sheet finally captured the market’s attention during the last three months of 2018.

By the start of the fourth quarter, the Fed had finished raising the caps on monthly roll-off of its balance sheet to the full $50bn per month (peaking at $30bn USTs, $20bn MBS, although on many months the B/S does not actually shrink by this full amount which depends on the redemption schedule) and by end-Q4 markets also experienced some of the largest volatility and drawdowns in nearly a decade. As Nomura's George Concalves writes in a Friday letter, whether it was a coincidence or not, broader markets questioned the Fed’s original view that B/S roll-off was going to be like “watching paint dry.” Indeed, recent Fedspeak has shifted to being more open-minded, with Fed policy makers suggesting that they are prepared to be “flexible” in implementing their balance sheet policy.

The reason for that is that as both the market and the Fed (and especially Chicago Fed president Charles Evans) were violently reminded, just as QE added liquidity and boosted all asset prices, so QT is draining liquidity from the system. Worse, as Marko Kolanovic wrote in his latest report from Jan 16, given the recent collapse in liquidity and the toxic feedback loop of flows- liquidity-volatility which we discussed last week, "investors are very attentive to monetary policy measures that may affect liquidity."

And since the most closely watched metric of systemic liquidity is once again the pace of the Fed’s balance sheet change, and specifically, reduction, Kolanovic notes the recent example of a sharply negative market reaction to the comment that balance sheet reduction (Quantitative Tightening or QT) will be on autopilot (and positive reaction when this statement was later modified). Additionally, even casual remarks on the balance sheet has dramatic and "significantly negative intraday impacts on markets" (such as Powell's recent remarks that the balance sheet should be "substantially smaller").

But why, Kolanovic asks rhetorically, is there such a focus on the Fed’s balance sheet from investors?

The answer is obvious: by now only clueless hacks will deny that adding liquidity in the form of QE was the single, most important factor driving asset classes higher over the past decade. According to JPMorgan, the impact of QE was ~20% of equity prices (see the bank's report here).

Yet while qualitatively the answer is simple, complications arise when one tries to quantify the impact of the balance sheet shrinkage. Specifically, as the JPM quant notes, the questions investors struggle with are how negative was/will be the impact of the QT, to wit: "It is plausible that dollar for dollar, QT has a significantly larger impact than QE."

The reason for that, according to Kolanovic, has to do that may be the previously discussed fragility feedback loop. During QE, both central banks and investors, and certainly HFTs and algos, would broadly buy assets in an environment of low volatility/ increased liquidity when the impact is small, while during QT "assets are typically sold while liquidity is removed, compounding the negative impact of other outflows."

Others have also tried to quantify the impact of QT on risk assets, most recently Morgan Stanley, which last week calculated that every $20 billion decline in Mortgage Backed Securities held by the Fed leads to a 0.37% drop in the S&P (curiously, MS found that S&P 500 returns are not significantly correlated with changes in the Fed's Treasury holdings, although that observations will surely be retested soon).

As a result, Morgan Stanley calculates that based on the recent MBS runoff of $15bn per month, the projected S&P 500 return impact is -3.3% for 2019, with the real estate sector hit the hardest.

Yet while Morgan Stanley believes it may have found the causality link between the Fed's B/S size and its impact on the market, JPM disagrees, and in his note Kolanovic assets that to his knowledge, "there is no broadly accepted understanding of the exact mechanics and magnitude of QT’s impact (e.g., how much it is a signal to the market, vs. mechanical supply/demand and price impact)."

Instead, he suggests that while there is a significant relationship between the Fed’s balance sheet changes and the market, the big drivers of this relationship are points when the large QE programs were announced such as March 2009 (e.g., when this point is taken out, the relationship no longer appears statistically significant).

In other words, unlike Morgan Stanley's attempt to extrapolate correlation into causation, JPMorgan is more intellectually honest, stating that "whatever the real mechanical impact of QT is, the indirect impact on market sentiment is likely much larger", in other words stocks drop as traders expect QT to drain liquidity and impair stocks, selling in the process and resulting in a self-fulfilling prophecy.

In a somewhat similar analysis, Nomura fixed income strategist George Concalves suggests a compromise option, noting that while his own analysis found little correlation of the smaller balance sheet to the SP500 ("unlike what was seen during the QE days where stocks had an eerie visual relationship to the actual size of the B/S") he did notice weekly B/S changes could be impacting markets.

As an example, he notes that the weeks where MBS holdings were paying down and/or weeks around the time the total size of the roll-off for both UST and MBS exceeded $20bn, markets would come under pressure with the most striking of those periods at the time being the February VIX shock. Additionally, in 2018 there were some “chunky” roll-off and around those weeks there was market volatility and drawdowns (especially in late October and November). To fine tune its analysis, Nomura looked at market performance for a few weeks after large roll-off weeks. It found that while in Feb 2018 it looks like the higher 10yr rates impulse was just as easily the driver of the SP500 declines a couple weeks later, by end-2018 the QT narrative was well entrenched and even then stocks would decline either before or after the larger rolloff periods.

So confirming Kolanovic's view that QT is a self-fulfilling prophecy, Goncalves muses that perhaps "markets were anticipating these moves and discounted them. Meanwhile, going back to Kolanovic's reflexive take on QT and the market, the JPM strategist notes recent intraday movements on balance sheet mentions, as well as the price action of the S&P 500 during Q4 shown in the chart below.

So what does all this mean for markets?

The answer remains generally unclear, with Nomura concluding that while it believes that "QT is tightening", it is not "straight forward and seems to come in rolling aftershocks of liquidity draining and markets adjusting positions." Meanwhile, the more actue impact of MBS QT on markets "makes sense as those securities are not zero-risk weight (as are USTs) and take up capital and/or need to be a substitutes for other credit products (which impacts FCI)."

Going back to Kolanovic, the JPM quant generally agrees with Nomura, and writes that while there may be little or no mechanical impact on equity prices, most macro traders will not "fight the Fed", meaning when liquidity is added they are buying assets, and when liquidity is removed they are selling assets. Finally, to justify his thesis that QT, for now at least, impacts markets largely as a result of feedback loops and quirks in behavioral finance, Kolanovic also notes that over the past months, "we have heard a large number of  anecdotes where investors avoid buying risky assets during (or actively sell into) weeks when there is a significant balance sheet reduction, e.g., traders taping the schedule to their screens, blogs and email chains, etc.."

JPMorgan's conclusion: whatever the mechanism or sequence of events by which QT affects markets, there is no denying that the shrinking of the Fed's balance sheet does affect the S&P in an adverse way: "balance sheet reductions put significant strain on market sentiment, on flows and on the weakest link in the market – the liquidity-volatility-flow feedback loop. If the balance sheet reduction is a signal to sell, volatility increases, liquidity decreases, and additional systematic flows are triggered." As a result, Kolanovic warns that "balance sheet driven market fragility is thus increasing the risk of market disruptions and ultimately the risk of a recession – which is in contrast to policy makers’ intentions."

Naturally one can argue this point very easily, and note that if true, then Kolanovic's assessment suggests that absent the Fed's balance sheet, the world would be in a singular depression right now if indeed the modest shrinkage of the Fed's balance sheet from $4.5TN to $3.9TN risked a recession. Consider that there is still another almost $2 trillion to go before the Balance sheet is "renormalized" and one can see why the Fed is not only trapped, but will never be able to renormalize without jeopardizing both the fake market and global economy erected over the past decade on the back of $16 trillion in central bank balance sheet expansion, i.e. liquidity.

But that's a problem for another day.

For now, we'll conclude with the schedule that JPMorgan says "traders tape to their screens, blogs and email chains" - the complete QT calendar consisting of past and projected Fed Balance sheet QT periods, courtesy of Nomura's George Goncalves. Needless to say, self-fulfilling prophecy is most likely to be validated during the "dangerous" QT weeks which are highlighted in red, when the Fed's balance sheet shrinks especially aggressively,such as Feb 20, April 3, and May 1 and 15.

 

d

 

Published:1/19/2019 3:59:56 PM
[Markets] Democrats Reject Trump's "BRIDGE Act" Deal, Say "Not A Good Faith Effort"

Well that didn't take long.

In fact, even before President Trump has issued his "major announcement," Democratic leaders were pre-emptively rejecting his ideas.

Trump's BRIDGE Act made two offers to Democrats in exchange for $5.7 billion in funds for a border wall: Extend DACA protections for Dreamers, who were brought to the U.S. illegally as children, and extend the legal status of Temporary Protected Status (TPS) holders.

Half an hour before the speech, House Speaker Nancy Pelosi said in a statement:

"Democrats were hopeful that the President was finally willing to re-open government and proceed with a much-need discussion to protect the border.

Unfortunately, initial reports make clear that his proposal is a compilation of several previously rejected initiatives, each of which is unacceptable and in total, do not represent a good faith effort to restore certainty to people's lives."

Pelosi further slammed the deal for not including “the permanent solution for the Dreamers and TPS recipients that our country needs and supports.”

Additionally, Democratic Whip Dick Durbin also issued a statement:

"First, President Trump and Senate Majority Leader McConnell must open the government today.  Second, I cannot support the proposed offer as reported and do not believe it can pass the Senate.  Third, I am ready to sit down at any time after the government is opened and work to resolve all outstanding issues."

A Democratic aide characterized the forthcoming offer from Trump as "non-serious product." 

"Dems were not consulted on this and have rejected similar overtures previously. It’s clearly a non serious product of negotiations amongst [White House] staff to try to clean up messes the president created in the first place. [The President] is holding more people hostage for his wall," the aide said. 

Day 30 of the shutdown seems inevitable...

Published:1/19/2019 3:30:21 PM
[Markets] Trump seen offering support for DACA in exchange for more wall funding: reports Trump seen offering support for DACA in exchange for more wall funding: reports Published:1/19/2019 3:00:22 PM
[Markets] Watch Live: President Trump Makes "Major Announcement"

After tweeting news of a "major announcement," leaks and reports suggest President Trump will not be going full-emergency over the border funding but will be offering a compromise deal, involving DACA, in an effort to end the longest government shutdown in history...

He has since pushed it back to 4pmET..

As The Hill reports, some Senate Republicans have floated the possibility of exchanging DACA protections for border wall money amid the stalled talks. However, a bill with a similar deal fell flat in the House, with lawmakers saying that a deal to reopen the government by trading wall funding for immigration benefits for so-called Dreamers doesn't stand a chance in the lower chamber.

Democrats have said they don't trust Trump to keep his end of bargains, and are wary of negotiating a deal that could benefit those in the DACA program while harming other undocumented immigrants.

Watch live here...

Published:1/19/2019 3:00:21 PM
[Markets] Disney, Dollar Tree and a trash stock are top picks at 2019 Barron's Roundtable Disney, Dollar Tree and a trash stock are top picks at 2019 Barron's Roundtable Published:1/19/2019 2:31:20 PM
[Markets] "Stay Alert!" Trader Warns Of "New Manufactured Reality" In Markets

Authored by Sven Henrich via NorthmanTrader.com,

I’ll provide a more in-depth technical update over the weekend, but just some quick thoughts and perspective as we are witnessing this melt-up during this OPEX week. My main message: Stay Alert.

Markets are back inside the consolidation range they broke below last December. What crash? What correction? It’s as if nothing has happened. But actually a lot has happened.

Earnings expectations have crumbled:

Confidence has plummeted:

Economic data has continued to slow across the globe and the US. The government is on week 3 of a shutdown with no apparent end in sight shaving off 0.1% of GDP growth per week and plenty of companies, including $AAPL, have come out and have warned about their outlooks for 2019.

Yet stocks have not only rallied (which we expected to alleviate oversold conditions), but they have done so in a vertical fashion with not even a hint of red:

One red candle in all of 2019. 11 blue candles in a row. So what has changed? Two things and two things only: January 4th. China intervened and has since proceeded with record liquidity injections and Jerome Powell and every FOMC central banker thereafter has promised flexibility and patience. That’s it. While the macro backdrop has worsened the central bank two-step has once again changed the price discovery dynamic to nothing but up.

And so yes one can sense the return of the low volatility grind which says to buy every tiny dip and shut your brain off:

And because of this you get to hear a new manufactured reality:

“We’re going to have a fairly significant slowdown in the economy, in earnings, in attitudes and everything…slower growth is the ticket to extending this recovery and its bull market… if price and wage pressures, were to stay at bay, the Federal Reserve could stay on the sidelines, and follow through on Fed Chairman Jerome Powell’s promise earlier this month that central bankers “will be patient” on interest rates given continued muted inflation”.

There’s been a barrage of people who did not predict the 20% crash in Q4 come out and state why the slowdown is good news. Their principle rationale: The Fed. Why then pretend anything else matters or has ever mattered. It’s not about earnings or growth or anything.

Expanding growth is bullish. Slowing growth is bullish too. Got it.

And that is the reality we are now again facing: Nothing matters. Hence good news is good news and bad news is good news, in short all news is good news whether it’s real or not. Case in point: Numerous China headlines indicating positive news to come. How many times have we heard this in the past year? Maybe it’ll happen and if it does a rally may well be justified.

But again, it hasn’t happened yet and there’s still no definitive evidence that it will.

Hence I like data, it stares you in the face and gives unemotional context as to where we are.

And we are here:

The corporate debt bomb keeps on ticking and business models that wouldn’t be able to sustain themselves during any other period are staying alive as long as rates stay historically low and hence markets are reacting to a Fed being suddenly being patient. The can is kicked once more.

And that’s why I presume participants are not freaking out over a $3B cash burn rate for $NFLX in 2019.

Look away, nothing to see here:

Yet nothing that’s happening on the price front now is unexpected, perhaps the one sidedness of it all, but not the destination.

Here’s what I said to clients on January 2nd:

And here we are:

One can’t predict the future, but markets can be predictable sometimes. So nothing that’s currently happening is unexpected in terms of the technical reconnect picture.

Indeed it all fits with the structural script I outlined in December mentioning the 2000/2001 market structure. A blow-off top early in the year, a yearly low in the December of that same year and then a big rally into January right into a slowing economy with risks of recession rising.

This is what I showed you in Imbalance:

What happened then in 2001 after the big rally in January when everybody got bullish again and declared the lows to be in?

This:

Back then it was a 10% rally into the December highs and then it was lights out with new lows coming a month later and again the following month. Each market is different, and we may not see new lows, but I can note some distinct similarities between then and now.

So before everybody declares victory and thinks happy days are here again all that’s changed of substance so far is mostly talk by central bankers and liquidity injections by China. Perhaps that’s enough and that’s all that’s needed, but be clear the larger macro environment has worsened, not improved, hence my view remains: Stay Alert. More this weekend.

*  *  *

For the latest public analysis please visit NorthmanTrader. To subscribe to our market products please visit Services.

Published:1/19/2019 2:31:19 PM
[Markets] Rising Credit-Card Use Shows Consumers Are Strapped

Authored by Danielle DiMartino Booth via LinkedIn.com,

Americans are increasingly reaching for the plastic in their wallets to cover what their paychecks won’t.

Even though evidence is mounting that the U.S. economy may be soon heading into a recession, there are plenty of analysts who say that the surge in credit card borrowing is a sign of strong confidence among households. That's hardly the case. In fact, households' confidence in the future growth of their incomes has been cooling since late last summer, which means borrowers will only reach for what’s in their wallet to compensate for what their paychecks will not cover.

Many working adults have no recollection of credit card borrowing not being a mainstay among their financing options. But then, few would be able to identify a Diners Club card, which was a popular brand during the 1980s "yuppie" era when Americans first began to embrace credit card spending in earnest. These days, consumers are not keen to lean on credit cards, partly due to a cultural and financial shift in the industry.

The financial crisis arguably altered households’ views on charging beyond their means. It didn’t hurt that the availability of subprime credit all but disappeared for a few years or that the interest rate on credit cards remained in double-digit territory despite the Federal Reserve’s zero interest rate policy. That said, the idea of frugality re-entered many households’ thinking in the wake of the severe hardship the foreclosure crisis brought to bear on millions of working Americans. Debit cards became the predominant form of plastic used at the checkout.

And yet, consumer credit likely rounded out 2019 at a new $4 trillion milestone as runaway higher educationand car-price inflation coupled with ridiculously looser lending standards pushed households to take on record levels of student loan and auto debt. At roughly $1 trillion, credit cards are but a co-star in a star-studded, full-length feature film. A long history of credit card borrowing suggests that we would have multiples of today’s $1.04 billion in outstanding balances had the growth rate of spending on plastic maintained the headier double-digit paces clocked in the 1980s and 1990s.

Credit Card Borrowing Decouples from Income Expectations in Current Cycle

Several factors worked to slow the rate of credit card usage, few of which were virtuous. The past several recoveries were characterized as “jobless” due to the prolonged period required to recapture prior cycle highs in the employment-to-population ratio and anemic wage growth that persisted in such environments. And while credit card spending certainly held up during the years the housing bubble was inflating, households didn’t have to lean near as hard on plastic when their homes had infamously become de facto ATM machines.

The question is where credit card borrowing goes from here in view of the deteriorating economic outlook. August marked the high in income expectationsas measured by Conference Board data. If history is precedent, there will be a rush to tap available credit as households become increasingly aware that the economy is headed into recession.

Challenger, Gray & Christmas layoff announcements began rising on an annualized basis in August. And the quits rate, as measured by the Job Openings and Labor Turnover Survey, or JOLTS, peaked in August. Janet Yellen, a labor economist by training, was known to lean heavily on the quits rate, which rises as workers gain increased confidence in the availability of jobs. And finally, confidence among small businesses, which we know are the largest source of job creation, also peaked in August. There is a pattern.

You may note that the effective personal income tax rate -- defined as the taxes paid on income, including realized net capital gains and on personal property -- has tended to move up alongside credit card borrowing with two exceptions in the history depicted. The 1980s and the current episode are marked by falling income taxes, hence the decline in this tax rate ahead of recession. It’s intuitive that this holistic tax rate also rises as stocks rally throughout an expansion and declines into recession as the swing factor of capital gains drives the marginal moves.

Add it all up and it’s likely that any rush to "charge it" will be a last gasp as income expectations continue to decline and eventually cross lines with credit card borrowing. The closer we get to recession, the more desperate a sign credit card borrowing is anything but a reflection on strengthening in household finances. Households wouldn’t be reporting that they expect their incomes to rise less if that was the case.

Published:1/19/2019 1:59:42 PM
[Markets] The Tell: Disney, Dollar Tree, a trash collector and a ski resort are top picks from this year’s Barron’s Roundtable Stock pickers tell Barron’s the 48 ways they think investors can prosper in a changing and tumultuous world, including the best selections among down-and-out industrials and fast-growing pharma stocks.
Published:1/19/2019 1:59:42 PM
[Markets] Yellow Vests Battle Tear Gas And Aggressive Riot Cops During 10th Week Of Chaotic Protests

Despite freezing temperatures and rain, tens of thousands of Yellow Vest protesters took to streets across France on Saturday for a tenth consecutive week of demonstrations, completely ignoring French President Emmanuel Macron's call for a "national debate" - the latest scheme we can add to the pile of failed gimmicks aimed at stopping the movement. 

And while the MSM is largely ignoring the size and scope of the protests, independent journalists, select foreign news outlets and others have been documenting the mayhem. 

Protesters assembled by the Invalides plaza near the National Assembly and marched through the city's Left Bank in freezing temperatures. The demonstrations were largely peaceful but, according to reporters, clashes broke out late in the afternoon between police and demonstrators, some wearing masks, in Paris' central Invalides district.

Protesters threw firecrackers, bottles and stones at the police who responded with water cannon and tear gas to push them back.

Authorities said there were around 7,000 protesters in Paris, some of whom gathered near the world-famous Champs Elysees, while there were similar demonstrations in major cities across France. Rallies took place in Toulouse, Lyon, Rouen and other cities.

According to the French Interior Ministry, there were less protestors across France on Saturday, with the official number standing at 27,000 at around 2pm local time.

A fire broke out at the Joan of Arc station in Toulouse, causing people to rush out and evacuate. The cause of the fire is currently unknown.

Twitter user @Bellingdawg is a highly recommended follow - both tweeting and retweeting footage you'll never see on the evening news. 

Published:1/19/2019 1:32:11 PM
[Markets] Luongo: Pelosi Fiddles While The Democrats Burn

Authored by Tom Luongo,

Nancy Pelosi (D – Boomers) has a problem. Scratch that, she has a number of problems, not counting her own ethical and moral shortcomings.

Pelosi is the Queen of Projection. She projects an air of invincibility while also projecting her weaknesses onto her political opponents. So, even though Nasty Nancy just got back her Speaker’s gavel, she does so at the weakest moment in the Democratic party’s history since World War II.

Democrats Are Close to Terminal Decline

The traditional three-headed coalition of the Democrats has been shattered. The middle class Union guys are gone. By the time Trump is done with her over border security Pelosi’ll lose a bigger swath of the Hispanic vote than she already has.

All that will be left is her warmongering, globalist, shills for the MIC and the Deep State. Bicoastal Smug Liberals.

Internal Revolt

But, the hollowing out of the middle class is Pelosi’s biggest problem. Betraying the former Bernie Bros was the beginning. The Democrats under her leadership give lip service to bank reform which, in turn, has the hard-core Socialist left fired up.

That’s what rock-star Alexandria Ocasio-Cortez represents. She is the face of what’s left of Occupy Wall St. And she has a strong, knee-jerk, anti-incumbent, anti-establishment momentum behind her.

It doesn’t matter that she’s 28 years old, has little to no life experience or a firm grasp on reality. This is politics and these are chaotic times. She already has an acronym (AOC) and a nickname. She’s important.

Warhorses like Pelosi don’t know how to change their ways this late in their game. They think they can buy off people like AOC and outmaneuver her.

Pelosi faced a serious challenge to her party leadership in the run up to being elected Speaker of the House again. And she paid for that smooth vote with AOC’s appointment to the House Financial Services Committee.

When you’re going for the kill-shot on Trump there can be no weaknesses perceived.

But the big betrayal by the Pelosi Set is on war and empire. The same arguments animating the GOP insurrection against Trump by neoconservatives keeps Pelosi’s Smug Liberal interventionists happy.

The leadership of both parties love the Empire. They work non-stop to keep that gravy train flowing. It’s how they stay in power, amass incredible personal fortunes and why the country at large — left, right and center — hates their guts.

Do you think AOC wins her primary if the DNC hadn’t been so thoroughly despicable to Bernie Sanders’ supporters?

Or such full-throated supporters of questionable foreign interventions?

Pelosi is betting her political farm on border security. She does so because it is the one issue which galvanizes both her corrupt leadership with the populist, socialist Left represented by AOC.

They all hate what they perceive as bigotry.

Gabbard: The Anti-Pelosi

And it is also a distraction from the real issue that Trump put front and center, the Democrats’ weakness on foreign policy.

By announcing the pull out of U.S. troops from Syria and Afghanistan he reminded everyone just how much Pelosi et.al. love spending your money bombing brown people overseas for their profit.

As I said, appearance of strength is all that matters in politics at this level. Pelosi cannot afford to look at all weak during a government shutdown she started to oppose Trump and regain the White House in 2020.

So, while Pelosi is focused on being the establishment’s mouthpiece for taking down Trump to regain control over the vast government machinery, rebellions are happening within her own party.

Enter Tulsi Gabbard. Gabbard has real promise as the anti-war/anti-empire insurrectionist within the Democrats. She is a leftist version of Ron Paul in that she’s hated by everyone who thinks they are someone.

Because nothing unites the DNC and the RNC like the threat of peace getting an audience on the national stage.

When “anti-incumbent” is the watchword of the day, Gabbard throwing her hat into the 2020 Presidential race is a big deal. Gabbard will get support from anti-war Republicans, Independents and Libertarians.

They will cross party lines to vote for her in primaries, hurting the anointed ones.

She will successfully fund-raise on ending useless and counter-productive engagements in the Middle East. With her part of the Presidential conversation it forces her opposition to adopt her positions while simultaneously supporting Trump’s struggle against his own staff.

Trump should give her a lifetime membership to Mar-a-Lago.

Yes, she’s a mess economically, but that’s not where her value lies. She’s everything the current Democratic party isn’t: attractive, conscientious, brave and committed to peace.

Pelosi’s Corner

And that is a nightmare for Pelosi. She’s positioned herself as being against whatever Trump is for. That makes her an easy foil for him.

With Gabbard in the race Trump can go hard on foreign policy and create havoc in the Democratic primaries. As long as he stays in the game, Gabbard is his stalking horse.

Don’t underestimate the political points he scored with canceling Pelosi’s overseas trip. This is the Donald Trump we asked for — end politics as usual.

Confront the banal hypocrisy of our ruling class.

And, most importantly, call out the cheap virtue signaling hacks like Pelosi get a free pass on every day in the media.

Trump made it clear that if Pelosi wants to conspire with foreign leaders against him that she can do it on her own dime.

And having the shutdown as the excuse in a perfect game of brinkmanship made it even more effective.

Pelosi acts like she has Trump dead to rights on petty corruption thanks to Mueller’s songbird Michael Cohen. I don’t discount how hard they are gunning for Trump now. But like Theresa May in the U.K. over Brexit, there is only so much people will take in service of petty party infighting.

Eventually a real political revolt occurs. Just ask Italian Democrats or Emmanuel Macron.

So Pelosi has to be careful how she plays her hand here. She’s losing to Trump on the wall. Every day the argument against it looks both silly and hysterical. $5.7 billion is less than one week’s interest on the national debt.

But, she’s pot committed to her position that ‘walls are immoral.’ What she may find out here is that if you back someone like Trump into a corner and promise to destroy everything he has, then he then has nothing left to lose.

And that is when he is most dangerous to not only her but to everyone she’s beholden to. After that her own people’s knives come out.

Published:1/19/2019 12:59:26 PM
[Markets] A trash stock and more picks from T. Rowe manager at Barron's Roundtable A trash stock and more picks from T. Rowe manager at Barron's Roundtable Published:1/19/2019 12:30:19 PM
[Markets] BlackRock Accidentally Exposes Confidential Sales Data For Thousands Of Financial Advisors

As we've pointed out before, the notoriously high fees charged by financial advisors aren't the only reason why young people are opting for low-cost robo-advisors (or simply stashing their money in an index-tracking ETF that charges 3 basis points a year) instead of human advisors. There's also the issue of whom financial advisors serve: Their clients - to whom they have a fiduciary obligation - or the big wirehouses and fund managers who supply their product?

Well BlackRock, which holds the title of world's largest asset manager, with more than $5 trillion AUM, appears to have inadvertently affirmed that thousands of financial advisors serve their masters first, and their clients second. 

BR

Because in what Bloomberg described as an embarrassing and incidental slip up - the result of an unforced error - BlackRock accidentally published details about its sales relationship with thousands of financial advisors.

In three spreadsheets accidentally published on a webpage associated with BlackRock's iShares ETF business,  thousands of financial advisors were given ratings based on how much business they bring BlackRock. Some were classified as "dabblers" or "power users". Some had even achieved "Club" status, including membership in a "Patriot's Club" or "Director's Club".

But despite the insight this offered into the relationship between BlackRock and the army of "independent" financial advisors responsible for selling its products, BBG didn't seem to give these revelations much thought. Instead, they focused on the fact that this is probably the most embarrassing Wall Street data breach since JPM's 2014 breach - the only difference being that the latter was perpetrated by malicious hackers.

BlackRock Inc., the world’s largest asset manager, inadvertently posted confidential information about thousands of financial adviser clients on its website.

The data appeared in three spreadsheets, linked on one of the New York-based company’s web pages dedicated to its iShares exchange-traded funds. The documents included names and email addresses of financial advisers who buy BlackRock’s ETFs on behalf of customers. They also appeared to show the assets under management each adviser had in the firm’s iShares ETFs.

The links were dated Dec. 5, 2018, but it’s unclear how long they were public. The documents were seen by Bloomberg and removed Friday. BlackRock, which oversees assets of almost $6 trillion, is the world’s largest issuer of ETFs.

One of the spreadsheets appears to list more than 12,000 entries of advisers and their sales representatives at BlackRock. On another, the advisers were categorized in a variety of ways such as “dabblers” or “power users.” A column noted their “Club Level” including the “Patriots Club” or “Directors Club.”

A BlackRock spokesperson said the company was reviewing the accidental leak, and hinted that two "distribution partners" (i.e. the BlackRock employees responsible for wholesaling the company's financial products) were likely to blame for the leak.

"We are conducting a full review of the matter," spokesman Brian Beades said in a statement Friday.  "The inadvertent and temporary posting of the information relates to two distribution partners serving independent advisers and does not include any of their underlying client information."

Securing data is known to keep Wall Street leaders awake at night. But most often, senior executives cite a fear of hackers, which has prompted some of the nation’s biggest banks to pour upwards of $1 billion a year into cybersecurity. It’s one area where financial firms set aside bitter rivalries, sharing tips and collaborating on projects to ensure the public remains confident in the industry - and that it never suffers a catastrophic loss.

According to one cybersecurity expert quoted by Bloomberg, the best way for Wall Street firms to mitigate the fallout from cybersecuriuty scandals is to 'accurately communicate what happened', adding that the firms' initial response is crucial.

Firms can’t avoid breaches entirely, but they can react to them in a way that rebuilds trust, said John Reed Stark, who focused on internet crimes while working in the Securities and Exchange Commission’s enforcement division and now runs a cybersecurity consulting business.

“Data security incidents are inevitable,” he said after the incident at BlackRock. “The most important thing in this kind of situation is about the response from the firm, and whether they’re communicating accurately about what happened.”

And what better way to restore confidence in one's business than by deflecting blame for its mistakes?

Published:1/19/2019 12:30:19 PM
[Markets] Trump says stock-rallying reports of lifting Chinese trade 'sanctions' were premature President Trump in comments Saturday said stock-rallying reports this week that trade talks with China would include the lifting of tariffs against the world's second-largest economy weren't true. The president referred to those tariffs as "sanctions" on Saturday. "Things are going very well with China and with trade," he said to reporters. "There were some false reports about sanctions being removed. We have taken in tremendous amounts of money into the United States because of the sanctions and we'll see how it goes. And if we make a deal, certainly we wouldn't have sanctions...," he said, expressing general optimism for progress. The Wall Street Journal reported Thursday, citing people familiar with the matter, that the idea of lifting tariffs in part or whole was proposed by Treasury Secretary Steven Mnuchin in a series of strategy meetings. The report added that U.S. Trade Representative Robert Lighthizer is concerned that any concession could be seen as a sign of weakness, however. Trade issues have been cited as the biggest headwind for stocks rallying in 2019 and the reported tariff removal pushed stock averages to session highs Thursday when the headlines hit. Published:1/19/2019 11:59:07 AM
[Markets] Trump: Stock-rallying reports of U.S lifting Chinese trade 'sanctions' premature Trump: Stock-rallying reports of U.S lifting Chinese trade 'sanctions' premature Published:1/19/2019 11:59:07 AM
[Markets] 66 Dead Near Mexico City After Fireball Erupts From Illegal Gas Pipeline Tap

Police and rescue workers in the small Mexican town of Tlahuelilpan, just 60 miles outside Mexico City, are still sifting through a ghastly scene after a explosion at an illegal gasoline-pipeline tap created a giant fireball that burned at least 66 people alive and left dozens of others badly wounded by the flames, according to the Washington Post.

66 people have been confirmed dead, and another 85 were missing at last count.

WaPo

Witnesses described a field of charred contorted corpses as the victims tried in vain to put out the flames covering their bodies. Forensic experts working on counting the casualties were having trouble separating bodies from one another after they fell in heaps, perhaps a sign that people stumbled over one another as they struggled to get away from a geyser of gas that shot into the air in the moments before the explosion, per NBC News.

Mexico

The explosion occurred as hundreds of people gathered to steal gas from a duct breached by fuel thieves.

On Saturday, several of the dead lay on their backs, their arms stretched out in agony. Some seemed to have covered their chests in a last attempt to protect themselves from the flames; another few black-charred corpses seemed to embrace each other in death.

Lost shoes were scattered around the scorched field, as were plastic jugs and jerry cans that the victims had carried to gather spilling fuel.

The tragedy took place just weeks after newly inaugurated Mexican President Andres Manuel Lopez Obrador launched an offensive against gangs of fuel thieves who stole $3 billion in fuel from state-run energy firm Pemex during the first 10 months of the year.

A staggering 12,581 dangerous illegal pipeline had been drilled in that time - a rate of roughly 42 per day.

One man wept after explaining that he believed his 13-year-old son had perished in the fire.

“Ay, no, where is my son?” wailed Hugo Olvera Estrada, whose 13-year-old son, Hugo Olvera Bautista, was at the spot where the fire erupted. Wrapped in a blanket outside a clinic, the man had already gone to six local hospitals looking for his child.

After returning home from middle school yesterday, his father recounted, the boy went to join the crowd scooping up gasoline. Olvera Estrada believed he was influenced by older and supposedly wise men from the town of about 20,000. “The older men brought him,” he said.

In a morning press conference, AMLO vowed to continue his campaign against fuel theft, and cited the explosion as an example of the very real human costs from this thievery.

"We are going to eradicate that which not only causes material damages, it is not only what the nation loses by this illegal trade, this black market of fuel, but the risk, the danger, the loss of human lives" he said.

"What happened here should serve as an example for the whole nation to unite behind the fight that the president is carrying out against this ill," said municipal health director Jorge Aguilar Lopez.

As part of the crackdown, AMLO has shuttered some pipelines and ordered fuel to be transported by truck - causing fuel shortages in some parts of the country - while more than 3,000 Mexican marines have been ordered to guard other pipelines.

Published:1/19/2019 11:59:07 AM
[Markets] Economic Preview: Economy is hitting more turbulence, but the shutdown leaves investors partly in the dark The longer the month-old partial government shutdown drags on, the harder it gets to figure out what the heck is going on in the economy.
Published:1/19/2019 11:29:08 AM
[Markets] "You Want To See A Stock Market Crash, Impeach Trump!" Warns President After Media Attacks

President Trump on Saturday hit back at critics after several "hit pieces" over the last week generated repeated calls by Democrats for his impeachment - the latest being a Thursday night BuzzFeed report that Trump instructed his former attorney, Michael Cohen, to lie about a Trump Tower Moscow project. The BuzzFeed report was debunked as a fabrication the next day by special counsel Robert Mueller's office, but not before giddy Democrats ran wild with calls for Trump's ouster. 

"The Economy is one of the best in our history, with unemployment at a 50 year low, and the Stock Market ready to again break a record (set by us many times) - & all you heard yesterday, based on a phony story, was Impeachment. You want to see a Stock Market Crash, Impeach Trump!" the President Tweeted Saturday morning. 

The latest flood of anti-Trump news began on January 11 with a New York Times report that the FBI supercharged their investigation into whether Trump had wittingly or unwittingly fallen under Moscow's influence after he fired FBI Director James Comey (at the recommendation of Deputy AG Rod Rosenstein). According to the report, agents and senior F.B.I. officials "had grown suspicious of Mr. Trump’s ties to Russia during the 2016 campaign" but held off on opening an investigation into him, the people said, in part because they were uncertain how to proceed with an inquiry of such sensitivity and magnitude.

One day after the NYT report, the Washington Post reported that Trump had "gone to extraordinary lengths to conceal details of his conversations with Russian President Vladi­mir Putin, including on at least one occasion taking possession of the notes of his own interpreter and instructing the linguist not to discuss what had transpired." 

Of course, buried in paragraph nine the Post admits: "No evidence has emerged publicly that Mr. Trump was secretly in contact with or took direction from Russian government officials."

Continuing the anti-Trump train was a Thursday report in the Wall Street Journal that President Trump instructed Michael Cohen to rig CNBC and Drudge polls in his favor. Cohen reportedly agreed to pay a small IT firm $50,000 to conduct the rigging, only to pay them in a bag of cash containing between $12,000 and $13,000 and a boxing glove that Cohen said had been worn by a Brazilian mixed-martial arts fighter. 

Cohen has disputed the account - but not the relationship with the IT firm - RedFinch or its CEO John Gauger, saying "All monies paid to Mr. Gauger were by check."

Hilariously, in May 2016 Cohen also asked Gauger to create a Twitter account - @WomenForCohen, which was run by a female friend of Gauger and described Cohen as a "sex symbol," praising his looks and character, while promoting his appearances and statements boosting Trump's candidacy. 

And while Gauger says he never received the rest of the $50,000 he was owed, Cohen still requested - and received - a $50,000 reimbursement from Donald Trump and his company for the work done by RedFinch, according to the Journal, citing a government document and a person familiar with the matter. The reimbursement - based on a handwritten note by Cohen, was paid largely out of Trump's personal account. 

Trump attorney Rudy Giuliani said that Cohen's full reimbursement for the $50,000 while paying RedFinch less shows the former Trump lawyer to be a thief. "If one thing has been established, it’s that Michael Cohen is completely untrustworthy," said Cohen. 

And last but not least, of course, is the now-discredited BuzzFeed report alleging that Trump instructed Cohen to lie about Trump Tower Moscow.

It's interesting how quickly the news cycle turned against Trump after he threatened to flex his presidential powers and declare a national emergency to fund his wall - right on the heels of a Syria pullout announcement which has been wildly unpopular with establishment war hawks.

Published:1/19/2019 11:29:07 AM
[Markets] Time for a media reckoning after Mueller response to BuzzFeed? Pundits speak Time for a media reckoning after Mueller response to BuzzFeed? Pundits speak Published:1/19/2019 11:29:07 AM
[Markets] No, Paul Krugman, This Shutdown Is Not A "Big Libertarian Experiment"

Authored by Thomas Eckert via The Mises Institute,

With the government shutdown now entering its fourth week, it seems that it’s left many political pundits clamoring for an excuse to wash their party’s blame from the situation. Perhaps the most glaring example came from Paul Krugman’s recent New York Times column,“Trump’s Big Libertarian Experiment.” The Nobel-prize winning economist has never been shy about his contempt towards libertarianism, and this column only demonstrates he’s come closer to full-blown lunacy. Because, as I’ll explain, no, this shutdown is not a libertarian experiment.

I know many who may be unfamiliar with libertarian philosophy like to think our only concern is hatred for the state, and that anything not inherently pro-government must be essentially libertarian-esque, but that’s not quite the case. Libertarianism, at its core, centers around the recognition of private property rights and a strict adherence to consent and the non-aggression principle (NAP). And already in Krugman’s first paragraph we begin to see his claim of tying this to libertarians unravel, as he admits that while conservatives often echo libertarian rhetoric, they’ve never actually followed through on any of their policies.

Nonetheless, now that it’s Trump who’s allowed a government shutdown (something every president has endured going back to Gerald Ford, but never mind that inconvenient fact), this somehow makes it a libertarian experiment. In other words, what we’re expected to believe is that although these politicians have ignored the advice of libertarians for decades, in most cases doing the exact opposite of what we espouse, now that people are seeing the negative side of their policies as government checks dry up, it is suddenly a libertarian’s dream. The obvious contradiction in that claim should be glaring.

It’s not unlike when we complain about silly, little things like endless wars and deficit spending; issues Democrats and Republicans can’t be bothered with, and we’re inevitably told to move to our utopia — Somalia. What Krugman is implying here is that a nation operating in complete contradiction to libertarian thought (poor regard for the protection of property rights and an inclination towards aggression against others as a political solution) can likewise come crashing down and somehow, this demonstrates it’s exactly what we’ve always wanted — or at least the negative consequences are our fault.

Not so fast though, Krugman.

Because as history shows, it wasn’t libertarians who advocated for any of this. We never lobbied for the government to expand to the point of hiring 800,000 workers that even they deem to be “non-essential.” Neither did we advocate for a massive, $4 trillion annual budget, requiring an ever-expansive debt ceiling just to keep it open, the very reason this experiment of a shutdown began in the first place.

You know who did though? Paul Krugman. With his commitment to Keynesian economics, he has rarely seen an instance of deficit spending he hasn’t liked. Unless of course Trump is in office with a Republican congress; then he’s almost downright libertarian on the deficit.

Ironically, one of the few policy agreements he actually does have with libertarians — a disdain for farm subsidies — is somehow pointed to as a strike against libertarians. Never mind that our use of the term “crony capitalism” here is the exact same as Krugman’s description in his own writing; I wouldn’t hold your breath for Krugman to share any fault now that the checks are no longer being mailed out to the farmers though. I suppose we can overlook the fact that it wasn’t even libertarians who initially enacted those subsidies back during the New Deal; a policy Krugman argues, didn’t go far enough in its spending, calling it only “modestly expansionary.” And I also suppose we ought to ignore the countless politicians who’ve fought to keep these crony policies in place, including the progressive darling, Bill Clinton, who saw to it that farm subsidiesballooned to $30 billion in 1998 by classifying it as “emergency aid.” Never mind that there weren’t any libertarians behind that. But now that people have been made dependent on subsidies and are suffering in their absence, we're now in a libertarian utopia!

And God forbid we use these libertarian critics’ own argument against them. Who was it that derided Sears’ CEO, Eddie Lampert, for running the company into the ground while still receiving a bonus check? Calling him an “Ayn Rand devotee”? Oh, that was Paul Krugman. While laying off 30,000 people and keeping your bonus is quite immoral, should we expect the same outrage from Krugman in the face of twenty-five times as many federal employees losing their checks as his friends in the Washington elite keep the money flowing in? Of course not. “Blame the libertarians!” goes the broken record.

It’s at this point, however, that Krugman spills the beans about his true agenda all along. As it turns out, he admits that libertarian ideas aren’t a “real” force within the GOP. (who knew?!) Rather, he surmises it’s only a cover story for Republicans’ true plan to distribute wealth to their rich friends — arguably the truest statement made in the entire column.

Now, what libertarian critique would be complete without a fallacious argument about food being poisoned?

Krugman decides to end his column with the oldest of libertarian strawmen: the insinuation that without the Food and Drug Administration working tirelessly to inspect our food, we’d succumb to the whims of greedy capitalist producers who only wish to poison us. Oddly, you’d think a Nobel economist would grasp the concept of how unlikely and unprofitable it is to intentionally kill off your customers — seeing as how we’re told relentlessly capitalism only cares about profits. What’s more likely is that in the absence of any real arguments comes an appeal to what political hacks do best: fearmongering.

So, does the prospect of contaminated food smell like freedom to us? No, not any more than your attempts to pass blame make this shutdown any sort of “big libertarian” experiment.

Published:1/19/2019 11:03:24 AM
[Markets] Key Words: A media reckoning — or one for Trump — after rare Mueller response to BuzzFeed Russia-probe leak? Dozens of pundits are chiming in across publications and speculating that a time of reckoning, as Axios put it, may be here. Is that reckoning for the media, or Trump, or both?
Published:1/19/2019 11:03:24 AM
[Markets] Trump Will Offer Democrats Deal In "Major Announcement" Today

President Trump will renew his demand for a border wall with a few new incentives for congressional Democrats in a 3 p.m. Saturday announcement, according to Bloomberg, citing a person familiar with the matter. Trump teased the announcement on Friday. 

Democrats have thus far refused to allocate $5.7 billion for Trump's long-promised southern border wall, and have called for protections for young immigrants brought into the United States as children and currently covered under the Obama-era Deferred Action for Childhood Arrivals (DACA) program. 

To that end, Axios reports that in exchange for the $5.7 billion in wall money, Trump will offer the BRIDGE Act - which would extend protections for Deferred Action for Childhood Arrivals, as well as legislation which would extend the legal status of Temporary Protected Status (TPS) holders. The deal is said to have been crafted by Jared Kushner and Vice President Mike Pence. 

The dispute over the wall has resulted in a partial government shutdown now in its 29th day. 

Trump, meanwhile, has threatened to declare a national emergency to bypass Congress and reallocate federal funds for the project - which he does not plan to do on Saturday according to Bloomberg's source who was "granted anonymity to discuss the announcement beforehand," whatever that means. 

The Saturday announcement comes on the heels of a contentious week between President Trump and House Speaker Nancy Pelosi, after Pelosi "disinvited" Trump from giving the State of the Union Address later this month. Trump hit back by grounding Pelosi

Pelosi earlier in the day accused the Trump administration of leaking her plan to fly commercially to Afghanistan, forcing her to scuttle the trip because of the heightened danger, after word of her intentions began spreading among several media organizations.

Trump on Thursday publicly revealed plans for the trip in a letter denying use of military aircraft for her congressional delegation to visit troops in the war zone. A day earlier Pelosi publicly suggested Trump either delay his State of the Union speech or submit it in writing, citing the shutdown.

The fact that they would leak that we were flying commercial is a danger not only us but other people flying commercial,” Pelosi told reporters Friday at the Capitol. “It was very irresponsible on the part of the president.” -Bloomberg

White House Press Secretary Sarah Huckabee Sanders denied the administration leaked the information about the commercial flight, while Pelosi has refused to explain why she believes the administration was behind the leak. 

Pelosi, meanwhile, was seen at Reagan National Airport. Looks like it was a really important secret trip to Afghanistan! 

Published:1/19/2019 10:33:37 AM
[Markets] Disney, down-and-out industrials, pharma stocks feature in Barron's Roundtable Disney, down-and-out industrials, pharma stocks feature in Barron's Roundtable Published:1/19/2019 10:03:26 AM
[Markets] Trump Attorney Goes Ballistic After BuzzFeed Blunder; Demands DOJ Reveal Leakers

Rudy Giuliani has gone ballistic over Twitter following a BuzzFeed News report alleging that President Trump told former attorney Michael Cohen to lie about a plan to build a Trump Tower in Moscow - only to have special counsel Robert Mueller's office issue a rare statement denying the report's validity.

"BuzzFeed’s description of specific statements to the Special Counsel’s Office, and characterization of documents and testimony obtained by this office, regarding Michael Cohen’s Congressional testimony are not accurate," said the statement by the Special Counsel, which was clarified by the Washington Post to mean the entire report. 

On Friday night, Giuliani praised Mueller's office for "correcting the BuzzFeed false story that Pres. Trump encouraged cohen to lie." He then called for the DOJ to "reveal the leakers of this false BuzzFeed story which the press and Democrats gleefully embraced." 

President Trump also slammed BuzzFeed Friday night, telling his 57.5 million Twitter followers: "Remember it was Buzzfeed that released the totally discredited “Dossier,” paid for by Crooked Hillary Clinton and the Democrats (as opposition research), on which the entire Russian probe is based!"