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Published:10/31/2018 1:48:41 PM
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Published:10/31/2018 1:48:41 PM
[Markets] John Mauldin Warns Debt Alarms Are Ringing

Authored by John Mauldin via,

Is debt good or bad? The answer is “Yes.”

Debt is future spending pulled forward in time. It lets you buy something now for which you otherwise don’t have cash available yet. Whether it’s wise or not depends on what you buy. Debt to educate yourself so you can get a better job may be a good idea. Borrowing money to finance your vacation? Probably not.

Unfortunately, many people, businesses, and governments borrow because they can, which for many is possible only because central banks made it so cheap in the last decade. It was rational in that respect but is growing less so as the central banks tighten their policies.

Earlier this year, I wrote a series of articles (synopsis and links here) predicting a debt “train wreck” and eventual liquidation—an event I dubbed The Great Reset. I estimated we have another year or two before the crisis becomes evident.

That’s still my expectation… but I’m beginning to wonder again. Several recent events tell me the reckoning could be closer than I thought just a few months ago. Today, we’ll review those and end with a few suggestions on how to prepare.

Addicted to Debt

As noted, debt can be appropriate—even government debt, in some (rare) circumstances. I am glad FDR issued war bonds to help defeat the Nazis, for instance. Now, however, governments go into debt not because they face existential threats, but simply to keep their citizens and benefactors comfortable.

Similarly, central banks enable debt because they think it will generate economic growth. Sometimes it does, too. The problem is they create debt with little regard for how it will be used. That’s how we get artificial booms and subsequent busts.

We are told not to worry about absolute debt levels so long as the economy is growing in concert with them. That makes sense. A country with a larger GDP can carry more debt. But that is increasingly not what is happening. Let me give you two data points.

Lacy Hunt tracks Bank for International Settlements data that shows debt is losing its ability to stimulate growth. In 2017, one dollar of non-financial debt generated only 40 cents of GDP in the US and even less elsewhere. This is down from (if memory serves) more than four dollars of growth for each dollar of debt 50 years ago.

This has significantly worsened over the last decade. China’s debt productivity dropped 42.9% between 2007 and 2017. That was the worst among major economies, but others lost ground, too. All the developed world is pushing on the same string and hoping for results like we saw 40–50 years ago. As my friend Rob Arnott constantly reminds me, hope is not a strategy.

Source: Hoisington Investment Management

Now, if you are accustomed to using debt to stimulate growth, and debt loses its capacity to do so, what happens next? You guessed it: The brilliant powers-that-be add even more debt. This is classic addiction behavior. You have to keep raising the dose to get the same high.

At this point, Paul Krugman and others usually call me a debt curmudgeon and argue the debt doesn’t matter. I point them to Ken Rogoff and Carmen Reinhart’s book from 10 years ago, This Time Is Different, which demonstrates that in every prior debt run-up, over centuries of history, accumulated debt clearly eventually made a difference. There is always an eventual Day of Reckoning.

The US economy is so huge and powerful that our current $24.5 trillion government debt (including state and local) could quite easily grow to $40 trillion before we meet that day. We are one recession away from having a $30 trillion US government debt total. It will happen seemingly overnight. And deficits will stay well above $1 trillion per year every year after that, not unlike now.

Some argue the US has almost $150 trillion of personal and corporate assets to offset that debt. That is true enough, but I think there might be some slight resistance if the government demanded 15% of your total assets, including your house, real estate, investment assets, furniture and goods, to pay off the debt. That would be in addition to your regular taxes, and then they begin accumulating more debt.

Even though you are reading about a budget deficit of under $800 billion this year, the actual amount of debt added last year was well over $1 trillion. That is due to “off budget” items that Congress, in its wisdom, thinks shouldn’t be part of the normal budgetary process. It includes things like Social Security and Medicare—which vary from time to time and year to year—and can be anywhere from $200 billion to almost $500 billion.

And here’s the point that you need to understand. The US Treasury borrows those dollars and it goes on the total debt taxpayers owe. The true deficit that adds to the debt is actually much higher than the number you see in the news. It brings to mind the scene in the Wizard of Oz, when they wizard says, “Pay no attention to the man behind the screen.”

Household and corporate debt is growing fast, too, and not just in the US. Here’s a note from Lakshman Achuthan.

Notably, the combined debt of the US, Eurozone, Japan, and China has increased more than ten times as much as their combined GDP [growth] over the past year.

Yes, you read that right. In the last year, the world’s largest economies are generating debt 10X faster than economic growth. Adding debt at that pace, if it continues, will boost the debt-to-GDP ratio at an alarming rate.

Lakshman continues.

Remarkably, then, the global economy—slowing in sync despite soaring debt—finds itself in a situation reminiscent of the Red Queen Effect we referenced 15 years ago, when tax cuts boosted the US budget deficit much more than GDP. As the Red Queen says to Alice in Lewis Carroll's Through the Looking Glass, “Now, here, you see, it takes all the running you can do, to keep in the same place. If you want to get somewhere else, you must run at least twice as fast as that!”

I am trying to imagine a scenario in which this ends in something less than chaos and crisis. The best I can conceive is a decade-long (and possibly more) stagnation while the debt gets liquidated. But realistically, that won’t happen because debtors won’t let it, and they outnumber lenders. Hence, something like the Great Reset will happen first.

The rational course would be to delay the inevitable as long as possible. Yet in the US, at least, we’re hastening it.

Lost Exorbitant Privilege

This month, the US Treasury closed the books on Fiscal Year 2018. It was a success in the sense that the government is still open and doing the things it should. Financially speaking, it was another debt-financed failure.

Source: US Treasury

The federal government spent approximately $4.1 trillion in FY 2018, of which it had to borrow $779 billion on budget and a few hundred billion more off-budget (amount TBD). And over 40% of the on-budget deficit went simply to pay $325 billion in interest on previously-issued debt.

Obviously, the government should spend less. But where to cut? There is no political agreement on that and little prospect of one. Nor, barring an economic boom of a magnitude and duration I think unlikely, are we going to grow out of this. So, I expect continued and even bigger deficits.

Deficits mean the Treasury has to borrow cash, which it does by selling Treasury bills, notes, and bonds. This wasn’t a problem for most of the last decade but is rapidly becoming one as the amounts grow larger.

Thanks to the “exorbitant privilege” I discussed earlier this month, the US has long had many foreigners willing to buy our debt. Now they are losing interest (forgive the pun) because hedging their currency exposure costs more. There are some complex reasons behind this, relating to swaps and the differentials between the US economy and others, but here’s the bottom line: European and Japanese investors can no longer buy US Treasury debt at a positive rate of return unless they want to take currency risk, which most do not. This is a new development.

This might be fine if US investors made up the difference, but that’s not happening, either, and might not be great anyway. Capital that goes into Treasury debt is capital that’s not going into bank loans, corporate bonds, mortgages, venture capital, stocks, or anything else in the private sector, which generates the growth we’ll need to pay off the government’s debt.

Treasury auction data shows it is getting harder to attract buyers. According to Bloomberg, last month’s two-year note auction matched the lowest bid-to-cover ratio for that maturity since December 2008.

Source: Bloomberg

The problem is manageable for now, and Treasury will always be able to borrow at some price… but the price could get awkwardly high, with interest costs rising dramatically.

Given the debt’s maturity structure, it could be sooner than you might think. Treasury took advantage of lower short-term rates in recent years, which reduced interest costs, but also created refinancing risk. Here’s a Torsten Slok chart (via my friend Luke Gromen on Twitter).

Source: Luke Gromen

Looking only at federal debt not held by the Federal Reserve, Treasury will need to borrow something like 43% of GDP over the next five years just to rollover existing debt at much higher interest rates. That’s not counting any new debt we accumulate, which could be quite a lot if we enter recession or (God forbid) another war.

But set aside the hypothetical possibilities. Just the things we know are already locked in, like Social Security and Medicare, are enough to blow up the debt. Somebody has to buy all that Treasury paper. If it’s not foreigners, and not the Fed, and not American savers, we are out of prospects.

Now, buyers will appear at the right price, i.e. some higher interest rate. Barring recession-induced lower rates (which would be a different problem), government borrowing could get way more expensive.

Which is more likely: a double-digit ten-year Treasury yield or a worldwide debt liquidation? Neither will be fun. But I’ll bet that we see one or the other at some point in the 2020s.

Trigger Points

My renewed fear comes from the very real possibility the global economy breaks down in the next six months. Anything could trigger a crisis, and it could well be something no one presently foresees, but here are three candidates.

Corporate Credit Crisis: As a whole, US companies are significantly more leveraged now than they were ahead of the 2008 crisis. We saw then what happens when the commercial paper market seizes up, and that was without a Fed in tightening mode. Now we have a central bank both raising short-term rates and slowly ending its crisis-era accommodations. Recent comments from FOMC members say they have no intent of stopping, either. A few high-profile junk bond defaults could ignite fears quickly.

There are trillions of dollars of low-rated corporate debt that can easily slide into the junk debt category in a recession. Since most public pension, insurance, and endowment programs are not legally allowed to own junk-rated debt, I can see where it could easily cause a debt crisis along the lines of the previous subprime crisis.

Trade war: One reason the US economy seems to be booming right now is a surge in imports. Companies are rushing to build inventory ahead of the 25% tariff on Chinese goods that takes effect January 1. Coming on top of usual holiday season stockpiling, it is jamming ports, highways, and warehouses—generating many jobs in the process.

That’s all good right now, but those truck drivers and warehouse workers will no longer be necessary once the shelves are stocked. Working down that inventory will take months, at least, and the resulting slowdown could ease the economy into recession next year.

We might avert that outcome if the US and China reach some trade resolution, but that doesn’t appear likely. The latest reports say the Trump administration is digging in for a long siege and, if anything, may get even more aggressive against China. Nor does China seem likely to bend.

You may have heard the tennis term, “unforced errors.” Those are mistakes of your own,  not a result of your opponent’s good shots. I think the tariffs may be an unforced error in US economic policy that could cause a serious growth decline, or worse.

European Slowdown: This week, we got October PMI reports from Markit. Its eurozone manufacturing and services index dropped to the lowest point since September 2016, with export-dependent Germany particularly weak. Meanwhile, Italy’s new budget is wildly out of line with its revenue and growth prospects. This threatens to set off another euro crisis. And then there’s the serious possibility of a hard Brexit in early 2019.

In short, Europe (at least some of it) is in real danger of entering recession next year. If that happens, the impact will spread around the globe as the continent reduces imports from the US, China, and elsewhere. Not to mention the potential fireworks if Italy or anyone else actually defaults on debt payments to foreign lenders, i.e. German, French, and other European banks with minimal loss reserves.

If the European Central Bank won’t buy Italian bonds, and the Italians won’t do it themselves, then Italian interest rates could jump dramatically, precipitating a crisis. This is essentially what forced the ECB into its first quantitative easing program. In theory, the Italians were then in compliance. That is not the case today. I have been pointing my finger at Italy for years. It is the linchpin in the whole euro experiment on debt and solidarity.

I could go on, but you get the point. The US economy looks fine just ahead, but problems lurk over the horizon. Bad things could happen soon.

So, what do you do? I have three suggestions.

  1. Build a cash reserve: I know every financial advisor says that, but disturbingly few people actually do it. Have several months of living expenses readily available in risk-free cash equivalents. Cash is also an option on buying discounted assets at lower prices in the future.

  2. Deleverage: If you carry business or personal debt, reduce it as much as you can and don’t assume you will be able to refinance. Banks can cut your credit lines in a heartbeat, and they will.

  3. Have a plan for your longer-term investments, whether they are stocks, real estate, or anything else. Decide now what you will sell, and to whom, because buyers may not be there when you need them. At the same time, decide what you plan to hold through any slowdown. I have assets in private companies and even a few public ones that I truly consider “for the long term.”

I sincerely hope I’m wrong. Maybe I’m jumping the gun here and 2019 will be another banner year. But I see major risks ahead, and I want you to be ready for them.

*  *  *

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Published:10/31/2018 1:48:41 PM
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[Entertainment] Brace Yourself: Andy Cohen and Debra Winger's Interview Is So Painfully Awkward to Watch Andy Cohen, Amanda Peet, Watch What Happens Live!Brace yourself because we didn't know this level of cringe was possible. It was just another night on Watch What Happens Live! when Andy Cohen kicked off a new round of his...
Published:10/31/2018 11:53:49 AM
[Markets] Single Stock Earnings Volatility Is Now The Highest Since The Financial Crisis

One week ago, with roughly half of earnings season in the books, FactSet and Bank of America revealed an ominous statistic about the jumpiness (or perhaps "peak earnings") of the market: in a curious twist, companies that had reported positive earnings surprises for Q3 2018 were punished by the market, with their stock price decreasing by -0.5% two days before the earnings release through two days after the earnings. Meanwhile, and as one would expect, companies that reported negative earnings surprises for Q3 2018 have an average price decrease of -3.5% two days before the earnings release through two days after the earnings.

While the market penalizing companies for earnings misses is hardly a surprise, the lack of reward for EPS & sales beats is typically a later-stage bull market signal according to BofA strategist Savita Subramanian who wrote that "this suggests that the good news is priced in." Putting these market reactions in context, the only time when the market had a sub-1% relative surprise reaction for beats was in both 1Q00 and 4Q07.

Now, Goldman's derivatives strategist Katherine Fogerty points out another curious statistic about the bifurcation between single name and index vol: in the latest indication of just how nervous traders are about corporate earnings, with just over half of the S&P having reported results as of last Friday, the average stock moved +/-4.5%, marking the highest earnings move since the Financial Crisis (Q3 2009).

Of note, this is not due to overall market volatility because while the S&P500 was down just 2% during October 2009 (vs -7% October 2018), the average level of the VIX was 61%, substantially higher than 19% this month.

When broken out by sector, communications (comprised of Internet, Media, and Telecom stocks) exhibited the least ties to macro volatility on earnings and the largest absolute moves: the average stock in this sector realized a +/-7.0% move on earnings this quarter. After adjusting for sector performance, Goldman calculates a Residual Earnings Move of +/-6.3%. This is 2.1% higher than the average move these stocks have realized on prior earnings reports (2006 - present).

Goldman's latest observations echo the analysis made by another member of the firm's derivatives team, when on Tuesday strategist John Marshall showed that while fear has risen sharply at the single stock level "as put-call skew is now in-line with the levels following the February sell-off", suggesting that investors fear gap-moves lower in single stocks over the next three months, the same thing is not true at the index (S&P500) level, where the put-call skew has declined since early October, "implying that investors aren't seeing as much potential for a sharp sell-off from this new lower level in equities."

Underscoring the single-name "paranoia" discussed above, Marshall further notes that while index put-call skew remains higher than single stock skew on an absolute basis, "such a large divergence between these two measures is unusual." This divergence is shown in the chart below:

Discussing recent conversations with investors, Marshall says that this spread in the vol world is is indicative of a divergences in near-term sentiment: "Macro investors we speak with seem focused on picking a bottom in the SPX which is oversold relative to other asset classes" while at the same time, "micro investors seem increasingly risk-averse following big earnings-day moves."

Whatever the reason, the increase in earnings-day moves over the past two years, discussed here most recently in August, is continuing this quarter.

* * *

So now that a clear pattern has emerged, how does one trade it? According to Goldman, the winning strategies going into earnings have been buying puts and strangles, while avoiding calls:

  • Given the overall challenging tape, buying the closest out of the money one month listed put 5 days ahead of earnings and closing the day after produced an average return of 107%. This is the highest profit for this strategy since the Financial Crisis.
  • Another trade that has fared well is buying the closest listed one month straddle 5 days ahead of earnings and closing the day after. Post crisis record earnings moves have helped drive an average return of 35% for this strategy, which isolates volatility.
  • Given the 7% drawdown in the S&P500, buying calls has been extremely challenging. In fact, buying the closest out of the money call 5 days ahead of earnings and closing the day after has produced a loss of 36% on average. All figures exclude transaction costs.

One obvious counter to the above is now that it has been publicized, the trade will no longer work. Whether or not that means that single stock volatility will also collapse now that everyone rushes to hedge it (while pushing index vol higher as hedges are pulled) remains to be seen.

Published:10/31/2018 11:53:49 AM
[Markets] "I'm Told Happy Days Are Here To Stay Again" One Trader 'Giggles' At The Punditariat

"Happy Days are here again," is the clear message from asset-gatherers and commission-rakers across the financial media space (as well as President Trump) as shocktober ends with a flourish of rebalancing exuberance prompting the goldfish-like memories of the trading community to forget the carnage of the last 20 trading days.

Former fund manager and FX trader Richard Breslow remarks that "I couldn’t help giggling on my way to work this morning," as he reflects on the market and the media's reaction to this dead cat bounce...

Via Bloomberg,

...not because global equity markets were all up. It was after reading reports from a number of commentators, who spent a good portion of the last few weeks asking what is going on with asset prices and settling on no definitive reason, that the worst is over and this time we should be looking for the moment to buy.

Brave words with 'other peoples money' as there were the obligatory hedges that the exact timing is left to the reader. Just in case there may be more bad news first. I couldn’t quite wade through the “logic” but it seemed to be some amalgamation of, all the bad news is priced in using a misreading of the Efficient Markets Hypothesis, a desire to make a random call based on the calendar turning in the hope of being a punditariat hero, or, more likely, a continuing belief that monetary policy makers can and will provide.

Whether they’re proven right remains to be seen, but it’s too early to make that call with any credibility. Especially given the obvious effects of month-end rebalancing and the upcoming midterm elections. The way traders have been faring over the last month makes it feel like the coin flips being made have a payout less than 50/50. Which probably means the statistical theories of Thomas Bayes is an invaluable read when trying to rebuild portfolios for the coming month.

I remember an amusing conversation with someone when thinking about whether to embrace the bad things are over declarations. It went, “Why are you following the advice of someone who has been consistently wrong? Because he is a smart guy who is due for a winner.” Many a hedge fund limited partner has regretted adopting that attitude when investing in a relaunch.

The economic news in Asia presented one disappointment after another. China’s manufacturing PMI fell to almost a two-year low. And the sub-indices offered no relief. South Korea’s industrial production was downright ugly as was that of Japan. And the equity markets didn’t care a whit. That might tell you something when deciding how definitively the all-clear has been signaled. At his post-policy meeting press conference BOJ Governor Haruhiko Kuroda talked about downside risks. Japanese CPI forecasts were lowered, consumer confidence was a miss and inflationary expectations rose thanks to the coming consumption tax hike.

In Europe, the theme of the day has been all of our problems have been solved. I’ve heard that one before.

Equities bouncing is a good thing, even if it won’t salvage anyone’s October. I still maintain that 2720 in the SPX is a very interesting technical pivot to watch. Of more interest to me, rather than debating whether or not to catch the falling equity knife, is contemplating what the dollar touching a new year-to-date high and sings of life in Treasury yields mean.

Especially for emerging markets. And then ask yourself why their stocks are rising so much on the day.

Published:10/31/2018 11:19:29 AM
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Published:10/31/2018 10:48:32 AM
[Markets] Cable Spikes After UK's Raab Promises Brexit Deal By Nov 21st

UK Brexit Secretary Raab says a deal is expected by November 21st (in a letter to Hilary Benn, chairman of U.K. Parliament’s Brexit select committee):

“I would be happy to give evidence to the Committee when a deal is finalized, and currently expect 21 November to be suitable”

It seems the algos are buying this one...


We will see how long this lasts - three weeks is a long time in European politics.

As Brexit negotiations really start to heat up towards the business end of the procress, Statista has made a timeline of the key dates and events that lay ahead for the UK and EU as they attempt to move towards the planned end of the transition phase on December 31, 2020.

Infographic: Brexit step by step | Statista You will find more infographics at Statista

Full letter below:

Published:10/31/2018 10:48:32 AM
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Published:10/31/2018 10:18:42 AM
[Markets] "High Anxiety Markets" - Doug Kass Warns "We Live In Mel Brook's Mad Mad Mad World Now"

Authored by Lance Roberts via,

“Brophy: I got it. I got it. I got it. 


Brophy: I ain’t got it.” – Mel Brooks, High Anxiety

Arriving at Los Angeles International Airport, Dr. Richard Thorndyke has several odd encounters (such as a flasher impersonating a police officer, and a passing bus with a full orchestra playing inside it). Dr. Thorndyke remarks:

“What a dramatic airport!”

He is taken by his driver, Brophy, to the Psycho-Neurotic Institute for the Very, Very Nervous, where he has been hired as a replacement for Dr. Ashley, who died mysteriously. Brophy has a condition of nervousness, and he takes pictures when he gets nervous. Upon his arrival, Thorndyke is greeted by the staff, Dr. Charles Montague, Dr. Philip Wentworth, and Nurse Charlotte Diesel. When he goes to his room, a large rock is thrown through the window, with a message of welcome from the violent ward.

During the movie, Thorndyke suffers from a neural disorder called “High Anxiety”, a mix of acrophobia and vertigo, and tries to overcome the infliction.

We Live In Mel Brook’s Crazy World Now

With an intraday move of almost 4% – the S&P futures fell by a remarkable 100 points from the day’s high to the day’s low. A large sell program at around 3:30 p.m. abruptly moved the market down by fifty handles in one of the largest sell programs I have ever seen hit the floor. (The day’s swing in the Dow Jones Industrial Average exceeded 900 points!)

The Spyders peaked at over $270 at around 10:10 a.m. and bottomed at under $260 (with 30 minutes left in the trading session). Spyders closed the day at $263.86.

Talk about High Anxiety!

As I write this morning’s missive the market volatility has continued. When I started writing this column, S&P futures were +18 and Nasdaq futures were +38 . They are now essentially flat, on no new news.

What Was Trump Thinking?

Since early 2018 I have warned that the return of The Orange Swan introduces more uncertainty – “Making economic uncertainty and market volatility great again.” #MUVGA I have and continue to caution that Trump’s behavior and his (hastily crafted) policy – conflated with politics – are now hurting the markets.

Case in point, futures rose early on Monday after the president said that he is going to make a great deal with China.

Then, in the middle of Monday’s volatile trading session (at around 2 p.m.), the president added fuel to the trade war with China with another threat to introduce more tariffs on the rest of China’s imports to the U.S.

As I wrote late in the day, Karen Finerman, on CNBC’s Fast Money, asked an interesting question – why did Trump bring up the Chinese tariff debate again?

After all he already has stated (as has Steve Mnuchin) that the stock market is a real-time judge of the administration’s economic policy and he must have known that his comments would be market unfriendly.

So, what was it?

Here are some possibilities:

  1. He is doubling down and posturing against the Chinese (I doubt it because he has already been quite hawkish in his trade rhetoric).

  2. Is the president simply oblivious and doesn’t care about the impact of his actions? (That’s hard to believe because we are so close to the important midterm elections).

  3. Is he not focused? (I don’t know)

  4. Was the statement part of a broader or more grand strategy? (I have no idea)

  5. He just felt like saying it, wants to humiliate China and is appealing to his base. (No clue, here)

  6. Is he playing chess while everyone else is playing checkers? (Doubtful)

  7. Is he testing the market’s response to a ridiculous policy that he has no intention of implementing? (Again, I am clueless)

  8. Is he overplaying his hand? (Clueless, Part Trois)

  9. Is it simple arrogance and ignorance? (Clueless, Part Four)

  10. Is he trying to change the narrative from the bomb mailings and the terrorist act in Pittsburgh? (You get the point by now!) 

I Have Warned About The Growing Risks of A “Flash Crash” in 2018

Back in December, 2017, I warned:

Surprise #9: Volatility Spikes, Causing a Major Flash Crash

“Though large daily drops in the markets are rare, the factors that could contribute to a quick drop have increased.

Investors have been concerned about the VIX for years, but the positioning has now moved to an extreme. Such positioning could accelerate a market drop as the chances of a flash crash have escalated.

Hyman Minsky has warned about the risks of becoming numb to the risks associated with a period of stability amid rising asset prices; it is not only inevitably followed by instability, it inevitably creates it.

In a world in which the chances of an external market shock are rising and at a time when volatility is cratering and stock prices never decline, the risks of a flash crash caused by the one-sided market positioning in VIX futures is increasing and are at a higher probability of occurring than at any time in history.” – Kass Diary, 15 Surprises for 2018

Kill The Quants Before They Kill Our Markets

Most observers are of the view that there is order in our markets today – that fundamentals and/or technicals are understandable and analyzable stars that shine above us and give us direction.

If you believe the market’s volatility is a function of the earnings reports, trade wars or interest rates concerns – I believe you are mistaken. Rather, this is the cruel cocktail consisting of the proliferation of ETFs and other quant strategies.

But, its not our “fathers’ market.” These factors used to be an important determinant to stock prices – they still are, but markets are now too frequently punctuated by the influence of ETF flows and risk parity leveraging or deleveraging.

As an example, it’s commonplace, in a market that moves by nearly 1000 DJIA points from high to low for bond markets to exhibit a “flight to quality”, for gold to rise and/or volatility to explode to the upside. None of this happened yesterday. There was no movement in bond yields lower (bond yields were up one basis points) nor a rise in the price of precious metals (gold fell). Credit spreads would also normally widen in the sort of volatility we saw on Monday – this, too, did not happen. And, importantly, volatility rose by a mere 50 cents.

I used the 3:30 p.m. “woosh lower” to add to my trading long rentals. It was not an easy tactic as markets were in a scary free-fall (a likely occurrence that I predicted previously in my Surprise List 10 months ago).

Tactical Approach to an Anxiety-Driven and Machine/Algo Influenced Market 

Throughout 2018 I have been looking at a projected S&P range of approximately 2550-2800. (In September we overshot the top end of my range by about 120 S&P points.) 

My “fair market value” calculation has been about 2500 and my pessimistic case has circled around the 2400 level.

I have been consistent with my forecasts – and I continue to basically have the same range projection (2550-2775), “intrinsic value” of (2500) and pessimistic case (2400). 

There are numerous reasons to be cautious today – a changing and more problematic market structure, a monetary pivot, trade rhetoric/wars, ambiguous global economic growth, political (The Orange Swan) and geopolitical uncertainties, etc. The market is still “a full on Monet”.

The new regime of volatility is now another bona fide reason to sit on the sidelines.

All these factors, I have argued, cap the market’s upside to levels much lower than believed by the consensus.

Nevertheless I am sticking with my process and trying to trade unemotionally and let the market’s wild moves work to my advantage. (In days like yesterday it was tough to divorce myself from the volatility in order to reach for opportunity – but I purchased the late afternoon “woosh” based on the move to the lower end based on my projected the 3-6 month trading range of 2550-2775 and what the current price provided in terms of reward v. risk. (At around 3:30 p.m. S&P cash traded at about 2598 – within 50 handles from the estimated low of the range).

Unlike many talking heads I do not confidently make these projections – as I recognize that the plethora of fundamental outcomes as well as the dangers of a changing market structure (in which too many are on the same side of the bullish boat and an increasingly large amount of traders/investors worship at the altar of price momentum).

The global stock markets are damaged (non U.S. markets led this decline which, in many stocks, are already in bear market territory) – it’s still “a full on Monet!”

“It’s like a painting, see. From far away it’s okay, but up close it’s a big ol’ mess.” 

I am still of the view that we made important tops in late January, 2018 and in September, 2018 – and that tops are processes, not events.

But, when anxiety and fear are elevated, trading opportunities abound.

Bottom Line 

I started Monday on an optimistic note, “The Case For an Oversold, Contra Trend and Playable Rally Higher Increases in Probability” – and, on cue S&P futures rose by over 30 handles in the early going:

The last thirty minutes of trading on Friday bears witness to the disproportionate role of passive strategies (ETFs and risk parity and other quant strategies that worship at the altar of price momentum – and exaggerate short term market movement – in which the Dow Jones Industrial Average moved up and down in excess of 400 points.

This unnatural backdrop – which showed a sharp drop in the last few minutes – was likely artificial and provided yet another short term trading opportunity.

As I have been harping on, the market is dynamic and we, or at least I, have to unemotionally and opportunistically trade in order to deliver superior investment returns. The machines and algos should be taken advantage of. (I covered my (SPY)  short on Friday at very nice prices and for a quick, few hours, +$4 to $5 gain.)

Though I have little idea how long it will last, there are several factors that may contribute to higher stocks in the next few weeks:

* As the Reporting Period (for 3Q2018 earnings) Matures, Buybacks Will Soon Be Back

* Investor Sentiment Is Dismal: The CNN Fear & Greed Indicator is at an ‘extreme fear’ level.

* Many talking heads in the media, formerly bullish, are now fearful.

* An Oversold Market: Several market Indices are 2-3 Standard Deviations Below 50 Day Moving Averages.

* The End of Mutual Funds’ Fiscal Year: Loss taking may soon be over as the month and fiscal year end on Wednesday.

As previously mentioned, I (unemotionally) purchased the “woosh” lower on Monday and I am temporarily net long based on my calculation of upside reward v. downside risk.

Published:10/31/2018 10:18:41 AM
[Entertainment] Meghan Markle Wears a See-Through Skirt on Final Day of the Royal Tour Meghan Markle, New Zealand, Kiwi Hatchery Meghan Markle made headlines after she wore a navy sweater and pleated skirt by Givenchy to her walkabout of Rotorua, New Zealand with Prince Harry on Wednesday. Royal admirers noted that her...
Published:10/31/2018 9:48:42 AM
[Entertainment] 7 Reasons You Should Be Following PCAs Finalist Ellen DeGeneres on Social Media Right Now Ellen DegeneresBe kind to one sharing Ellen DeGeneres' greatest posts with each other! In a surprise to no one, the popular talk show host is a finalist for the E! People's Choice...
Published:10/31/2018 9:18:20 AM
[Markets] Dow Surges Above Key Technical Level, Now What?

The last two days have seen Dow futures rise over 1100 points, ripping back above their 200DMA...

Dow Futs spiked from 24086 to 25145 in the last two days...


Send them very technically to their 200DMA...

Will it hold?
Published:10/31/2018 9:18:20 AM
[Entertainment] Jennifer Lopez Says It's Easier to Date Alex Rodriguez Than Ben Affleck Jennifer Lopez, InStyleCompared to her ex-boyfriends, Jennifer Lopez says dating Alex Rodriguez is a breeze. In the December issue of InStyle (on newsstands Nov. 9), the 49-year-old Second Act actress ruminates...
Published:10/31/2018 8:49:55 AM
[Markets] Mafia Hitman Is Primary Suspect In Jailhouse Murder Of Whitey Bulger

Hours after news of the jailhouse murder of notorious Boston crime boss James 'Whitey' Bulger leaked to the new media, rumors began circulating that the slaying of the 89-year-old, wheelchair-confined Bulger may have been carried out with the possible tacit approval of federal authorities, who were worried that Bulger - whose long-rumored status as a government informant was laid bare during his 2013 trial - might expose corruption at the highest levels of the FBI's witness cooperation program.

Authorities initially said a "mafia-linked" suspect was under investigation for his role in the killing. But amid an official information blackout, TMZ and the Daily Mail reported the grisly details of Bulger's death. After being transferred to the USP Hazelton facility in West Virginia on Tuesday, Bulger was released into the general population.

But before he could even be officially booked into the prison, the former Irish mob boss was whacked by three prisoners, who reportedly wheeled him to a secluded area and savagely beat him with combination lock stuffed in a sock, before attempting to gouge out his eyes - an old school organized crime gesture of contempt for 'rats', or criminals who give information about their underworld associates to law enforcement. 


Freddy Geas

While those reports were based on anonymously sourced accounts, the Boston Globe appeared to confirm these accounts when it reported late Tuesday that a notorious New England mafia hitman is the prime suspect in the slaying of Bulger. Fotios "Freddy" Geas, 51, who is serving a life sentence for his involvement in the 2003 assassination of Springfield, Mass. mob boss "Big Al" Bruno, is believed to be behind Bulger's slaying. And according to the Globe's sources, he hasn't disputed his role in the killing to authorities.

Geas' friends weren't surprised to hear that he may have been involved in the killing.

"Freddy hated rats," private investigator and Geas’ friend Ted McDonough told the paper. "Freddy hated guys who abused women. Whitey was a rat who killed women. It’s probably that simple."

Even Geas' former lawyer, who represented Geas in his Mafia murder case, said he wasn't surprised to hear that his former client had refused to dispute his role in the killing and had refused to identify any accomplices.

"He wouldn’t rat on anybody," said attorney David Hoose. "And he had no respect for anyone who did."

Meanwhile, the Massachusetts prosecutor who convicted Bulger offered no words of remorse for a man whom he once described as one of the cruelest killers in the criminal underworld, per CNN.


James 'Whitey' Bulger

A statement Tuesday from Andrew Lelling, the US Attorney for Massachusetts, was brief. It made no mention of Bulger other than he had died.

"We received word this morning about the death of James "Whitey" Bulger. Our thoughts are with his victims and their families," the statement said.

As Geas' involvement is looking increasingly likely, nobody in the Bureau of Prisons, or anywhere else in the federal government, has bothered to explain why Bulger was left in such a vulnerable position after a seemingly arbitrary transfer from his previous facility in Florida. 

Published:10/31/2018 8:49:55 AM
[Entertainment] Will Daniel Bryan Be Able to Teach Lana Everything He Knows Before the Money in the Bank Ladder Match? Total Divas 807Learning from the best! In this clip from Wednesday's all-new Total Divas, Lana gets one-on-one training from Bryan Danielson (known professionally as Daniel Bryan) ahead of her big...
Published:10/31/2018 8:18:15 AM
[Markets] 'Day-Trading' Trump Says "Today Looks Good For Stock Market"

While Presidents have traditionally shied away from commenting too much on the stock market, President Trump has been 'unusual' in his focus on the arbitrary measure of America's success (or failure).

Having been quite for much of the month - as US equity markets collapse most since the financial crisis - Yesterday's dead cat bounce along with today's extension...

...has sparked renewed optimism in The White House:

"Stock Market up more than 400 points yesterday. Today looks to be another good one. Companies earnings are great!"

As Bloomberg notes, Trump has commented on the stock market more than 30 times since his election, the latest on Tuesday to blame Democrats for the October “pause” in markets. (The S&P 500 is down almost 9 percent in the month and lower for the year. It’s up more than 20 percent since his election.)

Source: Bloomberg

We wonder if President Trump will comment when this bounce dies and we test February lows once again?

Published:10/31/2018 8:18:14 AM
[Entertainment] "That Was Traumatic!" Watch as a Panicked Ariana Grande Accidentally Gets Hurt in a Haunted Escape Room With James Corden James Corden, Ariana Grande, The Late Late ShowBack when Ariana Grande filmed her "Carpool Karaoke" segment for The Late Late Show in August, she and James Corden took a detour to visit 60OUT Escape Rooms' The Orphanage. That part...
Published:10/31/2018 7:48:07 AM
[Markets] US Employment Costs Soar At Fastest Pace In A Decade

US employment costs surged more than expected in Q3. Up 0.8% QoQ (equals the biggest quarterly jump since Q4 2017), as increases in private wages and salaries accelerated, perhaps signaling that workers are gaining leverage in a tightening labor market.

Wages & Salaries rose 0.9% QoQ (+2.9% QoQ) as benefits slowed (+0.8% QoQ from +0.9% in Q2, and +2.6% YoY vs +2.9% in Q2).

On a year-over-year basis, Q3 is up 2.8%, the biggest annual jump since Q3 2008...

Government wages rose 2.3% YoY vs Private Workers 3.1% YoY gain (the most since 2008).

As Bloomberg notes, the government’s quarterly ECI reading -- which covers employer- paid taxes such as Social Security and Medicare in addition to the cost of wages and benefits -- offers a glimpse at how American workers are being compensated.

The latest reading shows momentum in worker compensation ahead of October wage figures due in Friday's monthly employment report.

With the world's equity market bulls hoping for weak economic data to give The Fed an excuse to pause its 'normalization', this data crushes that hope. Is good news bad news? We shall see.



Published:10/31/2018 7:48:07 AM
[Entertainment] Prince Harry and Meghan Markle Prove They're Already Pros at Picking Baby Names Meghan Markle, Prince Harry, Kiwi Hatchery, New ZealandIt's been only two weeks since Prince Harry and Meghan Markle announced her pregnancy, but the future parents have already proven they're pros at picking out baby names. The Duke...
Published:10/31/2018 7:18:14 AM
[Markets] GM Soars 10% After Beating Dramatically Lowered Earnings Bar

General Motors stock is soaring in the pre-market after smashing earnings expectations (the 14th straight quarterly beat) and hinting that full-year earnings may be at the high end of the range that it has forecast.

In boosting adjusted profit to $1.87 a share, GM beat dramatically lowered expectations that earnings would slip from a year earlier and overcame global auto sales leveling off (with China deliveries plunging 15% YoY).

Bloomberg highlights the following key insights:

  • GM’s sales in the U.S. have been down slightly this year and dropped 15 percent in China in the quarter, so expectations for this report were low.

  • The automaker also said that it expects profit for the year to hit the high end of its previous guidance, which was for between $5.80 and $6.20 a share. Earnings could even beat $6.20 a share depending on “macro factors,” spokesman Tom Henderson told reporters at the company’s headquarters in Detroit.

  • Slower retail sales didn’t hurt GM’s performance. In the U.S., the automaker continues to sell more expensive models. New sport utility vehicles including the Chevrolet Traverse and Equinox have been selling well and commanding better prices.

  • Delivered nearly 700,000 vehicles in the U.S. in 3Q; GM China delivered nearly 836,000 vehicles.

  • GM’s income from its China operations was a third-quarter record. While retail sales dipped, this was driven by the low-priced Baojun brand, while the company delivered more lucrative Cadillac models such as the new XT4 SUV.

All of this has sparked a pre-open squeeze, sending GM up over 10%...

So, despite the plunge in China deliveries, this beat seems driven by China revenues - we wonder if this is a one-off pre-tariffs spike?

Published:10/31/2018 7:18:13 AM
[Markets] Global Stocks Surge On Last Day Of Dismal, Turbulent October

The nightmare on Wall Street may finally be over with markets getting a treat this Halloween...  but will the trick emerge during the last hour of selling trading?

It is a sea of green as stocks hope to end a turbulent month - which saw the biggest losses for global equity markets since 2012 - in an upbeat mood, with European stocks sharply higher following a rebound in Asia as US equity futures extended on their Thursday gains which saw the Dow soar by more than 400 points, while the dollar remained near one year highs as Treasury yields posted another day of modest increases.

A confluence of factors ranging from China-U.S. trade tensions to worries about global economic growth, corporate profits and higher U.S. interest rates have spurred volatility in financial markets in the past few weeks. But shares in Europe were expected to follow Asia’s lead higher on the last day of the month, while U.S. S&P mini-futures edged up 0.3 percent.

Every sector in Europe's Stoxx 600 Index rose, with miners and energy companies leading the way. France’s CAC 40 (+1.9%) outperformed peers with the index pushed higher by gains in heavyweights L’Oreal (+5.4%) and Sanofi (+5.0%) post-earnings. Energy names lead the gains as the complex retraced yesterday’s losses, while utility names underperformed. Tech stocks thanks to Dialog Semiconductor (+10.0%) which rose to the top of the Stoxx 600 amid optimistic earnings, while Nokian Tyres (-14.7%) plumbed the depths after cutting guidance due to currency impacts.

Earlier in Asia, the MSCI Asia-Pacific index rose 1%, with Japanese stocks the stand-out performers thanks to a 2.2% advance in the Nikkei, reassured by the Bank of Japan’s signal that it will keep its ultra-easy policy for some time to come. Even so, Asia was on track to fall around 11% this month, which would be its worst monthly performance since September 2011, dropping to its lowest level since February 2017 this week.

Hong Kong’s Hang Seng rose 1 percent on Wednesday and the Shanghai Composite Index climbed 1.4% as weaker-than-expected factory activity data reinforced views that Beijing will roll out more support measures for the economy.

In the latest economic disappointment out of Beijing, the latest official NBS manufacturing PMI fell to 50.2 in October, the lowest level since July 2016 as almost all sub-indexes showed weaker growth momentum. The non-manufacturing PMI missed expectations as well, printing at 53.9, below the 54.9 in September, due to the weaker services PMI.

In Beijing's ongoing attempt to stabilize the yuan, China's overnight repo rate surged by 84bps - the most in more than four years - to 2.39%, as authorities take aggressive steps to combat bets against the yuan, which held near the weakest level in a decade against the greenback.

Even so, hopes of boosting the Yuan have proven futile so far, with the USDCNH rising to the highest since January 2017, just shy of 6.800 and knocking on the door of the critical 7.00 level, with today's move largely a function of renewed dollar strength. The Chinese currency was on track for a loss of 1.4% in October, its seventh straight monthly loss — the longest such losing streak on record

Australian stocks ended 0.4 percent higher, South Korea’s KOSPI added 0.7 percent.

Today's gains will be a welcome respite in a month that has seen a near historic selloff: the broader MSCI All Country World index was down 8.6% this month, its biggest monthly drop since 2012, losing $4 trillion in market value.

The narrower MSCI World Index was down 8.43% and has wiped out $4.5 trillion in October. The month-end gains followed a sharp bounce for Wall Street’s main indexes, which jumped more than 1% on Tuesday, helped by strong gains for chip and transport stocks as investors took advantage of cheaper prices following the steep recent pullback for equities.

Equity bulls will be hoping this rebound can last following a series of bounces in the past few weeks that quickly gave way to declines as late day algo selling put a dent on carbon-based BTFDing.

Corporate results will be key to sustaining the share gains: attention will next turn to earnings from Apple on Thursday. But trade risks continue to simmer in the background, with the U.S. jobs report is due Friday and US midterm elections are creeping closer, all of which have the potential to further roil markets.

"The recent slide in equities had gone to such an extent that it was bound to invite buyers, such as in the Japanese stock market," said Masahiro Ichikawa, senior strategist at Sumitomo Mitsui Asset Management in Tokyo. Ichikawa said the U.S.-China trade row will likely remain a factor of concern beyond the U.S. midterm elections on Nov. 6.

In FX, the Bloomberg Dollar Spot index headed for its best month in two years amid supportive month-end flows that offset profit taking by short-term investors. Price action in the euro was quiet while the pound rebounded, tracking trading in the options market. The yen was steady as the Bank of Japan left its monetary stimulus unchanged and kept its 10-year bond yield target at about zero percent as it updated price forecasts that confirm it won’t meet its inflation target for years to come. Australia’s dollar declined following a weaker-than-expected inflation reading and the abovementioned miss in China's PMIs. The Indian rupee fell as much as 0.6% on reports that the central bank governor may consider resigning amid growing tensions with the government.

In rates, the 10Y TSY yield climbed 2bps to 3.14%, the highest in more than a week. Germany’s 10-year yield advanced two basis points to 0.39%. Britain’s 10-year yield advanced 3 bps to 1.434%, the largest gain in more than a week. The spread of Italy’s 10-year bonds over Germany’s declined 9 bps to 3.0205%.

Oil prices recovered slightly after dropping to multi-month lows the previous day on signs of rising supply and concern that global demand for fuel will fall victim to the U.S.-China trade war. WTI futures were up 0.38% at $66.43 per barrel after dropping to $65.33 on Tuesday, the lowest since mid-August. Brent crude gained 0.62% to $76.38 after a decline of 1.8% on Tuesday. Gold declined and oil recovered from a two-month low.

Expected data include mortgage applications and Chicago Business Barometer. Air Canada, ADP, General Motors, Kellogg, Sprint, and AIG are among companies reporting earnings

Market Snapshot

  • S&P 500 futures up 0.6% to 2,701.25
  • STOXX Europe 600 up 1.4% to 360.66
  • MXAP up 1.6% to 148.97
  • MXAPJ up 1.4% to 469.62
  • Nikkei up 2.2% to 21,920.46
  • Topix up 2.2% to 1,646.12
  • Hang Seng Index up 1.6% to 24,979.69
  • Shanghai Composite up 1.4% to 2,602.78
  • Sensex up 1% to 34,231.36
  • Australia S&P/ASX 200 up 0.4% to 5,830.31
  • Kospi up 0.7% to 2,029.69
  • German 10Y yield rose 2.6 bps to 0.395%
  • Euro up 0.09% to $1.1355
  • Italian 10Y yield rose 13.6 bps to 3.103%
  • Spanish 10Y yield unchanged at 1.567%
  • Brent futures up 1.1% to $76.75/bbl
  • Gold spot down 0.5% to $1,216.90
  • U.S. Dollar Index down 0.1% to 96.91

Top Overnight News

  • BBDXY rose for the third day to a fresh 2018 high even as the greenback traded mixed against Group-of-10 peers; Treasury yields crept steadily higher and the curve steepened
  • An official gauge of activity in China’s manufacturing sector worsened in October as the effects of an ongoing trade war with the U.S. hit home. The non-manufacturing PMI also worsened. China’s manufacturing PMI fell to 50.2 this month, lower than projected in a Bloomberg survey of forecasters. A gauge of new orders for export fell to the lowest reading since early 2016
  • Optimism in Britain’s economy slumped in October to the lowest level this year, with confidence falling in almost all parts of the country, Lloyds Bank said in a survey published on Wednesday
  • Italy’s populists are insisting their plans to ramp up government spending will shield the nation from recession, brushing off warnings that their confrontational approach may already be hurting the economy
  • Australia’s annual core inflation was weaker than forecast in the three months through September, suggesting the central bank’s prolonged interest-rate pause has further to run
  • The Aussie dollar lead G-10 declines, weighed down by slowing inflation and deteriorating Chinese PMI data, though an options expiry helped limit the drop
  • The Bank of Japan left its monetary stimulus unchanged as it updated price forecasts that confirm it won’t meet its inflation target for years to come
  • Official figures released over the past few weeks suggest money is increasingly leaving China’s borders
  • The euro held losses after inflation data matched estimates while the pound edged higher once London entered the market; Italian bonds extended bull steepening after a report that the government may see a deficit nearer to 2% than the 2.4% in the current budget draft for 2019
  • The yen held losses after the BOJ left its monetary policy unchanged, and forecasts inflation to remain below its 2% target through until at least early 2021
  • The rupee pared losses as India’s government sought to defuse growing tensions with its central bank, saying it respects the institution’s autonomy

Asian equity markets traded positive as the region sustained the momentum from Wall St where all majors finished with
firms gains and in which both S&P 500 and DJIA moved back into profit for the year. ASX 200 (+0.4%) and Nikkei 225 (+2.2%)
were higher from the open with financials the early outperformer in Australia after ANZ Bank earnings and with CBA to offload its
funds unit for over AUD 4.1bln, while Japanese stocks were underpinned by a weaker currency and with focus on a slew of
earnings releases. Hang Seng (+1.6%) and Shanghai Comp. (+1.4%) conformed to the overall risk appetite as investors digested
earnings including big 4 lenders ICBC and Agricultural Bank of China, but with early indecision seen following uninspiring Chinese
PMI data in which both Official Manufacturing PMI and Non-Manufacturing PMI fell short of estimates. Finally, 10yr JGBs were
lower with demand subdued by the strong performance in Japanese stocks and following an unsurprising BoJ policy
announcement in which the central bank maintained all policy settings.
PBoC skipped open market operations for a net daily drain of CNY 150bln, while it announced to sell CNY 10bln in 3-month and
CNY 10bln in 1yr CNY-denominated bills in Hong Kong on November 7th.

Top Asian News

  • BOJ Cuts Frequency, Tweaks Ranges for Short Bonds for November
  • MUFG Buys Commonwealth Bank Asset Arm for $2.9 Billion
  • Incredible Shrinking Australian Banks Shed $13 Billion of Assets
  • HNA Is Said to Try Offloading Airbus Planes to Leasing Firms

European equities are higher across the board (Eurostoxx 50 +1.3%) as the region took impetus from the gains experienced in Asia and on Wall Street. France’s CAC 40 (+1.9%) outperforms its peers with the index fuelled by gains in heavyweights L’Oreal (+5.4%) and Sanofi (+5.0%) post-earnings. In terms of sectors, energy names lead the gains as the complex retraces yesterday’s losses, while utility names underperform. Elsewhere, Dialog Semiconductor (+10.0%) rose to the top of the Stoxx 600 amid optimistic earnings, while Nokian Tyres (-14.7%) plumbed the depths after cutting guidance due to currency impacts.

Top European News

  • Telefonica Signals End to Decade of Weakness With Soccer Push
  • Sanofi Lifts Forecast as Vaccines, Eczema Drug Provide Fuel
  • Spanish Economy Proves Euro-Area Brightspot as Recovery Holds
  • Casino Short Sellers Ask Board to Block Interim Dividend Payment
  • L’Oreal Jumps as Luxury Cosmetics Get Another Boost From China

In FX, after breaching 97.00 to the upside overnight to hit its highest level since June 2017, the DXY initially paused for breath to sit on a 96.00 handle before extending gains back above 97.00 thereafter. USD will likely garner a bulk of the focus in the FX space today with month-end flows (as according to Barclays, Citi, Nordea and Credit Ag) said to be positive for the greenback. Furthermore, Nordea highlight that today is SOMA redemption day for the USD which will have a net USD -22.9bln impact on liquidity; Nordea explains that “On the ten SOMA days since the end of February, EUR/USD has always been lower at CET17:15 vs CET08:00, by an average of 0.25%”. In terms of where the majors stand vs. the USD, EUR/USD was unable to hold onto initial gains after Friday’s low at 1.1336 eventually gave way. As such, a test of 1.1300 to the downside could now well be on the cards. Option expiry activity for the pair could be a guiding force later on with 871mln due 1.1275-85, 2.2bln between 1.1300-25 and a further 1.47bln between 1.1340-50. EUR relatively unreactive to EZ inflation prints with headline Y/Y CPI in-line with Exp. at 2.2%, core and super-core metrics both slightly firmer than forecast. The AUD remains softer vs. the USD in the wake of domestic inflation metrics whereby all figures either missed or printed in-line with estimates and which was below the RBA’s 2%-3% target range. The data sent AUD/USD back below 0.7100 with Chinese PMI readings thereafter guiding the pair to session lows of 0.7073 before staging a mild recovery back towards the 0.71 handle. Elsewhere for the region, USD/JPY trades relatively unchanged as the risk environment outweighs mild USD softness; prices trade in close proximity to the 113.00 handle and just below 1.3bln in expiries at 113.10-20.0 Finally, focus during the Asia-Pac session also fell on the INR which faced some selling pressure amid a widening rift between the RBI and government with reports noting that Governor Patel may consider resigning; reports briefly pushed USD/INR above the 74.00 level. Turkish Central Bank Governor reiterates that the central bank will maintain a tight monetary policy decisively and further tightening will be delivered if needed with the use of all available instruments.

In commodities, WTI (+0.4%) and Brent (+0.8%) are both in the green amid a positive risk tone. This comes alongside markets preparing for Iranian sanctions coming into effect next week. Last night’s APIs showed a larger-than-expected crude stock build, although this was almost half of last week’s figure. Trader’s will be keeping an on US oil production numbers released later today with the weekly DoEs. Gold is trading in the red, albeit off lows amid safe haven outflows as equity markets continue to trade positively following the momentum from Asia. In related news, the London Bullion Market Association predicts that gold is to reach USD 1532/oz by October of next year. Separately, disappointing Chinese manufacturing PMI has resulted in a fall in the price of both zinc and copper, as well as affecting the outlook for China metals demand.

Looking at the day ahead, there should be some focus on the Q3 employment cost index (+0.7% qoq expected) along with the October ADP employment change report and October Chicago PMI. Worth flagging today also is scheduled comments from Italian Finance Minister Tria this morning, along with comments from the ECB’s Nowotny, Hansson and Nouy. Earnings wise today we’ve got Sanofi, GlaxoSmithKline, General Motors, Anthem, ADP, Estee Lauder, AIG, and Yum Brands.

US Event Calendar

  • 7am: MBA Mortgage Applications, prior 4.9%
  • 8:15am: ADP Employment Change, est. 187,000, prior 230,000
  • 8:30am: Employment Cost Index, est. 0.7%, prior 0.6%
  • 9:45am: Chicago Purchasing Manager, est. 60, prior 60.4

DB's Jim Reid concludes the overnight wrap

The tech sector had another wild ride yesterday, first tricking and then treating investors - especially into the US close. The NY FANG index reversed an early decline of as much as -2.33% to close up +1.88% – snapping a two day run which saw the index lose nearly $250bn in market cap. After the close Facebook posted EPS of $1.76 versus expectations for $1.47, but revenues were softer at $13.73bn versus $13.80bn. Facebook shares initially fell but recovered to be up +3.37% after hours. After Facebook, fellow tech company eBay reported mixed earnings, beating profit forecasts and upgrading its fourth quarter guidance, but posting weaker free cash flow and sales growth.

Before all this the S&P 500, DOW, NASDAQ and Russell 2000 closed +1.57%, +1.77%, +1.58% and +1.99% respectively last night – only the fifth time this month that all four bourses have closed higher. Markets had earlier pared their gains around US lunchtime and flirted with turning red, but ultimately rallied into the close, with the VIX ending the session -1.34pts at 23.36.

This morning in Asia positive sentiment from Wall Street has carried over with the Nikkei (+1.67%), Hang Seng (+0.60%), Shanghai Comp (+1.13%) and Kospi (+0.33%) all up along with most Asian markets. In terms of data, the official China October PMIs were released with the composite reading at 53.1 (vs. 54.1 in previous month) as both the manufacturing PMI (at 50.2 vs. 50.6 expected) and services PMI (at 53.9 vs. 54.6 expected) decelerated. The accompanying statement with the PMI release attributed the weakness to the long holiday in October but also admitted that the external environment is starting to drag manufacturing lower. In the details for the manufacturing PMI, the new export orders decelerated to 46.9 from 48.0 in September, marking the 5th consecutive month with a sub 50 reading. In the meantime, China's onshore yuan continues to attract attention and remains under pressure with it reaching the level of 6.9714 yesterday, the lowest since May 2008. It is currently trading
flattish in the Asian session at 6.9668, as we type.

Overnight, the BoJ left key interest rates and asset purchase targets unchanged while the BoJ's quarterly outlook report indicated  that inflation will remain below its 2% target at least until early 2021 and lowered the 2018 GDP growth forecast to 1.4% from 1.5%. The BoJ also added a statement in its outlook report about the need to "pay close attention to future developments" regarding risks to the financial system, while saying that the risks are not currently significant thanks to sufficient capital bases. The BoJ is also seeing the current core-CPI rising to around 1% yoy from earlier range of 0.5%-1%, which was lowered at June meeting. The BoJ will release its schedule for JGB purchases next month at 5pm Tokyo time today (8am BST) which is likely to be closely watched given the recent news from Asahi that the BoJ might tweak the schedule and also BoJ Governor Kuroda's presser will likely be started by the time this reaches your inbox.

Outside of Facebook and eBay, other major earnings were a bit disappointing when you include guidance. GE stock fell 8.88% to a new 9-year low, and the company’s benchmark 2035 bonds dropped to a record low price, after the company cut its dividend to $0.01 per share from $0.12 and announced that the SEC is expanding an investigation into the company’s accounting practices. Mastercard and Pfizer also traded lower, despite beating earnings estimates, as the market continues to punish companies for moderating guidance of missing on revenues. Coca-Cola was a bright spot, gaining +2.54% after beating on most major metrics and maintaining strong guidance.

In contrast to the US yesterday Europe largely struggled for traction from the moment the Italy and Euro Area GDP figures hit early in the session. More on that shortly but by the close the STOXX 600 had finished +0.01% and the DAX -0.42%. Italy’s FTSE MIB also ended -0.22% after being up as much as +0.73% while 10y BTP yields rose +13.8bps. Bunds and Treasuries on the other hand were -0.9bps and +3.8bps respectively.

Oil prices fell -1.72% to a two-month low amid reports that China and India, the top two buyers of Iranian oil, will defy American sanctions and continue to buy imports from Iran. Europe and South Korea have also indicated some degree of unwillingness to accommodate US sanctions, and there could therefore be minimal downside for Iranian oil exports moving forward – though they are already down -500,000bpd to 1.6mmbpd as of September. With less pressure on the supply side of the global oil balance, there could be scope for oil prices to remain pressured.

The British pound was pressured in yesterday’s trading, dropping -0.64% versus the dollar as S&P indicated that the potential for a no-deal Brexit outcome is a factor in its ratings decision for the UK. They argued that such a scenario would result in a “moderate recession” and cautioned that the odds have risen, given the apparent impasse within the governing coalition over how to address the Irish border issue in the withdrawal treaty. Separately, however, the DUP agreed to support the autumn budget removing the tail risk of a nearterm potential government crisis.

Back to the data. As noted earlier in Europe the big focus was on the Italian GDP preliminary print which disappointed at 0.0% qoq for Q3 compared to expectations for a +0.2% reading. That’s the first time the Italian economy has stalled since Q4 2014 with the last negative reading coming in Q2 2014. Our Italian economist Clemente De Lucia made the point yesterday that the focus will now turn to growth over the coming quarters as the fiscal expansionary plan put out by the government is largely based on the assumption that growth will surprise to the upside and converge to broader euro area levels. However with tighter financial conditions, elevated uncertainty, and softer Q4 data so far, the risks certainly appear to be to the downside for now. Post the data, Deputy PM Salvini stated that the government will push ahead with the budget regardless, while also blaming the weak quarter growth on the previous government.

That data - combined with a slightly softer than expected France reading (+0.4% qoq vs. +0.5% expected) - played a role in the broader Euro Area miss (+0.2% qoq vs. +0.4% expected) although there is likely to also be softness elsewhere in the region. Either the German economy must have contracted in the third quarter, Spain must have had a notable miss to our expectations for +0.6% qoq growth, or smaller countries like Ireland and the Netherlands must have had a marked slowdown. While the annual rate slipped to +1.7% yoy the previous quarter reading was revised up one-tenth to +2.2%. Also out yesterday was the preliminary October CPI reading in Germany which came in as expected at +0.1% mom and +2.4% yoy. That annual reading is actually the highest in over a decade now. German unemployment stayed steady at 5.1% as expected.

In the US the data was a bit more contrasting. The consumer confidence data for October was actually stronger than September, following downward revisions. The headline reading rose +2.6pts to 137.9 (vs. 135.9 expected) and marked a new post crisis high – in fact a new 18 year high. The present conditions index also rose 3.4pts to 172.8 and the expectations component 2.1pts to 114.6. The associated statement highlighted that employment growth continues to fuel sentiment, however next month’s data should be more interesting in light of capturing the full market crash in October and also the midterm elections. Meanwhile, the latest housing market data was a tad softer in the US yesterday. The August S&P CoreLogic house price index fell to +5.5% yoy from +5.9% and is now at the  lowest since December 2016.

To the day ahead now where the early focus in Europe this morning should be with the October CPI figures for the broader Eurozone. The consensus is for a lift in the YoY core rate to +1.1% yoy from +0.9% in September. Prior to this we’ll get France’s CPI report while a little later on we also get the same data in Italy. The release of the Central Bank of Turkey’s inflation report could also be worth a watch in EM land while Brazil’s latest policy meeting is also due today. This afternoon in the US there should be some focus on the Q3 employment cost index (+0.7% qoq expected) along with the October ADP employment change report and October Chicago PMI. Worth flagging today also is scheduled comments from Italian Finance Minister Tria this morning, along with comments from the ECB’s Nowotny, Hansson and Nouy. Earnings wise today we’ve got Sanofi, GlaxoSmithKline, General Motors, Anthem, ADP, Estee Lauder, AIG, and Yum Brands.



Published:10/31/2018 6:49:40 AM
[Entertainment] The Wildly Unpredictable Journey of Willow Smith Willow Smith, 18th BirthdayBy now, we know that Will Smith and Jada Pinkett Smith don't do other people's expectations. They don't do average, and they sure as heck don't hold back. So why should...
Published:10/31/2018 6:18:30 AM
[Entertainment] Why Kylie Jenner and Travis Scott Just Might Be Ready For Marriage Kylie Jenner, Travis Scott, 2018 MTV Music Video Awards, VMAsKylie Jenner is hardly the first person to claim that she marches to the beat of her own drum. Except when the beauty mogul subscribes to a new rhythm she's likely to convert several million...
Published:10/31/2018 5:16:58 AM
[Markets] "Hate Is Not Welcome": Trump Visits Pittsburgh As Thousands Protest

The crime scene inside the Tree of Life congregation had not yet been cleared when President Trump, First Lady Melania Trump and several administration figures arrived in Pittsburgh late on Tuesday to pay their respects after the deadliest attack on Jews in American history. At the same time, crowds of people both young and old gathered to shout and protest the president, letting him know that he was not welcome in their city.

Even Pittsburgh Mayor Bill Peduto opposed the president's visit, suggesting that Trump was being insensitive by visiting the city so soon after a massacre that some on the left have insisted is somehow the president's fault (though the shooter published posts on social media network Gab denouncing Trump and his agenda, insisting that the president was secretly a "globalist" who was "controlled by Jews.") Ahead of the visit, several Pittsburgh rabbis warned Trump that he was "not welcome" in the city.

Not everyone in Pittsburgh was so opposed to Trump's presence. After arriving at the building where the Tree of Life congregation is housed, Trump and Melania Trump were greeted by Rabbi Jeffrey Myers. Myers took them inside the building, where they lit ritual yahrzeit candles to honor the memories of the victims. After spending roughly 20 minutes inside, the Trumps emerged and walked to a memorial outside, where the first lady placed a flower and the president placed a small stone on a marker for each of the dead, per Reuters.


The two left in the presidential motorcade about 30 minutes after arriving.

Trump made no public remarks during his three hour stop in Pittsburgh, as "he wanted today to be about showing respect for the families and the friends of the victims as well as for Jewish Americans," according to White House Press Secretary Sarah Huckabee Sanders.


During his time in Pittsburgh, Trump also visited the hospital where three police officers, wounded in a gunfight with the shooting suspect, were being treated. Trump also visited with the wife of one of Richard Gottfried, one of the victims in Saturday's attack. "She said she wanted to meet the president to let him know that they wanted him there," Sanders said.

Throughout his visit, the Trumps were joined by Ivanka Trump and Jared Kushner. Trump's daughter famously converted to judaism before marrying Kushner. They were also joined by Treasury Secretary Steven Mnuchin, who is also Jewish. While CNN said Ivanka Trump and other members of the entourage became emotional at times, Trump reportedly remained stoic.

Meanwhile, thousands of protesters gathered in Squirrel Hill bearing signs with slogans like "we build bridges not walls" as well as "imagery evoking the neighborhood's most famous resident, the late Fred Rogers". Other popular slogans included "Hate is not welcome here."




Funerals for three of the victims were held on Tuesday, and were attended by hundreds of mourners, according to NPR.

A large crowd of Jewish and non-Jewish mourners gathered Tuesday under a vaulted white ceiling, tall chandeliers and stained glass windows inside Pittsburgh's Rodef Shalom to honor Cecil and David Rosenthal. At 59 and 54, the brothers were two of the youngest victims and are among the first of the 11 victims of the shooting at Tree of Life synagogue to be laid to rest.

The brothers' wooden coffins sat head-to-head at the front of the temple as family remembered them as social, thoughtful men who were deeply involved in their congregation.


For many in Pittsburgh's Jewish community, Tuesday's funeral services start the formal period of mourning the victims — a process carefully guided by Jewish tradition. A separate service was held Tuesday for Dr. Jerry Rabinowitz, 66, a physician who also was killed on Saturday. Services for the rest of the victims will be held in coming days.

For his part, Trump said he insisted on visiting Pittsburgh because he said on Saturday that he would - and he wanted to keep the promise he made to the victims and their families. Funerals for the other 8 victims will be held on Wednesday and throughout the week.

Published:10/31/2018 5:16:58 AM
[Markets] After Germany's Merkel Comes Chaos

Authored by John Rubino via,

After a long, initially-successful run promoting European integration and mass immigration, German Chancellor Angela Merkel saw the bottom fall out of her political fortunes this year. This week she stepped down as leader of the formerly-dominant Christian Democrat party and promised not run again when her term as Chancellor ends in 2021.

What happens next is almost certain to be chaotic, as the following chart (courtesy of this morning’s Wall Street Journal) makes clear:

Note that in August of 2017 the two least popular parties were the far right Alternative for Germany (blue line) and the far left Greens (green line). In the ensuing 14 or so months AfG’s support rose from single digits to around 17% while the Greens rocketed from the bottom of the pack to 20%.

If you didn’t know what these two parties stood for you might think, “Fine, they’re new and interesting, so let them form a coalition and govern for a while.”

Unfortunately they’re more likely to kill each other in street fights than work together, since the former want closed borders and free markets while the latter want increased regulation and unlimited immigration.

The alternative to an AfG/Green coalition then becomes some combination of the remaining, more centrist (by European standards at least) parties. But the biggest of those parties – Merkel’s Christian Democrats and their coalition partner Social Democrats – are in freefall, precisely because of what they’ve done while in power.

So there appears to be no way to put these puzzle pieces together to produce a stable government.

And – here’s where things get truly scary – a stable Germany under Merkel’s bland but firm hand has been the only thing holding the European Union and eurozone together. If Germany descends into internal turmoil without a coherent government to push the Italys and Hungarys around, European populists/nationalists will fill the resulting vacuum. Borders will be re-imposed within and without the EU, national government budgets – already above EU deficit limits in many cases – will explode. Already-debilitating debts will keep rising, and the ECB will be forced to bail out Italy for sure and probably several other member states after that.

Since an ECB bailout of the Italian banking system means, in effect, moving Italy’s debt onto Germany’s balance sheet, the world’s one remaining rock-solid credit will join the ranks of politically unstable, increasingly indebted countries that may or may not be able to avoid financial collapse.

The end-game? A euro devaluation will be imposed by the global currency markets or announced preemptively on some future Sunday night by Merkel’s successor (assuming there is one).

The descent of the world’s second most important currency from reserve asset to modern day Italian lira will raise a lot of questions, including:

  • Should we all buy the US dollar because it’s the only sound currency left?

  • Should we dump dollars because the US is really not that different from Europe in terms of financial mismanagement and political incoherence?

  • Should we dispense with the whole fiat currency thing and go back to sound moneythat requires politicians and central bankers to live within their means?

  • Should we dispense with the whole “constitutional democracy” thing and hand over control to a leader who’s strong enough to put things right?

These four options seem about equally plausible at the moment. But the worlds they’ll create couldn’t be more different.

*  *  *

Other posts in the “Why We’re Ungovernable” series are here.

Published:10/31/2018 4:17:05 AM
[Markets] Russia Planning Series Of Missile Tests Amid NATO's "Largest Military Exercise Since The Cold War"

As 50,000 NATO troops mass in Scandinavia for the military alliance's annual "Trident Juncture" military exercises, an annual affair that has been expanded to become the largest NATO exercise since the end of the Cold War in reflection of the deepening hostilities with Russia, it appears President Vladimir Putin has decided to flex some military muscle of his own.

As Radio Free Europe reports, the Russian Navy has alerted NATO that it is planning to test missiles in international waters off Norway's coast this week. And while the missiles Russia will be testing aren't of the hypersonic variety that Russia is planning to introduce in the coming years, NATO commanders will undoubtedly seize on Russia's decision to help justify even more aggressive displays of military force in the future.


For what it's worth, NATO Secretary-General Jens Stoltenberg tried to play down the missile tests as part of routine activity by the Russian military.

"Russia has a sizable presence in the north, also off Norway," Stoltenberg told the Norwegian news agency NTB.

"Large [Russian] forces take part in maneuvers and they practice regularly."

Russian officials did not immediately comment on the planned missile tests, which come amid persistent tension between NATO and Russia, which seized Crimea from Ukraine in 2014 and backs separatists in an ongoing conflict in eastern Ukraine but accuses the alliance of provocative behavior near its borders.

A spokesman for Avinor, the organization that operates Norwegian airports and air-navigation services, told RFE that Russia had informed them about the tests in a NOTAM (a type of "routine message" to pilots about potential hazards along a flight route). The tests are set to take place between Nov. 1 and Nov. 3 west of the coastal cities of Kristiansund, Molde, and Alesund.

Norway also tried to play down the significance of the Russian missile tests.

"There is nothing dramatic about this. We have noted it and will follow the Russian maneuvers," Norwegian Defense Minister Frank Bakke-Jensen said.

The Trident Juncture exercises began Oct. 25, and are expected to run through Nov. 7. They will involve around 50,000 soldiers, 10,000 vehicles, and more than 300 aircraft and ships from all 29 NATO allies, as well as "non-aligned" Finland and Sweden. The exercises will stretch from the North Atlantic to the Baltic Sea to test the alliance's ability to respond to an attack on the Baltics (as the Baltic states grow increasingly nervous that Russia might attempt an annexation similar to what occurred in the Crimea).


The exercises follow by more than a year the Zapad exercises, a similarly unprecedented display of force by the Russian federation. Those exercises involved more than 100,000 ground troops as well as tanks, aircraft and artillery, while also featuring a test launch of a nuclear ballistic missile. And just last month, Russia and China unnerved members of NATO by holding their joint "Vostok" war games.

Published:10/31/2018 3:20:11 AM
[Markets] UK Fracking Pauses, Again

Authored by Tsvetana Paraskova via,

For the second time in two weeks since Cuadrilla started fracking at an exploration site in northwest England - resuming hydraulic fracturing in the UK for the first time in seven years - the company had to stop operations due to a micro seismic event measuring above the threshold requiring a halt.

Cuadrilla confirmed that a micro seismic event measuring 1.1 on the Richter scale was detected at about 11.30 a.m. local time on Monday, while the team were hydraulically fracturing at the Preston New Road shale gas exploration site in Lancashire, the company said in a statement today.

According to regulations, in case of micro seismic events of 0.50 on the Richter scale or higher, fracking must temporarily be halted and pressure in the well reduced.

“This is the latest micro seismic event to be detected by the organisation’s highly sophisticated monitoring systems and verified by the British Geological Survey (BGS). This will be classed as a ‘red’ event as part of the traffic light system operated by the Oil and Gas Authority but as we have said many times this level is way below anything that can be felt at surface and a very long way from anything that would cause damage or harm,” Cuadrilla said.

“Well integrity has been checked and verified,” the company said, noting that in line with regulations, fracking has paused for 18 hours.

Cuadrilla had paused fracking at the site on Friday morning after a 0.76 on the Richter scale micro seismic event was recorded, the latest of some dozen seismic events since fracking started, but the first that was above the 0.5 threshold.

The seismic event on Monday was the strongest yet to be recorded since Cuadrilla started fracking at the exploration site two weeks ago, on October 15.

Anti-fracking activists say that there have been now 27 seismic events since October 15, Blackpool Gazzette reports.

Published:10/31/2018 2:47:00 AM
[Markets] US Pressuring Saudis To Heal Qatar Rift, Ease Sanctions, As Riyadh's Isolation Grows

In the latest fallout over the murder of journalist Jamal Khashoggi, the United States is demanding that Saudi Arabia make nice with Qatar, according to sources quoted in Bloomberg.

Three officials with knowledge of the issue have described to Bloomberg that the US is "raising pressure" on the kingdom to "wind down" its ongoing "political and economic isolation of Qatar" at a moment that Riyadh is potentially facing its own such isolation as international outrage has grown since the October 2nd slaying of Khashoggi inside the Istanbul consulate. 

One U.S. official further says the Saudis are being asked to "take steps" to wind down its over three-year long bombing campaign in Yemen, or at least to greatly mitigate the factors causing a massive humanitarian crisis in famine — an ironic and contradictory request given the Pentagon's own lead role as part of the Saudi coalition. 

Since June of 2017, when a rift came out in the open and Saudi Arabia led a full economic and diplomatic blockade of its tiny oil and gas rich neighbor along side three other Gulf Cooperation Council states of the UAE, Kuwait, and Bahrain (non-GCC Egypt also initially cut ties), the two sides have essentially been in a state of war; however Qatar has remained defiant throughout the unprecedented crisis, relying on its vast oil wealth to weather the storm.  

The land, air, and sea Saudi-led boycott has included aggressive economic sanctions, even food blockages, as most of Qatar's basic staples had previously been supplied by land via Saudi Arabia. But it's been hugely awkward for Western allies of both countries like the United States and Britain, as Qatar hosts the largest US/UK military base in the Middle East, Al Udeid Air Base, located 20 miles southwest of the Qatari capital of Doha and home to some 11,000 US military personnel, plus Royal Air Force units. 

Given Washington's close economic and military ties to both countries, healing the inter-GCC schism has been a priority for the White House, and it now appears to be using the international outcry to pressure Riyadh in an amenable direction regarding Qatar. 

Could the pressure already be working? Last week at the Saudi Future Investment Initiative (FII) hosted in Riyadh, which a number of Western companies and media outlets boycotted, Crown Prince MbS took the the previously unheard of step (since the 16-month crisis with Doha began) of acknowledging the resilience of Qatar’s “strong economy” and forecast progress over the next half decade. 

“Even Qatar, despite our differences with them, has a very strong economy and will be very different” in the next five years, the prince said at an investment summit in the Saudi capital as he explained his vision for the Middle East’s place in the world. Bloomberg

These words alone signal an opening between the two countries that could lead to detente under Washington oversight. 

Though Trump had previously seemed to endorse the Saudi position that Qatar is a state sponsor of terror in the region and had helped facilitate Iranian influence and expansion, former Secretary of State Rex Tillerson had previously attempted to negotiate an agreeable closure to the crisis and softening of tensions, without success. 

But it appears that in the end the Saudis will only perhaps respond to what they know best — blackmail. So ultimately should MbS survive the heat of the Khashoggi investigation, it will likely come at the expense of having to make nice with Qatar and play by other Washington rules as well.  

Published:10/31/2018 12:07:58 AM
[Markets] Whitehead: America Is On The Brink Of A Nervous Breakdown

Authored by John Whitehead via The Rutherford Institute,

“As nightfall does not come at once, neither does oppression. In both instances, there is a twilight when everything remains seemingly unchanged. And it is in such twilight that we all must be most aware of change in the air – however slight – lest we become unwitting victims of the darkness.”

- Supreme Court Justice William O. Douglas

Yet another shooting.

Yet another smear of ugliness, hatred and violence.

Yet another ratcheting up of the calls for the government to clamp down on the citizenry by imposing more costly security measures without any real benefit, more militarized police, more surveillance, more widespread mental health screening of the general population, more threat assessments and behavioral sensing warnings, more gun control measures, more surveillance cameras with facial recognition capabilities, more “See Something, Say Something” programs aimed at turning Americans into snitches and spies, more metal detectors and whole-body imaging devices at so-called soft targets, more roaming squads of militarized police empowered to do more stop-and-frisk searches, more fusion centers to centralize and disseminate information to law enforcement agencies, and more government monitoring of what Americans say and do, where they go, what they buy and how they spend their time.

All of these measures play into the government’s hands.

All of these measures add up to more government power, less real security and far less freedom.

As we have learned the hard way, the phantom promise of safety in exchange for restricted or regulated liberty is a false, misguided doctrine that has no basis in the truth.

Things are falling apart.

When things start to fall apart or implode, ask yourself: who stands to benefit?

In most cases, it’s the government that stands to benefit by amassing greater powers at the citizenry’s expense.

Unfortunately, the government’s answer to civil unrest and societal violence, as always, will lead us further down the road we’ve travelled since 9/11 towards totalitarianism and away from freedom.

With alarming regularity, the nation is being subjected to a spate of violence that not only terrorizes the public but also destabilizes the country’s fragile ecosystem, and gives the government greater justifications to crack down, lock down, and institute even more authoritarian policies for the so-called sake of national security without many objections from the citizenry.

Clearly, America is being pushed to the brink of a national nervous breakdown.

This breakdown - triggered by polarizing circus politics, media-fed mass hysteria, racism, classism, xenophobia, militarization and militainment (the selling of war and violence as entertainment), a sense of hopelessness and powerlessness in the face of growing government corruption and brutality, and a growing economic divide that has much of the population struggling to get by—is manifesting itself in madness, mayhem and an utter disregard for the very principles and liberties that have kept us out of the clutches of totalitarianism for so long.

Yet there is a method to this madness.

Remember, authoritarian regimes begin with incremental steps. Overcriminalization, surveillance of innocent citizens, imprisonment for nonviolent—victimless—crimes, etc. Bit by bit, the citizenry finds its freedoms being curtailed and undermined for the sake of national security. And slowly the populace begins to submit.

No one speaks up for those being targeted.

No one resists these minor acts of oppression.

No one recognizes the indoctrination into tyranny for what it is.

Historically this failure to speak truth to power has resulted in whole populations being conditioned to tolerate unspoken cruelty toward their fellow human beings, a bystander syndrome in which people remain silent and disengaged—mere onlookers—in the face of abject horrors and injustice.

Time has insulated us from the violence perpetrated by past regimes in their pursuit of power: the crucifixion and slaughter of innocents by the Romans, the torture of the Inquisition, the atrocities of the Nazis, the butchery of the Fascists, the bloodshed by the Communists, and the cold-blooded war machines run by the military industrial complex.

We can disassociate from such violence.

We can convince ourselves that we are somehow different from the victims of government abuse.

We can continue to spout empty campaign rhetoric about how great America is, despite the evidence to the contrary.

We can avoid responsibility for holding the government accountable.

We can zip our lips and bind our hands and shut our eyes.

In other words, we can continue to exist in a state of denial.

Whatever we do or don’t do, it won’t change the facts: the nation is imploding, and our republic is being pushed ever closer to martial law.

As Vann R. Newkirk II writes for the Atlantic:

Trumpism demands that violence be solved by local militarization: increased security at schools, the arming of teachers, and now, the adoption of guns in places intended quite literally to be sanctuaries from the scourges of the world. Taken altogether, what Trumpism seems to intend is the creation—or perhaps the expansion—of the machinery of a police state

In facing what appears to be a rising tide of violence—a tide that Trump himself elevates and encourages—the prescription of arms merely capitulates to the demands of that bloodshed. The purpose of political violence and terrorism is not necessarily to eliminate or even always to create body counts, but to disempower people, to spread the contagion of fear, to splinter communities into self-preserving bunkers, and to invalidate the very idea that a common destiny is even possible. Mandates to arm people accelerate this process. They inherently promote the idea that society cannot reduce the global level of harm, and promote the authoritarian impulses of people seeking order.

Where Newkirk misses the point is by placing the blame squarely on the Trump Administration.

This shift towards totalitarianism and martial law started long before Trump, set in motion by powers-that-be that see the government as a means to an end: power and profit.

As Paul Craig Roberts, former Assistant Secretary of the Treasury, recognized years ago, “Adolf Hitler is alive and well in the United States, and he is fast rising to power.”

Roberts was not comparing Trump to Hitler, as so many today are wont to do.

Rather, he was comparing the American Police State to the Nazi Third Reich, which is a far more apt comparison.

After all, U.S. government agencies—the FBI, CIA and the military—have fully embraced many of the Nazi’s well-honed policing tactics and have used them repeatedly against American citizens for years now.

Indeed, with every passing day, the United States government borrows yet another leaf from Nazi Germany’s playbook: Secret police. Secret courts. Secret government agencies. Surveillance. Censorship. Intimidation. Harassment. Torture. Brutality. Widespread corruption. Entrapment. Indoctrination. Indefinite detention.

These are not tactics used by constitutional republics, where the rule of law and the rights of the citizenry reign supreme. Rather, they are the hallmarks of authoritarian regimes, where the only law that counts comes in the form of heavy-handed, unilateral dictates from a supreme ruler who uses a secret police to control the populace.

The empowerment of the Gestapo, Germany’s secret police, tracked with the rise of the Nazi regime in much the same way that the rise of the American police state corresponds to the decline of freedom in America.

How did the Gestapo become the terror of the Third Reich?

It did so by creating a sophisticated surveillance and law enforcement system that relied for its success on the cooperation of the military, the police, the intelligence community, neighborhood watchdogs, government workers for the post office and railroads, ordinary civil servants, and a nation of snitches inclined to report “rumors, deviant behavior, or even just loose talk.”

In other words, ordinary citizens working with government agents helped create the monster that became Nazi Germany. Writing for the New York Times, Barry Ewen paints a particularly chilling portrait of how an entire nation becomes complicit in its own downfall by looking the other way:

In what may be his most provocative statement, [author Eric A.] Johnson says that ‘‘most Germans may not even have realized until very late in the war, if ever, that they were living in a vile dictatorship.’’ This is not to say that they were unaware of the Holocaust; Johnson demonstrates that millions of Germans must have known at least some of the truth. But, he concludes, ‘‘a tacit Faustian bargain was struck between the regime and the citizenry.’’ The government looked the other way when petty crimes were being committed. Ordinary Germans looked the other way when Jews were being rounded up and murdered; they abetted one of the greatest crimes of the 20th century not through active collaboration but through passivity, denial and indifference.

Much like the German people, “we the people” have become passive, polarized, gullible, easily manipulated, and lacking in critical thinking skills.  Distracted by entertainment spectacles, politics and screen devices, we too are complicit, silent partners in creating a police state similar to the terror practiced by former regimes.

Can the Fourth Reich happen here?

It’s already happening right under our noses. Much like the German people, “we the people” are all too inclined to “look the other way.”

In our state of passivity, denial and indifference, here are some of the looming problems we’re ignoring:

Now these are not problems that you can just throw money at, as most politicians are inclined to do.

These are problems that will continue to plague our nation—and be conveniently ignored by politicians—unless and until Americans wake up to the fact that we’re the only ones who can change things.

We’re caught in a vicious cycle right now between terror and fear and distraction and hate and partisan politics and an inescapable longing for a time when life was simpler and people were kinder and the government was less of a monster.

Our prolonged exposure to the American police state is not helping.

As always, the solution to most problems must start locally, in our homes, in our neighborhoods, and in our communities.

We’ve got to refrain from the toxic us vs. them rhetoric that is consuming the nation.

We’ve got to work harder to build bridges, instead of burning them to the ground.

We’ve got to learn to stop bottling up dissent and disagreeable ideas and learn how to work through our disagreements without violence.

We’ve got to de-militarize our police and lower the levels of violence here and abroad, whether it’s violence we export to other countries, violence we glorify in entertainment, or violence we revel in when it’s leveled at our so-called enemies, politically or otherwise.

For starters, we’ll need to actually pay attention to what’s going on around us, and I don’t mean by turning on the TV news. That will get you nowhere. It’s a mere distraction from what is really going on. In other words, if you’re watching, that means you’re not doing. It’s time to get active.

  • Pay attention to what your local city councils are enacting.

  • Pay attention to what your school officials are teaching and not teaching.

  • Pay attention to whom your elected officials are giving access and currying favor.

Most of all, stop acting like it really matters whether you vote for a Republican or Democrat, because in the grand scheme of things, it really doesn’t.

While you’re at it, start acting like citizens who expect the government to work for them, rather than the other way around. While that bloated beast called the federal government may not listen to you without a great deal of activism and effort brought to bear, you can have a great—and more immediate—impact on your local governing bodies.

This will mean gathering together with your friends and neighbors and, for example, forcing your local city council to start opposing state and federal programs that are ripping you off. And if need be, your local city council can refuse to abide by the dictates that continue to flow from Washington, DC. In other words, nullify everything the government does that is illegitimate, egregious or blatantly unconstitutional.

Finally, remember that when you strip away all of the things that serve to divide us, we’re no different underneath: we all bleed red, and we all suffer when violence becomes the government’s calling card.

As I make clear in my book Battlefield America: The War on the American People, the oppression and injustice—be it in the form of shootings, surveillance, fines, asset forfeiture, prison terms, roadside searches, and so on—will come to all of us eventually unless we do something to stop it now.

Unless we can learn to live together as brothers and sisters and fellow citizens, we will perish as tools and prisoners of the American police state.

Published:10/30/2018 11:17:07 PM
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Published:10/30/2018 10:45:55 PM
[Markets] Russia "Ready To Shoot Down" U.S. Spy Plane Behind Attacks On Airbase, Says Defense Official

A Russian defense official has doubled down on prior claims that the United States was behind a prior massive drone attack against Khmeimim Air Base near Latakia (alternately Hmeimim), which has further come under sporadic waves of attack by small armed drones which have appeared increasingly sophisticated. 

Vladimir Shamanov, head of the lower parliamentary house's defense committee and a former airborne troops commander, warned, according to a translation of his Tuesday statement by Russian Market:

In case of another U.S. drone attack on Russian Military Base in Syria, Russia is ready to shoot-down that plane

The threat was made against an American spy plane possibly being in the area near Syria to coordinate any future attack. Last week the Kremlin said, based on new intelligence provided by the Russian defense ministry, that a major attack on Khmeimim last January was coordinated by a US P-8 Poseidon surveillance plane

US P-8 Poseidon surveillance plane

The nighttime January 8th attack which involved 13 unmanned aerial vehicles (UAVs) in total — 10 approached Khmeimim while 3 attempted an attack on the naval facility in Tartus. That significant attack came after a prior New Year's eve drone assault actually damaged Russian jets parked at the airbase. 

Last weekend President Putin himself addressed the uptick in drone attacks especially over just the past two months while in discussions with the leaders of Germany, France and Germany in Istanbul, according to TASS

Terrorists continue attacks in Idlib, with dozens of drones shot down near the Russian military base in the country in the past two months or so, Russian President Vladimir Putin told reporters after a four-party summit on Syria held in Istanbul on Saturday.

"Russia reserves the right to support the Syrian government if terrorists carry out provocations from the Idlib zone," Putin said. "Quite recently - I have informed my counterparts - artillery strikes were delivered from the Idlib zone in the direction of Aleppo. In the recent six weeks to two months, our air defense has shot down 50 aerial vehicles near our base in Hmeymim."

Though at the Istanbul summit the Russian president stopped short of blaming the U.S. for coordinating the attacks — something that Pentagon officials have vehemently denied — the words came just days after Russian Deputy Defense Minister Colonel General Alexander Fomin went public with details of a Russian intelligence report at a plenary session of the Beijing Xiangshan Forum on security last Thursday: "Thirteen drones moved according to common combat battle deployment, operated by a single crew. During all this time the American Poseidon-8 reconnaissance plane patrolled the Mediterranean Sea area for eight hours," the deputy defense minister said. 

These latest threats "to shoot down that plane" also follow the mistaken downing of a Russian Ilyushin-20 reconnaissance plane in mid-September with 15 crew members on board after Israel launched a massive attack on Syrian government targets. Following the incident, for which Israel expressed regret, Russia had vowed an "adequate response" and effectively declared a "no-fly zone" in the area of its assets in Syria, and further moved forward with transferring S-300 air defense systems to the Syrian government. 

With Russia's heightened rhetoric of late, it appears to be anticipating the next potential major incident over the skies of Syria — only this time Moscow has raised the stakes as it vows to follow through on attacking American or other foreign aircraft behind attacks on Russian bases and aircraft in Syria. 

Published:10/30/2018 10:45:55 PM
[Markets] Paul Craig Roberts Asks "Is America Finished?"

Authored by Paul Craig Roberts,

The refusal of the Democratic Party and the military/security complex to accept the results of the 2016 US presidential election and the misuse of their positions of power to prevent Donald Trump from exercising presidential powers is a revolutionary step, well described by Angelo Codevilla here:

In 2010, Claremont Institute Senior Fellow Angelo Codevilla reintroduced the notion of "the ruling class" back into American popular discourse. In 2017, he described contemporary American politics as a "cold civil war." Now he applies the "logic of revolution" to our current political scene.


It has unfolded faster than foreseen. Its sentiments’ spiraling volume and intensity have eliminated any possibility of “stepping back.”


The Democratic Party and the millions it represents having refused to accept 2016’s results; having used their positions of power in government and society to prevent the winners from exercising the powers earned by election; declaring in vehement words and violent deeds the illegitimacy, morbidity, even criminality, of persons and ideas contrary to themselves; bet that this “resistance” would so energize their constituencies, and so depress their opponents’, that subsequent elections would prove 2016 to have been an anomaly and further confirm their primacy in America. The 2018 Congressional elections are that strategy’s first major test. Regardless of these elections’ outcome, however, this “resistance” has strengthened and accelerated the existing revolutionary spiral.

Read more here...

Americans are now so polarized that they “no longer share basic sympathies and trust, because they no longer regard each other as worthy of equal consideration.” Codevilla blames the progressives and their attitude of moral superiority, but his explanation is independent of who is to blame. I blame both sides. The Constitution and our civil liberties took a major hit from the “conservative” Republican regime of George W. Bush.

The consequence has been to weaponize government for use against the domestic adversary. In other words, unity has departed us. The absence of unity makes it easy for the ruling oligarchy to achieve its material interests at the expense of the welfare of the American people. Indeed, it is amazing to find progressives aligned with the military/security complex to block Trump from normalizing relations with Russia.

The provocations of Russia, which have been ongoing since the Clinton regime, have reached unprecedented levels under the neoconservative regimes of Obama and Trump. The conflict that has been orchestrated is good for the $1,000 billion annual budget of the military/security complex at the cost of maximizing the chance of nuclear war. The demonizations of Russia, Putin, China, and Iran are so extreme as to have convinced Russia and China that Washington intends war.

For Russia, Trump’s withdrawal from the intermediate range missile treaty (INF) confirms that an attack on Russia is being prepared. Intermediate range missiles cannot reach the US. The treaty gave safety to Russia and Europe, which is why Washington’s claim that Russia is violating the treaty is absurd. The only reason for Washington to withdraw from the treaty is to be able to place intermediate range nuclear missiles on Russia’s borders that would substantially increase the likelihood of success of a US first strike against Russia.

This apparently is not clear to the American people, media, and Congress, but it is clear to the Russians.

Mikhail Gorbachev, who negotiated the INF Treaty with President Reagan, stated the war threat succintly:

“It looks as if the world is preparing for war.”

It is also very clear to the Russian government. A top official, Andrei Belousov, declared:

“Yes, Russia is preparing for war, I have confirmed it. We are preparing to defend our homeland, our territorial integrity, our principles, our values, our people – we are preparing for such a war.”

Putin himself finally found tough words. A country that attacks Russia will be obliterated, “will die like dogs,” and “go to Hell.”

As demonization of Russia is part of the Democrats’ demonization of Trump - “Putin stooge,” “Putin agent,” or, in the words of former CIA Director John Brennan, “traitor” - the American people are too disunited to take a stand against conflict with Russia that serves the agendas of the military/security complex and the neoconservatives’ ideology of US world hegemony.

As it is impossible for Russia to accept US intermediate range nuclear missiles on Russia’s border, war is close at hand.

China also sees war on the horizon. China’s president has ordered the military to “prepare for war.”

The recklessly irresponsible policy of the US government toward Russia and China is leading to nuclear war.

Perhaps the European governments, Washington’s compliant stooges, will finally wake up and refuse to participate in Washington’s orchestrated conflict. If not, the Doomsday Clock will have to be moved to one second before doom.

Published:10/30/2018 9:45:58 PM
[Entertainment] You Better Beliebe It: Justin Bieber Has Shaved His Head Justin Bieber "What Do You Mean?" Justin Bieber has shaved his head? Oh baby, baby, baby it's real. The singer chopped off his luscious blonde locks on Tuesday and showed off his new...
Published:10/30/2018 9:15:35 PM
[Entertainment] Kanye West Renounces Politics Amid Controversial Stances: "I've Been Used" Donald Trump, Kanye WestKanye West is taking a new stance on politics. In late September and into October, the rapper received some backlash from fellow celebrities about his overt pro-Donald Trump views. West...
Published:10/30/2018 8:46:45 PM
[The Blog] Trump: Best danged economy of the 21st century on the line next Tuesday

If it's still the economy, stupid ...

The post Trump: Best danged economy of the 21st century on the line next Tuesday appeared first on Hot Air.

Published:10/30/2018 8:22:35 PM
[Entertainment] Sanaa Lathan Says Being a Black Woman in Hollywood Has Gotten Easier ESC: Sanaa LathanNow that Sanaa Lathan has over 20 years experience working in movie business, she's reflecting on her evolution, as well as Hollywood's. In honor of the launch of Ralph Lauren...
Published:10/30/2018 8:22:35 PM
[Entertainment] Beyoncé's Toni Braxton-Inspired Halloween Costume Is a Masterpiece Beyonce, On the Run II TourThings Beyoncé did? That. After an epic weekend of star-studded Halloween celebrations and the elaborate get-ups that followed, the real MVP dusted off her costume closet for one...
Published:10/30/2018 7:16:32 PM
[Markets] Three Reasons Why '7' Is The Most Important Number In The World Right Now


We’re seeing a lot of commentary about the number 7 lately, specifically related to the exchange rate between the US dollar and the Chinese yuan. Some sources are even calling it the most important number for global capital markets just. So let’s talk about it...

The issue:

  • The yuan has weakened versus the dollar by 6.5% since the start of 2018 and 10.1% from its late March high water mark.
  • This is greater dollar weakness than that experienced by developed economy currencies. The DXY Dollar Index (mostly the euro, yen, and pound versus the dollar) is +4.5% YTD and 8.7% higher since its February lows.

The number 7:

  • The offshore yuan trades for 6.9719 to the dollar just now.
  • You have to go back to December 2016 to find equally low levels for the yuan/dollar cross. We were unable to find a time when the yuan ever breached 7/dollar since 2011.

All this matters for 3 reasons:

#1. Trade. The 10% depreciation for the yuan since March largely cancels out the current 10% US tariffs on many Chinese goods in terms of their effect on the country’s exporters. But… these tariffs go to 25% at the end of 2018. A further 15% depreciation in the yuan would certainly exacerbate already parlous relationship between China and the United States. Something global equity markets don’t want to see…

Policymakers at the Central Bank of China were out last week saying they would not use the yuan as a tool to fend off the economics effects of trade disputes. A good piece from the South China Morning Post (link below) explained that the Chinese government “regards the exchange rate not as a normal price indicator but as a symbol of China’s economic health that must be defended.”

#2. Global capital markets volatility. Those of you with long-ish memories will recall that China did allow a surprise 2% devaluation during the local stock market rout of August 2015. Markets around the world took that as a sign of panic on the part of Chinese policymakers, and equities in developed economies plummeted the Monday morning of the move lower for the yuan.

Currency trading data complied by Bloomberg last week shows that dollar-yuan volumes are now higher than that 2015 meltdown. They attribute this to several Chinese banks selling dollars, potentially to defend the yuan. Worth noting: the yuan weakened a further 0.4% over the 2 days after this possible central bank intervention.

#3. The Chinese economy. The SCMP article notes that China saw $500 billion of outflows in 2015 as it weakened its currency from 6.2/dollar to 6.4/dollar. With the currency now 9.4% lower than 2015, and near its 2011-present lows, further outflows from incremental devaluation is a real risk.

All this could not come at a worse time for the Chinese economy, already beset by trade/tariff frictions, frothy real estate markets, and high levels of corporate financial leverage.

Summing up: it is easy to see why so much fast/smart money is focused on the 7 yuan/dollar exchange rate. We’ve mentioned in past notes that the Shanghai Composite is the world’s most important stock market to watch just now, the canary in the coalmine for global equity market sentiment.

Yes, China has the capital to defend the 7 level for now. But how much does it want to, and for how long? Even if your investment bailiwick is small cap US stocks, seemingly distant from this topic, this is an important number to watch.

Published:10/30/2018 7:16:32 PM
[Entertainment] Watch Rami Malek Turn Down a Fan's Request in This Hilariously Awkward Viral Video Rami MalekYou win some, you lose some. Such was the case for Rami Malek and a now-viral fan. As the story goes, 19-year-old film major Xian Black approached the Bohemian Rhapsody actor on the...
Published:10/30/2018 6:18:13 PM
[Markets] Energy Junk Bonds Tumble, Dragging High Yield Spreads To 2018 Wides

Last weekend we reported that "the world's most bearish hedge fund", Horseman Global, had charted a specific path to trade the coming bear market, and it went through one commodity - oil, and one industry - shale.

As Clark wrote in his most recent Market View letter, data from the EIA, price action of stocks, and comments and capital market activity "are all pointing to the oil industry beginning to move away from US onshore. Not in a huge way, but a bit" He then added that when looking at the "brutal and unrelenting economics of US shale oil drilling", Clark predicted that US oil production would slow and quite possibly contract.

This is made even more likely in my view by the consolidation of large shale drillers, who may well feel that it is in their self-interest to slow oil production and help to push up WTI oil prices. Betting on self-interest, particularly when it comes to Americans, has historically been a good bet.

Aside from specific sectors, a slowdown in US oil production and a rise in oil prices, would also have broader economic implications and cause a sharp slowdown in US growth.

For now, this thesis has yet to pan out at the macro level: in fact, as Bloomberg wrote overnight, North American oil and gas producers "are delivering the wrong type of growth" in terms of both what investors, and Horseman, is expecting: too much production, not enough cash.

Earlier this year, many shale explorers pledged to change their ways, reducing spending and returning more to shareholders.

Dividends and share buybacks were the major theme of the first quarter, but then many companies blew through their capital spending budgets in the second quarter. Third-quarter earnings will reveal whether the industry can adhere to its much-touted plan for financial discipline.

The main reason for this is that while pipeline constraints have hampered production from the Permian, companies haven’t stopped drilling resulting in a skyrocketing number of wells awaiting completion and foreshadowing a production deluge - and lower prices - once the pipes are ready next year.

Just as concerning is that while companies blew out their capex estimates, and many expecting to boost their capital spending budgets further next year, they have been unable to produce shale on a regular basis. In fact, at a time when shale producers should be rolling in the green, 2018 has been far from great, at least in the Permian, with many companies burning through cash in the past 12 months.

Meanwhile, having learned little from the 2015 near death experience for many shale companies, despite the rebound in oil prices and commitment to restrain spending, oil companies’ debt levels remain little changed since 2013, according to Moody’s.

These trends came to a head on Monday when troubled shale company Weatherford posted a quarterly loss and missed its target for free cashflow, sending its stock tumbling and bonds plunging deeper into distressed territory, while pushing energy junk bond spreads wider.

h/t Sebastian Boyd

As Bloomberg notes, citing CreditSights which cut the company to underperform, Weatherford and its peers face a slowdown onshore in the U.S., as well as lower oil prices. As a result, the whole oil and gas services sector is wider, especially the lower-rated bonds, with the Barclays High Yield Energy Index spread blowing out to 452bps, the widest since September 2017.

This was the biggest one-month move wider in energy HY spreads since the E&P crisis of December 2015/January 2016, when energy junk bonds blew out, as many shale companies defaulted on their debt.

And as energy credit is suddenly reeling, the weakness has spread with credit markets continuing to crack wider as cash markets catch up to derivatives, and the junk bond index now back to levels last seen in November 2017.

And with oil prices having peaked and sliding to 2 month lows, with cash flows in the red and with sticky debt refusing to shrink, how much longer before the woes in the oil patch - which have already sunk the bonds of several distressed names - spread to the broader market and shake the one asset class which until just a month ago had confounded so many traders with its perplexing immunity to any bad news.

Published:10/30/2018 6:18:12 PM
[Entertainment] Victoria Beckham to Receive the Fashion Icon Award at the 2018 E! People's Choice Awards Victoria BeckhamIt's official: Victoria Beckham is the most fashionable woman out there. OK, there are a lot of stylish women in the world, but Beckham has proven year after year that she is iconic,...
Published:10/30/2018 5:55:17 PM
[Markets] "Self Segregation" - Niall Ferguson Exposes The Destructive Power Of Social Networks

Authored by Robert Huebscher via,

The conventional wisdom promoted by the developers of social networks was that they would provide immense benefits to society through faster and broader connectivity. That view was shattered by Niall Ferguson, who called services like Facebook and Twitter “crazy ideas gone viral, with deeply negative implications.”

Ferguson is a historian and teaches at Stanford. His views are generally regarded as politically conservative and he has often taken positions that specifically oppose those of the New York Times columnist Paul Krugman. He was the evening keynote speaker at the Schwab IMPACT conference yesterday in Washington, D.C.

Speaking from a historical perspectives, Ferguson said that human history has been dominated by the tension between social networks and hierarchies of all kinds. Indeed, that is the central theme of his most recent book, The Square and the Tower: Networks and Power, from the Freemasons to Facebook, which is available here.

“The idea was that everything would be awesome if we are all connected,” Ferguson said, in regard not just to modern social networks, but to inventions such as the printing press.

“But that is a deeply suspect idea,” he said.

Giant social networks, like Facebook and Twitter, do not form an online social community. Instead, a large social network will “self-segregate” into opposing clusters, according to Ferguson. In the realm of politics, social networks have gravitated to become platforms for those with strongly held liberal and conservative views, with far fewer members offering centrist opinions.

A historical perspective

Ferguson said that the phenomenon of polarization was predictable, when one considers similar historical events.

To understand our time, he said, you must go back 500 years to the early 16th century, when the printing press became widely available. It allowed a greater volume of content to be produced and disseminated with a lower cost of communication.

The Mark Zuckerberg figure of that time was Martin Luther, the leader of the Reformation. Luther’s axiom, he said, was that if you could read the Bible and have a direct relationship with God, everything would be awesome. But what ensued was 130 years of conflict due to polarization. Half of the population wanted to reform the church, the other half didn’t, he said.

The most insidious manifestation of this polarization was in the persecution of those considered to be witches. The “witchcraft mania,” Ferguson said, was not just in Salem, Massachusetts; it swept across Europe.

Today we see a similar manifestation in the context of fake news that spreads faster than true news, which undermines our confidence in the media.

In the realm of network science, this process is called “preferential attachment.” When you create a large network, Ferguson said, new nodes (i.e., the people who become its members) are incentivized to join the already well-connected nodes. As networks grow they are not “flat,” he said. Instead, they are highly clustered around those members with “monopolistic” power; everyone else has relatively few connections.

Social networks evolve so that there are two kinds of members: users and owners. The owners become fantastically wealthy, he said. The users don’t realize that if the service if free, then they are the product.

Political implications

Networks are designed to maximize engagement, Ferguson said, and that favors moving people further out on the ideological spectrum. Studies have shown that liberals retweet content from other liberals, and conservatives do likewise. Moreover, Ferguson said that a tweet is 20% more likely to be retweeted if more emotional language is used.

“This is why the political center is threatened,” he said.

“Most people are exhausted by this stuff,” Ferguson said.

One outcome could be the emergence of a third political party.

“The two-party system is not written into the Constitution,” Ferguson said. Very few two-party democracies are left in the world.

“One consequence could be that the exhausted majority will form a new party.”

The puzzle of America’s future is that there is a political center, but they don’t have a party, according to Ferguson. But he doesn’t think Michael Bloomberg will fill that role. Ferguson said it is too hard for him to reinvent himself as a Democrat and get the nomination. John Kasich has a better chance, he said.

Election outcomes can be predicted by social-network followers, Ferguson said. He presented data that showed how Trump dominated Clinton on Twitter and Facebook, in terms of their respective number of followers.

The same was true of England’s Brexit vote, he said, which revealed that there were two kinds of politicians:

“those who understand Facebook and those who lose elections.”

“Too many political scientists don’t get the power of social networks,” Ferguson said.

Democrats have learned this and upped their game, he said. Nationally, there was a competitive bump in the House for Republicans in social network followers from the Kavanaugh hearings, but not in the competitive races. That was not true in the Senate, Ferguson said, which has moved more toward Republicans.

The Quaaludes of quantitative easing

The banking system is a form of network, Ferguson said. Prior to the great financial crisis, the banking system was highly fragile.

“The banking network didn’t have the resilience that a better network would have.”

Specifically, the problem was that Lehman Brothers was a very important part of a cluster of financial institutions. That significance was underestimated by the Fed and Treasury Department, which didn’t understand the consequences of removing a central node like Lehman.

“That is the key insight that explains why the crisis was global,” Ferguson said.

Central banks are the hierarchical structures in the financial system, according to Ferguson. The Fed transcripts from the financial crisis show that the staff economists predicted a minor consequence, and it was then-Chairman Ben Bernanke’s knowledge of the Great Depression that was crucial to avoiding the banking runs of the 1930s. Bernanke understood that absolutely everything had to be done to protect the network, and that included measures like expanding the Fed’s balance sheet and its swap lines to increase liquidity, according to Ferguson.

Now, the financial markets are weaning themselves from “the Quaaludes of quantitative easing (QE),” Ferguson said. QE is best thought of as a volatility suppressant, like Quaaludes that were used to relax the financial markets and reduce volatility.

But the idea that we could “come off the meds” without increasing volatility is not just implausible, he said. It is “magical thinking.”

We are already seeing higher volatility as the Fed normalizes a return to pre-crisis liquidity levels. “This is a reminder of what volatility is like,” he said. The Fed will do another rate hike, especially considering the president is leaning on the Fed to reduce its independence, according to Ferguson.

There was a period of maximum central bank coordination after the Lehman failure, when swap lines were implemented. But then there was a policy divergence among the major central banks. Each began pursuing its own interests. Since then, the major economies have been putting themselves first. “It’s no longer a network that’s operating in sync,” Ferguson said.

As a result, the financial system is as connected and vulnerable as it was 10 years ago, he said.

China’s role in the global network

Most of the post-crisis regulation was focused on bank capital adequacy. “But we are not in a radically different place,” he said.

It is unclear what form the next crisis will take. The big question is what will be the unintended consequences of the trade war with China. Ferguson said the worst case would include the same knock-on effects as a U.S.-centered crisis.

China’s massive credit expansion, which started in 2009, was crucial to avoiding another Great Depression, he said. That expansion facilitated the growth of a strong U.S.-China trade relationship, which Ferguson referred to as “Chimerica.” But, he said, we are now seeing an end to Chimerica.

It’s the classic case of an incumbent power confronting an entrenched power. The business and political elites in China are uncertain about how to respond to Trump.

China does not have a good retaliatory strategy to counter Trump’s tariffs, he said. It thought it could target areas and industries in the U.S. where Republicans were vulnerable, and that it could defuse the trade war.

That was wrong, Ferguson said. China misread the situation. This war could carry on and expand into 2020.

“China has no good options,” he said. It can’t depreciate currency because it would hurt all its citizens through inflation. Likewise, it can’t dump its Treasury bond holdings, because the rest of the world wants them.

“This is the first real obstacle China has run into since joining the World Trade Organization in 2009,” Ferguson said.

Fighting the social network addiction

What are the best ways to use social networks?

Fight the addiction, Ferguson said.

Detach yourself from the daily bombardment of noise.

“The challenge is to be offline enough of the time to think and select what is worth reading,” he said. “It is probably not on Twitter.”

Read an old book, such as an autobiography. “They will help you to think,” he said.

Social networks and the amount of time we spend on devices ruins relationships, according to Ferguson.

“We will look back and view smartphones the way we view cigarettes and the way we make them available to children,” he said.

“The damage is much greater than you realize, because it distracts you from the people near you.”

Real relationships are threatened by the phony relationships through phones.

“A revolution in manners is needed with respect to our personal phones,” Ferguson said.

“A day with a great book is worth 365 days with social media.”

Published:10/30/2018 5:55:17 PM
[Entertainment] Meghan Markle Has Emotional Reunion With Fan She Used to Talk to on Instagram ESC: Meghan MarkleMeghan Markle made the day of one of her biggest fans in New Zealand. While leaving the Viaduct Harbour in Auckland alongside Prince Harry on Tuesday, the Duchess of Sussex spotted a...
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[Entertainment] Meet Jenna Dewan's New Man: 6 Things to Know About Steve Kazee Jenna Dewan, Steve KazeeJenna Dewan has a new man in her life. In April, she and Channing Tatum announced they were separating after eight years of marriage. Since then, they've both gotten back on the...
Published:10/30/2018 4:44:27 PM
[Markets] USGS: Yellowstone Super Volcano Threat Set To "High"

Authored by Mac Slavo via,

The United States Geological Survey has increased the Yellowstone supervolcano threat to “high.” This is the first time that the USGS has updated its volcano threat assessments list since 2006.

The USGS said that 11 of the 18 volcanoes they have classified as a “high threat” or a “very high threat” are located in Washington, Oregon, or California, “where explosive and often snow- and ice-covered edifices can project hazards long distances to densely populated and highly developed areas.”

According to the Epoch Times, the danger list is topped by Kilauea in Hawaii, which has been erupting continuously in 2018.  Mount St. Helens as well as Mount Rainier in Washington, Alaska’s Redoubt Volcano, and California’s Mount Shasta are also in the top five, according to what the USGS has said.

Although the Yellowstone supervolcano is a “high” threat, it’s only the 21st most dangerous volcano in the United States.  

According to Forbes, the assessment that Yellowstone supervolcano was only high was not assigned on a whim. While theYellowstone supervolcano does have the potential for a large eruption, other factors are at play. Such as the fact that it erupts so infrequently, shows no signs of increasing eruption risk today, and is located in a relatively sparsely populated area of the United States which decreases the threat. To be clear, the USGS still ranked the supervolcano as a “high” threat, but it is clearly not the most dangerous volcano in the United States.

Despite the recent gradual uptick in thermal activity in the caldera directly below the supervolcano, the new USGS threat assessment is showing Yellowstone as stable, but dangerous when it does happen to erupt in the future, according to a report by the Missoulan.

The Yellowstone supervolcano is one of the most feared volcanoes on the globe, however, scientists are constantly reminding everyone that the chance of it erupting in a violent and globally devastating fashion is rather small, even though it is said to be “past due” for such an explosion.

Published:10/30/2018 4:44:27 PM
[Entertainment] Naomi Watts Joins Game of Thrones Prequel at HBO Naomi Watts, Hugo Boss Prize 2018 Artists DinnerThe Game of Thrones prequel series just got one step closer to happening: Naomi Watts has signed on to star, E! News has confirmed. Set way before the events of Game of Thrones, the...
Published:10/30/2018 3:50:52 PM
[World] Scott Disick and Sofia Richie Take Their Romance Down Under Scott Disick, Sofia Richie, SydneyScott Disick and Sofia Richie have taken their romance down under. The lovebirds jetted off to Sydney this week, where the reality star is scheduled to appear at Marquee Nightclub for...
Published:10/30/2018 3:50:51 PM
[Markets] WTI Pops Despite Sixth Weekly Crude Build In A Row

Demand concerns and contagion from equity carnage continue to weigh on WTI (overwhelming fears about supply disruptions in Iran and Venezuela) as it tested a $65 handle again today.

API reported a bigger than expected 5.69mm crude build, the sixth weekly rise in inventories in a row, as Gasoline and Distillates drewdown.


  • Crude +5.69mm (+3.2mm exp)

  • Cushing +1.44mm (+2.1mm exp)

  • Gasoline -3.5mm

  • Distillates -3.1mm

6 weeks of Crude builds in a row (and 6 weeks of Cushing builds and Distillate draws)...

The original 14.4mm build associate with Cushing was a typo from the provider.

WTI tested back into the $65 handle once again today, but some are suggesting that is weakness to buy...

“You’re approaching a level where a lot of traders are looking at value,” said Josh Graves, senior market strategist at RJO Futures in Chicago.

“The market is looking at growth potential in the future and trading off of earnings announcements and anything that can give an outlook on what oil prices might be down the road.”

But WTI was hovering just above $66.00 ahead of the API data... dipped and then popped...

Published:10/30/2018 3:50:51 PM
[Markets] Stocks Bounce In 'Pause That Refreshes' For Bears As Systemic Risk Surges

The last few days explained...

China started off weak but quickly ramped, pushing CHINEXT green for the week - briefly...

European stocks failed to be inspired by China and limped weaker with Italy worst today...


A chaotic open saw stocks bounced

...Nasdaq was levitated to unchanged on the week...


Futures show the indices chaotic swings and push for Friday's highs again...


All the major US equity indices remain well below their 200DMAs. Dow futs ramped to theoir 10/11 plunge l;ows - looks like we are going back down...


GE was a bloodbath back below $10...


MSFT tumbled back below its 200DMA and bounced...


FANGs were mixed all day (AMZN and NFLX red, FB and GOOGL green)


But we note that AMZN may have lost its battle with retailers


But we have seen these size drawdowns before - will it be different this time?


Despite stocks bounce, credit markets continued to crack wider as cash markets catch up to derivatives...


Treasury yields limped higher today as stocks bounced with 30Y underperforming...


10Y yields bounced off unch for the month...


For now bond yields are up and stocks are down for the month...


The Dollar Index is up for the 4th time in 5 days making new 2018 highs (highest since May 2017)

NOTE - the USD is up over 2% in the last 10 days - the biggest surge since May.


Offshore Yuan drifted near its cycle lows...


Cable tumbled to near August cycle lows after S&P said it now sees a no-deal Brexit as a rating consideration...


Cryptocurrencies trod water after yesterday's tumble...


Despite the surge in the dollar,. silver was flat today (after yesterday's tumble) but copper and crude slid notably...


WTI Crude fell to a $65 handle intraday as oil suffers its worst month since July 2016...


Gold slipped back to support...


Finally, we note the pros' risk indicator in the market - that of implied correlation (or true systemic risk) - has spiked to its highest since February...

And judging by Goldman's Financial Conditions Index (modeled by Bloomberg's Sebastian Boyd), the S&P has plenty of room to fall further...

Published:10/30/2018 3:14:19 PM
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Published:10/30/2018 2:43:21 PM
[Markets] Is Cliffhanger Market Just Beginning?

Via Dana Lyons' Tumblr,

Swift corrections from market highs have, at times, marked the beginning of longer-term bear markets.

The recent (ongoing) stock market selloff seems to have blindsided many investors. And perhaps what caught them most off guard was the swiftness of the decline — in particular, given that it was coming directly off of all-time highs in the large-cap averages. Though, we also saw a similarly swift selloff from the January highs, it is relatively rare to see the market sell off this much so soon after hitting new highs.

Specifically, at the lows today (October 26, 2018), the S&P 500 was down more than 10% from its late September all-time high. Going back 60 years, this is just the 13th unique time the index has sold off by at least 10% within 30 days of hitting a multi-year high.

Below are the dates of the occurrences identified by the blue markers on the chart.

If you simply look at the median and % positive returns, it doesn’t strike one as too “scary”. In fact, they are not that far off of normal aggregate returns. However, the risk is asymmetrically skewed. Why do we say that? Because 4 of the prior 12 signals marked precise cyclical market tops. There have only been a handful of cyclical bear markets over this time frame and to have 4 of them marked by these swift corrections from multi-year highs t least gives us pause in assuming the median returns will be necessarily be close to normal, at least in the long-term.

Will the current cliffhanger lead to another cyclical bear market? It remains to be seen. There certainly is enough evidence out there, though, to consider that a legitimate possibility.

*  *  *

If you’re interested in the “all-access” version of our charts and research, we invite you to check out our site, The Lyons Share. FYI, given the current treacherous market landscape, TLS has extended our CRASH SALE through this weekend. So considering the discounted cost and the current treacherous market climate, there has never been a better time to reap the benefits of our risk-managed approach. Thanks for reading!

Published:10/30/2018 2:13:13 PM
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Published:10/30/2018 1:43:49 PM
[Markets] Notorious Mob Boss Whitey Bulger Killed In Prison

Mere hours after he was moved from a federal transfer facility to a prison in West Virginia, notorious Boston crime boss James "Whitey" Bulger, who led the city's Irish mob for more than two decades through a potent mix of cunning and ruthless intimidation, has been killed, according to Fox News.

While the circumstances of his death are unclear, the Associated Press confirmed Tuesday that Bulger had been moved to a prison in West Virginia called USP Hazelton, a high-security prison with near a minimum security satellite camp in Bruceton Mills. The 89-year-old prisoner had recently been moved from a prison in Florida to a transfer facility in Oklahoma City. While the Bureau of Prisons refused to confirm why Bulger had been moved, sources said his health had been deteriorating. The DOJ has launched an investigation into his death. Bulger was found unresponsive in his cell around 8:20 am, the prison said. Staff attempted to resuscitate him, but failed, according to CBS News.


He was serving a life sentence after being convicted in 2013 of a long list of crimes including participating in 11 murders. For 16 years, he topped the FBI's most wanted list after fleeing a pending indictment in 1994 after being tipped off by former FBI agent John Connolly, with whom he grew up in the notorious housing projects of South Boston, and who federal authorities later convicted on accusations that he protected Bulger and essentially operated as a member of his Winter Hill gang. But he was arrested in 2011 in Santa Monica, along with his longtime girlfriend Catherine Grieg, who was sentenced to 21 months in prison back in 2016. She remains behind bars. 

Bulger's legend grew after the 2006 film 'The Departed' won Martin Scorsese a 'Best Director' Academy Award. It's chief antagonist, an Irish mob boss played by Jack Nicholson, was said to have been based on Bulger. Like the character in the film, Bulger was exposed for feeding information about underworld rivals to Connolly and the FBI.

As several commenters pointed out on Twitter, the timing of Bulger's death is certainly suspicious, particularly the fact that US media organizations are reporting that he was killed - rather than dying from natural causes - and was found dead at the facility.



Published:10/30/2018 1:43:44 PM
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Published:10/30/2018 1:15:46 PM
[Markets] Trump's Plan For The Caravan; "We're Going To Put Tents Up All Over The Place" 

The Trump administration will "build tent cities" for thousands of Central American migrants currently making their way north through Mexico to the Southern US border, reports The Hill

In an interview with Fox News's Laura Ingraham, Trump said that his administration would "hold" the migrants seeking asylum instead of releasing them pending court dates as prior administrations have done, also known as "catch and release."

"If they applied for asylum, we’re going to hold them until such time as their trial takes place," Trump told the Fox News host. 

"Where? We have the facilities?" she asked.

"We’re going to put up - we’re going to build tent cities," Trump responded. "We’re going to put tents up all over the place. We’re not going to build structures and spend all of this, you know, hundreds of millions of dollars -- we’re going to have tents."

"They're going to be very nice," he added.

Trump has called the migrant caravan a "national emergency," and threatened to cut financial aid to Guatemala, Honduras and El Salvador, tweeting last week: "We will now begin cutting off, or substantially reducing, the massive foreign aid routinely given to them."

Meanwhile, on Monday the Wall Street Journal reported that the US military will deploy 5,000 troops to the Southern border to reinforce the roughly 2,000 National Guard forces already in place. 

On Monday, President Trump warned the caravan, tweeting: "Many Gang Members and some very bad people are mixed into the Caravan heading to our Southern Border. This is an invasion of our Country and our Military is waiting for you!"

Democrats and pro-illegal immigrant activists have accused Trump of invoking xenophobic and racist themes in an effort to scare Republicans into voting during next week's midterm elections. 

Former President Obama denounced Trump's rhetoric at a recent campaign event in Florida, saying: "Now the latest, they’re trying to convince everybody to be afraid of a bunch of impoverished, malnourished refugees a thousand miles away -- that’s the thing, it’s the most important in this election? ... We’re scare-mongering people on the border." 

When Ingraham asked him to comment, Trump replied that there were "gangs" within the caravan. 

And they will be living in a tent should the choose to cross the southern US border. 

Published:10/30/2018 1:15:45 PM
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Published:10/30/2018 12:45:41 PM
[Markets] S&P, Nasdaq Slump Into Red As MSFT Plunges Below Key Technical Support

Well that didn't last long...

S&P and Nasdaq have given up the early bounce gains...


As MSFT tumbles below its 200DMA...


And all the FANGs slump...

GE also fell back below a $10 handle...

Published:10/30/2018 12:45:41 PM
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Published:10/30/2018 12:13:03 PM
[Markets] Why The 2018 Stock Market Corrections Are Different

Via Global Macro Monitor,

Just a quick note and some data to bolster our last post and concern that Treasury yields are not coming in  during this stock market correction.

The table illustrates that the this year’s two S&P 10 percent corrections have coincided with a rise in the 10-year  Treasury yield. 

 This is very rare, at least in recent history, and has happened only once in the last 20 years, and that was a special case due to a massive flight to quality and complications around the Russian Debt Default and LTCM crisis.

Flight To Quality

In general, when stocks fall by 10 percent, there is a flight to quality and yields fall on Treasury securities.

Yes,  the 10-year is down from its peak of 3.25 percent but higher than when the S&P500 peaked in September.  One can fiddle with the data and use intraday highs and lows, but you get our point, we hope.

The Gathering Storm In The Treasury Market  

If you haven’t read our beast of a post on the structural changes in the Treasury market, we suggest you run to it now!   Click right here:  The Gathering Storm In The Treasury Market 2.0

We also recommend our most recent piece,  Where The Next Financial Crisis Begins.

Keep this on your radar folks,  we think it signaling there are structural changes taking place in the global capital markets.

Updated:  October 29 @  4:06 pm Eastern

Published:10/30/2018 11:50:10 AM
[Markets] U.K.'s Financial Regulator Mulls Ban On Sale Of Crypto Derivatives

Authored by Marie Huillet via,

The U.K.’s Financial Conduct Authority (FCA) has said it will consider whether to ban the sale of cryptocurrency-based derivatives, the Financial Times (FT) reported Oct. 29.

image courtesy of CoinTelegraph

Unlike crypto spot market activities, trading, transacting and advising on crypto derivatives such as contracts for difference (CFDs), options, and futures currently falls within the FCA’s regulatory perimeter and requires its official authorization.

In a statement published Monday, the watchdog is reported to have said it will now launch a consultation in the first quarter of 2019 into whether or not to place a ban on their sale in future.

The regulator’s remarks came the same day as a new report published by the Cryptoassets Taskforce – which includes representatives from the FCA, the U.K. Treasury and the Bank of England – emphasized that leveraged crypto-based derivatives were even riskier than spot market trading as they can amplify and “cause losses that go beyond the initial investment,” as well as imposing additional fees.

FT reports that the sale of crypto derivatives have become increasingly profitable for London-listed online trading platforms, citing IG Group and Plus500 as examples.

The FCA reportedly plans to launch a parallel consultation into whether to extend its regulatory jurisdiction to crypto assets themselves, as well as to infrastructure providers such as exchanges and wallet services.

CryptoUK chair Iqbal Gandham is quoted by FT as saying the group was “pleased” by the proactive move, but stressed “[i]t is important that new rules are proportionate and do not put up excessive barriers, including for retail investors.”

In its statement, the FCA is said to have “made clear that in its view cryptoassets have no intrinsic value and investors should therefore be prepared to lose all the value they have put in,” further highlighting that the asset class as a whole poses “potential future threats to stability.”

As reported yesterday, the U.K. government Taskforce’s newly-published report proposed a three-fold framework for cryptoassets, depending on whether they are used as a means of exchange, for investment, or to support capital raising and the development of decentralized networks through Initial Coin Offerings (ICOs). The report struck a circumspect and interventionist tone, while recognizing the beneficial innovations of the emerging sector.

Earlier this month, the legal director of London-based corporate and insurance law firm Reynolds Porter Chamberlain (RPC) said the introduction of crypto market regulations in Britain could take around two years.

Published:10/30/2018 11:12:25 AM
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Published:10/30/2018 11:12:25 AM
[Markets] Kolanovic Triples-Down On Bullish: Why He Now Expects A Year-End "Rolling Squeeze" Higher

Early in the October dump, JPMorgan's head quant Marko Kolanovic predicted that the recent selling pressure, which he said was due to option gamma hedging, was ending and noted that since "equity indices already experienced comparable declines to February (and e.g. Russell 2000 even a bigger drawdown), we think that the current setup favors buying the dip."

It did not, because after a brief bounce, stocks then tumbled some more.

One week later, Kolanovic doubled down on his bullish take, focusing on option hedging which he said "is a temporary impact (intraday momentum) that tends to revert" and went on to justify this week's volatile, erratic market action largely in terms of continued option hedging which he also saw as ending.

Stocks stabilized briefly... then the selloff turned even more violent (with Monday's late day mega sell program having all the fingerprints of a systematic liquidation, which allegedly was "over") with the S&P briefly entering a correction on Monday, while hedge fund favorites, the FANG stocks, entered a bear market.

In fact, it got so bad that as Nomura noted earlier this morning, the market selloff has basically trapped hedge funds, who are damned if they delever and damned if they try to pick a position in the market in hopes of BTFD and timing the bottom:

equity hedge fund performance continues to suffer due to legacy positioning effectively being "long high beta" vs "short low beta", which means that despite cutting net exposure to lows, they still bleed on high "market" exposure:

As for Kolanovic, having been burned on his market timing calls twice in a row in the span of three weeks, did the JPM quant finally throw in the towel? Apparently not, because as his latest piece shows, he is now tripling down on his bullish call, and while no longer calling for the end of systematic selling to be a bullish catalyst, he has instead shifted his sight to hedge funds who have gotten crushed (perhaps after listening to those making repeat bullish calls in the past few weeks) and is betting that in their year-end performance scramble, hedge funds will have no choice but to load up on high beta garbage forcing a market squeeze in the process.

First, just like Nomura's cross-asset quant McElligott, Kolanovic lays out the all-out bloodbath in the hedge fund space as follows:

October was a brutal month for equity fundamental and quantitative investors. The past week was particularly damaging, where technical selling from the first part of the month (~$150bn) abated, only to be replaced by hedge fund de-risking and a rout in Tech stocks. The global HF equity beta dropped from ~95th percentile in September to ~15th percentile now (over the past 5 years), one of the largest and fastest declines on record. Our prime brokerage team noted that HF net exposure dropped from near all-time highs in September, to 2015 lows (lower than in February this year).

Kolanovic also notes that hedge fund HF shorting (as % of gross) in JPM's prime book also increased to the highest level since 2015, and for good reason: as the chart below shows, shorts are finally making a killing, enjoying the best return since January 2016, when China almost crashed the world before the Shanghai Accord resulted in a global, coordinated central bank intervention.

Meanwhile, Kolanovic also notes that given equities recorded their worst 1-month return in over 9 years, "asset managers who rebalance to fixed weights on a monthly schedule are currently the most underweight equities since February 2009." He also repeats what he said two weeks ago, namely that "systematic investors are also near the bottom of their exposure – volatility targeting strategies’ equity holdings are similar to February lows, and many CTAs are outright short or out of equities."

In short, "A ~10% decline from the peak and markets turning negative for the year triggered all kind of institutional stops, driving the sell-off deeper."

Here Kolanovic, who incidentally did not anticipate any of this, is confused: "Did the macro and fundamental outlook deteriorate enough to justify this extreme swing in investor positioning" he asks and answers bullishly:

In October, US GDP surprised expectations to the upside, core PCE remained steady, and ~80% of US companies reporting Q3 earnings beat analyst expectations that were formed before the sell-off, while forward guidance remains largely unchanged. Given the weakening economy in China and poor market performance in the US, there may be an increased (rather than decreased) probability of November progress on trade.

Which brings us to his, relatively naive, bullish thesis: a squeeze higher, the same thesis that Charlie McElligott was pitching back in August, and admitted earlier this week that it was not going to work. Well, here's Kolanovic to double, pardon triple down, on his bullish thesis:

With investors positioned defensively, and leverage rapidly coming out of system, there is an elevated risk of market reversion into year-end. Investors should keep this risk in mind – namely that an October ‘rolling bear market’ turns into a ‘rolling squeeze higher’ into year-end. This would cause further underperformance of active managers relative to broad indices.

Why yes, which is why as Nomura said earlier, hedge funds are damned if they buy, damned if they do nothing.

As for Kolanovic, who with this 3rd consecutive bullish call in a row is now staking his reputation on a rebound in stocks, gives the following justification for what could drive this potential rolling squeeze higher:

First, we note that October month-end will lead fixed weight asset managers to increase their equity exposure. Given the size of the move in October (largest since Feb 2009), that could contribute to ~1-2% of upside market pressure (based on the historical beta of month-end reversion).

Buyback activity is expected to increase significantly going forward (~$200bn realization run rate to year-end).

We also expect volatility to decline into year-end, which should prompt systematic investors to re-build equity positions (~$100Bn).

Finally, any progress on trade could result in discretionary inflows, reduction of current elevated short positioning, and year-end performance chase.

All of these are valid arguments. They are also completely meaningless if, as Morgan Stanley observed - correctly - the "Buy The Dip" strategy - for a decade the savior of countless copycat funds - is now dead.

As for the downside case to Kolanovic' thesis, that selling and liquidations will beget more selling and liquidations, well we expect to hear about that in his next note in 1-2 weeks when he will quadruple down on a bullish bounce...

Published:10/30/2018 10:46:27 AM
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Published:10/30/2018 10:13:10 AM
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Published:10/30/2018 9:51:48 AM
[Markets] "Algo-Induced Panics" Leave Traders Screaming "I Don't Care, Just Get Me Out"

With hedge funds having suffered their longest losing streak on record... (Goldman VIP Basket down 6 weeks in a row, and cratering in October)

It is no surprise that former fund manager and FX trader Richard Breslow noted this morning that "I can't find anyone who has enjoyed October..."

With both the dollar and gold up most on the month and bonds and stocks lower... as correlations snap across every asset class, either can we.

Via Bloomberg,

We’ve spent a lot of time of late debating why equity markets have struggled so badly in October. Most of the hypotheses, frankly, haven’t been all that helpful. Today, we got a modest bounce in Asia and early U.S. futures trading and people are equally struggling to come up with a unified theory for that... but even that is fading.

Personally, I’m more sympathetic to the view it was news from China’s CSRC on measures meant to encourage more liquidity being pumped into the stock market than some notion that there has been progress on the U.S.-Sino trade front. But if you want to know the real reason, you would be better off chalking it up to randomness.

A quick glance at any of a number of indexes that track hedge fund performance will starkly tell you that the commentators’ debate about why things have moved as they have will most likely elicit the response, “I don’t care, just get me out of here.” It’s Oct. 30 and it would be shocking if many, or any, traders are looking to add risk before month-end. And this attitude could carry right through to the midterm elections. If I told you how they would come out, would you be willing to bet the ranch on how markets will react?

As early-bird U.S. begins to arrive, futures are trading right in the middle of yesterday’s range. And just about every other equity market of note finished or is presently sitting at prices we’ve seen already in this young week. That seems fitting.

Traders need to avoid adding to their woes by seeing fundamentally significant moves behind every algorithmically induced panic. Easier said than done when alpha is hard to come by and liquidity is sparse. Even when reported trading volumes are decent, it doesn’t help when the market is serially all bids then offers. Describing these episodes as markets being risk on versus risk off gives too much credit to what is going on.

As we limp toward November, tentative would be the best way to describe what it looks like out there. Markets have clear biases but are afraid to push the issue. Ironically, that’s not a bad set-up to eventually allow trends to develop. But the timing is unknowable.

On the monthly charts, 10-year Treasury yields look like they want to go up, but they failed rather miserably at the 200-month moving average. It’s now major league resistance and, importantly, confirms a lot of what can be gleaned from much shorter studies. You can be sure traders would love to see what’s above there. Perhaps the caution comes from the fact that monthly support is a decent bit lower than what is suggested by the dailies.

The dollar looks like it’s defiantly pushing northward. I have to say that versus the euro this well advertised 1.13 level is looking less and less formidable. As is August’s year-to-date high in the dollar index. I’m very interested to see how the currency reacts the next time Washington pushes back on its strength. At the moment, it looks like that would be an opportunity rather than a danger for the bulls. Especially when you include emerging markets in the conversation. The MSCI emerging markets currency index sits, with two trading days left to go, just above its very creditable 55-MMA. Of course, I may be getting ahead of myself. A trap easy to fall into.

The only thing one can say about gold, is no one is getting rich trading that at the moment.

As for equities, you have to decide whether the Russell 2000 is a bellwether or not. The other major indexes have bent but haven’t broken. The next two days will matter. A lot of people are watching that SPX 55-week moving average, now in their rear-view mirror, and concluding it’s time to study the trading patterns of 2015/2016.

Published:10/30/2018 9:12:47 AM
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Published:10/30/2018 8:41:27 AM
[Markets] Goldman: The VIX Curve Is Sending An Ominous Message

Over the weekend we showed a peculiar pattern in the VIX term structure, which failed to normalize after a sharp inversion early in the month, and has since drifted further into negative territory.

This is notable as it was the first time since the financial crisis that the VIX term structure had failed to disinvert before resuming its slide, suggesting that the market is expecting even more pain down the road.

Today, Goldman's derivatives strategist Rocky Fishman makes a similar observation.

As Fishman notes, looking simply at spot VIX does not reveal anything particularly troubling: while VIX has predictably spiked during the October selloff to the highest closing VIX since February, it has been nowhere near February’s VIX peak: at 25, the VIX is just below Wednesday’s (24-Oct) highest closing level since mid-February in 2018’s second mathematical SPX tail event, "but has not come anywhere near its ETP-fueled February peak of 37 (closing, and 50 intraday)."

In fact, one can argue that the move in spot VIX has been relatively subdued, and as the Goldman strategist points out, 10% sell-offs without the VIX hitting 30 have been historically uncommon, but are not unprecedented.

But as we noted over the weekend, and as Goldman reiterates today, the real action is not in the spot VIX but in the forwards, with Fishman observing that "some longer-dated volatility metrics have now exceeded February’s."

What is particularly notable, is that the market appears to be pricing in a longer-duration high volatility period than they did in Q1 "consistent with a view that this sell-off is driven more by reduced economic growth expectations than market technicals." In realized terms, Goldman brings attention to the 140bp median daily absolute SPX return over the last three weeks which has been higher than seen over any period in Q1 (though 15-day realized volatility was higher in Feb due to the outsized impact of 5-Feb’s 4.1% selloff).

The best way to see this is by looking at 3-6 month VIX futures which are now above Q1 highs: this suggests that expectations of volatility a few months into the future are now higher than they were in February.

Similarly, 6-month, 6-month forward-starting SPX variance (expectation of 6M variance, 6M from now), is near its March high, as traders brace for a longer period of turmoil than they did at the start of the year.

Finally, when looking at shorter-dated implied vol, Goldman points out that while it is very high, it is the result of recent market turmoil and not because of next week's US elections. Fishman points to the 9-day VIX index which is at 31, just below Wednesday’s (24-Oct) highest level since the week of 5-Feb, and notes that the index is derived from the prices of options expiring this Friday (2-Nov) and next Friday (9-Nov); the pre-elections 2-Nov has a much higher at-the-money implied vol (31) than the post-elections expiration (27), "implying more fear over a continuation of recent volatility than an event-driven shock next week."

To summarize: while the spot VIX may not indicate a panic, and remains well below the record high levels hit during the February selloff, which was largely a function of inverse VIX ETFs blowing up and forced to bid VIX to stratospheric levels, an even which was promptly cleared out once several inverse VIX providers blew up, what is more concerning this time is that the market is now hinting that the slow grind higher in volatility could be more pernicious as it extends for far longer than the market turmoil experienced at the start of the year. And with the S&P already in de fact correction, one wonders if the long-overdue bear market isn't finally on deck.

Published:10/30/2018 8:41:26 AM
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Published:10/30/2018 8:18:42 AM
[Markets] US Home Price Appreciation Slows At Fastest Pace Since 2014

Amid the collapse on US home sales, as mortgage rates surge above 5.00%, August's Case-Shiller home price data plunged to its weakest annual growth since Dec 2016, dramatically missing expectations).

Against expectations of a 5.80% YoY rise, August home prices rose 5.49% (slowing from July's 5.90% YoY) to its weakest since Dec 2016...

This is the biggest two-month slowdown in Case-Shiller home price growth since 2014...

On a non-seasonally-adjusted basis, home prices rose 5.77%, down from 5.99%, the lowest since June 2017.

And judging by mortgage rates, it's about to get a whole lot worse...

Is it any surprise that homebuilder stocks have collapsed along with US housing data?

Published:10/30/2018 8:18:42 AM
[White House Watch] President Trump to hold MAGA rally in Missouri Thursday

By R. Mitchell -

President Donald holds a Make America Great Again rally in Columbia, Missouri, Friday evening to support Republican candidate Josh Hawley who has a 4-point lead over Democrat incumbent Senator Claire McCaskill according to the latest poll. His last event in Missouri was in Springfield just 5 weeks ago when Hawley was tied ...

President Trump to hold MAGA rally in Missouri Thursday is original content from Conservative Daily News - Where Americans go for news, current events and commentary they can trust.

Published:10/30/2018 8:18:42 AM
[Entertainment] These Are Fall TV 2018's Best and Worst New Shows--According to You! Fall TV splitA sure sign of the fall, aside from the changing leaves, is the rash of new TV shows premiering across the five major broadcast networks, NBC, CBS, Fox, ABC and The CW. All of the new...
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[Markets] The Mother Of All Support Levels?

Via Dana Lyons' Tumblr,

U.S. stocks are testing potentially important support stemming back several decades.

When it comes to technical charting levels, there is support…and there is SUPPORT. The former represents minor levels that may be sufficient in a raging B.T.D. bull market. However, in a swift decline like we are witnessing now, the market will make a mockery of such levels, slicing through them as if they have no relevancy at all. In such a decline, it may take the latter type of SUPPORT to halt or at least slow down the descent. The genesis of these SUPPORT levels likely stem back several years, at least. Currently, one market index is testing such key SUPPORT, with several decades of history behind it.

We are talking about the Value Line Geometric Composite (VLG), an index that tracks the median U.S. stock performance among a universe of roughly 1800 stocks. As we have said many times, this is one of our favorite measures of the health and direction of the overall market. And, as we have also said many times, it is helpful to track it because research has shown that 70-80% of the determinant of the trend direction of a particular stock is based on the trend of the overall market.

So what is so significant about this current SUPPORT level? Due to the unique construction of the VLG, its price path looks a bit different than most other equity indices. However, we will say that it does still tend to “obey” the technical and charting techniques that we like to apply. For example, take a look at the VLG’s current proximity, especially from a historical perspective.

In 1998, the VLG topped out at an all-time high level around 510. 9 years later, in 2007, the index again topped out ~510. Fast forward 7 years and we see the index (briefly) top out there one more time in 2014. At the market top in mid-2015, the VLG was finally able to exceed the 510 level — temporarily. After a false breakout, the VLG sold off hard in the subsequent correction. Finally, last fall, the VLG was able to sustainably break out above the 510 level. Well, so far it has been sustainable.

We say that because after topping out just shy of 600 in August, the current correction has brought the index all the way back down to near the 510 level.

So will this level serve as support - or SUPPORT - for the stock market? That remains to be seen. But, in our view, it is certainly a development that bears monitoring (no pun intended).

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If you’re interested in the “all-access” version of our charts and research, we invite you to check out our site, The Lyons Share. FYI, given the current treachorous market landscape, TLS has extended our CRASH SALE through this weekend. So considering the discounted cost and the current treacherous market climate, there has never been a better time to reap the benefits of our risk-managed approach. Thanks for reading!

Published:10/30/2018 7:14:53 AM
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Published:10/30/2018 6:13:47 AM
[Markets] Futures Rally Fizzles After Trump China "Great Deal" Headline Sparks Algo Confusion

Yesterday's violent reversal which saw the Dow tumble nearly 1000 points intraday from session highs on the Bloomberg report that Trump was preparing to unleash tariffs on all Chinese imports if upcoming talks with China's president do not yield results, continued in the overnight session with headline scanning algos launching a global buying frenzy on a late Monday headline that Trump expects a "great deal" with China during a Fox News interview, while completely ignoring the rest of what Trump said, namely that China has "drained" the U.S. which has "really helped rebuild China" adding that "we are going to win that one," referring to China trade battle, but the piece de resistance was that Trump doesn’t think China is "ready" to make a deal. Trump also confirmed the Monday's Bloomberg report, saying that he is ready to impose $250BN in additional tariffs if deal doesn’t go through and adding that $267BN in tariffs was "waiting to go if we can’t make a deal."

As it turned out, however, the "great deal" quote was enough to push Chinese stocks out of negative territory, and send Chinese stocks higher on the day, closing up 1%...

... while US futures followed suit and rose as much as 20 points from Monday's close. However, it took some human intervention to temper the algo enthusiasm and read between the lines and trim the entire S&P futures rally...

.... while European stocks dropped as traders turned their focus to a slew of company results while realizing the what Trump said was not at all positive, and instead confirmed the next phase of a trade standoff between America and China.

While Europe's Stoxx 600 index opened higher after better-than-expected results for major companies including BP and Volkswagen, earnings were mixed overall and promptly European bourses went into reverse after Germany's DAX slumped to session lows dragging the broader Stoxx 600 into the red. Automakers declines were the culprit, which as Bloomberg noted is a sign that any inkling of good news, like VW's earnings beat for example, faces a high bar in convincing investors the worst is over for the sector.

Optimists meanwhile noted that U.S. futures were still up, if well off session highs, while there's was little spillover into other asset classes. Core euro-area bonds were underperforming the periphery, while risk-sensitive currencies like AUD and NZD in G-10, or TRY and ZAR in the EM are keeping their gains for the moment even as the dollar surged to session highs.

Earlier, the MSCI Asia Pacific Index outside Japan swung in and out of negative territory in morning trade and last traded 0.3 percent higher on the day, halting a five-day losing streak. The yen slid and Aussie rose as Japanese and Australian shares rallied. China’s stocks climbed after authorities made a fresh attempt to stabilize its stock markets by saying they’d encourage long-term funds to invest, although activity was choppy with investors cautious about further escalations in the Sino-U.S. trade war.

The index has lost 12 percent this month and is on track for its biggest October decline since 2008, during the global financial crisis: "At this point, nobody can say the equity market is bottoming out. Global investor sentiment remains shaky," said Yasuo Sakuma, chief investment officer at Libra Investments in Tokyo.

China’s Shanghai Composite and the blue-chip CSI 300 gained to 1.0% and 1.1%, respectively, winning back earlier losses in a volatile session after China’s securities regulator said it would encourage share buybacks and mergers and acquisitions by listed firms, and would enhance market liquidity, in the latest attempt to put a floor under the country’s skidding equity markets. Japan’s Nikkei average also erased early losses and climbed 1.5%.

Adding to the jitters, China’s yuan continued to weaken, drawing closer to the closely watched support level of 7.00 vs the dollar. In onshore trade, the yuan slipped 0.15 percent to 6.9774 per dollar, a more than 10-year low, stirring speculation over whether the central bank will tolerate a slide beyond the key level of 7 per dollar.

According to Reuters, major state-owned Chinese banks were seen swapping yuan for dollars in forwards on Tuesday, but there was no immediate evidence of dollar selling in the spot market as the currency neared a key support level, three traders said.

As a result of the rising volatility, sentiment has continued to deteriorate: “The probability of global stocks turning to a bear market is increasing,” said Masanari Takada, cross-assets strategist at Nomura Securities. “While some investors who look at fundamentals buy stocks on dips, there are other players who keep selling automatically in response to heightened volatility. At times like this, buyers can easily be overwhelmed by negative headlines on tariffs, etc.”

In FX, the dollar extended its recent advance as month-end flows that kicked off the London session lent support, sending the euro and sterling to fresh day lows. The common currency subsequently got brief support from regional German inflation data and rebounded while Antipodean currencies led gains in G-10. The dollar gained on a decline in the euro after news German Chancellor Angela Merkel would not seek re-election as head of her CDU party and a big miss in European GDP (Q3 GDP 0.2%, vs Exp. 0.4%). Merkel said she would not seek re-election as party chairwoman, heralding the end of a 13-year era in which she has dominated European politics.

Oil prices were mixed after easing overnight as Russia signaled that output will remain high and as concern over the global economy fueled worries about demand for crude. West Texas Intermediate crude futures dropped below $67/barrel, while Brent crude futures dipped 0.3 percent to $77.13.

Expected data include Conference Board Consumer Confidence. Aetna, Allergan, Fiat Chrysler, GE, Mastercard, Pfizer, Amgen, Facebook, Hyatt, and T-Mobile are among many companies reporting earnings.

Market Snapshot

  • S&P 500 futures up 0.1% to 2,646.00
  • STOXX Europe 600 up 0.1% to 355.88
  • MXAP up 0.6% to 146.61
  • MXAPJ up 0.3% to 462.99
  • Nikkei up 1.5% to 21,457.29
  • Topix up 1.4% to 1,611.46
  • Hang Seng Index down 0.9% to 24,585.53
  • Shanghai Composite up 1% to 2,568.05
  • Sensex down 0.2% to 34,009.09
  • Australia S&P/ASX 200 up 1.3% to 5,805.10
  • Kospi up 0.9% to 2,014.69
  • German 10Y yield rose 2.0 bps to 0.397%
  • Euro down 0.01% to $1.1372
  • Italian 10Y yield fell 10.7 bps to 2.967%
  • Spanish 10Y yield rose 0.3 bps to 1.547%
  • Brent futures down 0.4% to $77.02/bbl
  • Gold spot down 0.5% to $1,223.42
  • U.S. Dollar Index up 0.2% to 96.76

Top Overnight Headlines

  • President Trump tells Fox News a deal with China has to be “great” because China has “drained” the U.S. “We have really helped rebuild China,” Trump says
  • U.S. is preparing to announce by early December tariffs on all remaining Chinese imports if talks next month between presidents Trump and Xi Jinping fail to ease the trade war, three people familiar with the matter said
  • China is considering atax cut to revive its flagging automotive market, according to people familiar with the matter, lending support to a key industry that’s been damaged by a trade war with the U.S.
  • Yuan exchange rate is unlikely to weaken past the level of 7 per dollar as China’s international balance of payments remains sound and monetary authorities are determined to stabilize market, Economic Information Daily says
  • President Trump’s job approval rating plunged 4 percentage points last week amid a wave of violence, the latest troubling signal for Republican chances in upcoming midterm elections
  • China will increase stock market liquidity and cut trading barriers, China Securities Regulatory Commission says in Weibo statement in response to market concerns
  • The European Union won’t allow a no-deal Brexit to cut off access to London’s crucial financial infrastructure, which would threaten trillions of dollars of derivatives contracts, according to the bloc’s financial-services policy chief
  • The recent rally in Treasuries has seen derivatives traders bid up the price of related call options, potentially fueled by demand for hedges. The difference in implied volatilities between these bullish bets and bearish put options on the benchmark notes is now back at levels which have tended to see a sell-off in bonds
  • The VIX surged above its European equivalent in mid-October and has stayed above it on most days since -- an occurrence that before this year almost never lasted more than a day
  • Italy’s growth was unchanged in the three months through September on a quarterly basis, down from 0.2 percent in the second quarter. The median estimate in a Bloomberg survey of 31 analysts called for expansion of 0.2 percent

Asian equity markets were mostly higher as the region aggressively shrugged-off the weak lead from Wall Street, where stocks extended on losses due to renewed tariff concerns and in which the major US indices were momentarily all in correction territory. ASX 200 (+1.3%) and Nikkei 225 (+1.5%) both pared opening losses as a rebound in tech and resilience in Australia’s top-weighted financial sector led the advances, while the Japanese benchmark and its exporters cheered the favourable currency moves. Elsewhere, Shanghai Comp. (+1.3%) and Hang Seng (-0.1%) both initially lagged following recent reports that suggested US is planning to announce further tariffs on China if talks between US President Trump and Chinese President Xi fail, while the upcoming deluge of blue-chip earnings and continued liquidity drain by the PBoC added to the cautious tone. However, Chinese markets gradually recovered amid continued supportive intentions by China’s authorities and optimism by US President Trump who was said to predict a great deal with China on trade. Finally, 10yr JGBs were softer amid the improved risk tone but with losses stemmed by the BoJ’s presence in the market for JPY 880bln in JGBs, while the central bank also kicks off its latest 2-day policy meeting.

Top Asian News

  • Analysts Still Love This Chinese Supplier to Nike
  • China Evergrande to Sell Dollar Debt as Bond Prices Plunge
  • Noble Group Flags Another Loss as Restructuring Costs Mount
  • Kazakhstan Drops 20-Year Dollar Addiction With First Euro Bond
  • Bond Buyers Scorched as Sri Lanka’s Promise Turns to Crisis

Major European bourses are mixed with the SMI (+0.3%) out in front despite being weighed on heavily by Geberit (-9.0%) following their earnings; and the Dax (-0.7%) lagging with Lufthansa (-7%) dragging it down. Sectors began in the green, but have since fallen to being largely in the red with industrials lagging (-0.8%), although energy is still the outperforming sector (+1.1%). In terms of individual equities Ocado (+7.0%) is higher following a master services agreement with Kroger, while BP (+4.0%) rose after reporting earnings higher than their previous, notably revenue is up by USD 20bln. Elsewhere, Jyske Bank (-10.0%) are at the bottom of the Stoxx 600 after reporting a miss on earnings.

Top European News

  • Italian Economy Stalled in Third Quarter in Populist Setback
  • Hammond Spends His U.K. Budget Windfall Buying Votes for May
  • Reckitt Benckiser Formula Glitch Hits Kapoor’s Turnaround Effort
  • BP Profit Smashes Estimates on Eve of Giant Shale Oil Deal
  • Genmab Soars After ‘Impressive’ Results With Cancer Treatment

In FX, the Greenback remains relatively evenly split vs G10 counterparts, with its Dollar peers still outperforming and preventing the index from staging a more concerted attempt to test recent peaks ahead of the ytd high and psychological 97.000 marker. However, the DXY is nudging closer at 96.847 vs 96.860 and 96.984 respectively as other majors succumb to more downside pressure. AUD/NZD/CAD - As noted above, the non-US Dollars are bucking the overall trend again, and deriving support from another resilient performance across Asia-Pacific bourses overnight given Wall Street’s retreat from early recovery highs. The Aud in particular may also be gleaning encouragement from US President Trump’s talk about a decent trade agreement with China and latest Yuan stabilisation talk from a PBoC advisor that appears to be keeping the Cny and Cnh just off 7.0000 vs the Usd. However, Aud/Usd is still struggling to climb above 0.7100, while the Kiwi looks equally toppy over 0.6550 and the Loonie seems unable to breach resistance at 1.3100. JPY/GBP/EUR/CHF - All victims of the general Buck bid into month end, and their own downfalls to an extent, as Usd/Jpy climbs through recent highs and closer to 113.00, with a 50% Fib at 112.97 just ahead of the big figure. Cable has failed to maintain recovery gains above 1.2800 and is now only just holding above 1.2750, with tech support seen down at 1.2724, while Eur/Usd has retreated further from 1.1400 to 1.1350 amidst a stagflationary mix of Eurozone data and surveys. The Franc has extended losses beyond parity and hardly helped by a disappointing Kof indicator.

Commodities are mostly lower with WTI and Brent in close proximity to USD 67/bbl and USD 77/bbl respectively, on speculation that an escalating trade war between the world’s two largest economies will dampen global growth at a time when US crude inventories are growing. Meanwhile, IEA’s Chief Birol said he sees the oil market tightening next month, while adding that oil demand faces downward pressure in 2019. Traders will be keeping an eye on the weekly API crude inventories released later today for a sign of rising inventories. Elsewhere, gold is softer as the yellow metal mirrors dollar action, while copper and Shanghai rebar steel dipped as market sentiment was dampened by the prospects of a fresh round of US tariffs on USD 257bln of Chinese goods.

Earnings are busy today, with Facebook, Mastercard, Coca-Cola, General Electric, Pfizer, Sony, eBay, BP and BNP Paribas all releasing their earnings. On the data front, we get the advance Q3 GDP release for the Euro Area, France, and Italy along with preliminary October CPI for Germany and Spain, and October confidence indicators for the Euro Area and Italy. In the US, we get October Conf. board consumer confidence and expectations survey. Late night, we get Japan's preliminary September industrial production.

US Event Calendar

  • 9am: S&P CoreLogic CS 20-City MoM SA, est. 0.1%, prior 0.09%; YoY NSA, est. 5.8%, prior 5.92%
  • 9am: S&P CoreLogic CS US HPI YoY NSA, prior 6.0%
  • 10am: Conf. Board Consumer Confidence, est. 135.9, prior 138.4; Present Situation, prior 173.1; Expectations, prior 115.3

DB's Jim Reid concludes the overnight wrap

A bullish morning European session peaked at the US open yesterday with the S&P 500 soon +1.81% shortly after the start. However this was the high-water mark with the index eventually closing -0.66% after dipping as low as -1.95% 15 minutes before the close. A wild ride and one led by tech with the NASDAQ losing -2.02%. Amazon led losses, falling -6.33%. The internet retailer is now down -24.55% from its peak and has shed $242bn worth of market capitalisation, equivalent to the 17th largest S&P 500 company and more than the market cap of Verizon or Procter and Gamble. Also more than the largest pure continental European company. A stunning fall of late. The NY FANG index closed down -3.24% having been -5.58% just over 15 minutes from the close. The DOW traded in an 918 point range, (which is actually only the 11th widest of the year), and like the S&P 500 touched “correction” territory, dipping -10% off its peak before ending -0.99% lower and escaping that definition on a closing basis.

While a global tech tax in the UK budget weighed on global tech stocks a little, markets were seemingly more pressured by the news that the US is readying tariffs on the remainder of China imports. According to reports (Bloomberg), the administration is preparing a product list to encompass up to $257bn of imports, which would be released later this year and implemented in Q1 2019. Apparently, the tariffs will be deployed in the event that next month’s meeting between Presidents Trump and Xi does not go well. As a result the defensive rotation continued, with the real estate and utilities sectors gaining +1.56% and +1.35%, respectively.

As discussed above though, Asia has rebounded ahead of a day that gives us Italian Q3 GDP (and elsewhere in Europe), flash German inflation and Facebook’s earnings as the highlights. The Nikkei (+1.84%), Hang Seng (+0.47%), Shanghai Comp (+0.72%) and Kospi (+1.50%) all up along with most Asian markets. Futures on the S&P 500 (+0.67%) are also pointing to a positive start. Sentiment is being aided by US President Trump’s late night rhetoric on trade as in an interview with Fox News he stated that "I think we will make a great deal with China, and it has to be great because they’ve drained our country" even as he cautioned that he doesn’t think China is “ready” yet. This was enough though to ease the concerns related to escalations in the trade war. Elsewhere, the Chinese yuan reached levels of 6.9689 against US dollar, the lowest level since June 2008 and is now closing in on touching the key level of 7. A reminder that DB is targeting 7.40 next year.

Back to yesterday and behind the scenes it was an interesting day for a bigger picture theme we’ve been following carefully over the last couple of years - namely global fiscal loosening. Since 2016 we’ve felt that we’re structurally moving away from maximum loose monetary policy and tight fiscal policy to tighter monetary and looser fiscal policy. This should mean higher yields and inflation. The move is partly because of populism, and partly due to the realisation of the counterproductive elements to negative rates/yields and extreme easing. The fiscal stimulus in the US has been the biggest evidence of this so far, but slowly and surely we’re seeing more and more major economies following in various forms. The Italian budget follows the same path, as does the recent tax change package in China, albeit more to prop up growth rather than from populism. Yesterday, we saw further subtle moves in this direction around the globe as we saw suggestions of a fresh tax cut on autos from China, a UK budget with some signs that austerity is being slowly reversed, and the start of the changing of the political guard in Germany that might lead to speculation about looser domestic policy further down the road.

The German story is still the most tenuous as the alternatives to Mrs. Merkel could still be even more fiscally prudent, but there was certainly chatter yesterday that with the global anti-establishment political trend continuing to hit Germany as well, the pressure might be to win over voters in the future. In the near term see here for our DB experts take on Merkel’s announcement that she won’t run again for the CDU’s party-leadership at the Dec. party convention and will end her political career in 2021 at the end of her current term assuming she can make it there. They analyse the top contenders to replace Merkel: Party Secretary Kramp-Karrenbauer, Health Minister Jens Spahn, and former Party Whip Friedrich Merz. The CDU has lost voters to both its left flank (i.e. to the Greens) and its right flank (i.e. to Alternatives for Germany), so it is not immediately clear which direction the party will move. Kramp-Karrenbauer is likely to be the safest and least disruptive successor, while Spahn and Merz are somewhat more conservative. The note also looks at the problems for the SPD.

In China, the wires (e.g. Bloomberg) circulated stories that the country’s top regulator is considering a cut in the tax on auto sales from 10% to 5%. Such a tax cut could boost the sector in China, which has been flagging lately amid trade headwinds and slowing macro momentum. Auto sales declined yoy in September, and they are now up only +0.6% yoy over the first 9 months of the year. The auto sector has expanded every year since the 1990s, so such a contraction would likely worry policymakers in Beijing. Auto stocks across the world rallied in response, with the automobiles and parts indexes of the STOXX 600 and S&P
500 gaining +2.95% and +2.61% respectively.

In the UK, Chancellor Philip Hammond announced an end to austerity in the UK, though deficit forecasts were actually revised lower. Growth projections were higher, and several new spending initiatives were moved forward. The budget will include a 2.8bn pound income tax cut for individuals in 2019-2020, earlier than expected, and another 1.3bn pounds of spending on infrastructure, education, and contingency spending in the event of a no-deal Brexit outcome. The budget also included the aforementioned new digital services tax on tech companies, which will apply based on the companies’ amount of revenue, not profit. The UK is still hoping they’ll be a global agreement on this before this comes in in 2020 but the plan is to implement it unilaterally if not.

Before the US sell-off, European bourses had traded higher, boosted by the news of fiscal easing in China as well some excitement over the news that Prime Minister Merkel will not run again as party leader which as discussed was hoped by some to be a gateway to more stimulative policies whether wishful thinking or not. The DAX gained +1.20% and the STOXX 600 advanced +0.90%. German bund yields rose +2.5bps, while peripheral spreads tightened. Italy outperformed, with 10-year spreads to bunds trading -13.4bps narrower in the first day of trading since S&P opted to not lower the country’s credit rating. All eyes will be Italy’s GDP print later today as the next major landmark.

Now looking at data releases from yesterday. In the US, September core PCE came at +0.2% mom with the unrounded reading at +0.153% mom (vs. +0.1% mom expected), keeping the annual inflation rate in line with consensus at 2.0% mom. September real consumer spending came in line with consensus at +0.3% mom while the previous month’s read was revised upwards to +0.4% mom from +0.2% mom. September personal income came in at +0.2% mom (vs. +0.4% mom expected), while the previous month’s read was revised upwards to +0.4% mom from +0.3% mom.

In Europe, UK’s September net consumer credit stood at +£0.8bn (vs. +£1.2bn expected) while mortgage approvals came in at 65.3k (vs. 64.7k expected) with net lending secured on dwellings standing at +£3.9bn (vs. +£2.9bn expected). The UK’s September M4 money supply came at -0.3% mom while the previous month’s read got revised down to +0.1% mom from +0.2% mom.

Earnings are busy today, with Facebook, Mastercard, Coca-Cola, General Electric, Pfizer, Sony, eBay, BP and BNP Paribas all releasing their earnings. On the data front, we get the advance Q3 GDP release for the Euro Area, France, and Italy along with preliminary October CPI for Germany and Spain, and October confidence indicators for the Euro Area and Italy. In the US, we get October Conf. board consumer confidence and expectations survey. Late night, we get Japan's preliminary September industrial production.

Published:10/30/2018 6:13:47 AM
[Entertainment] Why the Child-Star Curse Was No Match for Kiernan Shipka Kiernan ShipkaHollywood is littered with the wreckage of promising careers and unmet potential. For every young talent like Jennifer Lawrence, who left high school to pursue acting, secured a full-time...
Published:10/30/2018 5:42:56 AM
[Markets] NATO Is At War With NATO In Northern Syria

Not for the first time the Turkish army has attacked U.S.-backed forces in northeastern Syria on Sunday in yet another absurd contradiction of American policy in the region. It highlights the awkward fact that in northern Syria for over the past year one NATO country (Turkey) is at war with another NATO country's proxy force, namely the Pentagon armed and trained Kurdish-led Syrian Democratic Forces (SDF, of which the YPG is a core part).

The new flair up of tensions comes as President Turkey's President Recep Tayyip Erdogan again vowed to eliminate "terrorists and separatists" from near its border. Speaking at the four-way Syria summit involving Russia, Germany, and France in Istanbul over the weekend, Erdogan said"We will continue eliminating threats against our national security at its root in the Euphrates' east as we have done so in its west."

Notably the Saturday summit with two major European/NATO powers did not include the United States. 

Turkish soldiers gather in the Kurdish-majority city of Afrin, via Getty

Syrian Kurdish groups, for their part, have accused Turkey of committing ethnic cleansing on Syrian soil in a bid to essentially annex territory while conducting a campaign of 'Turkification' — a charge for which there's ample evidence. As a new AFP report finds in the northwest Syrian town of Azaz: "From Turkish-language classes for Syrian children to the state-owned Turk Telekom company erecting its first cell towers on Syrian soil, Ankara's role in the rebel-held region around Azaz has been expanding."

And on Sunday amidst a continuing slow onslaught of pro-Turkish forces, the Associated Press reported

The Turkish army shelled on Sunday positions held by the U.S.-backed Kurdish fighters in northeastern Syria, east of the Euphrates River, in a new spike in tension along the borders.

The report further noted the timing of Turkey's shelling US-backed fighters east of the Euphrates, coming just after Erdogan, Putin, Macron, and Merkel met in order to talk Syria, and among other things shore up the shaky ceasefire over Idlib brokered between Turkey and Russia.

Image via Global Look Press 

The fact that major European powers went to Istanbul to negotiate the future of Syria — all without the United States — represents a huge shift and diplomatic win for both Putin and Erdogan, both in Washington's cross hair of late, especially over Syria policy.  

Per the AP

The rare Turkish shelling east of the Euphrates comes a day after an international summit on Syria hosted by Turkey, which called for an inclusive political process and for creating conditions to allow the return of millions of refugees.

Thus Turkey seems to be signalling Washington that it is now firmly within Putin's orbit on Syria  both Putin and Erdogan are interested in American forces getting booted from Syria, yet with separate geopolitical ends in mind. 

The Turkish strikes hit the village of Zor Moghar, in rural northern Aleppo, across the Euphrates River that separates pro-Turkish Syrian rebel forces and the YPG. The Kurdish YPG issued a statement confirming one death in the "unprovoked" attack, and further said, "Any illegitimate attack against northern Syria will not go unanswered."

Meanwhile the Pentagon was relatively silent on the matter, only saying the US-led Coalition would regain territory lost by its SDF allies, and added that the fighting was "difficult". Brett McGurk, the special presidential envoy for the coalition, said in a statement: “It is very difficult because we are in the last stages, where almost every (ISIS) fighter is in a suicide belt.”

And in another significant development, this week McGurk finally dropped the figleaf of the Pentagon's justification for keeping over 2000 troops in northern Syria as "fighting ISIS" - but now says it is to "counter Iran". This, as NATO member Turkey effectively remains at war with NATO member U.S. inside of Syria. 

Published:10/30/2018 3:41:21 AM
[Markets] The Real Reason Europe Finally Attempts To Stabilize Libya

Authored by Scott Belinksi via,

After years of reticence to reengage as the situation in Libya increasingly spiralled out of control, the European powers - and particularly France and Italy - are finally wading into the debate over how to put an end to the civil war which has wracked the country for the better part of a decade. The ball is currently in Rome’s court, with the Italian government organizing a conference in Sicily on November 12-13 to “find a common solution, even though there will be different opinions around the table.”

Why the about face? Beyond the issue of migration, volatile oil prices, coupled with uncertainty over the ultimate fate of Iranian crude, are the international community added incentive to take the country seriously: analysts are increasingly looking to Libya and Nigeria as the only swing producers that could keep oil under the $100 mark.

The fluctuations in the oil markets are obviously more complex than that, but Libya’s growing output has nonetheless been able to stave off some unexpected production declines – such as the 150,000 bpd drop in Iranian production that was offset by Libya’s 100,000 bpd jump. Saudi Arabia boasts that its total spare capacity is in excess of 1.3 million bpd, but that won’t cover the almost 2 million bpd Iran exported in August. With the Trump administration’s Iran sanctions kicking back in November 5, Libya’s importance to the stability of the global oil markets will only increase in importance.

As Libya’s role grows, so does Europe’s new-look engagement. While the Italians are sending out invitations to Sicily, the French are continuing to push for the December 10 elections they got the opposing sides to agree to back in May. Rather than encouraging immediate elections, the Italian government promised $5 billion of investment in exchange for Libya cracking down on migrants in the Mediterranean.

Against this backdrop, it doesn’t take a cynic to see mercantilist motives as the driving force behind the newfound impetus to fix Libya, the country with Africa’s biggest oil reserves. Francewould love to install a diplomatic ally in North Africa, while oil titan Eni — 30% owned by the Italian state — just acquired a controlling stake in BP’s Libyan assets. Given that Eni hopes to resume oil and gas exploration, there’s an urgent need to resolve rampant corruption and instability in the Libyan oil sector. A few days ago, chairman Mustafa Sanalla of the Tripoli-based national oil company claimed BP and Eni could help his country expand production by “hundreds of thousands of barrels” from the first quarter of next year. Of course, Sanalla’s company is just one of two rival “national” firms in Libya.

Regardless of their motivations, Western attempts to begin repairing the damage they caused in Libya are a welcome change to the status quo of interminable instability.

Oil: the solution to Libya’s problems or another layer of the crisis?

Libya’s oil crisis is merely a reflection of the wider schism in the country, effectively split down its geographical centre as the civil war drags on. There are two administrations: the UN-backed Government of National Accord in Tripoli to the west, and an unofficial body in the east backed by military commander Khalifa Haftar, who acts as a de facto ruler and is usually present when the two sides sit down to talk. Each side is backed by a litany of militias, and the picture is muddied even further by city-states and rogue tribal clans.

After Gaddafi’s ouster, oil was intended to lubricate the reconciliation process. Under a UN-approved system, crude is produced in the mineral-rich east before being sold by the state oil company on the other side of the country. This system purports to ensure that all oil is sold by Libya’s National Oil Corporation (NOC) and not by the myriad rebel groups. This past June, however, Haftar’s Libyan National Army (LNA) reclaimed four key ports from rival militias and turned off the taps, freezing nearly all of Libya’s oil production for over a fortnight and causing global prices to soar.

Barrels of corruption

His motivation, Haftar's supporters insisted, was to stop the loss of oil money to corruption and keep it out of the hands of terrorist groups. That said, the conflict over the ports also fit into a longer-term East-West battle over the control and distribution of proceeds. Haftar eventually relinquished control in response to demands led by Donald Trump. As part of the agreement to reopen the ports and meet Haftar’s demands, representatives from the UN, France, Italy, the US and UK reportedly agreed that Libya’s oil industry, along with the country’s official — and unofficial — central banks, should be the subject of a wide-ranging corruption investigation under UN oversight.

Despite the acrimony of this past summer, it seems Haftar’s move may finally have moved the needle on Libya’s internal oil feud. Earlier this week, Benghazi played host to an “oil and gas exhibition and forum” that secured the participation of both of Libya’s rival national oil corporations. Even Sanalla delivered an address in which he insisted “Benghazi city will play a prominent and important role for the oil and gas sector in the region and probably the world.”

Even with these positive steps, corruption in the Libyan oil sector remains a systemic problem. Misused oil revenues have turned Libya’s natural resource wealth into yet another vector for conflict. Cleaning up the industry and reconciling the competing sides will be integral to any effort to bring about a long-term resolution to the crisis – and, perhaps more importantly for the country’s Western interlocutors, make sure the country maintains its capacity to act as a swing oil producer.

Published:10/30/2018 2:41:24 AM
[Markets] Varoufakis: "Soros Phoned Tsipras In 2015 And Demanded [My Sacking]"

With billionaire 'philanthropist' George Soros making enemies and influencing people all around the world, a little more from his sordid puppetmastery background was exposed this week as his successful efforts to have a finance minister of a European Union nation fired have been put under the spotlight of awkward conspiracy fact.

Infamous former Greek Finance Minister Yanis Varoufakis claimed on Monday that it was Soros who demanded that he was sacked from the Greek government in 2015.

As reports, in an interview with private Skai TV, the former minister and founder of DiEM25 said George Soros phoned Alexis Tsipras in July 2015 and demanded that he be sacked.

“Soros has picked up the phone about me only one time. When he contacted Tsipras in July 2015 and demanded my expulsion,” Varoufakis said.

He added that his “contact” with Soros was limited to this one phone call.

At the same time, he attacked Defense Minister Panos Kammenos who recently claimed Soros had funded the Prespes Agreement – and apparently had attacked also Varoufakis.

“Kammenos said about me that I was a Soros employee,” the ex finance minister said.

Saying that Kammenos is a far-right populist like Orban, Salvini and others, the ex minister stressed “when they want to tarnish someone’s reputation and honor, all these neo-fascists use the name of Soros.”

This trend shows antisemitism and anti-Jewish because “Soros is of Jewish origin,” the ex minister said.

Describing Soros as a “controversial” figure Varoufakis said that the billionaire “did a few good things but also some weird ones.”

After the interview, Varoufakis posted on Twitter that he recounted the incident with Soros in full in his book “Adults in the Room.”

As KeepTalkingGreece poignantly concludes, while we have not read Varoufakis’ book we wonder whether he also wrote what kind of power Soros had over the Greek SYRIZA-ANEL government to be able to demand his removal form government.

Published:10/30/2018 2:12:57 AM
[Markets] Military Escalation In Europe Is Like Runaway Train: It's Time To Slow It Down

Authored by Arkady Savitsky via The Strategic Culture Foundation,

Much has been said about the Trident Juncture 2018 NATO exercise being held in the immediate vicinity of Russia’s borders. This is the largest training event since the Cold War, but it’s only part of a broader picture, in which military war preparations targeting Russia are in full swing. Exercises are being coordinated, along with infrastructure facilities that are being built, expanded, and modernized. For instance, last week the construction of an aircraft maintenance hangar at Estonia’s Amari Air Base, the first military project fully funded by the European Deterrence Initiative (EDI), was completed.

The event was celebrated by US and Estonian air force officials with a ribbon-cutting ceremony. More than $38 million in EDI funds are being invested in that base. Beyond the training, a joint maintenance facility will also support the NATO aircraft that are conducting air policing in Eastern Europe. The Air Force Times cited US Air Forces Europe Commander Gen. Tod Wolters, who promised that even more funding was coming down the pipe for other projects.

“Looking into fiscal year 2019, we are proposing a [European Defense Initiative] budget that demonstrates the US commitment to NATO,” he noted. According to him, “Our total [US European Command] request includes a significant funding increase from $4.7 billion to $6.5 billion."

The NATO infrastructure modernization plans include upgrades to the Kecskemet Air Base in Hungary so that it can accommodate US F-15 fighters, A-10 attack planes, and C-5 transport aircraft, in addition to building a munitions storage facility at Malacky Air Base, Slovakia and a taxiway at Rygge, Norway. These steps are part of a larger effort to prepare for offensive operations against Russia.

The fiscal 2018 defense budget authorizes the US Air Force secretary to purchase land and build installations in other countries. There are plans to invest some $214 million into air bases in Europe, including a $13.9 million investment in Estonia’s preeminent military air base, Amari, plus the Lielvarde Air Base in Latvia is to receive a $3.85 million investment. The biggest chunk of the money, $67.4 million, goes to the Sanem Air Base in Luxembourg. The Kecskemet Air Base in Hungary will get another $55.4 million investment.

To all this can be added the US Army Prepositioned Stocks (APS) for permanent storage in Europe that have been modernized and replenished since 2017. The APS will be sufficient for another armored brigade to fall in on. The militarization of Northern Europe is underway and Poland is being rearmed and prepared to host American bases, such as Fort Trump. The US Air Force is expanding its presence on the European continent, along with NATO’s growing naval might  in the Black Sea.

In October, the Ramstein Air Base in Germany received the largest shipment of ammunition in many years (since 1999). Some 100 containers have been delivered to “support NATO's European Deterrence Initiative (EDI) and augment the Air Force's War Reserve Materiel in Europe," said Master Sgt. Arthur Myrick, 86th MUNS munitions flight chief.

NATO is aiming for territorial expansion. Only 36.9% of eligible voters participated in Macedonia’s Sept. 30 referendum over changing the country’s name and thus paving the way for NATO and EU membership. NATO Secretary General Jens Stoltenberg, US Defense Secretary James Mattis, and German Chancellor Angela Merkel were part of the West’s “Skopje landings” team that stormed that nation’s capital to influence the results of that vote. The voters said yes, but turnout was stunningly low — poor enough to stoke doubts about the plebiscite’s legitimacy.

On October 18, the decision to rename the country was pushed through the Macedonian parliament. This move also lacked overwhelming support from lawmakers, with the ruling coalition barely able to secure the required majority of 80 out of 120 votes to ram the measure through and jump-start formal accession talks at NATO headquarters. The US ambassador to Macedonia was actually inside the parliament building at the time of the vote, but US officials don’t think that counts as “pressure.”

The restoration of Macedonia’s Krivolak army training center to its full capacity, offering thousands of NATO soldiers a venue for drills, is already underway. Next year, Macedonia will host the Decisive Strike 2019 joint exercise that will involve about 1,000 US and Macedonian soldiers.

Albania is offering its territory for NATO bases. Kosovo is on its way to creating its own army. This is a blatant violation of international law. The UN Security Council has never approved it. But NATO nations support the move. US Assistant Secretary of State for Europe and Eurasia, Wess Mitchell, believes that “[n]obody can place a veto on Kosovo’s right to develop its armed forces." According to him, Kosovo "has the right to form professional forces" and this would not pose a threat to either Serbia or Kosovo’s Serbs.

UN Security Council Resolution 1244 states explicitly that no other military presence except KFOR and Serbia’s army shall be permitted without the mandate of the UN Security Council. The declaration of independence in 2008 by Kosovo’s parliament without a previous UN-monitored referendum was a flagrant breach of that resolution. Kosovo, which is part of Serbia, is turning into “NATO Land” without the consent of the Serbian government. It has actually been annexed by the alliance. This entity was also created specifically in opposition to Russia. Hashim Thaci, the leader of Kosovo, makes no secret of it. He claims a threat is emanating from “the Russian military bases in Serbia, from Russia's MIG jets in Serbia and from the Russian military exercises in Serbia."

Whatever Russia does is being portrayed by Western officials and media as a demonstration of hostile intent. Should Russia sit idly by, watching all these preparations going on in full view? If those are not considered provocative behavior, then what is? Any nation would be concerned if an infrastructure were being built that was designed for offensive operations against it.

The NATO-Russia Council (NRC) is scheduled for October 31. Perhaps any expectation of progress is nothing but the slimmest of hopes. After all, this will be the eighth time the NRC has met in the last two years and no progress in any area has been achieved. But hope is the last to die. The escalation has gone too far. NATO’s war preparations have become too large-scale and provocative and have turned Europe into a hotbed. The time is right for the alliance — or at least its European members who have been negatively affected by these developments — to start talking seriously. On Oct. 31 they’ll have such a chance. 

Published:10/30/2018 1:15:54 AM
[Entertainment] How Ellie Kemper Feels About Doing a Reboot of The Office Ellie Kemper, 2018 Emmys, 2018 Emmy Awards, Red Carpet FashionsWell, well, well, how the turntables: Ellie Kemper would totally be down for a reboot of The Office. The Unbreakable Kimmy Schmidt star discussed her former role on the show as Erin...
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[Entertainment] 'Dancing With the Stars': Two perfect scores on Halloween night, plus elimination "Dancing With the Stars" may have had a happy ending with no elimination last week, but Halloween Night proved to be a night full of trick or treats.
Published:10/29/2018 10:12:08 PM
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Published:10/29/2018 9:09:14 PM
[Markets] The Auction Starts Today: $250 Million Superyacht Linked To 1MBD Scandal Put Up For Sale 

Burgess, a yacht brokerage firm, was appointed as the exclusive worldwide Central Agent by the High Courts in Malaysia to assist with the judicial sale of the 300ft yacht Equanimity, linked to the multi-billion dollar scandal at Malaysia's state fund 1MDB.

Bidding on the superyacht starts Monday and will end on November 28, said Ong Chee Kwan from law firm Christopher & Lee Ong, who is representing the government and 1MDB in the sale of the vessel, reported Bloomberg.

The Equanimity is among $1.7 billion in assets bought by fugitive Malaysian financier Low Taek Jho with funds that were siphoned off from 1MDB, the U.S. Department of Justice has said.

Malaysia and U.S. officials have also said some of the money was used to buy private jets, Picasso paintings, fine jewelry, and real estate.

A Malaysian court in August approved the sale of the 300ft Cayman Islands-flagged Equanimity that they said was costing "substantial and escalating expenses" to maintain.

Equanimity Cayman Ltd., the holding company that owns the vessel, said the sale of the yacht would be a "violation of due process and international legal comity, and would call into question the actual ownership of the yacht for any buyer," said Bloomberg.

Ong said Monday that exchange of ownership of the vessel would take place immediately after bidding ends.

The Equanimity's interior was designed by Winch Design using a variety of exotic materials. The vessel can accommodate up to 22 guests and 31 crew, with amenities that include a beach club, health center with gym, massage room, sauna, hammam, plunge pool and beauty salon. Other amenities and equipment include a hospital, a helipad (certified for an Airbus EC-135 or equivalent), and a circular swimming pool.

Law enforcement in Malaysia have issued an arrest warrant and filed criminal charges against Low, but his whereabouts are still unknown.

In about 30 days, Malaysian officials will announce the new owner of the $250 million luxury yacht

Published:10/29/2018 9:09:14 PM
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[Markets] Swiss Banker Sentenced To 10 Years Jail In Venezuelan Money Laundering Plot

As if the embattled government of Venezuelan President Nicolas Maduro didn't have enough problems, a former rainmaking banker with Swiss asset manager Julius Baer has been sentenced to 10 years in prison for his involvement in a money laundering scandal that siphoned off $1.2 billion (or 1.2 billion Swiss francs) from PDVSA, Venezuela's deteriorating state oil company, in a scandal that allegedly involved three of Maduro's stepsons, according to and Bloomberg.

Matthias Krull, 45, was sentenced Monday in US federal court in Miami after entering a guilty plea on Aug. 22. As part of the plea, he admitted that he had joined a network of money launderers who used real estate and fraudulent investment schemes to conceal funds taken from Petroleos de Venezuela. According to his attorney, Krull is cooperating and his sentence could be reduced if he provides "substantial assistance" to the investigation, which could apparently give the US government justification for pressing sanctions against more members of Maduro's family, given the step-sons' involvement. None of the stepsons have been charged.


The money laundering scandal is only the latest headache for Baer in South America.

According to Bloomberg, the bank is in its third year of a deferred-prosecution agreement with the DOJ after admitting two years ago that it helped thousands of Americans evade taxes, a scandal for which it paid nearly $550 million in fines and for which two bankers pleaded guilty. Another former banker at Baer pleaded guilty last year in a federal courtroom in New York for his role in funneling money from an Argentinian sports-marketing company to FIFA in part of the wide-ranging international corruption scandal that tarnished the reputation of the international sports association.

As we reported a few months back, Baer has launched an internal investigation into how billions of dollars were laundered from PDVSA. Swiss banks, which still do business with Venezuelans in defiance of US sanctions (though the Swiss government has long since cracked down on Russian depositors), are a key resource for the Venezuelan elite.

Julius Baer said in a statement that Krull is no longer employed at the bank and clarified that the bank hadn't been implicated in any wrongdoing.  

"Mr. Krull is a former employee who has been sentenced to charges brought against him in his personal capacity - the bank is not charged of any wrongdoing," said Julius Baer spokeswoman Larissa Alghisi. "The charges brought against Mr. Krull are not related to the matters covered in the bank’s DPA, and we have no indication that these events will have any impact on the DPA."

The US District Judge who sentenced Krull also imposed a $50,000 fine and ordered Krull to forfeit $600,000, or the amount in fees that he earned for helping launder funds, as part of his punishment. However, there's still a chance that Krull could avoid his stiff sentence in a US prison: As part of his agreement, prosecutors have agreed to lessen Krull's sentence if he provides them meaningful information about his co-conspirators, including the aforementioned step sons of Maduro, who haven't been charged in the case. This suggests that the case could eventually grow to implicate more family members of Maduro, and expose what for the Venezuelan leader would probably be an uncomfortable truth: That even his own flesh and blood has seized every opportunity to steal from his government.

Published:10/29/2018 8:42:31 PM
[Entertainment] How Meghan Markle's Australian Royal Tour Style Compares to Kate Middleton's ESC: Kate Middleton, Meghan MarkleMeghan Markle is taking some style cues from another royal: Kate Middleton. Back in 2014, the Duchess of Cambridge took Prince William's hand, journeyed through Australia to fulfill...
Published:10/29/2018 8:10:46 PM
[Entertainment] Cardi B Tells Nicki Minaj They Could "Fight it Out" as Feud Escalates Even More ESC: Best Dressed, Cardi BCardi B added fuel to the fire that is her longstanding feud with Nicki Minaj. Before getting into the nitty gritty, let's rewind. On Sept. 7, Minaj and Cardi got into a heated...
Published:10/29/2018 7:39:09 PM
[Markets] Will The Feds Flip Julie Swetnick Against Michael Avenatti?

Authored by William Jacobson via,

From what we know about flimflam mam Julie Swetnick, is there a doubt that if offered the right deal, she would flip on Avenatti as to allegedly perjurious sworn statements against Kavanaugh?

Here’s a thought experiment.

If you were a federal prosecutor, and given the choice, would you prioritize prosecuting:

(a) a clearly disturbed woman with a long history of flimflam, but who in herself has no important societal role but for her outlandish and possibly perjurious sworn statements against a Supreme Court nominee, or

(b) the high-profile lawyer who helped her and a second woman submit possibly perjurious sworn statements, who is a fixture on cable TV, and who has presidential ambitions.

If you say, ‘get the lawyer’ — come on down.

But if you wanted go after the lawyer, what would you need to prove criminal culpability? After all, if you can’t prove the lawyer knew of the falsity of the sworn statements, and took no steps to suborn the perjury, you would need more for a prosecution. Whether it’s a perjury or conspiracy prosecution, what you would need, barring some documentary smoking gun, is for the witness accused of perjury to flip on the lawyer.

“He made me do it” might be enough. It would be in the jury’s hands.

Fast forward to the real world.

Julie Swetnick submitted a sworn statement, through Michael Avenatti, that Supreme Court nominee Brett Kavanaugh participated in arranging gang rape parties in high school.

Swetnick’s story, dropped just before Kavanaugh and accuser Christine Blasey Ford were to testify, fell apart during Swetnick’s interview with NBC News, Julie Swetnick’s rape train claims against Kavanaugh crash and burn in NBC Interview:

Julie Swetnick, Michael Avenatti’s client, has the most incredible of all the accusations against Brett Kavanaugh — that he participated in organizing and running rape train parties in which girls were given spiked drinks then gang raped.

Her original declaration is here.

Both Kavanaugh and Mark Judge, who Swetnick also implicated, denied the accusations:

Previous attempts to corroborate any part of her story proved fruitless. Yet Avenatti has been taunting Senate Republicans that her story would be proven.

NBC News interviewed Swetnick, and her story collapses to such a degree that NBC cautioned viewers that her story was not corroborated and contradicted, in important details, her sworn affidavit submitted by Avenatti.

Swetnick and Avenatti recently were referred by the Chuck Grassley, Chair of the Senate Judiciary Committee, to the DOJ and FBI for criminal investigation with regard to sworn statements submitted by Swetnick. The referral is not limited to perjury, but to any possible crime the evidence might show.

We covered the story previously, Senate Judiciary refers Julie Swetnick and Michael Avenatti for criminal investigation. From the referral announcement:

Senate Judiciary Committee Chairman Chuck Grassley today referred Julie Swetnick and her attorney Michael Avenatti to the Justice Department for criminal investigation relating to a potential conspiracy to provide materially false statements to Congress and obstruct a congressional committee investigation, three separate crimes, in the course of considering Justice Brett M. Kavanaugh’s nomination to the Supreme Court of the United States.

While the Committee was in the middle of its extensive investigation of the late-breaking sexual-assault allegations made by Dr. Christine Blasey Ford against Supreme Court nominee Judge Brett Kavanaugh, Avenatti publicized his client’s allegations of drug- and alcohol-fueled gang rapes in the 1980s. The obvious, subsequent contradictions along with the suspicious timing of the allegations necessitate a criminal investigation by the Justice Department….

The referral methodically details the issues with Swetnick’s allegations as relayed by Avenatti, the immediate diversion of committee resources to investigate those allegations, the subsequent contradictions by both Swetnick and Avenatti, the lack of substantiating or corroborating evidence, and the overarching and serious credibility problems pervading the presentation of these allegations.

There was a second criminal referral, this time just of Avenatti. The second referral concern a sworn statement from a second woman purporting to back up Swetnick’s claims, and submitted by Avenatti. NBC News just recently disclosed, for the first time, that it knew no later than October 3, 2018, three days before that Senate floor vote, that the second sworn statement had been disavowed by the woman making it.

The second referral read, in part:

Yesterday, I wrote to you referring Mr. Michael Avenatti and Ms. Julie Swetnick for investigation of potential violations of 18 U.S.C. §§ 371, 1001, and 1505, for materially false statements they made to the Senate Judiciary Committee during the course of the Committee’s investigation into allegations against Judge Brett M. Kavanaugh. I write today because of important additional information regarding Mr. Avenatti that has since come to the Committee’s attention. In light of this new information, I am now referring Mr. Avenatti for investigation of additional potential violations of those same laws, stemming from a second declaration he submitted to the Committee that also appears to contain materially false statements. As explained below, according to NBC News, the purported declarant of that sworn statement has disavowed its key allegations and claimed that Mr. Avenatti “twisted [her] words.”

We covered this development, and NBC News’ complicity in concealing important information, in NBC News turns on Michael Avenatti over Julie Swetnick, but it concealed problem.

So let’s get back to our thought experiment, in the Swetnick/Avenatti scenario.

It’s not like Avenatti doesn’t understand the pressures the Feds can put on a witness to flip on a lawyer. Avenatti brags that he was the first to predict that Michael Cohen, Donald Trump’s former lawyer, would flip on Trump:

Having seen Julie Swetnick in action on TV, is there a doubt in your mind that if offered the right deal, she would turn on Avenatti in a heartbeat?

How would Avenatti defend himself? Would he call his former client a liar about her claim to have lied in her sworn statement? The same client he repeatedly said was not a liar.

I don’t know what the feds will do. Or how much they care. But if they did flip Swetnick against Avenatti, it would be a fitting closing act in this drama.

There’s a word for this, that Avenatti loves to use: #Basta.

Published:10/29/2018 7:39:09 PM
[Markets] China's Economic Slump Accelerated In October, Early Indicators Show

As corporate defaults surge, forcing a desperate PBOC to reverse its deleveraging efforts and threaten more interventions to stave off a more serious retrenchment in growth in the world's second largest economy, it seems like not a day goes by without another warning sign that China's economic precarious situation is even worse than we thought.

The impact this has had on the mainland investors' psyche has been obvious to all. Repeated interventions by China's 'National Team' have done little to arrest the inexorable decline in mainland stocks in October, leaving the Shanghai Composite, the country's main benchmark index, on track for one of its worst months since the financial crisis, and its worst year since 2011. Meanwhile, a flood of FX outflows has pushed the Chinese yuan dangerously close to the 7 yuan-to-the dollar threshold which, if breached, could unleash another wave of chaos across global markets.

And as Chinese policy makers are probably already scrambling to pad the official stats, Bloomberg has released its own proprietary preliminary gauge of Chinese GDP in October which showed that the slowdown unleashed by the US-China trade war worsened in October.


The Bloomberg Economics gauge aggregates the earliest-available indicators on business conditions and market sentiment, and unequivocally affirmed that the Communist Party's efforts to stabilize the country's economy and markets - the party this month introduced a raft of measures to stabilize sentiment, including steps to boost liquidity in the financial system, new tax deductions for households and targeted measures aimed at helping exporters - haven't been successful - at least not yet.


Kyle Bass and the other prominent China bears across the US hedge fund community will be pleased to see the latest early indicator from Bloomberg, which suggests that economic growth in China remained (relatively) sluggish in October after slowing to its weakest level since the crisis during the third quarter.

All of this suggests that China's October PMI, due out later this week, will confirm that the weakness in the China is multipronged, with consumption and manufacturing in the midst of a multipronged slowdown, after the survey-based index fell to an eight-month low over the summer. China's increasing desperation is President Trump's gain, as the loss of investor confidence could force Chinese policy makers to engage in meaningful talks later this year despite the government's reluctance to even consider America's demands. That could improve the likelihood that the elusive "major breakthrough" being sought by both sides could finally arrive.

The upshot of all of this is that, unless they want to roll the dice and start arresting short-sellers and pumping an unprecedented amount of debt into its financial system, risking even more destabilizing corporate defaults, Chinese leaders will need to find a way to end the trade battle with the US - and do it soon.

Published:10/29/2018 7:11:15 PM
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[Markets] Powell Is A "Prisoner Of History": Volcker Bashes Bernanke & Yellen

Authored by Christopher Whalen via,

In his new book, “Keeping At It: The Quest for Sound Money and Good Government,” by Paul Volcker (1979-1987) with Christine Harper, the former Fed Chairman delivers a sound rebuke to Chairmen Ben Bernanke (2006-2014) and Janet Yellen (2014-2018), and other Fed governors and economists, for fretting overmuch about deflation.  He argues that the true danger is that loose monetary policy leads to inflation and market contagion caused by the manipulation of risk preferences.

Volcker specifically chides Bernanke and Yellen for their fixation on a two percent inflation target, one of the main ornaments on the data dependent Fed Christmas Tree.  “How did central bankers fall into the trap of assigning such weight to tiny changes in a single statistic, with all of its inherent weakness?” he asks.  Good question. Volcker writes in Bloomberg:

“Deflation is a threat posed by a critical breakdown of the financial system. Slow growth and recurrent recessions without systemic financial disturbances, even the big recessions of 1975 and 1982, have not posed such a risk.  The real danger comes from encouraging or inadvertently tolerating rising inflation and its close cousin of extreme speculation and risk taking, in effect standing by while bubbles and excesses threaten financial markets. Ironically, the ‘easy money,’ striving for a ‘little inflation’ as a means of forestalling deflation, could, in the end, be what brings it about.  That is the basic lesson for monetary policy. It demands emphasis on price stability and prudent oversight of the financial system. Both of those requirements inexorably lead to the responsibilities of a central bank.”

Of course, Volcker is cut from different cloth than his successors. 

Janet Yellen was only chairman of the Federal Reserve Board for four years and with good reason.  She was arguably the most dovish Fed Chairmen in the history of the central bank, with a strong tendency to do too much rather than too little.  Yellen confessed to the Financial Times last week that “I really thought we needed to pull every rabbit out of the hat.”  And she did.

An adherent of the state-intervention school championed by her Yale mentor James Tobin, Yellen has always followed the tendency of the left to support greater ease and tolerate higher levels of inflation. During her tenure as a Fed governor and then chairman, the Fed engaged in the purchase of trillions of dollars in government debt and mortgage securities through “quantitative easing” – a free loan to the Treasury that was couched as “stimulus.”

The Federal Open Market Committee (FOMC) under Bernanke and Yellen also engaged in a deliberate manipulation of the term structure of interest rates via “Operation Twist,” a terrible mistake that has yet to be reversed.  Operation twist caused untold damage to the financial markets and the US economy – damage that is still in process.

In that interview with the FT, Yellen worries that the rhetorical attacks on the central bank by President Donald Trump is “whittling away the legitimacy and stature of institutions the public has traditionally had some confidence in. I feel it ultimately undermines social and economic stability.”  She then goes on to say that “Trump has the potential to undermine confidence in the Fed.”

Former Chairman Alan Greenspan, the most politically astute Fed chief in half a century, puts such worries in perspective:

"I don't know a single President, and I worked for a lot of them, who don't want lower interest rates. Now, obviously that's not possible. You keep lowering them down to zero, where do you go from there?"

Like Yellen, many observers worry that criticism of the Fed will make it difficult for the central bank to act when necessary.  The dual, conflicted political mandate of full employment and price stability created by the Humphrey Hawkins law is not possible to achieve in practice, thus the FOMC lurches from one extreme to the other, causing enormous collateral damage.

Consider the effects of QE and Operation Twist on housing.  Think about the thousands of people in the mortgage industry, for example, that have lost their livelihoods because the boom and bust policies followed by the Fed since 2008 and even before.  Think about the millions of American families today that cannot afford to buy a home because asset prices have skyrocketed over the past five years.

By pulling tomorrow’s home sales and other economic activity forward via various policy manipulations, tomorrow is now light in terms of growth. Tomorrow also carries hidden market and credit risks caused by the Fed’s past actions.  As we watch mortgage lending and home building volumes fall next year and thereafter thanks to the property price inflation created by the FOMC under Bernanke and Yellen, remember that Fed policy was explicitly meant to “help” the housing sector.

When people talk about “Fed independence,” our response is independence from what?  Presidents going back to FDR have tried, unsuccessfully, to bend the central bank to the political circumstances of the day.  In the book Inflated: How Money and Debt Built the American Dream, we wrote about how Chairman Thomas McCabe (1948-1951) and his colleagues on the FOMC starred down President Harry Truman on the eve of the Korean War.  He won back the Fed’s independence from the Treasury.  But the Fed and Treasury, like all federal agencies, are notional institutions, merely alter egos for the United States.

The greatest threat to the central bank’s existence is the tendency of Fed governors and economists to pursue abstract economic theories that make no sense in real world terms and often do more harm than good. We have written at length about how the radical policies followed by the FOMC, first under Bernanke and then Yellen, have distorted asset allocations, and the term structure of interest rates and credit spreads.

For example, our best guess is that the 10-year Treasury bond, in the absence of QE2-3 and Operation Twist, should be yielding well-over 4 percent today.  Instead this important benchmark of risk is barely over three percent. Indeed, the entire Treasury yield curve still shows a strong tendency to fall thanks to debt purchases by the Fed and other central banks.  And corporate credit spreads remain compressed, with high-yield spreads up 25bps in the past month but really unchanged from a year ago, as shown in the chart below.

Traditionally, Fed chairmen have disappeared into the world of academia, speaking or consulting after leaving office. Bernanke has followed this rule, but Yellen seems unconstrained by such conventions. During her discussion with the FT, Yellen worries about lending to heavily indebted, less creditworthy corporate borrowers, which she sees as a source of potential “systemic risk.”  She also talks about the need for more regulation, to counter the potential for systemic risk caused by this accumulation of risk.

Is it really possible that Chair Yellen fails to understand that the Fed’s deliberate manipulation of the credit markets since 2008 made this worrisome accumulation of corporate junk debt possible? Does she understand why most corporate debt issuers are clustered around the “lower bound” of investment grade ("BBB")?  As we noted this past week, liquidity in the credit sector is the next risk on the merry-go-round of financial markets, a cycle of asset and market risk that the Fed largely controls.  

Today the FOMC under Chairman Jay Powell is working to “normalize” policy, but without unwinding QE2-3 and Operation twist.  Last week, at a talk at the Peterson Institute for International Economics, newly confirmed Fed Vice Chairman Richard Clarida discussed monetary policy normalization, but significantly made no mention of ending other legacies of "unconventional" policy such as QE 2-3 and Operation Twist, or paying above-market interest rates on excess bank reserves.

In the language of the FOMC, QE and Operation Twist were a form of stimulus.  In the language of the financial markets, they represented a back door loan to the Treasury and the manipulation of credit markets.  Even in the supposedly conventional world of Fed monetary policy, the concepts and indicators used to formulate public policy are often vague – a point that has already drawn the critical notice of Chairman Powell.

Chairman Volcker is not the first member of the Federal Reserve System to criticize the dangerous policy drift inside the US central bank, but his comments are entirely on point.  By substituting nonsensical concepts like “neutral” interest rates for hard data, and by manipulating the financial markets so that they are no longer reliable measures of risk or inflation, the FOMC under Bernanke and Yellen has been deliberately flying blind.

Former Cleveland Fed President Lee Hoskins and his former colleague Walker Todd note in a important research paper, “Twenty Years after the Fall of the Berlin Wall: Rethinking the Role of Money and Markets in the Global Economy,” that the Fed is now a source of systemic risk. They write:

“Today we bear the fruits of state-managed intervention and seat-of-the-pants monetary policy.  Many of the interventions from the 1930s are still with us—the Federal Housing Administration, Fannie Mae, and Freddie Mac, to name just a few—and they all played a major role in the housing bubble and its collapse in 2008… Meanwhile, government guarantees and insurance programs for financial assets, along with bank bailouts, have produced, arguably, the largest increase in moral hazard in the history of financial markets. The Fed’s zero interest rate policy lasted so long (2008–15) that it encouraged excessive risk-taking, certainly riding the yield curve for banks (funding short and lending long).  Unless reversed, these policies will plant the seeds for the next bubble.”

So far, Chairman Powell and his colleagues on the FOMC have refused to speak publicly about unwinding QE 2-3 and Operation Twist. Meanwhile, former Fed Chairs Bernanke and Yellen travel the globe, congratulating themselves for saving the world from the threat of deflation even while encouraging the accumulation of the biggest pile of debt in modern history. 

But the full aftermath of the 2008 crisis is still incomplete.

As and when the wheels come off the proverbial cart in the credit markets around 12-18 months out, it will not be due to a lack of regulation but rather because of reckless polices of the FOMC under the past two Fed chairmen.

As Jim Grant noted recently, Chairman Powell truly is a prisoner of history.

Click here to listen to the interview with Jim Grant of Grant's Interest Rate Observer.  

Published:10/29/2018 7:03:33 PM
[In The News] Watch: Pentagon and Homeland Security Hold a Press Conference on Border Deployment “Operation Faithful Patriot” – 10/29/18

By R. Mitchell -

U.S. Customs and Border Protection Commissioner Kevin McAleenan, Commander, United States Northern Command and North American Aerospace Defense Command General Terrence John O’Shaughnessy, and Assistant Secretary of Defense for Homeland Defense and Global Security Kenneth P. Rapuano hosted a joint press conference Monday on the Department of Defense deployment to ...

Watch: Pentagon and Homeland Security Hold a Press Conference on Border Deployment “Operation Faithful Patriot” – 10/29/18 is original content from Conservative Daily News - Where Americans go for news, current events and commentary they can trust.

Published:10/29/2018 6:40:31 PM
[Entertainment] Tour the Spooky Chilling Adventures of Sabrina House With Lucy Davis Lucy DavisWelcome home, witches. Now that Chilling Adventures of Sabrina is finally out on Netflix, it's time to take a deep dive into the magical world of Sabrina Spellman. Specifically,...
Published:10/29/2018 6:40:31 PM
[Markets] "They All Look The Same" - Hillary Cracks Racist Joke After Booker/Holder Mix-Up

Being the paragon of political-correctness and queen of virtue-signaling opportunism, Hillary Clinton sat down with Recode's Kara Swisher this weekend to answer questions about just how evil and awful conservative opponents have been in the last few months.

The conversation began normally, with Clinton hypocritically toeing the progressive line of identity politics by explaining how each of the groups are different but can be managed by the same liberal movement:

"What’s often called political correctness is politeness,” Clinton said.

“It’s not being rude and insulting to people. It’s respecting the diversity that we have in our society,” she said.

The Democratic Party is a much more diverse political party, attracting people who are African-American, Latino, LGBT, whatever the reason why people feel more comfortable where they are taken in, where they are included as part of a political movement or party."

“And I don’t think it’s politically correct to say we value that. And I don’t want to go around insulting people. I don’t want to paint with a broad brush every immigrant is this, every African-American is that, every, you know, other person with different religious beliefs or whatever - that’s childish."

Childish, indeed. Insulting, indeed.

Just 30 seconds later, as Swisher asked:

"what do you think of Cory Booker... saying ‘kick them in the shins,’ essentially...” incorrectly recalling Eric Holder's recent comments.

Which Clinton quickly corrected:

“Well that was Eric Holder..."

Adding, rather extraordinarily,

"Yeah, I know they all look alike,” Clinton joked, triggering howls of laughter from the apparently mind-numbed audience.

Sorry Hillary, we don't think they look anything alike? Or did u mean all black people?

Finally, we have one question - what would have happened if Trump said it?

As The American Mirror's Kyle Olsen concludes so eloquently, Hillary Clinton appears to benefit from her progressive privilege - it is the only thing that protects her from getting the 'Roseanne treatment', and not being dismissed in disgrace.

Published:10/29/2018 6:40:31 PM
[Entertainment] 10 Crazy-Epic Celebrity Halloween 2018 Costumes You Can't Miss ESC: Paris Hilton, HalloweenEven though Hollywood A-listers are dressing up as vampires and skeletons (See: Zoë Kravitz and Kylie Jenner), their Halloween costumes are giving us life. Over the weekend,...
Published:10/29/2018 6:03:14 PM
[Entertainment] Channing Tatum Is Becoming Jessie J's Biggest Fan After Attending Houston Concert Jessie J, Channing TatumLook in the audience Jessie J and you may just see a special guy. Less than three weeks after news broke that Channing Tatum and the "Price Tag" singer were dating, E! News has...
Published:10/29/2018 5:35:45 PM
[Markets] US Market Indexes Close With Losses After Rumor of Further Chinese Tariffs Nasdaq Composite closes at 7,050.29 for a loss of -1.63% Published:10/29/2018 5:35:44 PM
[Markets] Disaster Awaits: National Debt Will Be 6 Times The Size Of The Economy

Authored by Mac Slavo via,

Even without changes to the current spending policy, the government’s spending is on an unsustainable path.

By the time a child born in 2018 reaches retirement age, the United States national debt will be six times the size of the economy according to an analysis released this week.

Without making any changes to current policy (in other words, even without the glut of new entitlement spending proposed by some of Bernie Sanders’ acolytes) that’s the trajectory for the national debt over the rest of the 21st century, according to the Congressional Budget Office (CBO), as reported by Reason. It’s an outlook that the Committee for a Responsible Federal Budget (CRFB), in an analysis released this week, calls “frightening and almost certainly unsustainable.”

Under current law—which assumes, among other things, that last year’s tax cuts will expire in 2025 and not be extended—the national debt will double from 78 percent of gross domestic product (GDP) this year to 160 percent of GDP by 2050. It would hit 360 percent of GDP, and still be climbing, by the end of the CBO’s 75-year projection window in 2093. In the so-called “alternative fiscal scenario,” which assumes current policies (such those tax cuts) are kept in place, the debt would hit 225 percent of GDP by 2050 and more than 600 percent of GDP by 2093. -Reason

The CBO’s 75-year budget forecast (its longest of long-term projections) makes it clear that the current budgetary course must change dramatically.  The United States simply cannot afford the size of government it has now, let alone the size of government demanded by socialists.  The spending must be cut, there’s no other way around it.

Unsurprisingly, spending is still the main culprit of the coming fiscal catastrophe. Driven largely by the forced Ponzi scheme of Social Security and Medicare, total government spending under the “current law” scenario will double as a share of the economy in the next 75 years. It’ll go from about 21 percent of GDP today to more than 42 percent.

“While today’s high levels of debt already threaten to slow economic growth, there is literally no precedent for deficits and debt at the levels projected over the next 75 years,” warns the CRFB.

“If policymakers don’t act to avoid such high levels of debt, a financial or inflation crisis would likely force action and severely damage the global economy in the process.”

In other words, as bad as the 75-year outlook appears, it’s actually revealing a bigger and much more immediate problem: spending way too much money.

Of course, all of this means the government is to blame for all of the financial destruction currently occurring.  They’ll also be ones to usher in the global economic crash, but will people learn? Or will they constantly go down the road of large totalitarian and unsustainable government control over vast swaths of what should be free human beings?

Published:10/29/2018 5:35:44 PM
[Entertainment] Richard Rankin and Sophie Skelton Gave Us All the Feels--and a Grandad Dance Tutorial--on the Outlander Set Richard Rankin, OutlanderOutlander fans have much to celebrate--but perhaps even more to worry about--when it comes to Roger and Bree in season four. When E! News visited the show's set in Scotland and asked...
Published:10/29/2018 5:03:32 PM
[Entertainment] Taylor Lautner Is Now Instagram Official With His New Girlfriend Taylor Lautner, Halloween, Instagram, TayLooks like there's a new number one #TeamJacob fan in town. Taylor Lautner went Instagram official with his new romantic interest this weekend as he and his girlfriend dressed up as...
Published:10/29/2018 4:33:02 PM
[Entertainment] 5 astonishing things that happen underwater on a real 'Hunter Killer' submarine USA TODAY was granted exclusive access to the fast-attack submarine USS Annapolis to discuss the movie 'Hunter Killer.' Here's what amazed us.
Published:10/29/2018 4:32:59 PM
[Entertainment] Shaun White Sparks Backlash Over Tropic Thunder Halloween Costume Shaun WhiteShaun White is facing backlash over his Halloween costume. Over the weekend, the 32-year-old Olympic snowboarder dressed as Simple Jack, an intellectually disabled character from the 2008...
Published:10/29/2018 4:02:26 PM
[Markets] Israel Quietly Transferred $250m Of Sophisticated Spy Systems To Saudi Arabia: Report

A new bombshell report in the Jerusalem Post confirms that Israel and Saudi Arabia's somewhat "quiet" but growing security relationship is far more extensive than previously thought, as it now includes a $250 million weapons deal.

This is unprecedented as the two nations still don't even have official diplomatic relations, as the kingdom has yet to officially recognize the state of Israel, but continue a close behind the scenes alliance based on intelligence sharing especially in places like Syria or even Yemen in order to "counter Iran". 

According to the Jerusalem Post report

Saudi Arabia and Israel held secret meetings which led to an estimated $250-million deal, including the transfer of Israeli espionage technologies to the kingdom, Israeli media reported on Sunday, citing an exclusive report by the United Arab Emirate news website Al-Khaleej.

The report goes on to describe the spy systems as "the most sophisticated systems Israel has ever sold to any Arab country" and notes they've already been transferred to Saudi Arabia, where a Saudi technical team will undergo training to operate them. 

It is extremely unlikely if not impossible that Israel's own technicians and operators would actually conduct the training of Saudi personnel — likely it is to be done through contractors from Western countries who are usually in abundance in the kingdom. 

Interestingly, it appears the United States and Britain may also have had a role to play in cementing the deal, which was first exposed by a Gulf-based news outlet

The exclusive report also revealed that the two countries exchanged strategic military information in the meetings, which were conducted in Washington and London through a European mediator.

Lending credibility to the report are prior recent revelations in September that Saudi Arabia had purchased Israel’s Iron Dome missile defense system amidst its ongoing war with Houthi rebels in Yemen, which have resulted in several short to medium range ballistic missile attacks on the kingdom over the past year.

The controversial report detailing that Saudi Arabia has purchased Israeli's Iron Dome defense system went viral at the time after a prominent Arabic news site, Al-Khaleej Online, made the claim based on diplomatic sources. The report alleged the first Iron Dome missile battery is slated to be transferred to Saudi Arabia before the end of the year in December. 

Israel had denied the Iron Dome transfer story at the time while Riyadh kept silent: “We deny the existence of a deal to sell Iron Dome to Saudi Arabia,” Israel's Defense Ministry said in an emailed statement to the Times of Israel in SeptemberIsraeli officials had only responded to the story after it swept national media on the heels of the claims taking Arabic social media by storm. 

Two weeks ago, as the Jamal Khashoggi affair began shaking up Saudi-Washington relations, Benjamin Netanyahu told Israeli parliament"Because of the Iranian threat, Israel and other Arab countries are closer than they ever were before," the prime minister said. This acknowledgement came after years of Saudi Arabia joining in a covert partnership to topple the Syrian government — a project which has clearly failed. 

This latest revelation of the transfer of $250m in sophisticated spy equipment is part of a broader trend in closer Saudi-Israeli "secret" relations which will only continue so long as both see the United States as "not doing enough" to thwart Iranian expansion in the region. 

However, the timing of the alleged transfer of Israeli espionage equipment is especially especially interesting as well as alarming, given that news of it comes just as Riyadh has been exposed as spying on and murdering journalists, activists, and dissidents even as they reside in foreign countries. 

Published:10/29/2018 4:02:25 PM
[Markets] Kunstler: Midterms Will Mark A Shift From "Total Culture War" To "All-Out Civil War"

Authored by James Howard Kunstler via,

The Monster Mash

The sad reality is that last week’s Pittsburgh synagogue massacre is only the latest float in the long-running parade of ghastly homicidal spectacles rolling across this land and will be just as forgotten in one week as was last year’s Las Vegas Mandalay Bay slaughter of 58 concert-goers plus over 800 wounded and injured, a US record for non-military acts of violence. The Pittsburgh shootings elbowed the mass pipe bomber, Cesar Sayoc, out of the news cycle - but then Sayoc didn’t manage to actually hurt any of the high-profile figures he targeted with his mailings. What I wonder - and what the news media has so far failed to report - is just how incompetent a bomb-maker Sayoc was. Fake news meets fake bombs.

One of the strange side effects of an epic American political hysteria is this strange ADD-like inability of the public to focus on anything for more than a few moments, even the most arresting atrocities. The hysteria itself is too compelling, like the actions of a human limbic system driving the collective public psyche from fight to flight on the wild horses of pure emotion. Reason has been discarded by the wayside just as a super-drunk person will shed his clothing even on a freezing night.

Total culture war now beats a path toward all-out civil war, with the looming mid-term election as a fulcrum of history.

The country is not “divided,” it’s sliced-and diced like a victim in one of the Halloween bloodbath movies now so beloved by movie audiences that they must be regularly updated. It’s hardly a stretch to say that the US public sees its collective self as a throng of zombies lurching across the ruined landscape in search of a dwindling supply of brains, and they even seem to take a certain comfort in that endeavor, as though the zombies were performing a meritorious public service ridding the nation of as many brains as possible.

The Democratic Party could not be more in tune with this monster mash of collapse politics. The party has been living in a haunted house of its own construction for much of this century, and methodically adding to its roster of resident blood beasts month by month in an orgy of monster creation. They remind me of the chanting and stomping “natives” in any of the long line of King Kong movies, summoning the giant ape to the gate of their Great Wall so as to scare off the party of feckless white adventurers from faraway Hollywood. Only in this edition of the story, King Kong is the Golden Golem of Greatness at 1600 Pennsylvania Avenue, and it annoys him greatly to be summoned by these tiny savages beating their drums. Of course, America-the Horror-Movie doesn’t add up as a coherent narrative. And so the nation sinks into bloody incoherence.

The Democratic Party war on white people and their dastardly privilege has been the theme all year long, with its flanking movement against white men especially and super-especially the hetero-normative white male villains who rape and oppress everybody else. Anyway, that’s the strategy du jour. I’m not persuaded that it’s going to work so well in the coming election. The party could not have issued a clearer message than “white men not welcome here.” Very well, then, they’ll vote somewhere else for somebody else.

And if it happens that the Dems don’t prevail, and don’t manage to get their hands on the machinery of congress — then what?

For one thing, a lot of people get indicted, especially former top officers from various glades of the Intel swamp. It shouldn’t be a surprise, given the numbers of them already called before grand juries and fingered by inspectors general. But it may be shocking how high up the indictments go, and how serious the charges may be: sedition… treason…?

These midterm election may bring the moment when the Democratic Party finally blows up, at least enough to sweep away the current coterie of desperate idiots running it. It’s time to shove the crybabies offstage and allow a few clear-eyed adults to take the room, including men, yes even white men. And let all the shrieking, clamoring, marginal freaks return to the margins, where they belong.

Published:10/29/2018 3:34:20 PM
[Entertainment] Halsey's "Without Me" Music Video Documents a Toxic Relationship--and Stars a G-Eazy Look-Alike Halsey, Music VideoHalsey has fans doing a double take while watching her new music video. On Monday, the 24-year-old singer dropped the visual for her song "Without Me," which documents a...
Published:10/29/2018 2:34:16 PM
[Markets] Bears Are Taking Over World Stock Markets 

Wall Street’s S&P 500 is down .56% on the year in the most extended bull market ever while the MSCI All-Country World Index, a barometer of world stocks, has declined 7.39% on fears of a full-blown trade war, supply chain disruptions, global growth momentum waning, and of course, the threat of a worldwide recession.

According to data analyzed by Thomson Reuters, the number of global stocks that are technically in a bear market has increased since the start of the year, prompting some analysts to ring the proverbial bell that the Central Bank bubble in stocks may already be over.

Reuters said 9.3% of the individual constituents of the S&P 500 index were in a bear market in January. By October 22, that number significantly jumped to 34.1%, and more than 70% of stocks were in correction territory.

Bank of America Merrill Lynch notes that bears are becoming more vicious outside the United States. About 58% of the 2,767 stocks in MSCI’s global index are now in a bear market.

In Europe, there is blood on the streets. Most equity indexes are in or about to achieve correction status. The German DAX Performance Index has fallen 13.28% this year. Italy's FTSE MIB is lower 14% on the year, and the Financial Times-Stock Exchange 100 Index is about to enter a correction.

Some analysts point out that the recent surge in securities hitting 20% declines could be the straw that breaks the camel's back, and an ominous turning point that could signal the global economy is headed for trouble in 2019.

“It’s really an indication that a global bear market has probably already started,” said Albert Edwards, global strategist at Societe Generale, who spoke with Reuters, adding that technical indicators, such as the breadth of the market - pointed to the same conclusion.

Other MSCI indexes have seen a correction or are nearing a bear market.

Some analysts believe hot money can still flow into popular stocks, but a growing number of stocks are quietly collapsing in the background.

“They say fish rot from the head but in the market’s case, it’s rotting from the tail onwards,” said Societe Generale’s Edwards.

The bear is taking the global stock market by storm and has just recently made a presence in the United States. If Edwards is right, then 2019 could be the year of the bear. 

Published:10/29/2018 2:34:16 PM
[Entertainment] Selena Gomez Is No Longer the Most-Followed Person on Instagram ESC: Selena GomezCristiano Ronaldo is now the most-followed person on Instagram. The 33-year-old soccer star has dethroned Selena Gomez on the social media platform, with a current total of 144,320,746...
Published:10/29/2018 2:03:02 PM
[Markets] A Godfather Story (Or How To Get Out From The Game Of Markets)

Authored by Ben Hunt via,

“Just when I thought I was out, they pull me back in!”

It’s one of the most famous quotes in movies, as Michael Corleone rages in Godfather III over the assassination he narrowly avoided and his inability to steer the family into legit businesses.

Michael is what I like to call a coyote, someone who is VERY smart and VERY strategic. Actually, too smart and too strategic for his own good, what a Brit would call too clever by half.

That’s in sharp contrast to his father, Vito Corleone, who is no less smart and no less strategic, but is somehow far less conniving and far more beloved.

You see this difference in character most clearly in the deaths of Vito and Michael.

How does Vito Corleone die? Playing in his vegetable garden with his grandson. At home. Surrounded by life and laughter and plenty of bottles of Chianti.

Vito got out.

How does Michael Corleone die? Sitting in a stony Sicilian courtyard as two skinny dogs scurry around. Struggling to peel an orange. All dressed up and no place to go. Alone. Utterly alone.

For all his smarts and strategy and cleverness, Michael NEVER got out.

How did Vito get out, while Michael failed? I think it’s the whole too-clever-by-half coyote thing. Michael never trusted ANYONE in the way that Vito did. Michael was obsessed with finding the Answer, an impossibility in the game of organized crime. Or the game of markets. 

Michael was a maximizer.

Which is another way of saying that, like most coyotes, he wasn’t very good at the metagame.

Do you want OUT from the game of markets?

I do.  

Am I good at the game? Yeah. Do I enjoy it? Not really. I used to. But ever since Lehman it’s been mostly a drag. And that’s okay! The game of markets is a means to an end. It’s a really big, important game, but it’s only one of several big important games within the larger metagame of life and doing.

My goal in doing is to have a happy ending. I want the Vito ending, not the Michael ending.

How do we get there? We keep our eye on the prize – the happy ending – and we work backwards. We maintain our vision on the metagame and its outcome even while we play the immediate game.

My goal as an investor is NOT to maximize my investment returns or to maximize my personal wealth. That’s myopic thinking. That’s coyote thinking. That’s the sort of thinking that ruined Michael.

My goal as an investor is to minimize my maximum regret in the metagame. What is that maximum regret? Dying alone. Failing to protect and sustain my pack, both at the most personal level of family and the broadest level of humanity. Minimizing the risk of THAT is what drives my doing, in both politics and in markets. I want enough wealth to avoid the bad ending, not the most wealth I can possibly achieve, because going for the most wealth I can possibly achieve actually increases the chances of the bad ending.

You will NEVER get out of the immediate game, whether it’s the mafia game or the markets game, if you play that game as a maximizer. You will ALWAYS be pulled back in.

And yet, all of our dominant ideas about financial advice – ALL OF THEM – are based on the assumption that we are maximizers. Every bit of Modern Portfolio Theory – ALL OF IT – is based on assumptions of maximization. All of those Big Bank model portfolios that are handed down from on high every month – ALL OF THEM – are based on the assumption that we are maximizers. Worse, all of these ideas about economics and investing aren’t just based on the assumption that we ARE maximizers. All of these core ideas about financial advice are based on the narrative that we SHOULD BE maximizers.

The business of financial advice is hurting. We all know that. It’s hurting for its practitioners and it’s hurting for its clients. I think it’s hurting because the narrative of maximization, in both its descriptive and its normative forms, gives particularly poor outcomes when Things Fall Apart. It gives particularly poor outcomes when the gravity of a Three-Body System makes the ground beneath our feet quiver and shake.

In order to survive … in order to do better for clients … the business of financial advice needs a new narrative, one based on what truly matters for practitioners and clients alike in a world of profound uncertainty.

What is the new narrative for financial advice?

I think it’s regret minimization in the metagame rather than reward maximization in the immediate game.

I think it’s Clear Eyes and Full Hearts.

A new narrative isn’t just possible. It’s necessary. And it’s happening.

Published:10/29/2018 2:03:01 PM
[Entertainment] Lena Dunham Says She's 6 Months Sober After "Misusing Benzos" Lena DunhamLena Dunham has reached six months of sobriety after "misusing" benzodiazepines, specifically Klonopin. The Girls star opened up about this milestone during Monday's episode...
Published:10/29/2018 1:34:50 PM
[Markets] Stocks, Yuan Tumble On Report US To Announce Tariffs On All China Imports If Trump-Xi Meeting Fails

It has been a while since the market was reminded of how quickly and violently it can be rocked as a result of Trump's mood swings, and moments ago it got just such a stark reminder when Bloomberg reported that the U.S. is preparing to announce by early December tariffs on all remaining Chinese imports if next month's talks between presidents Donald Trump and Xi Jinping fail to ease the trade war.

As Trump had threatened previously, the latest tariff list would would apply to the imports from the Asian nation that aren’t already covered by previous rounds of tariffs which may be $257 billion using last year’s import figures.

The latest trial balloon indicates the Trump administration remains willing to play hard ball with Beijing, and is prepared to escalate the trade war with China even as companies complain about the rising costs of tariffs and financial markets continue to be nervous about the global economic fallout.

U.S. officials are preparing for such a scenario in case a planned Trump-Xi meeting yields no progress on the sidelines of a Group of 20 summit in Buenos Aires in November, according to two of the people, who declined to be identified to discuss internal deliberations. They cautioned that final decisions had not been made.

According to Bloomberg, the early-December announcement of a new product list would mean the effective date following the mandatory 60-day public comment period, would coincide with China’s Lunar New Year holiday in early February.

Already in 2018 the U.S. has already imposed tariffs on $250 billion in trade with China. After 10% percent tariffs on $200 billion in imports that took effect in September, and are set to increase to 25% on Jan. 1, Trump also threatened to impose tariffs on the remaining goods imports from China, which last year were worth $505 billion.

“We are in the middle of a pretty nasty dispute. We’re in a trade dispute -- I want to use that word because it’s a nice, soft word -- but we’re going to win,” Trump said on Saturday at an event in Indiana. “You know why? ’Cause we always win.”

As Bloomberg also reports, another option considered by the White House is to exclude trade from the meeting agenda but it is unlikely to cancel it altogether.  White House Press Secretary Sarah Huckabee Sanders on Thursday said a meeting between Trump and Xi at the Nov. 30-Dec. 1 summit was still in the planning stages.

Following the Bloomberg report, stocks promptly slumped to session lows amid fears of even more trade war escalation...

... while the Yuan dropped, and is approaching the lowest level since December 2016.


Published:10/29/2018 1:34:50 PM
[Entertainment] Every Celeb Who Dressed Up as Their Famous Friends for Halloween Olivia Munn, Kim Kardashian, HalloweenCelebs kicked off the Halloween celebrations over the weekend! From the star-studded Casamigos party on Friday night to Kate Hudson's celeb-filled bash on Saturday, Hollywood's...
Published:10/29/2018 1:02:15 PM
[Markets] "Palo Alto Mafia" Censoring Conservatives: Trump 2020 Campaign Manager

President Trump's 2020 campaign manager Brad Parscale renewed his criticism of social media companies on Monday for silencing conservative voices across several platforms, reports CNBC

"I think that when the left found out that Facebook, a tool built by Silicon Valley, helped elect President Trump, they weren't very happy," Parscale told CBS This Morning. "And I think that you have multiple platforms I call the 'Palo Alto mafia' trying to stop that."

In the interview, Parscale credited the Trump campaign's dominance in Facebook advertising as a key contributor to its success in 2016. He referenced the wide gap between the number of Facebook ads Trump and Hillary Clinton placed during the run up to the election. Trump's team placed 5.9 million ads compared to Clinton's 66,000. -CNBC

Parscale, who was promoted to Trump's 2020 campaign manager after spearheading his digital media strategy in 2016, was originally hired to build a website for Trump's exploratory campaign in 2015. 

Trump and other conservatives have slammed social media platforms over allegations of anti-Republican bias. In July, Trump accused Twitter of "shadow banning" prominent Republicans, vowing to "look into this discriminatory and illegal practice at once!" 

Trump's tweet came after Brad Parscale, along with Republican National Committee (RNC) Chairwoman Ronna McDaniel, wrote a letter in May calling for the CEOs of Facebook and Twitter to address concerns over conservative censorship ahead of the 2020 election, as well as a call for transparency.

"We recognize that Facebook and Twitter operate in liberal corporate cultures," the letter reads. "However, rampant political bias is inappropriate for a widely used public forum."

In August, President Trump tweeted that Google is "controlling what we can & cannot see. This is a very serious situation-will be addressed!" 

The GOP controlled congress has explored the issue throughout 2018, with executives from Facebook, Google and Twitter testifying before lawmakers over issues of bias and security breaches. 

In April, Facebook CEO Mark Zuckerberg was questioned on the issue at a congressional hearing.

"There are a great many Americans who I think are deeply concerned that that Facebook and other tech companies are engaged in a pervasive pattern of bias and political censorship," Sen. Ted Cruz, R-Texas, said at the time.

The companies have all said that they do not filter content based on political ideology. -CNBC

And while Facebook and Twitter are allegedly filtering individual users on their platform, Google has been accused of biased search results, providing support to Hillary Clinton in the 2016 election, and making conservative employees feel uncomfortable expressing their opinions. In September, Breitbart obtained and published a leaked video of Google's top executives crying and comforting each other as they mourn Hillary Clinton's 2016 election loss. 

What's more, Google allegedly helped create ads and donated funds to a partisan Latino group which physically bussed voters to cast ballots for Hillary Clinton during the 2016 election. 

This, of course, isn't the first evidence of Google doing all they could to help Hillary win the election. In an April 15, 2014 email from Google's then-Executive Chairman Eric Schmidt found in the WikiLeaked Podesta emails, titled "Notes for a 2016 Democratic Campaign," Schmidt tells Cheryl Mills that "I have put together my thoughts on the campaign ideas and I have scheduled some meetings in the next few weeks for veterans of the campaign to tell me how to make these ideas better.  This is simply a draft but do let me know if this is a helpful process for you all." 

Parscale claims that even if social media companies exclude conservatives, people will always find a way to spread ideas. 

"There are lots of things they can't stop," said Parscale. "And I think one of the big emerging technologies is just your cell phone, direct, rich media, and text messaging, and the things we can do directly through your phones."

Published:10/29/2018 1:02:15 PM
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Published:10/29/2018 12:32:11 PM
[Entertainment] Get Ready to Cry During Every Single Episode of Netflix's Dogs Documentary Series DogsMan's best friend is getting a documentary series on Netflix. That's right, the streaming platform that riveted you with Making a Murderer and The Keepers is turning its attention on your...
Published:10/29/2018 11:31:45 AM
[Markets] "Extreme Portfolio Pain" Ahead: Morgan Stanley Expects A "Cyclical Bear Market" Slamming The S&P To 2,400

One day after Goldman reiterated its optimistic outlook on the market, stating that traders appear to have over-reacted to the slowdown signs emerging from both the economy and earnings, despite warning that "risks are rising to the downside" and listing various reasons why the bank's 2,850 year-end price target may not be hit, Morgan Stanley's far more bearish equity strategist, Mike Wilson, is out with his latest bearish piece, in which he pours cold water on the "cautiously optimistic" views proposed by his Wall Street peers, and reiterated that "rallies should be sold until the liquidity picture improves, valuations compress further or 2019 earnings estimates are reduced."

Readers will recall, that just one week ago, Wilson warned that his preferred explanation of recent market moves, namely the "rolling bear market" had "unfinished business with the S&P" and two weeks after "the rolling bear market made its latest and loudest statement yet by attacking this bull market's darlings - Growth stocks, concentrated in the US Technology and Consumer Discretionary sectors" it was going for the overall market itself.

As we further showed, as of two weeks ago, "the rolling bear has now hit virtually every major asset class and the S&P 500 was the final holdout, beating the CPI year to date."


Fast forward to today, when Wilson writes that the "rolling bear market" continues to make progress - having now focused on the S&P directly - and notes that "there is growing evidence that it is morphing into a proper cyclical bear market in the context of a secular bull."

According to the Morgan Stanley strategist, "it doesn't take heavy analysis to recognize this market is now approaching bear territory," and although the S&P 500 is only down 10% from its highs, "40% of US Stocks and almost every sector have fallen 20% at some point from their 52 week highs."

As a result, he believes that "the evidence is building and the message from Mr. Market is clear- The consensus outlook for earnings growth is too rosy next year."

To be sure, market professionals have heard this message loud and clear, and it's not just the violent market move.

While for the month of October, the S&P 500 is down 8.8% and gave up all of its YTD gains in just 3 weeks, after being up close to 11%, far more importantly for portfolio managers is that these losses were concentrated in the areas of the market where they are most exposed: Tech, Consumer Discretionary, Energy and Industrials; while the best performers were in the generally avoided defensive sectors--Utilities, Staples, and REITs.

While we already know that hedge fund performance in 2018 has been abysmal, this is the latest confirmation of "extreme portfolio pain" leaving most active managers down on the year as well.

Unfortunately for these long-suffering portfolio managers, there is no hope in sight according to Wilson, who writes that the rolling bear market is quickly moving to complete its job with growth stocks (Tech, Health Care and Discretionary) catching up on the  downside and "it won't be over until this gap is completely closed."

We showed in last week's note that growth cyclicals, namely Tech and Consumer Discretionary stocks, have seen their forward P/Es correct by only half as much as the S&P 500 Year to Date. That closed a little more last week but there is still another 5-6 percent to go on a relative basis even if the broader market valuation stabilizes.

But wait, there's more. Because while traders have been hit with various "rolling bear markets", Wilson is confident that when looking at the broader market, "this rolling bear is quickly turning into a cyclical bear", highlighting what he showed in the second chart above that nearly half of all the stocks in the MSCI US Equity Index have now fallen at least 20% from their 52 week high. While this isn't as bad as 2015 or 2011, the last time the S&P fell close to 20%, "the momentum suggests we may be on our way to those levels if things don't stabilize soon."

Wilson then shows another was in which the recent drawdown is different from the other corrections we have experienced since 2015, namely that "the 200 day moving average has completely broken for the S&P and most of the sectors and stocks within the S&P 500 are also below their respective 200 day moving averages."

This tells Morgan Stanley two things:

  1. The Cyclical Uptrend that began in early 2016 has been broken, and
  2. The collapse in the breadth of the market suggests this is more fundamentally driven than most market participants and commentators have acknowledged.

It also tells Wilson that he has been right: in lieu of a victory dance, the strategist writes that "this break is overdue and reflects our primary concerns we have discussed all year", the same one that most market skeptics have highlighted, namely that "the Fed and other central banks have tightening more than the market (and possibly the economy) can handle and company earnings growth is destined to slow significantly next year thanks to the very difficult comparisons, rising operating costs and a temporary return to fiscal austerity by both companies and the government."

Commenting further, and referencing the chart above, Wilson says that all year he has been most concerned with the shrinking liquidity conditions as the Fed and other central banks have been tightening monetary policy, and while others may be focused on the neutral interest rate (r*) or the shape of the yield curve, "we have focused on the Global Central Bank balance sheets growth."

From January's very healthy 15% y/y rate, these balance sheets' growth has been plummeting and will go negative by January if the Fed, ECB and BOJ do not change course. Historically, whenever this has happened, we ended up with a financial crisis, a recession or both.

And just in case Wilson wasn't gloomy enough, he writes that while he has not yet modeled an outright earnings recession next year, he does think that the risk of one is "rising significantly."

* * *

Putting the above together, Wilson repeats that his "bear case target" for this year has always been 2400 - a far cry from Goldman's 2,850 PT - and assumes a full blown earnings recession next year which is looking more likely.

Meanwhile, with the Fed having to respond to still strong economic data and the desire to remain apolitical, Wilson thinks it could take another 200 S&P points making 2450 a reasonable downside target.

We expect violent rallies along the way but with market liquidity about as bad as we have seen in our careers, trying to capture them will be difficult.

Morgan Stanley's target also lines up perfect with the 200 WEEK moving average which the bank views as an absolute floor for the S&P at any time during a secular bull market, although if the S&P indeed hits 2,400, expect panic selling to kick in and drag the S&P far lower as every systematic trader bails.

That said, not even Wilson is a permabear and clarifies that its 2400 bear case target should hold throughout this correction which is taking place inside a secular bull market that began in 2011 and this year "represents a cyclical bear within that secular bull."

We think this cyclical bear is taking the course of a consolidation that will keep the S&P 500 in a wide range of 2400-3000 for up to two years. This was our call back in January and we think there is now ample evidence both technically and fundamentally to support it. Furthermore, our rolling Bear market narrative seems to have captured this outlook quite well.

While the S&P appears to indeed be on its way to 2,400, the only question outstanding is whether the Fed will step in when this support is breached - in line with market expectations of where the "Fed Put" is found...

... or if Powell will let the market slide beyond, and instead of a cyclical bear market in a secular bull, the current correction is exposed as the long-overdue breach of what has always been a secular bear market, that was only delayed by 10 years thanks to $15 trillion in central bank liquidity.

Published:10/29/2018 11:31:44 AM
[Trump Administration] Watch Live: White House Press Briefing with Sarah Sanders – 10/29/18

By R. Mitchell -

Sarah Huckabee Sanders - 13

White House Press Secretary Sarah Huckabee Sanders holds a briefing to update the media on the events and issues of the day including: President sending up to 5,000 troops to the U.S. – Mexico border Update on Pittsburgh synagogue shooting Update on mail bomber proceedings Update on Saudi murder investigation ...

Watch Live: White House Press Briefing with Sarah Sanders – 10/29/18 is original content from Conservative Daily News - Where Americans go for news, current events and commentary they can trust.

Published:10/29/2018 11:31:44 AM
[Entertainment] Zoë Kravitz Has Been Secretly Engaged to Karl Glusman for 8 Months Zoe Kravitz, Karl Glusman, 2017 Emmys, CouplesZoë Kravitz bares all in the November issue of Rolling Stone--literally and figuratively. In addition to recreating her mom Lisa Bonet's nude photo shoot from 1988, the...
Published:10/29/2018 11:02:17 AM
[Markets] "A Rough Decade Ahead" - 'Math' & The Future Of The US Housing Market

Authored by Chris Hamilton via Econimica blog,


  • New Housing is being Created at an Unprecedented 2.5x's the pace of the Growth of the 15 to 64yr/old Population

  • Total Annual Population Growth Has Slowed 25% from Peak Growth, 2 Decades Ago

  • However, Annual Population Growth Among 15 to 64yr/olds Has Slowed Over 80% From Peak Growth & Will Continue Decelerating Through 2030

  • 15 to 64yr/olds Do Nearly all the Net Home Buying, 65+yr/olds Net Home Selling

    • 15 to 64yr/olds Have a 70% Labor Force Participation Rate vs. 27% for 65-74yr/olds, just 8% for 75+yr/olds

    • 15 to 64yr/olds Earn and Spend Double that of 65-74yr/olds & triple that of 75+yr/olds

    • 65+yr/olds Have Highest Homeownership Rate at 78% vs. Just 36% for Group with Lowest Rate, 15 to 34yr/olds

    • 15-64yr/olds are Credit Willing Relative to Credit Averse 65+yr/olds

I read an article  a few days ago that got me thinking.  The article's author claimed,

"At 5% mortgage rates and with today's level of affordability, history shows that there is nothing in the way from having a homebuilding boom over the next ten years to satisfy this demographic demand."

I found the claim contrary to everything I think I know, so I thought I'd lay out the counter argument.

The chart below shows annual growth of the 15+yr/old US population (blue columns) vs. the annual growth of the 15 to 64yr/old population (red balls).  The 15+yr/old annual population growth has fallen 25% (decline of a half million annually) since the 1998 peak but more significantly, the 15 to 64yr/old annual population growth has fallen over 80% (decline of 1.8 million/yr) due to a combination of lower immigration rates and lower birth rates.

These population growth trends will only continue to slow through 2030, according to UN and Census estimates (not really estimates, since this population is already born and simply advancing into adulthood).  The future estimates for 15 to 64yr/old population growth (presented above) include estimated immigration well above present rates.  Most, if not all (net) of the assumed 15 to 64yr/old minimal population growth is premised on ongoing immigration that continues slowing.  Thus the forward looking 15 to 64yr/old growth estimates are likely to be lower and perhaps even turning to outright annual declines.

The chart below shows average income, spending, and LFP (labor force participation) rates by age segment.  No shocker, those actively working make and spend more than those with low rates of employment.  Those who have worked longer earn more than those new to the labor force.  Elderly expenditures come into very close alignment with their (generally) fixed incomes.

Noteworthy is that 75+yr/olds have only an 8% LFP rate but will make up over half of the total 65+yr/old population growth through 2030.  The next largest growth segment is among 70 to 74yr/olds with a 19% LFP rate, and the smallest increase is among the 65 to 69yr/olds with a 32% LFP.   As an aside, 65+ year olds have the highest homeownership rates at 78% vs. 36% for those aged 15 to 34. So while the more affluent portion (5% to 20%?) of 65+yr/olds may be interested in a second home in the desert, the mountains, or beach...the majority already own and are eventually looking to downsize.  Simply stated, nearly all the coming growth is among those that work the least, earn the least, spend the least, already own homes, and are more likely to downsize than buy a second home.

Putting it all together (chart below), annual 15+yr/old total population growth (blue columns), 15 to 64yr/old population growth (red line), housing starts (yellow line), and federal funds rate (black line).  Given it is the 15 to 64yr/old population that does the net home buying, (and growth among them continues decelerating...coupled with rising rates and elevated valuations versus most population growth among 75+yr/olds who are more likely to sell via downsizing and/or willing properties to their heirs) I contend the US is creating too many homes presently, not too few.  Of course, this doesn't even factor in things like the lack of income growth among the vast majority those working, high student debt loads, slowing household formation, continued delayed family formation and the lowest birth rates in US history which were just recorded in the first quarter of 2018 (according to CDC...HERE), etc. etc.

Contrary to the author of the article that inspired me, I contend that housing is in for another very rough decade (at the very least)... likely worse than the period during the GFC.  The math is pretty straightforward on this one.

Published:10/29/2018 11:02:17 AM
[Entertainment] The Cast of Riverdale's Love for One Another Runs Deep & There Are Pictures to Prove It! Riverdale, Hart Denton, KJ Apa, Cole Sprouse, CastRiverdale is a small town full of secrets, scandals and milkshakes, but the cast of Riverdale is full of bubbly personalities, go-getters and real-life BFFs. Even though the cast has only...
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[Entertainment] Priyanka Chopra Basically Wore a Wedding Dress to Her Bridal Shower Priyanka Chopra, Bridal Shower ArrivalIt seems Priyanka Chopra gave fans a sneak peek of her upcoming wedding. Three months after Nick Jonas proposed to her with a $200,000 ring from Tiffany's, the Quantico actress...
Published:10/29/2018 10:04:11 AM
[Markets] Russia Preparing Answers To U.S. "Extensive List Of Questions" Over Nuclear Pact

On Sunday Russian Foreign Minister Sergei Lavrov said his country is preparing answers related to nuclear arms control previously delivered by American officials, according to RIA news. Lavrov said a list of questions related to prior treaties had been issued via the US embassy in Moscow only days prior to President Trump signalling his desire for the U.S. to drop the Intermediate-Range Nuclear Forces (INF) treaty. 

“Just a week ago, a couple of days ahead of the announcement of the (U.S.) aim to leave the Intermediate-Range Nuclear Forces treaty, Americans via their embassy in Moscow sent the Russian foreign ministry an extensive list of questions which are a concern to them,” Lavrov stated. Lavrov, for his part, also demanded clarity out of Washington as to its intentions, but confirmed that Moscow is in process of answering the submitted questions. 

National Security Advisor John Bolton was in Moscow for a 2 day working visit to discuss prior nuclear pacts last week, file photo

Trump's comments came on October 20th and set off a flurry of accusatory rhetoric and diplomatic activity between the countries over the 1987 treaty signed by Mikhail Gorbachev and Ronald Reagan.

Kremlin officials said last week that the U.S. withdrawal from the INF Treaty could pave the way for a dangerous new arms race, even threatening the New START treaty, which would become the final barrier preventing unfettered global nuclear proliferation. 

Meanwhile FM Lavrov further asked Washington for clarity as to its intentions: "The United States should reveal its arms control plans since it has decided to quit the Intermediate-Range Nuclear Forces (INF) Treaty," he said Sunday, speaking to Rossiya 1 TV channel. "Washington should be clear on what it will do in the area of arms control after its withdrawal from the key INF Treaty with Russia," according to a translation by China's official Xinhua News agency .

Last week a top Russian defense official warned that it's impossible that Moscow will renegotiate the the Intermediate-Range Nuclear Forces (INF), said to likely be at the top of the agenda when Presidents Vladimir Putin and Donald Trump are set to meet in Paris on November 11 on the sidelines of commemorative events of the 100th anniversary of the end of the First World War. 

And this came after Russian officials reportedly urged US National Security Advisor John Bolton to stay in the treaty during his trip to Moscow at the start of last week, something he rebuffed while saying“There’s a new strategic reality out there,” and described the INF Treaty as a “bilateral treaty in a multipolar ballistic missile world," that remains insufficient as it does not account for countries like China, Iran or North Korea.

Published:10/29/2018 10:04:11 AM
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[Markets] One Trader Warns "Extrapolation Could Ruin Your November As Well"

This morning's overnight dead-cat-bounce is once again being heralded as the beginning of the end of the carnage that investors have suffered in October. We're not holding our breaths...

"Should we buy the dip?" "Has it gone far enough yet?" As former fund manager and FX trader Richard Breslow notes, those seem to be everyone’s favorite question.

Obviously, the first things that jumps to mind are equities. But the oil and currency folks are asking as well. And for all the talk about how muted the fixed income response has been to the share price melt-down, you can be sure that bond and credit traders want to know the answer as well.

Via Bloomberg,

This week brings to a close a month that certainly didn’t work out as expected. But it is doing it in style. Lots of economic news, some central bank meetings where no policy changes doesn’t mean bereft of meaningful information and a bunch of assets sitting at levels that are potentially important crossroads. Wouldn’t it be ironic, but somehow fittingly apt, if assets that failed to proportionately move with equities did so just when the stock indexes decided to bounce. Or shares bounce just when everything else begins to flash caution.

Credit, despite high corporate leverage, had been remarkably tame.

How can a business cycle end if there are no obvious signs of stress in this sector? Which is why it’s worth keeping an eye on both the investment grade and high-yield Markit CDX indexes.

Both of these measures of credit-default swap prices are in play and look like they are attempting to see how strong are their resistance levels. And both made year-to-date highs at the end of last week. They are near resistance, not clear of it. Risk premia demanded from bonds in these sectors are most assuredly getting pricier. But they’ve had false break-outs before.

Ten-year Treasury yields back below 3% would be a problem. We all know that. And there seems to be a creeping resignation that it is only a matter of time.

It might look close but that is probably misleading. Some chart story can be associated with every basis point. I know it doesn’t feel that way when lugging around positions but the technical outlook to me appears fairly well-balanced with a small upside in yields still showing through on the monthlies. The 5s30s Treasury curve is exhibiting some life. It’s a well-defined trade with support at 34 basis points and getting above ~41 basis points opening up some interesting possibilities.

Gold just can’t seem to make headway above its well-flagged resistance at $1236. Perhaps because it has other hurdles so close above that. To me, it trades like a market that thinks it is meant to go higher but has no verve.

The dollar has been on a bit of a run. It really is a safe haven, even if it’s not popular to say so. But it needs to build up some renewed momentum to carry on. Whether its the dollar indexes, emerging markets or versus the majors, it doesn’t look at all straight-forward at the moment.

As far as stocks are concerned, the Russell 2000 was the leader on the way down, therefore it seems appropriate to start there when looking for next clues.

I like the current set-up from a risk/reward point of view. Last Wednesday and Thursday the index printed just about equal lows. Friday punched through that level making a new extreme for this entire move before rebounding strongly. That’s bullish from a technical point of view. Perhaps more importantly, you can now define, with a little comfort, where your stop should be.

Published:10/29/2018 9:37:20 AM
[Entertainment] Farewell, Rick Grimes: The Walking Dead Sets the Stage for Andrew Lincoln's Exit The Walking DeadGoodbye to you, Rick Grimes. Andrew Lincoln officially says goodbye to The Walking Dead in the Sunday, Nov. 4 episode of the AMC drama, but his swan song has already begun. In the Sunday,...
Published:10/29/2018 9:00:33 AM
[Markets] Luongo: The Attack On Gab Proves Speech Was Never Free

Authored by Tom Luongo,

“Who Runs Bartertown!?”

– Mad Max: Beyond Thunderdome

The First Amendment protects your right to say whatever you want free from government prosecution.  It does not protect you from saying hateful things on private properties or privately-owned forums without fear of repercussion.

That is the very definition of freedom of association.

Friday’s attack by an unhinged, vile piece of human excrement on a Synagogue in Pittsburgh wasn’t hours old before real world agendas pushed to the top of the news.

Twitter alternative Gab was immediately dropped by PayPal without specific reasons.

Then immediately, Gab’s latest hosting service unilaterally gave the company a 48-hour termination notice of its contract.

This is the second time Gab has had to switch providers this year.  They have been denied an app in the iOS store.  Google will not allow their Android app to be in the Play Store.

Why is Gab targeted?

Because Gab is a true alternative to Twitter which exists outside of the control of the financial and political oligarchy.

With the recent passing of the EU’s “Link Law” which is designed to shut down opposition voices, the merged corporate/political oligarchy are moving to ensure that all speech is criminalized.

But to do that they first have to square the circle around that pesky First Amendment in the U.S.

And that means outsourcing the censorship to the companies who own the internet access points – the app platforms, the social media giants, the hosting firms and payment processors.

If you can’t build and maintain a business then you can’t oppose their rule.

With apologies to Trey Parker and Matt Stone, “Free Speech isn’t Free… it costs a buck o’ five.”

This is classic barrier-to-entry stuff that the government engages in to protect the market share of the favored companies over their competition.

And despite the roadblocks put up in front of Gab it has continued to grow.

The platform has improved.  I know.  I’ve been a member since 2016 when it was only a haven for the vilest of people.  That early culture drove me away along with its limitations, but then again, I’m pretty bad at this whole social media thing.

But, today that is not the case.  Gab simply doesn’t censor you.  If you want to be a jackass in public, that’s your business.

It doesn’t seem to stop Elizabeth Warren after all.

What content you consume and produce is your responsibility and CEO Andrew Torba has given you those tools to speak freely and freely be ignored.

In fact, the censorship tools are stronger than they are on Twitter.

Gab is more stringent in enforcing its policy to remove speech which is a clear incitement to violence than Twitter is.

And that’s the irony of this. 

The Synagogue shooter was a member of Gab.  He also had a Facebook, Twitter and Instagram account.  They did this to Gab because they could and because they were told to.

Gab’s statement about the shooting is public for the world to see.  And they assisted the police in identifying the person responsible.

And yet, Gab will again be off the air, this time for weeks, while it migrates to a new platform, because its existence is a threat to the powerful who are rightly scared of losing their shiny new control platform.

It shouldn’t matter whether you like Gab’s platform or not.  Are there terrible people on Gab?  Yes.

Are there terrible people posting horrific things on Twitter?  Oh, you betcha.

Businesses which are paying their bills should be welcomed by service providers.  Hosting a platform is not an endorsement of the content of that platform.  A 48 hour shutdown notice was designed to destroy Gab’s business.

The companies terminating these contracts are doing so because of the pressure from those that want Gab shut down, case closed.  And they are hiding behind their vaguely worded Terms of Service to act unilaterally.

Because none of these companies believe in Free Speech.

That the hand of The Davos Crowd is behind this move to shut down alternative speech platforms is chilling.

That they are willing to deprive a peaceable man, in this case Gab’s CEO, his right to associate with all who are willing to support him is despicable.

Free Speech is cheap, defending it costs money.   It’s also messy and chaotic.  It means building new systems that prevent this from happening again.

The only people who want to see free speech curtailed are those scared by what people say about them.  Everyone else should be happy vile men like the shooter let everyone know who they are.

They help us define the limits of our associations.

Those that spend their money supporting platforms like Gab, news outlets like InfoWars or even people like myself are the means by which we break their control.

People like Dave Rubin, Joe Rogan and even Sargon of Akkad have larger audiences now than CNN.  Their credibility gap with the public is massive.

And it will never be crossed.

Moves like this are desperation.  They still think the old rules still rule – that these power brokers still control transmission of information.

Gab will find a new home.  Within hours of their pending de-platforming, another service offered them a home, apparently looking to build a business hosting the unwanted, the maligned and the persecuted.

I’m putting them in my bookmark folder for future reference.

Governments are like generals, always fighting the last war. Humans are too smart to be kept down for too long.  Someone will always find a way to offer a work-around to an existing problem.

And if the problem is censorship, then the solution is technology.

That’s what the division of labor is all about.  Gab was a reaction to Silicon Valley’s hatred of free speech.  Eventually all of this will be put on a blockchain and paid for outside of the normal banking system if Soros, Zuckerberg, Merkel and the rest of these corporatists continue pushing for total control over speech.

Meanwhile, Gab had its best couple of days in terms of new accounts ever.

Just like Alex Jones saw interest in InfoWars spike after his un-personing in August.   So, I have no doubt that Gab will survive because as Ron Paul so brilliantly said during his runs for the Presidency, “Freedom is Popular.”

And that freedom is what Twitter and Facebook have forgotten.  They were popular because of their lack of filter.

Their anarchy.

And if there is one thing the government hates is competition.

What is the antithesis to government?  Lack of it.

Everything great in the world was created through voluntary exchange.  Through functional anarchy.

Even if you disagree with this article, you are doing so freely, without any coercion.  All I can do is offer up my best ideas and see if you like them.   I can’t make you read this.

And I don’t do it for free.  I do it because I feel what I have to say is worth not only your time but your direct support.  And so far more than 210 of you have chosen freely to do just that.

Just like I supported Gab at the outset, sending in donations because I saw this coming.  And I knew that money spent today was a down payment on a world without speech controls tomorrow.

And that’s something we should all shout about at the tops of our lungs.

Published:10/29/2018 9:00:32 AM
[Entertainment] Kerry Washington's "Mother of Three" Comment Explained Kerry Washington, 2016 Oscars, Academy Awards, BeautySurprise...sorta?! During an appearance on NBC's Today Monday, Kerry Washington casually announced she is now a "mother of three." The actress and husband Nnamdi Asomugha are...
Published:10/29/2018 8:31:15 AM
[Markets] Nomura: Beware Halloween's Massive Fed Liquidity Withdrawal

Last Friday, when surveying the carnage in capital markets, Nomura's cross-asset chief Charlie McElligott observed that "Next Week Is Make Or Break For Stocks" and so far it's been so good, with European and US stocks defying yet another swoon in China, which was driven by the latest drop in Industrial Profits suggesting more "slowdown" pressure, as well as the PBoC skipping reverse repo operations Monday, draining 120B Yuan net—the largest liquidity withdrawal since August and reversing some of the large 460B Yuan injection last week, while the Onshore Yuan is heading towards its weakest level in more than a decade, while offshore too sees speculative flows again pressing near 6.97.

Meanwhile, as noted earlier, European stocks lept higher on 1) news that Merkel looks to remain “on” as German Chancellor despite stepping-down as CDU leadership after disastrous election result, while specifically within the Cyclical / High Beta Equities universe, 2) tax-cut headlines from Chinese regulators (this time a 50% cut on new car purchase tax) shows they are continuing to tinker with stimulus, driving the massively China-levered and very-cyclical European Autos sector +5.0% at peak delirium/illiquidity.

However, as McElligott notes, the most relevant drivers for this week's performance will be in the liquidity space, where "bullish flows" will need to override the risk-negative “QT” liquidity impulse of this week’s largest Fed SOMA run-off YTD (with another coming Nov 21st).

On the bullish flow side, over the weekend we noted that the much-anticipated surge in buybacks is finally coming, as companies with $50bn of quarterly buybacks were off their blackout periods, and the number jumps to $110bn by the end of next week and to $145bn the following.

Offsetting the favorable flows from corporate buybacks will be the Fed itself, even as rates move back to the cross-asset forefront into a critical week of month-end Macro, which includes the largest Fed balance-sheet reduction-to-date ($-33.2B) on Helloween, as well as the payrolls report this Friday.

As McElligott reminds readers, the “Quantitative Tightening” via the Fed’s SOMA unwind going "max" in the month of October— along with ECB’s ‘halving’ of bond purchases and the BoJ’s ongoing “stealth taper” escalation — were the key inputs when he made his original call to expect a “financial conditions tightening tantrum” towards the end of October… "and here we are."

As such, the Nomura strategist notes, Bloomberg’s major global financial conditions indices (U.S. + EU + AeJ) show that global FC’s are “tightest” since June of 2016, as higher Equity Volatility, higher U.S. Dollar and higher Money Market / front-end Rates now begin to drag Credit spreads modestly wider as well in a collective lunge "tighter."

So what the market does will be determined by this liquidity tug of war between buybacks and central banks soaking up liquidity. Meanwhile, as McElligott notes, the month of October saw four major market reassessments:

  • The re-pricing LOWER of U.S. growth-expectations (“the best is behind us,” with late-cycle bellwether Equities industries seeing capitulatory sell-flows)
  • The re-pricing LOWER of Fed expectations (this current “policy error” tantrum instead forcing the Fed to “pause” or outright “cease” normalization)
  • The pulling-forward of the “end-of-cycle” timing (2019) and thus…
  • The commencement of the next EASING-cycle timing (Eurodollar calendar spreads for both 2020 and 2021 are implying RATE CUTS)

That said, just like JPM and Goldman, McElligott is in no rush to throw in the "tactical towel", and continues to believe there remains short-term upside-trade in U.S. stocks (1 to 3 month window) for the following reasons:

  • Earnings-season progression means > 50% of Corporate repurchases are back “online” through this week = bullish / price-insensitive flows
  • +++ Mid-term elections analogs, with data back to 1936 showing “bullish” outcomes on ALL “ownership” scenarios
  • Contra- “Bullish” signal generated by current leadership from the uber-Defensive “Dividend Yield” Factor, with the 2w 97th %ile positive move showing as a forward-looking SPX tactical positive, with SPX 1m median return at +2.0% with a 67% “hit rate” / 3m median return +4.1% with a 71% “hit rate”
  • Nomura “Fear and Greed” indicator at just 10th %ile, generating a contrarian “BUY” signal for SPX, with median 1m SPX forward returns +3.1% @ 59% hit-rate
  • “Volatility / De-Leveraging” signal in SPX, where three unique 1.5 standard deviation + AND - moves in SPX within a two week period and within 10% of a 52 week high shows SPX median return of +2.9% out 21d with an 85% “hit rate”
  • Powerful month-end Pension Fund rebalancing flows also likely, due to the scale of the performance differential this month between Equities (Russell 1k -9.0% MTD) and Bonds (AGG -0.6% MTD), with some Street estimates of ~$50B notional in U.S. Stocks to BUY on weakness
  • U.S. growth “macro wise” should see positive catalysts resume as well, with our expectations for U.S. data set to resume “better” into the “bearish rates” dynamic of HEAVY UST supply in Nov and Dec driving +++ Equities / --- USTs performance drivers for consensual Macro positioning

To be sure, any tactical bounce will need to overcome what has been a painful gravitational pull on hedge fund performance, which has been skewered by the "QE to QT" transition, as the macro regime shift has been a "bust" for leveraged fund performance. As McElligott shows in the chart below, the year-to-date underperformance of hedge funds has been exclusively tied to "tighter", more restrictive financial conditions:

Finally, what happens if this time buy the dip fails again, and if buybacks prove less powerful than the upcoming Fed liquidity drain?

According to McElligott, "if U.S. stocks cannot “get legs” in these next two weeks, it is likely indicative that investor psyche has pulled-forward the “end-of-cycle” trade in self-fulfilling fashion, with prior “buy the dip” conditioning now being reset to “sell bounces,especially as portfolio de-risking occurs via either:

  • 1) MECHANICAL “gross-down” VaR-model driven flows (reduce $ exposure) OR
  • 2) more bearish “net-down” flows (sell longs, press shorts) occur, following the realized volatility spike created Fed Chair Powell’s infamous “far-from-neutral” comments on running outright “restrictive policy”

And the above summarized: how the market closes the year will likely depend on what happens this week - if stocks can stage a rebound from last week's beat down, there is still hope for a year-end rally. If not, don't be the last one heading for the exits.

Published:10/29/2018 8:31:15 AM
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Published:10/29/2018 8:01:35 AM
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Published:10/29/2018 7:30:11 AM
[Markets] Watch Live: Angela Merkel Takes Responsibility For Party's Stunning Electoral Defeat In Hesse

After Angela Merkel's CDU suffered a crushing defeat in regional elections in the western state of Hesse, the German leader is giving a press conference Monday morning to discuss what went wrong - and presumably to address reports that she will be retiring from politics at the end of her term.

In her opening remarks, she took responsibility for her party's loss in Hesse on Sunday, and added that her party had "lost credibility."

Watch the conference, which was slated to start at 8 am ET, below:

Reports emerged Monday that Merkel won't seek another term in the German Parliament after her current term ends in 2021.

Published:10/29/2018 7:30:11 AM
[Markets] Boeing Jet Crashes Off Indonesia; All 189 Aboard 'Likely Dead'

In what is believed to be the worst plane crash in three years, a Boeing 737 Max jet operated by Indonesia’s troubled Lion Air carrier plunged into the Java Sea with 189 people on board just minutes after takeoff on Monday. The domestic flight was flying from the city of Jakarta and flying to the mining town of Pangkal Pinang off the island of Sumatra when air traffic controllers lost contact shortly after 6:30 am local time, when the plane was flying at a relatively low altitude of 2,500 meters. Indonesian search and rescue found debris, possessions belonging to the 189 passengers and crew as well as body parts strewn about the crash site, but that all those aboard are "likely" dead.

The pilot reportedly asked to return to the airport, and was cleared, minutes after contact was lost.


Rescuer workers have started the process of pulling bodies from the water.

Notably, the crash is the first involving the widely sold Boeing 737 MAX, the more fuel-efficient iteration of the manufacturer's workhorse single-aisle jet. Lion Air's Malaysian subsidiary, Malindo Air, received the first delivery of the jets last year following a $21 billion deal signed in 2011. The airline was also the first to put the model into service, per Reuters.


In a Monday statement, Boeing said it "stands ready to provide technical assistance to the accident investigation." A haunting video taken aboard one of the rescue vessels showing an oil slick peppered with debris has surfaced on social media.

One twitter user tweeted a photo of the 31-year-old pilot, Bhavye Suneja, an Indian national who had more than 6,000 flight hours, who presumably died during the crash.

Established in 1999, Lion Air Group operates domestic flights as well as a number of international routes connecting Southeast Asia, Australia and the Middle East. Its founder, Rusdi Kirana, is the incumbent Indonesian ambassador to Malaysia. However, the airline is no stranger to safety scandals, and was briefly barred from flying in Europe after several of its pilots were found to possess methamphetamine back in 2013. If all aboard have indeed died, the crash would be the country’s second-deadliest air disaster since 1997. Though Indonesia is one of the world's fastest growing air markets.

Here are the key takeaways from the traffic incident (courtesy of Bloomberg):

  • A Lion Air jet crashed in Indonesia while flying from Jakarta to Pangkalpinang
  • The jet, which entered service for Lion Air on Aug. 15, had about 189 people on board; search for survivors, debris continue
  • Rescue agency expects no survivors from crashed jet
  • The aircraft involved was a Boeing 737 Max 8 and this is the first ever accident for the model
  • Lion Air sees no reason to ground Boeing 737 Max 8 fleet
  • The plane was serving the Bali-Jakarta route on Sunday evening and pilots for that flight reported a technical glitch; the aircraft was cleared by engineers prior to Monday's ill-fated journey, according to Lion Air's Edward Sirait
  • The crashed plane has served local and international trips, including to Jeddah and China, Sirait says
  • The jet lost contact at 6:33 a.m. local time and crashed in the Java Sea, 15 miles off Jakarta airport, according to Bangka rescue agency
  • Australia banned government officials and contractors from flying Lion Air
  • Lion Air is the largest privately-owned Indonesian airline and among the major customers for Boeing and Airbus in Asia
  • The last major accident in Indonesia was in December 2014, when an AirAsia Indonesia Airbus A320 crashed after taking off from Surabaya to Singapore with 162 people on board
Published:10/29/2018 7:01:35 AM
[Markets] US Futures, European Markets Jump Despite Another Chinese Rout

After trading modestly in the red for much of Monday's early session, US equity futures rebounded to session highs even with IBM 5% lower after its offer to buy Red Hat at a ridiculous 63% premium...

... and European stocks jumped as investors rediscovered some confidence as corporate buybacks were set to return with a bang. The euro first dropped then jumped after reports German Chancellor Angela Merkel would step down as leader of Germany's ruling CDU party, although she would stay on as Chancellor.

Meanwhile, concern over China’s slowing economy sent the Shanghai Composite lower for another day, sliding 2.2% on Monday and keeping Asian stocks under pressure.  Chinese data underscored worries of a cooling economy as profit growth at its industrial firms slowed for the fifth consecutive month in September due to ebbing sales of raw materials and manufactured goods.

Shares in Tokyo also ended lower after rising more than 1% at one stage. South Korea also slumped, but markets in Hong Kong, Australia and India all gained.

Contracts for the S&P 500, Dow Jones and Nasdaq indexes all climbed as the European morning wore on, tracking a bank-led rally for the Stoxx Europe 600 Index after HSBC Holdings Plc earnings beat expectations. Earlier in Asia the mood had been more cautious, and shares in Tokyo ended down after rising more than 1 percent at one stage. Gauges in China and South Korea slumped, but those in Hong Kong, Australia and India all gained.

European shares climbed led by banks thanks to encouraging earnings reports and relief that S&P did not downgrade Italy on Friday and after HSBC Holdings earnings beat expectations, while the Stoxx 600 Automobiles & Parts index surged 3.8%, the biggest intraday rally since July 5, as China’s top economic planning body is proposing cutting the tax levied on car purchases by half.

The euro first fell to a session low, then rebounded sharply, after a senior party source said German Chancellor Angela Merkel would not seek re-election as party chairwoman after bruising losses for her Christian Democrats in a regional election in Hesse. Germany's DAX was up 0.7% while the leading index of euro zone stocks rose 0.5 percent, boosted by a weaker euro. Italy's FTSE MIB led the market with a 1.5% gain after Italian bond yields fell sharply to a one-week low following Standard & Poor's decision to leave Italy's sovereign rating unchanged at BBB, sparking relief there was no ratings downgrade, even though it lowered the outlook to negative from stable.

With risk gradually returning to markets, core European bonds turned lower alongside Treasuries. The dollar jumped while gold dropped. Oil fell toward $67 a barrel as traders assessed mixed supply signals.

Today's risk-on session caps a torrid month in which global stocks have lost almost $8 trillion of value, and are set for the biggest wipeout since the height of the financial crisis a decade ago on concerns ranging from peak earnings growth and the U.S.-China trade war to the end of easy money and rising rates.

As discussed last Friday, traders have slashed bet for more Federal Reserve hikes for next year, with markets now expecting less than two quarter-point increases in 2019, compared with three projected by policy makers, and a rate cut in 2020.

Emerging markets stocks were a bright spot, gaining 0.1% in their first rise in five sessions after far-right candidate Jair Bolsonaro won the second-round runoff in Brazil’s presidential election. Brazil-exposed stocks in Europe climbed as investors cheered the win. Blackrock’s Latin American Investment Trust London-listed shares gained 7.4% while a Germany-listed iShares MSCI Brazil ETF climbed 6.6%.

“Our initial assessment for the Bolsonaro administration is that it will have a pro-business stance, focused on enhancing the country’s competitiveness,” said UBS analysts.

Despite gains on Monday, investors remain wary of betting the farm on a turnaround in risk: "The only way I can summarize the core sentiment among the European investors I met is something like ‘pretty grim’," wrote Erik Nielsen, group chief economist at UniCredit, in a note to clients.

Still, the MSCI world equity index managed a 0.1% gain. The index is down 9.3% so far this month and has shed $6.7 trillion in market capitalization since its January peak: "There’s room for a bit of a downside to go, because I do see this as being largely a structural shift in markets,” Kyle Rodda, a market analyst at IG Group in Melbourne, said on Bloomberg Television. “Sentiment is still to the downside, is still quite bearish and there will be a little while for this correction to play out.”

Today is the presentation of the UK budget and it may have an impact on several sectors, with pensions and bookmakers most likely to face some pressure. Banks, retailers and homebuilders will also be closely watched.

In FX, the dollar index rose 0.2 percent to 96.553 after gaining 0.7 percent last week. The euro fell 0.2 percent to near a two-month low at $1.1381. Sterling fell 0.2 percent, holding near a two-month trough of $1.2775 ahead of Britain’s annual budget due later on Monday.  Finance minister Philip Hammond will likely urge his divided Conservative Party to get behind the government’s push for a Brexit deal, or put at risk a long-awaited easing of austerity. Mexico’s peso slumped more than 1% after a vote to scrap a $13 billion airport.

In commodities, oil also reversed early gains to dip on growing worries about Chinese growth. U.S. crude fell 58 cents to $67.01 per barrel and Brent crude slid 71 cents to $76.89.

Market Snapshot

  • S&P 500 futures up 0.3% to 2,676.50
  • STOXX Europe 600 up 0.4% to 353.69
  • MXAP down 0.2% to 146.38
  • MXAPJ up 0.2% to 463.14
  • Nikkei down 0.2% to 21,149.80
  • Topix down 0.4% to 1,589.56
  • Hang Seng Index up 0.4% to 24,812.04
  • Shanghai Composite down 2.2% to 2,542.10
  • Sensex up 1.5% to 33,838.77
  • Australia S&P/ASX 200 up 1.1% to 5,728.16
  • Kospi down 1.5% to 1,996.05
  • German 10Y yield rose 0.3 bps to 0.355%
  • Euro down 0.04% to $1.1389
  • Italian 10Y yield fell 4.6 bps to 3.074%
  • Spanish 10Y yield fell 2.6 bps to 1.541%
  • Brent futures down 0.6% to $77.18/bbl
  • Gold spot down 0.3% to $1,230.45
  • U.S. Dollar Index up 0.2% to 96.50

Top Overnight News from Bloomberg

  • Brazilian markets were set for an advance after the nation’s next president Jair Bolsonaro pledged to trim the deficit, pay down debt and reduce the size of government after results showed him cruising to victory over Fernando Haddad of the left-wing Workers’ Party
  • German Chancellor Angela Merkel will quit as head of her Christian Democratic party after nearly two decades, a person familiar with the matter said, a dramatic sign of her waning authority that will raise questions about her staying power as chancellor
  • Instability plaguing German Chancellor Angela Merkel’s fourth term was laid bare in the latest state election drubbing, with her coalition partner’s flagging support posing a growing threat to her government
  • Some leading lawmakers backing Brexit are examining plans to keep the U.K. in the European Economic Area until the government reaches as a trade agreement with the bloc, the Sunday Telegraph reported
  • Traders are paring bets on 2019 rate hikes by the Federal Reserve as disappointing corporate earnings fuel losses in U.S. stocks. Markets are now factoring in fewer than two quarter-point hikes for next year, compared with the three increases that policy makers project
  • U.S. Treasury Secretary Steven Mnuchin is set to snatch from Timothy Geithner the mantle of selling a record amount of notes and bonds as he seeks to finance America’s growing budget deficit
  • China’s economic growth continued to slow in October, a period in which the trade conflict with the U.S. has intensified and policy makers have stepped up support for businesses. That’s the signal from a Bloomberg Economics gauge aggregating the earliest- available indicators on business conditions and market sentiment
  • Bank of Japan will maintain its policy settings this week, according to economists surveyed by Bloomberg, amid a growing view that the BOJ will eventually use greater flexibility in yield movements as a tightening measure

European equities are kicking off the week on the front-foot, despite the downbeat tone in Asia. As such, Eurostoxx 50 (+0.8%) is supported mostly by the financial sector following optimistic earnings from HSBC (+4.6%), which saw the likes of Intesa Sanpaolo (+3.2%), Deutsche Bank (+1.7%) and RBS (+4.1%) higher in tandem. Elsewhere, Europe’s auto stocks index (+3.9%) rose sharply following reports that Chinese regulators are said to propose a 50% cut to car purchase tax. Subsequently, DAX 30 outperforms as the index is buoyed by shares in Daimler (+5.4%), BMW (+5.2%) and Volkswagen (+5.1%). Finally, Euronext is experiencing problems in which the CAC and AEX remain halted until the technical glitches are resolved.

Top European News

  • U.K.’s Hammond to Set Out a Budget That Brexit Talks Could Break
  • Helicopter Maker Leonardo Slips After Fatal Leicester Crash
  • Italy Stocks Outperform Led by Banks as S&P Rating Cut Avoided
  • Browder Laundering Complaint Shows $97 Million Nokia Payment

Asian equity markets began the week mixed as the region’s attempts to pick itself up following last week’s stock rout, waned heading into this week’s key earnings releases and month-end. ASX 200 (+1.1%) and Nikkei 225 (-0.3%) were both initially positive in which the healthcare sector led the broad upside in Australia, while the Japanese benchmark was less decisive as earnings dominated news flow. Elsewhere, Hang Seng (-0.2%) and Shanghai Comp. (-2.1%) were subdued with the mainland worst hit following softer Industrial Profit growth and a net liquidity drain by the PBoC, while this week’s key earnings including China’s big 4 banks further added to the tentativeness. Finally, 10yr JGBs were choppy as prices reflected the indecisiveness across stocks and eventually edged higher as the risk tone in Japan deteriorated.

Top Asian News

  • Early Indicators Show China’s Slowdown Worsened Again in October
  • Hong Kong’s New-Home Sales Tumble in First Data Since Rate Rise
  • Angst Over Chinese Spending Shaves $10 Billion Off Liquor Stock

In FX, NZD/AUD/CAD - All performing well vs their US counterpart to varying degrees, with the Kiwi outpacing and  bouncing firmly from overnight lows to 0.6555 vs circa 0.6500 amidst a broad upturn in risk sentiment, while Aud/Usd struggles around 0.7100 and the Loonie pivots 1.3100. GBP/EUR - Both choppy, but the Pound relatively rangebound ahead of the UK budget and following mixed data, as Cable hovers above 1.2800 within a tight 1.2805-40 range. However, the single currency has been whippy between 1.1360-1.1415 trading parameters amidst reports that German Chancellor Merkel will not stand for re-election as CDU head after serving out the current term, but would like to remain as Chancellor in wake of another chastening regional result for the coalition. However, Eur/Usd has bounced firmly ahead of hefty option expiry interest at the 1.1350 strike (1.5 bn) and a sharp rally in EU auto stocks on China’s cut in purchase tax to 5% from 10%. CHF/JPY - Victims of the improvement in risk appetite, with the Franc just off parity-plus lows and Jpy retreating from circa 111.80 to 112.25 amidst similar reversals in cross pairings. EM- Broad gains in regional currencies vs the Usd, but with the Mxn a notable underperformer on disappointment that Mexico will not pursue plans to build a new airport. Looking ahead, it will be interesting to see how the Brl reacts to Bolsonaro’s resounding 2nd round win vs a flattish close on Friday.

In commodities, WTI and Brent are both down by around 0.3% amid concerns that global growth is slowing, particularly in China, and that ongoing market uncertainties are leading to a downward pressure on prices. Of note with the Iranian sanctions, it is imminent is that India, China and Turkey, three of Iran’s top five customers, are resisting pressure to completely end purchases; citing a lack of worldwide supply for this. Over in the metals market, gold is down by 0.2% as the yellow metal moves inversely to the USD, although still in a relatively tight USD 5/oz range as market concerns still remain over upcoming US earnings, trade tensions and a slowdown in global economic growth. Elsewhere, the head of the Japanese steel industry group stated that he is worried about the weakening Chinese economy. Copper’s gains have been cut after a slowdown in industrial profits indicate that China’s economy is losing steam, affecting demand for the metal.

US Event Calendar

  • 8:30am: Personal Income, est. 0.4%, prior 0.3%
  • 8:30am: Personal Spending, est. 0.4%, prior 0.3%; Real Personal Spending, est. 0.3%, prior 0.2%
  • 8:30am: PCE Deflator MoM, est. 0.1%, prior 0.1%
  • 8:30am: PCE Deflator YoY, est. 2.0%, prior 2.2%; PCE Core YoY, est. 1.98%, prior 2.0%
  • 10:30am: Dallas Fed Manf. Activity, est. 28.1, prior 28.1

DB's Jim Reid concludes the overnight wrap

I suspect if markets ended up this week being as boring as watching paint dry it would be a welcome relief for many investors. So that brings us to what to make of last week’s sell-off? As you’ll see later it doesn’t feel right to blame it on the current earnings season as this looks fine. However there does seem to be increasing fears that the profit outlook is going to be more challenging  than was perhaps anticipated a few weeks back. In terms of other catalysts, the sector breakdown in the sell-off doesn’t really suggest it’s about fears of higher yields but it does suggest that it might reflect fears of a weaker global economy going forward  as defensives have outperformed cyclicals (see comment below and graphs in today’s pdf). So this is probably a good buying opportunity if you think the global economy is fine for now and that earnings will hold up. It also a good time to buy if you think that October is just a freakish month that like with Halloween attracts and magnifies scare stories if there are any about. The record after mid-terms is also positive historically. However we should all know by now that US equities are valued at one of the most expensive levels in all of history assuming you mean revert all the valuation components. Anyone wanting confirmation of this should look at our long-term study from last month (see p38 from the link here )that showed that if you mean revert everything, real returns in the S&P500 will be a very weak -5.0% p.a. over the next decade vs the century plus average of +6.7% p.a.

However markets don’t often turn because mean reversion say they should. A personal view that has driven our 2018 strategy is that with the stage we’re at of the Fed tightening cycle, with global QT now in full force and the US yield curve flattening, it is the perfect breeding ground for more volatile and difficult markets even if the cycle holds. So we continue to think volatility should remain structurally higher than the 2013-2107 calm even if the global economy likely has at least another 12 months of decent  growth ahead. The area we have got wrong this year is core European yields. We still think they are completely mis-priced but wonder whether we can be right on this going into next year if our view on regular bouts of vol continues to prove correct. Bunds seem to be a lightning conductor for any risk off. A view to resolve before our 2019 outlook is published.

This morning in Asia, markets are off to a mixed start with Nikkei (+0.41%) up while, Hang Seng (-0.07%), Shanghai Comp (-1.47%) and Kospi (-0.20%) are all down. Overnight, Japanese news daily Asahi reported, without citing anyone, that the BoJ is set to discuss measures to make trading of JGBs more active at its policy meeting to be held this week as the BoJ’s current policy is causing activity to shrink. The report also added that the BoJ will consider delaying purchases of long-term JGBs until two business days after the Ministry of Finance’s auctions and will discuss reducing the frequency of mid- and long-term bond purchases.

The reaction in 10y JGB yields has been muted with yields up +0.4bps to 0.103%. Yesterday we saw the Hesse regional election in Germany where the CDU won 27.2% - down from 38.3% five years ago. The SPD won 19.8% and the Greens 19.6%, with the SPD down from 30.7% five years ago and the Greens up from 11.1%. The far-right AfD achieved 13.2% per cent (from 4.1%) - taking it into the Hesse regional assembly for the first time as expected. This is less about the AfD for now though and more about Mrs Merkel’s future and that of her national level coalition. SPD head Andrea Nahles said as the projections came in yesterday that “the condition of the government is not acceptable,” while adding the government needs a short-term policy road map and its implementation will determine whether the coalition still is “the right place for us.” According to our German political experts’ (Boettcher & Braeuninger) piece last week, this type of result seems to put us into the scenario where Merkel might come under pressure to refrain from running again as the CDU leader at the party convention on Dec. 6-8. Among the SPD, these losses might fuel even more reservations about the Groko. Thus, Merkel’s government could become even more fragile. So at a time when Europe needs a strong Germany there is much domestic political uncertainty. Chancellor Merkel is set to address the election results today while, CDU general secretary Annegret Kramp-Karrenbauer has stated that Merkel will run again for the party leadership at the CDU national convention.

After markets closed on Friday, S&P downgraded Italy’s ratings outlook to negative, but maintained their BBB status. This was a positive surprise, as the agency could have followed Moody’s in downgrading Italy to the last notch of investment grade. We mentioned on Friday that S&P could indeed keep the rating unchanged as they didn't previously have Italy on negative outlook and they’d only upgraded a year ago so a complete about turn was less likely. However a cut was still slightly more likely. Ahead of this BTPs traded in a somewhat wide range of 34bps on the week but ultimately out-performed notably given their risk profile in a risk off week to close -3.7bps lower as the EU and national authorities continue to negotiate on Italy’s 2019 budget plan.

Staying with Italy, Il Messaggero reported that the Italian Premier Giuseppe Conte is seeking to mediate between the Italian government coalition partners and the EU over the budget standoff and has indicated that among proposals for compromise Italy will place €17bn earmarked in the budget for the citizens income program and for reform of the pension system in a separate fund as a “standby,” and then the funds would be attributed to the relevant programs “only if the situation permits it.” In the meantime, the paper also reported that the Italian government is also working on a proposal for a possible “re-modulation” of the citizen’s income program which could bring Italy’s budget deficit down to 2.3% from 2.4%. So, lots bubbling up in the background.

Yesterday, in Brazil, far right candidate Jair Bolsonaro won the Presidential run-off election securing 55% of votes defeating the Worker’s party candidate Fernando Haddad who got 45% of votes. Brazilian assets should rally today as Jair Bolsonaro is viewed favourably by the markets. He is set to assume the office from January 1st.

Recapping last week now, and global equities ended the week on a down note, at or near their weekly lows. The S&P 500 was down -3.95% (-1.74% on Friday) and dipped back into negative YTD territory again by the end of the week. The index also dipped into ‘correction’ territory on Friday, briefly trading below -10% down from its all-time peak on September 20. This came despite a strong GDP print that showed the economy grew at an annualized pace of 3.5% qoq in the third quarter, beating expectations for 3.3%. All S&P 500 industry groups traded lower with losses led by energy (-7.06% on the week and -0.78% Friday) and financials (-5.24% on the week and -1.35% Friday). In the pdf today we show charts of the full sectoral performance in the US and Europe last week and over the course of the recent selloff since early October. In short defensives have notable outperformed cyclicals suggesting that the sell-off may be as much a fear about the global economy than anything else. Indeed a sell-off which might have started with higher yields, is not seeing a sector performance suggestive that this is now the main concern. Anyway see the link at the top of this piece for what are interesting charts.

All other major indices also traded lower, with the NASDAQ down -3.59% on the week to close in correction territory (-11.01% from its peak, and -2.34% Friday). The FANG index traded in a wide 6.53% range on the week, but actually closed only -0.11% on the week (-1.68% Friday). The DOW shed -2.97% (-1.19% Friday). In Europe, the STOXX 600 dropped -2.46% (-0.77% Friday) to its lowest level since 2016 and banks were down -4.10% (-3.40% Friday). Bourses across the continent traded lower as well, as flash PMIs printed softer-than-expected, with DAX underperforming down -3.06% (-0.94% Friday).

Sovereign bonds rallied across the globe, with 5-year Treasuries and 10-year JGBs rallying -13.4bps (-4.7bps on Friday) and -3.6bps (-0.4bps Friday) respectively on safe-haven flows, their best weeks since April 2017. Ten-year Treasuries rallied -11.3bps (-3.7bps Friday), while Gilts outperformed closing down -19.3bps (-5.8bps Friday) – their best week since immediately post-Brexit – after the FT reported that tax receipts will surprise to the upside ahead of today’s budget announcement, potentially resulting in a reduced government borrowing requirement. The dollar gained +0.62% on the week (-0.38% Friday), the euro shed -0.90% (+0.31% Friday), though the safe-haven yen was the best-performer among major currencies, up +0.65% (+0.54% Friday). Emerging markets were mixed, with the Brazilian real up +1.80% (+1.53% Friday) ahead of yesterday’s Presidential runoff election and the Turkish lira up +0.91% (+0.81% Friday) after the central bank held rates steady but signaled a willingness to act in the near future.

Earnings season is well underway now and was a huge focal point last week with some big swings on beats and especially misses. We’ve now seen 48% and 39% of S&P 500 and STOXX 600 companies report. US companies are actually outperforming in-spite of some big headline misses, with 82% of companies beating on earnings numbers and 58% beating on sales (versus recent historical averages of 73% and 57% respectively). Aggregate profits and revenues are up 23.7% and 8.8% yoy respectively, eclipsing expectations by 6.2pp and 0.8pp (the historical average is to beat expectations by around 3.4pp for profit and 0.3pp for revenues). The main issue for this US season is that some have started to bring their 2019 numbers down - albeit from still elevated growth rates. However this has certainly be blamed for part of the recent sell-off. In Europe, only 47.8% of companies have beaten expectations on earnings and 55% on sales, compared to historical averages of 50% and 54%.

It’s a busy Monday. In the UK, we get September net consumer credit, mortgage approvals, M4 money supply and October CBI retailing reported sales along with Italy's September PPI. There is no other data release in Europe. In the US, we get September’s PCE deflator and core PCE along with September personal income and real personal spending data releases, and October Dallas Fed manufacturing activity index. Late night, we get Japan's September jobless rate. Away from data, the Fed's Evans will be speaking at an event and the UK's Chancellor of the Exchequer Philip Hammond will present his budget. The WTO's dispute settlement body is also set to consider a US request to investigate possible violations related to China’s intellectual property  policies. In addition, Mondelez and HSBC will report their earnings.

Published:10/29/2018 6:30:39 AM
[Entertainment] We're Kind of Pissed The Haunting of Hill House Was Missing These Scenes The Haunting of Hill HouseIt turns out the Crain family wasn't the only meal Hill House was craving. Netflix's The Haunting of Hill House, based on Shirley Jackson's 1959 novel of the same name, tells...
Published:10/29/2018 5:31:22 AM
[Markets] French FinMin: The Euro Zone Is Not Prepared To Face A New Crisis

Europe finds itself at a troubling crossroads: while on one hand the official narrative emanating from Brussels and Berlin (and, of course, the ECB) is that there is no risk of contagion from Italy’s budget crisis in the European Union, on the other hand the euro zone is "not prepared enough to face a new economic crisis", French Finance Minister Bruno Le Maire told daily Le Parisien on Sunday.

“We do not see any contagion in Europe. The European Commission has reached out to Italy, I hope Italy will seize this hand,” he said in an interview.

“But is the eurozone sufficiently armed to face a new economic or financial crisis? My answer is no. It is urgent to do what we have proposed to our partners in order to have a solid banking union and a euro zone investment budget.”

Le Maire's remarks come just days after the European Commission rejected Italy’s draft 2019 budget earlier this week for breaking EU rules on public spending, and asked Rome to submit a new one within three weeks or face disciplinary action. And while Brussels officials said that Rome’s "unprecedented" standoff with Brussels seems certain to delay the reform process and probably dilute it for good, Italy has remained defiant and has repeatedly said it would not budge on its target deficit at 2.4% of GDP.

The standoff between Italy and the EU, and concerns about who will buy Italian debt after the ECB ends its QE at the end of the year, has sent Italian yields soaring to the highest level in nearly 5 years.

The blowout in yields has sparked panic in some official circles, with the Peterson Institute for International Economics warning that if Italy is headed for a debt crisis, it would be “horrific,” according to a May 2018 report which blamed the higher rates on a "political backlash to slow growth and immigration" which has "produced the least cooperative government imaginable, a coalition between the left-populist Five Star Movement (M5S) and the right-populist Lega."

Meanwhile, a growing risk is how much time Italy has before the market revolts ahead of the upcoming end of the ECB's QE. As the following chart from Deutsche Bank shows, the central bank has been the only net buyer of Italian debt, serving as backstop to the broader market which will soon be over...

... although in recent months Italian banks have been on a debt buying spree, sparking concerns about Italy's "doom loop", where any blow out in yields results in an immediate hit to bank stocks, and financial stability.

Meanwhile, in what can only be interpreted as a disastrous negotiating tactic, last week, Italy's Cabinet Undersecretary Giancarlo Giorgetti said in an interview on Italy's RAI that Italian banks would need a "recapitalization" if the spread with German bonds continues to rise toward 400 basis points, from the current level of 310bps which is just shy of the widest level it has been going back to early 2013.

With the market on edge, and Italy's standoff with the EU likely to go the distance, the bond vigilantes will be all too happy to test just what happens when the 400 bps threshold is crossed and a more pressing question is at what level in "lo spread" will Italian households decide they have had enough of this "game of chicken" and pull their money out of the banks, a process which will only culminate with a test of the French finance minister's dire warning.

Published:10/29/2018 3:29:41 AM
[Markets] EU Court Upholds Prosecution Of Woman For Comparing Muhammad's Marriage To A Six-Year-Old Girl To Pedophilia

Authord by Jonathan Turley via,

A new decision from the European Court of Human Rights (ECHR) confirms the all-out assault on free speech that has taken hold of Europe.  In a chilling decision, the ECHR upheld a fine levied against an Austrian woman who called Muhammad a pedophile for his arranged marriage with a young girl while in his 50s.   The court ruled that such views are not protected by free speech because they violate “the right of others to have their religious feelings protected.” The decision confirms the near complete subjugation of free speech to religious and other views in society.  

In 2009, the defendant held two seminars entitled “Basic Information on Islam,” in which she compared Muhammad’s marriage to a six-year-old girl, Aisha, to pedophilia.

Most accounts put Aisha’s birth around  late 613 or early 614.  She was six or seven years old when she was married to Muhammad in Mecca and he consummated the marriage when she was reportedly ten. Muhammad was around 50 at the time.

For most of us in the free speech community, the differing views of this marriage is immaterial to the right of both sides to be free to state their views.  However, complainants have sought to silence critics like this woman by seeking criminal fines.

Moreover, I am not particularly interested in how the woman expressed her views since they raise core religious and political values.  The court said that she stated that Muhammad “liked to do it with children” and “… A 56-year-old and a six-year-old? … What do we call it, if it is not pedophilia?”  That was found to be “disparaging religion” and lower courts upheld the conviction.

The Strasbourg-based ECHR ruled that the woman’s “right to freedom of expression with the right of others to have their religious feelings protected, and served the legitimate aim of preserving religious peace in Austria.”

The ECHR engaged in what is now an all-too-familiar effort to deny its obvious denial of free speech by saying that freedom of religion did not protect religions from criticism but they upheld the punishment of someone for doing precisely that.  It simply declared that the woman’s comments “could only be understood as having been aimed at demonstrating that Muhammad was not worthy of worship.”

The opinion is perfectly Orwellian in saying that you cannot get away with using free speech by simply claiming the right of free speech.  The court rejected that people are entitled to free speech by simply “pack[ing] incriminating statements into the wrapping of an otherwise acceptable expression of opinion and claim that this rendered passable those statements exceeding the permissible limits of freedom of expression.”

That type of circular logic would be laughable if it were not so chilling.

We have previously discussed the alarming rollback on free speech rights in the West, particularly in France (here and here and here and here and here and here) and England ( here and here and here and here and here and here and here and here and here and here). Much of this trend is tied to the expansion of hate speech and non-discrimination laws.  These prosecutions are part of a new and dangerous attack on free speech. We previously discussed the rise of anti-blasphemy laws around the world, including the increase in prosecutions in the West and the support of the Obama Administration for the prosecution of some anti-religious speech under the controversial Brandenburg standard.  The effort by Muslim countries to establish an international blasphemy standard ran into opposition in the West so a new effort to launched to use hate crimes and discrimination law to achieve the purpose.

This new ruling shows the rapid abandonment of the European courts of fundamental values of free speech.  The ECHR has now established itself as legitimizing the criminalization of speech in Europe.

Published:10/29/2018 2:59:28 AM
[Markets] Russia's GRU Dealt Blow As Kremlin Spies Exposed By Black Market Data Sale

Russia's military intelligence agency, the GRU, has been dealt a blow after a Russian journalist living in Europe reportedly bought the identities of undercover agents on the black market from Moscow police, according to ABC

Kanev, who lives in self-imposed exile in Europe, told The Associated Press he uncovered the identities by using databases purchased on the black market from Moscow police, traffic police or security agents. He said he cross-checked them with open sources and discussions with security sources. Other Russian journalists have described using similar methods. -ABC

Bankrolled and published by Kremlin opponent Mikhail Khodorkovsky's "Dossier Project," journalist Sergei Kanev says he wants to call attention to issues within an organization he thinks has gone from spycraft to "unchecked violence and foreign interference," according to ABC - however his report describes the GRU as more sloppy than scary, with Kremlin operatives blowing their own cover in some cases. 

Journalist and Russian dissident Sergei Kanev

Kanev said he identified three agents after they filed police reports for stolen goods, by cross-checking names with databases showing addresses or other information on GRU employees. Another was identified after being arrested over a cafe shootout.

The report also says the Russian Defense Ministry sought to conceal the identities of dozens of children of alleged GRU officers living in a Moscow housing complex by adding 100 years to their ages in administrative registries. GRU agents jokingly called it the "old folks' home," Kanev said.

However, pension authorities raised alarm upon discovering the freak concentration of very elderly residents, suspecting some kind of pension fraud. -ABC

The GRU has been accused of conducting the March nerve agent attack in Salisbury, England which targeted former Russian double agent Sergei Skripal. Two alleged GRU agents were identified in the case, however others have suggested they are patsies. 

Dutch authorities, meanwhile, reported earlier this month they identified four alleged GRU agents who attempted to hack the Wi-Fi of the Organziation for the Prohibition of Chemical Weapons (OPCW), the primary watchdog group responsible for investigating the Skripal attack as well as suspected chemical attacks in Syria. 

All this makes it look like GRU officers "can't tie their own shoelaces," said Michael Kofman, an expert on Russian military affairs at the Woodrow Wilson International Center in Washington.

In an interview with the AP, Kanev said he also identified 16 GRU officers who once lived in the same Moscow dormitory as Anatoly Chepiga, one of the Russian officers suspected of poisoning turncoat GRU agent Sergei Skripal in Salisbury. Kanev did not publish their names.

Kanev said that he could identify so many officers was a sign that "Russia is eroding." -ABC

Of note, none of the "outed" GRU agents are suspected of wrongdoing at this time, which, according to Keir Giles, the director of the Conflict Studies Research Center in Cambridge, England, has exposed Kanev and his oligarch-turned-dissident backer Khodorkovsky "to charges that instead of reforming Russia, they just want to harm it." 

Giles said the revelations highlight a sense among Russian intelligence agencies that they are "above the law" and could reinforce their view that "mass connectivity, unhindered communications, and widespread access to information" is a threat to national security.

Meanwhile, the drip-drip of revelations will continue to dent the image of the GRU, but not deter it from unsavory actions, experts said. Kofman said it's not unheard of for one agent after another to get burned publicly, and noted that agents like Chepiga and his colleagues could be replaced. -ABC

"They will likely write this off as a consequence of carrying out a lot of operations," Giles concluded. 

Published:10/29/2018 1:58:41 AM
[Markets] Putin's Approval Rating Plunges After Pension Friction

The latest Gallup poll shows that support for President Trump surged to 44% during the first two weeks of October, just one percentage point below his personal best, which was reached during his first week in office.


Furthermore, as we noted previously, Democrats are worrying that their get-out-the-vote efforts (which have included such novel strategies as catfishing people on twitter) won't mobilize the two demographic groups that are seen as crucial to a Democratic victory: Young people and Hispanics.

However, as Statista's Martin Armstrong points out, there is a silver lining for the Russophobic left...

Russian president Vladimir Putin has long enjoyed a high approval rating but, this infographic shows, the latest Levada-Center surveys have revealed a steep drop off in recent months.

Infographic: Putin's Approval Rating Tanks Amid Pension Friction | Statista

You will find more infographics at Statista

The main reason for this change in mood is a planned raising of the retirement age in the country - gradually from 60 to 65 for men and from 55 to 63 for women.

Having been consistently above 80 percent in recent years, the dip in popularity has seen Putin's rating hit 67 percent.

Published:10/29/2018 12:30:58 AM

The Boston Red Sox won the World Series Sunday night in Game 5 after a 5-1 drubbing of the Los Angeles Dodgers: YOUR BOSTON #REDSOX ARE THE 2018 WORLD SERIES CHAMPIONS! #DAMAGEDONE — Boston Red Sox (@RedSox) October 29, 2018 And this is a savage tweet as the win happened minutes from Hollywood: HOLLYWOOD […]


Published:10/28/2018 11:06:21 PM
[Markets] Red Sox shut down Dodgers to win World Series The Boston Red Sox capped one of the best seasons in baseball history Sunday night, beating the Los Angeles Dodgers, 5-1, in Game 5 to clinch the World Series, four games to one.
Published:10/28/2018 10:29:09 PM
[Open Threads] Bookworm Beat 10/28/18 — the illustrated edition and open thread

I’ve spent some time trawling across the internet for the best posters about the invasion, stupid Leftists, elections, #Blexit, and much more. Have fun! I was working on a long post that made perfect sense when I woke up at 3 am thinking about it. By the time I’d worked on it for more than […]

The post Bookworm Beat 10/28/18 — the illustrated edition and open thread appeared first on Bookworm Room.

Published:10/28/2018 10:29:09 PM
[Entertainment] Jenni "JWoww" Farley and Roger Mathews Have a Family Halloween Photo Shoot Jenni JWoww Farley, Roger Matthews, HalloweenJenni "JWoww" Farley and Roger Mathews celebrated Halloween together as a family, their two kids included. E! News obtained exclusive photos of Farley, Mathews and their...
Published:10/28/2018 10:29:09 PM
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Published:10/28/2018 9:57:58 PM
[Markets] The Vatican Under Siege: What The Church Must Do To Restore Trust?

Authored by Lawrence Franklin via The Gatestone Institute,

On October 12, Pope Francis officially accepted the resignation of Washington's archbishop, Cardinal Donald Wuerl, from the high-profile post Wuerl had occupied for 12 years. Wuerl's resignation was the latest and most direct casualty of the sex-abuse scandal that for years has been rocking the Catholic Church. More specifically, Wuerl -- a close ally of Pope Francis -- stepped down as a result of a nearly 900-page Pennsylvania grand jury report from 2018, which detailed the extent of the rampant sexual abuse of priests against children and of the systemic cover-up of the crimes.

Cardinal Wuerl was among those accused of covering for abusive priests in the grand jury's exhaustive investigation of Pennsylvania's dioceses, including the Diocese of Pittsburgh, which Wuerl had headed from 1988 to 2006. As a consequence of his role in re-assigning or reinstating priests accused of sexual abuse, Wuerl requested that the Pope accept the resignation he had previously submitted in 2015, at age 75, as is tradition. Although Pope Francis acceptedWuerl's resignation, he nevertheless requested that Wuerl stay on as apostolic administrator of the diocese until a new Archbishop to Washington, D.C. is selected.

It was, however, the Pope's heaping of praise on Wuerl that especially angered the victims of sexual abuse at the hands of clerics. In his letter accepting Wuerl's resignation, Francis wrote:

"To our Venerable Brother Card. Donald William Wuerl, Archbishop of Washington,

"On September 21st I received your request that I accept your resignation from the pastoral government of the Archdiocese of Washington.

"I am aware that this request rests on two pillars that have marked and continue to mark your ministry: to seek in all things the greater glory of God and to procure the good of the people entrusted to your care. The shepherd knows that the well-being and the unity of the People of God are precious gifts that the Lord has implored and for which he gave his life. He paid a very high price for this unity and our mission is to take care that the people not only remain united, but become witnesses of the Gospel "That they may all be one, as you, Father, are in me and I in you, that they also may be in us, that the world may believe that you sent me" (John 17:21). This is the horizon from which we are continually invited to discern all our actions.

"I recognize in your request the heart of the shepherd who, by widening his vision to recognize a greater good that can benefit the whole body (cf. Apostolic Exhortation Evangelii Gaudium, 235), prioritizes actions that support, stimulate and make the unity and mission of the Church grow above every kind of sterile division sown by the father of lies who, trying to hurt the shepherd, wants nothing more than that the sheep be dispersed (cf. Matthew 26:31).

"You have sufficient elements to "justify" your actions and distinguish between what it means to cover up crimes or not to deal with problems, and to commit some mistakes. However, your nobility has led you not to choose this way of defense. Of this, I am proud and thank you.

"In this way, you make clear the intent to put God's Project first, before any kind of personal project, including what could be considered as good for the Church. Your renunciation is a sign of your availability and docility to the Spirit who continues to act in his Church.

"In accepting your resignation, I ask you to remain as Apostolic Administrator of the Archdiocese until the appointment of your successor.

"Dear brother, I make my own the words of Sirach: "You who fear the Lord, trust in him, and your reward will not be lost" (2:8). May the Virgin Mary protect you with her mantle and may the strength of the Holy Spirit give you the grace to know how to continue to serve him in this new time that the Lord gives you."

A few months earlier, in July, Pope Francis also accepted the resignation of Cardinal Theodore E. McCarrick, the former archbishop of Washington, from the College of Cardinals, after he had been removed from public ministry in June over "credible allegations" of his sexual abuse of a minor nearly five decades ago, when he was a priest in New York.

In August, former Papal Nuncio (ambassador) to the United States, Carlo Maria Viganò, called upon Pope Francis to resign the Papacy. Viganò justified this demand by claiming that the Pontiff had covered up allegations of sexual-abuse crimes by McCarrick. Viganò also named several high-ranking, pro-Pope Francis officials -- including Wuerl -- whom he accused of abetting a homosexual sub-culture inside the Vatican.

In a September 13 piece in National Review, Michael Brendan Dougherty posed two questions about why McCarrick's influence had endured, despite frequent and long-standing allegations of his predatory sexual behavior.

The first was: Did Francis spare McCarrick because he sought McCarrick's counsel on how the Vatican should reform the American Episcopate (bishops)?

The second was: Does Francis overlook the sins of those prelates he views as allies, such as McCarrick, in order to advance his papal agenda?

If the response to either of those questions is yes, then the Vatican's factional infighting between liberals and conservatives may have reached a critical level. This moment may demand a massive restructuring of church structure to sustain Catholicism's vitality as the moral compass for half of the world's Christians.(Non-Catholic Christians such as Orthodox and Protestant sects comprise the other half of the world's 2.2 billion Christians.)

Viganò's 11-page "indictment" was published at a vulnerable moment for the Catholic Church, already reeling from ever-widening evidence of sexual abuse of innocents by predator priests. Viganò had launched his attack during the Pope's visit to Ireland, a country where respect for the Catholic Church had already declined, following revelations of sexual crimes by priests and decades of harsh treatment of young women who have given birth to children outside of marriage.

Given public knowledge of the bitter factional disputes within the Vatican, Viganò's detailed accounts of political maneuvering within the College of Cardinals and the Roman Curia (the Catholic Church's administrative bureaucracy) are indeed plausible. He is allied with high-ranking Vatican conservatives who are opposed to the apparent liberal agenda of Francis, such as permitting divorced and remarried Catholics, in some cases, to receive the Eucharist (Communion). He is also allied with whoever is against the Vatican's recent pastoral rhetoric on same-sex attraction; and with those who are skeptical of what they perceive as the Pope's antipathy to capitalism. Other high-ranking church officials have denounced the West for failing to support Christians being persecuted in Muslim lands.

These denunciations can be interpreted as criticism of Pope Francis's perceived unwillingness directly to confront the issue of clerical sexual crimes. Additionally, some Catholics have criticized the pope's tendency to grant unscripted in-flight media interviews, and then seeming to blame them for confusion among Catholic laypeople as to where he stands on key theological and social questions.

Viganò himself has been a casualty of inside-the-Vatican bureaucratic wars during his tenure as Secretary-General of the Vatican Governorate (2009-2011), the equivalent of serving as Mayor of Vatican City. While in this position, he was accused by some of his Vatican City adversaries of, among other things, nepotism and exhibiting "a harsh and intransigent managing style." However, these accusations may have been generated by Viganò's uncompromising opposition to financial improprieties he had previously uncovered in the Vatican Bank.

Those criticisms prompted Viganò's removal at the time by Pope Benedict XVI from his position as the Vatican Bank's Secretary-General. Subsequently, Benedict dispatched him to the United States to serve as nuncio (ambassador from the Vatican). Viganò may also be disappointed by the failure of Popes Benedict and Francis to appoint him as president of Vatican City, a post that automatically includes a promotion to Cardinal.

Viganò's allegations against Pope Francis were buoyed by some recently surfaced corroborating evidence, including a letter from 2006 indicating that the Vatican had been aware of McCarrick's alleged predatory behavior for some time. This letter, addressing McCarrick's alleged pattern of sexual abuses, was written by Father Boniface Ramsey. Ramsey then was a faculty member at Immaculate Conception Seminary at Seton Hall University in New Jersey. The university was in the Diocese of Newark, where McCarrick was archbishop at the time. The letter appears to confirm Viganò's charge that McCarrick's sexual criminal activity had been known by the Vatican for several years.

On September 27, Viganò released an additional letter, appealing directly to Canadian Cardinal Marc Ouellet, Prefect of the Congregation of Bishops, to reveal documents that would further corroborate Viganò's allegations. Cardinal Ouellet, however, refused to substantiate them. Instead, he defended the Church as having been grievously wounded by Viganò's unproven assertions.

Some prominent Catholics imply that the Vatican gave a pass to McCarrick because of the Cardinal's prodigious fund-raising capabilities for the Catholic Church's Papal Foundation in America. That theory, which connects McCarrick's fund-raising prowess to the Vatican's toleration of the Cardinal's aberrant behavior, was furthered by an announcement on September 13 that West Virginia's only bishop, Michael Bransfield, had resigned over allegations of sexual harassment. Bransfield was the President of the Papal Foundation for several years in conjunction with his tenure as Rector of the Basilica of the Immaculate Conception in Washington, D.C. He had worked closely with Cardinal McCarrick, raising millions for the favorite charities of Popes Benedict XVI and Pope Francis.

As for former Ambassador Viganò, he reserved some of his most pointed criticism for those in the Vatican who allegedly promoted the careers of members of homosexual networks in the Holy See. It seems likely that Viganò supports Catholic teaching that "homosexuality is a psychological and moral disorder... that is always sinful, depraved, and ruinous of character." In addition, Viganò assertedthat one Vatican prelate possessed a "pro-gay ideology" and another favored the promotion of homosexual clerics to positions of authority.

In his original letter, Viganò also sardonically ridiculed the Pope's public condemnation of clerical careerism, as if that were the source of the Church's problem, when the real issue was predatory sexual behavior. Viganò may be calling out the inadequate response of the Pope because he is genuinely horrified. The Pope's silence on Viganò's specific charges, however, as well as his thinly veiled comparison of Viganò to the devil, may lend further credibility to Viganò's accusations and character.

Moreover, Pope Francis, a week before he accepted Wuerl's resignation, ordered a search of the Vatican Archives to determine how McCarrick managed to climb the ladder of Catholic hierarchy despite allegations that he had abused both seminarians and younger priests.

The President of the U.S. Conference of Catholic Bishops, Cardinal Daniel DiNardo, urged Francis to establish a more exhaustive investigation -- called an "Apostolic Visitation" -- of McCarrick's crimes. This would be similar to the investigation that the Vatican approved recently in Chile, which helped lead to the resignation of almost all of its bishops.

More significant than the personalities involved in these allegations of misconduct, however, is the greater question of what the American Catholic Church can do to redeem its moral authority among its approximately 70 million lay faithful. What must the Church do to restore the trust of the billions of Christians and non-Christians around the world? How can the Vatican recalibrate its primary mission that every human's ultimate and proper destination is union with the divine presence of God?

One thing Pope Francis should not do is resign -- at least not immediately. Such a dramatic move might throw the Church into chaos and lead to a feeding frenzy by secular enemies of Catholicism and cynical media outlets. If, however, reports are verified that Francis, while Archbishop of Buenos Aires, defamed accusers of predator priests, refused to meet with them, and denied that any abuse occurred under his watch, then he may not possess the moral authority to cleanse the Church of predatory priests, and those who protected them, without resigning himself. These reports about the Pope's tenure in Argentina were echoed in a cover story on Francis's papacy raised in Der Spiegel, charging that there are currently 62 cases on trial in Argentina concerning allegations of clerical sex crimes.

While Francis is still Pope, he should first demand that any cleric or lay person guilty of sexual abuse or its cover-up resign immediately. The Vatican should then invite lay investigative authorities to review all allegations of criminal behavior, including any possible related blackmail activity. Only when innocent clergy, seminarians, and lay Catholics believe that a total eradication of inappropriate sexual activity within the Church's hierarchical structure has occurred, will harmony be restored to the Church.

Such a purge is not likely to result in an open-season hunting period on homosexuals inside the church. The church teaching on homosexual behavior as immoral is likely to remain constant, but continued compassion towards those with a same-sex attraction is also likely. The Vatican, it seems, still needs to make a policy decision on whether to allow homosexual-oriented clergy. Paedophilia, on the other hand, needs to be treated with zero tolerance.

The Catholic Church, one of humanity's oldest institutions in civilization, will endure. Moreover, its followers embrace as article of faith the words of Jesus that "the gates of hell will not prevail against it (the church)." All the same, to remain relevant in this contemporary moment, the Church would do well to draw open the curtains to let fresh air and new ideas into its hallowed halls.

The Vatican could convene a new Vatican Council where resolutions could be adopted to permit priests to marry and have children. In a world where women are increasingly recognized as equals before the law, such a council could also decree that female priests are permissible. These changes would be superficial and would not alter the eternal truths and dogma of the Catholic faith.

The Church needs to be revolutionary in action in a revolutionary era. Its high clerics must lead, not manage. It must not seek to be popular or even welcomed in the halls of state power. The Catholic Church needs to recast itself as the conscience of the world, although this could invite censure, even persecution, and risk alienation from secular authorities and some leaders of other religions over issues such as abortion, immigration, capital punishment, religious freedom, the equality of women, and freedom of conscience. The Church's hierarchy must not shy away from confrontation with some of society's materialistic, one-dimensional view of man.

If the papacy can regain its moral authority, it might also be able to rally Christians to the cause of defending Western civilization from religious totalitarian extremism, responsible for the martyrdom of hundreds of thousands of the faithful in recent decades -- around 90,000 in 2016 alone.

The failure of the Vatican to posit a comprehensive rebuttal of Viganò's allegations has seriously wounded this Papacy. The Pope's indecision is sapping his once-wide international acclaim. His lack of exigency is characterized by his decision to wait until January before formally addressing the issue of sexual criminality among the clergy in front of Church's bishops. There is also confusion and anger within the body of the Catholic faithful. If support for Francis continues to ebb, it will, and should, lead to his resignation as Pontiff.

Published:10/28/2018 9:57:57 PM
[Entertainment] Matthew McConaughey Surprises Hurricane Harvey First Responders Matthew McConaughey, 2018 Oscars, Red Carpet FashionsMatthew McConaughey surprised many first responders all across Houston on Sunday as a part of National First Responders Day. McConaughey and the Bourbon maker Wild Turkey teamed up again...
Published:10/28/2018 9:27:42 PM
[Markets] Hillary Teases 2020 Run: "I'd Like To Be President"

President Trump's wish may be about to come true.

During a Q&A with Recode's Kara Swisher this weekend, Hillary Clinton addressed the question of whether she would run for President again in 2020. Her response was 'mixed' as while initially answered "no" when asked, she quickly followed up - after some groans of sadness from her lapdog audience that "well, I'd like to be President," she admitted with a smug cackle...

“Look, I think, hopefully, when we have a Democrat in the Oval Office in January of 2021, there's going to be so much work to be done.”

Clinton went on to brag about why she would be qualified to be president (now when have we heard that before)...

“The work would be work that I feel very well-prepared for, having been in the Senate for 8 years, having been a diplomat in the State Department. It’s just gonna be a lot of heavy lifting."

Finally, after Swisher pressed her, Clinton concluded:

"I'm not even going to think about it until we get through this November 6th election about what’s going to happen after that."

Full clip below (via The American Mirror)

As a reminder, it was a year ago that President Trump said that he hopes Hillary Clinton runs for president in 2020.

"Oh I hope Hillary runs," Trump said during a press conference at the Rose Garden.

"Is she going to run? I hope - Hillary, please run again!"

And, as  The American Mirror points out, it's not entirely out of the question. Newsweek reported earlier this month:

A longtime aide to Hillary Clinton hinted that while it’s unlikely, it’s not impossible that the United States gets a rematch election in 2020. Yes, there seems to be an ever-so-slight chance President Donald Trump could see a familiar foe come his bid for re-election.

The aide, Philippe Reines, made the comments in a Politico piece—titled “How Do You Solve a Problem Like Hillary?”—that examined, in detail, what Clinton’s role might be moving forward in Democratic politics. The former secretary of state has remained in the public eye after her shocking election loss to Trump, and she’s set to soon embark on a speaking tour with her husband, Bill Clinton, the former president. Her future could be appearing at rallies and, importantly, fundraising for Democrats.

“It’s curious why Hillary Clinton’s name isn’t in the mix - either conversationally or in formal polling - as a 2020 candidate,” Reines said.

“She’s younger than Donald Trump by a year. She’s younger than Joe Biden by four years. Is it that she’s run before? This would be Bernie Sanders’s second time, and Biden’s third time. Is it lack of support? She had 65 million people vote for her.”

Still, for now...

Published:10/28/2018 9:27:40 PM
[Markets] "The State Of The Government Is Unacceptable": German SPD Leader Gives Merkel An Ultimatum After Devastating Loss

Angela Merkel’s junior coalition partners gave her conservatives until next year to deliver more policy results, threatening to end their alliance if there is no improvement after both parties suffered another round of crushing losses in today's regional election in Hesse.

As reported earlier, Merkel’s conservative Christian Democrats (CDU) came home first in the election in the western state of Hesse, but took just 27.2% of the vote, a huge drop from the 38.3% the CDU won at the last Hesse election, in 2013 according to projections by German broadcaster ZDF. Meanwhile, Merkel's center-left coalition partner Social Democrats (SPD) fared even worse, winning just 19.6% of the vote, down from 30.7% and its worst result in the western state in history. The party was on a par with the Greens, also on 19.6%.

After the disastrous results, SPD leader Andrea Nahles said she would use a "roadmap" with which to measure the progress of the ruling coalition, which has been plagued by infighting, at a mid-term review next year according to Reuters.

"We could then gauge the implementation of this roadmap at the agreed mid-term review, when we would be able to clearly see if this government is the right place for us," Nahles told reporters. "The state of the government is unacceptable."

Her ultimatum to the embattled Chancellor was clear: the SPD needs to show tangible results to its supporters next year or else the party’s leaders will pull out of the coalition with Merkel, resulting in a government crisis in Europe's largest economy.

German Social Democratic Party (SPD) leader Andrea Nahles

Merkel’s ruling coalition “has lost the confidence of the electorate”, said Josef Joffe, publisher-editor of weekly Die Zeit. He also slammed the SPD, saying "a party on the way down cannot suddenly rise from the ashes by going into the opposition. So the party grandees will clench their teeth, stay in the coalition and wait for a better day."

Meanwhile, the incumbent CDU state premier in Hesse, Volker Bouffier and a Merkel ally, said his party had achieved its goal of being able to lead the next government in Hesse, but added: “We are in pain because of the losses”.

“The message to the parties ruling in Berlin is: People want fewer disputes and more focus on the important issues,” he said.

Shockingly, unlike various US politicians, he did not blame the Russians for the dramatic losses.

Today's latest loss will have international implications well: the CDU’s poor result in Hesse, after its sister party in the state of Bavaria, the CSU, suffered its worst result there since 1950 two weeks ago, will "turbo-charge a debate about who succeeds Merkel and when."  Merkel’s weakness at home may limit her capacity to lead in the European Union at a time when the bloc is dealing with Brexit, a budget crisis in Italy and the prospect of populist parties making gains at European parliament elections next May.

While the CDU and the SPD suffered, the Greens and the AfD were delighted with another impressive result: the Greens strong performance in Hesse means Bouffier will likely be able to remain state premier at the helm of a CDU/Greens government. The other big winner was the far-right Alternative for Germany (AfD), which entered the Hesse regional assembly for the first time with 12.8% of the vote. As we reported earlier, the result also means the anti-immigration party, which entered the federal parliament for the first time last year, will now be represented in all 16 German regional assemblies.

* * *

While Merkel’s fourth - and surely final - government has already come close to collapsing twice, Nahles’ comments show the SPD will put more pressure on the conservatives to deliver policy results for the center-left party. Recall that Merkel’s CDU only formed a bitter national partnership with the SPD in March after the collapse of talks on a three-way coalition of the conservatives, Greens and pro-business FDP. The alternative would have been a government crisis.

Merkel's historic collapse is the result of popular outcry to her disastrous "open door" policies: according to the ARD exit poll, only 13% of CDU voters believed Merkel had helped the party in Hesse, down from 70% at the last state election, which according to Reuters reflects "voter anger at her decision in 2015 to welcome almost one million, mainly Muslim asylum seekers."

Next on Germany's political agenda is the CDU's annual congress in December, when Merkel will seek re-election as party chairwoman. While she is still expected to be reappointed, a weak show of support for her would undermine her authority and accelerate the succession debate. Merkel has said previously she could not continue as chancellor were she to lose that role.

Published:10/28/2018 8:34:07 PM
[Markets] The "Rental Affordability Crisis" Explained In Three Charts 

Four years ago, the United States Department of Housing and Urban Development (HUD) warned of "the worst rental affordability crisis ever," citing data that:

"About half of renters spend more than 30% of their income on rent, up from 18% a decade ago, according to newly released research by Harvard's Joint Center for Housing Studies. Twenty-seven percent of renters are paying more than half of their income on rent."

This is a significant problem for US consumers, and especially millennials, because as we have noted repeatedly over the past year, and a new report confirms, "rent increases continue to outpace workers' wage growth, meaning the situation is getting worse."

In the second quarter of 2017, median asking rents jumped 5% from $864 to $910. In the first half of 2018, they have remained at levels crushing the American worker.

While the surge in median asking rents has triggered an affordability crisis, new data now shows just how much a person must make per month to afford rent. 

According to HowMuch.Net, an American should budget 25% to 30% of monthly income for rent, but as shown by the New Deal Democrat, workers are budgeting about 50% more of their salaries than a decade earlier. The report specifically looked at the nation’s capital, where a person must make approximately $8,500 per month to afford rent.

In California, the state with the largest housing bubble, the monthly income to afford rent is roughly $8,300, followed by Hawaii at $7,800 and New York at $7,220.

In contrast, the Rust Belt and the Southeastern region of the United States, one needs to make only $3,500 per month to afford rent.

“Based on the rule of applying no more than one-third of income to housing, people living in the Northeast must earn at least twice as much as those living in the South just to afford rent for what each market considers an average home,”’s Raul Amoros told MarketWatch.

Which, however, is not to say that owning a house is a viable alternative to renting. In fact, as Goldman notes in its latest Housing and Mortgage Monitor, "buying is looking increasingly less affordable vs. renting with home prices growing faster than rents."

In short: the situation is not likely to improve in the short-term.

A sign of relief could be coming in the second half of 2019 or entering into 2020 when the US economy is expected to enter a slowdown, if not outright recession. This would reverse the real estate market, thus providing a turning point in rents that would give renters relief after a near decade of overinflated prices.

Published:10/28/2018 7:57:09 PM
[Markets] Avoid The Slippery Slope (Censorship Exposes The Censor's Weakness)

Authored by Robert Gore via Straight Line Logic blog,

"Everything government touches turns to crap."

- Ringo Starr

Social media companies, search engines, and payments platforms are excising conservative, libertarian, and assorted anti-government voices. SLL argued in “The Friendly Faces of Fascism” that the largest and best known of these companies were essentially arms of the government. They are mechanisms for conveying information, opinions, and commerce between billions of people.

Given their reach, importance, and ties to the government, should these ostensibly private companies be subject to the First Amendment’s prohibition of government restriction of free speech and the free press?

The First Amendment states that:

 Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof; or abridging the freedom of speech, or of the press; or the right of the people peaceably to assemble, and to petition the Government for a redress of grievances. By its terms, the amendment applies to one institution, Congress. By necessary implication, freedom of speech and the press must also be the freedom to choose what not to speak or publish.

In Pruneyard Shopping Center v. Robins, 447 U.S. 74 (1980), the Supreme Court held that California’s Constitution permissibly required a private shopping center to allow a group to express its political views on shopping center property regularly held open to the public. California’s Constitution created an affirmative right of free speech that the court reasoned went beyond the First Amendment, which is a set of prohibitions on the government, or negative rights.

Those who argue that the social media companies, search engines, and payments platforms shouldn’t be allowed to suppress viewpoints they don’t like hang their rhetorical hats on the Pruneyard rationale. These companies are virtual public forums or enable such forums, the argument goes. As such, they should be required to accept all viewpoints.

However, Pruneyard’s reasoning is flawed. The California Constitution’s affirmative “right” of free speech doesn’t go beyond or extend the First Amendment. The two are in direct conflict. The affirmative “right” abridges First Amendment rights.

If Pruneyard Shopping Center must hold open its so-called public spaces, the owners’ First Amendment rights are curtailed. At the very least, during the time when they must hold their spaces open they are hindered or prevented from expressing their own views on those parts of their own property. They may instead be hosting views with which they completely disagree.

Any affirmative right, be it to a private property forum, medical care, housing, education or other goodies government provides inevitably restricts the rights of those coerced to provide or fund such rights. Their rights to the products of their labors and use of their property are denied.

A constitution can delineate restrictions on the government to protect individual rights—negative rights—or it can grant citizens affirmative “rights” to this, that, and the other government-provided thing, but it cannot logically do both. A government cannot employ the force necessary to supply the specified benefits without violating the rights of those from whom it takes. If it does so, sooner or later there will be nothing left to take.

If the companies in question are to be considered arms of the government, how would they be subjected to the First Amendment’s prohibitions? Which companies would qualify? Those with the largest market share? Those who are most demonstrably in bed with the government?

Right now, it’s easy to pick the companies that function as virtual public forums and important payment platforms. However, technology and its market leaders change. Implicit in the calls for First Amendment treatment is the necessity for the government itself to specify as a matter of law the criteria for what constitutes a covered public forum or payment platform and how they are supposed to comply with the amendment.

This is using government to solve a problem created in part by those companies’ ties with the government. Government to solve government-sponsored problems is a strategy batting .000 at solving problems and 1,000 at compounding them. In the long run, First Amendment regulation will make the companies’ much decried “censorship” even more stringent and effective.

Just as FDA approval conveys the government’s imprimatur of a drug’s supposed safety and effectiveness, ostensibly private companies deemed so vital to free speech and free press as to create an affirmative right will jump through the necessary hoops and receive a government imprimatur: First Amendment Compliant.Those who think this will expand our First Amendment freedoms betray ignorance of the implications of their own argument and the process of regulatory capture.

If the problem they lament stems from the companies’ influence with the government, do they think that influence vanishes when the companies come under a government regulatory umbrella? As soon as the law is passed, most of the laws’ proponents, their quest fulfilled, will shift their attention to other issues. The companies, meanwhile, will go to work shaping the law to their own advantage in the regulatory and legislative depths of the swamp, where the light seldom shines.

This is regulatory capture, and anyone who thinks it won’t happen should check the history of the ICC, Federal Reserve, SEC, USDA, FCC, FDA, EPA and all the other agencies in Washington’s regulatory menagerie. First Amendment regulation will further restrict First Amendment rights.

Anyone who thinks that Google, Facebook and Twitter and the rest won’t bribe - through the revolving door or actual bribes - the regulators to bless what they’re currently doing is insufficiently cynical about the workings of regulatory agencies. They may develop secret technologies that will allow them to continue their censorship and exclusion as the complaisant regulators turn a blind eye. Keep in mind, most of the prospective regulators would share these companies’ liberal political philosophy. They also cannot match the companies’ technical expertise.

What happens when someone develops a better search engine, social media site, or payments platform? The incumbent companies will use the First Amendment regulatory mechanism to stifle potential competition. Again, check the history of regulatory agencies. Entrenched interests will be government-certified First Amendment compliant and the upstarts won’t be, giving the former a powerful competitive advantage.

Some people believe that anything the FDA approves is safe and effective and anything not approved is risky and dangerous. There will be those who will believe that certified companies are First Amendment exemplars and companies not so certified are not. Ironically, companies will be judged by a standard - First Amendment compliance - that by the amendment’s own terms should not apply to them.

The present situation is unsatisfactory and will grow more so. However, the correct response is the non-coercive one. Don’t patronize those search engines, social media sites, and payments platforms whose political philosophies don’t align with yours, and either patronize the existing alternatives or develop new ones.

If search engines and social media platforms are going to pick and choose which views they support, they are publishers, and should no longer be exempt from the laws governing traditional publishers (see “The Hi-Tech Threat,” Justin Raimondo), particularly defamation and criminal laws. They have argued that they cannot police the billions of entries on their sites and perhaps they are right. They are, however, policing those entries enough to exclude a certain class they don’t like.

Logically they can’t have it both it ways. Their current exemption was a product of legislation. They should be forced to make a choice: they are either open platforms and retain their legislative exemption for publisher’s content responsibility, or they choose what they publish but bear the civil and criminal consequences of defamatory or criminal content.

Censorship is everywhere and always a sign of the censors’ weakness. The globalists, the corrupt goons running China, Russia, Europe, and the US, and their corporate cronies are fighting centrifugal forces of decentralization they fear and cannot contain. Those forces are winning and rigged search engines, antisocial media, and nonpayment platforms aren’t going to stop them.

There are too many sources of information and too many ways to stifle, stymie, and stop those who would rule. “Everything government touches turns to crap.” Curtailing the First Amendment by having an untrustworthy government (a redundancy) “protect” it will hinder, not help, the cause of freedom.

It further slides down the slippery slope to complete censorship. Believing otherwise is allowing misbegotten hope to triumph over bitter experience.

Published:10/28/2018 7:29:04 PM
[Entertainment] Wells Adams and Sarah Hyland's Halloween Costume Is the Definition of Couple Goals Wells Adams, Sarah HylandTaco bout a cute couple! Sarah Hyland and Wells Adams put all other Halloween couple costumes to shame on Saturday night at the Just Jared Halloween party. The Modern Family star dressed...
Published:10/28/2018 7:00:18 PM
[Entertainment] Andy Cohen Becomes the 6th Member of the Backstreet Boys During Las Vegas Concert Andy Cohen, Backstreet Boys, InstagramBackstreet's Back...with a new addition? On Saturday night, TV host Andy Cohen attended the Backstreet Boys' concert in Las Vegas and briefly made a cameo as the band's sixth...
Published:10/28/2018 6:26:49 PM
[Entertainment] Joe Jonas' Halloween Costume Was Perfectly Inspired by Fiancée Sophie Turner Joe Jonas, HalloweenIntroducing Sansa Stark of Winterfell! Well, not quite, but you get the idea. It seems Joe Jonas didn't have to look far for inspiration for this year's Halloween costume because...
Published:10/28/2018 6:05:02 PM
[Entertainment] Jennifer Garner and Ben Afflect Reunite and Attend World Series Game With Their Kids Ben Affleck, World Series, DodgersJennifer Garner and Ben Affleck reunited on Saturday night at a 2018 World Series game in Los Angeles. Sources tell E! News that the two of them were together and arrived with their three...
Published:10/28/2018 4:27:42 PM
[Entertainment] A Kidney Stone Couldn't Stop Simone Biles From Dominating at the 2018 World Gymnastics Championships Simone BilesEven a kidney stone could not keep Simone Biles down. On Friday afternoon, the Olympic gymnast wasn't practicing for the 2018 World Artistic Gymnastics Championships qualifying...
Published:10/28/2018 3:56:30 PM
[Markets] Is The Pain Over: Buybacks Set To Soar As 48% Of S&P Exits "Blackout Window"

On Friday, JPMorgan strategist John Normand revealed a striking statistic contextualizing the recent global risk-asset selloff: only on two prior occasions - the 1970s stagflation and the global financial crisis - have so many asset classes had negative returns in one year, and almost never has every market - including the Nasdaq, commodities and US Leveraged Loans - underperformed the trade weighted USD as is the case in 2018:

"the percentage of asset classes that has generated positive returns this year is only 20%, a share that has never been so low outside of 1970s stagflation episodes and the Global Financial Crisis."

According to JPMorgan there are three likely explanations for this "misery":

  • the global economy and US earnings have reached a major turning point;
  • the Fed is committing its habitual policy mistake by overtightening; and
  • after the pre-Lehman experience with complacency, markets are so paranoid they will overreact late-cycle to even minor changes in fundamentals.

Not surprisingly, JPMorgan - whose strategists have been encouraging the bank's clients to keep buying the dip, even as Morgan Stanley recently showed that in 2018 for the first time in 13 years the "BTFD" strategy has generated negative returns...

...remained optimistic and as we discussed yesterday, suggested that the market, which has become "paranoid" after failing to spot the 2008 financial crisis, is overreacting by pricing in a major economic, and market, inflection point well ahead of time.

If complacency is one of the words most associated with the pre-Lehman years – even Queen Elizabeth asked publicly afterwards, "Why did no one see this coming?” – then paranoia may be the one most tied to what remains of this cycle. The second-longest expansion in post-war history and the slowest Fed tightening cycle in three decades has given investors plenty of time to build exposures, but also to study the anatomy of turning points and to contemplate the exit constraints from lower market liquidity.

As a result, Normand - who is "not yet willing to run the year of tracking error implied by holding broadly defensive exposure until the global economy weakens materially" - believes that "2018 looks like the year of overreaction."

He is not the only one.

In his latest Weekly Kickstart note, Goldman's chief equity strategist David Kostin agrees with JPMorgan and concludes that the "sell-off appears overdone relative to fundamentals" with the market pricing in "too sharp of a near-term growth slowdown" in response to which Goldman "expects continued economic and earnings growth will support a rebound in the
S&P 500."

We believe the market has moved past fair value and expect earnings growth will lift the S&P 500 toward our year-end target of 2850.

Even so, Goldman is realistic about the slowdown that has gripped the global economy, noting that in the context of the sharp contraction of economic growth in Europe, Japan and EMs, US economic activity had been an outlier until recently:

US economic activity had been a bright spot: the GS US Current Activity Indicator has averaged 3.5% this year and the ISM Manufacturing Index sits near a cycle high at 60.

However, the latest downside surprises this week from the Richmond Fed survey and new home sales as well as weak investment in the Q3 GDP report have raised concerns about slowing US growth. Yet even despite the growth worries, investors still believe the Fed will continue its quarterly hike path. Futures price 1 additional hike this year and 2 hikes in 2019, unchanged versus a month ago.

Echoing JPMorgan, Goldman then notes that while the US economy may have indeed peaked, the S&P 500 appears to be pricing in a far sharped slowdown in US economic growth (ironically, one which is somewhat validated by Goldman's own forecast for US GDP growth to gradually slow from 3.5% in 3Q 2018 to 1.6% in 4Q 2019.) However, Kostin notes, "the move in equity prices reflects a sharp adjustment in growth expectations: based on historical relationships, current prices would correspond with a near-term drop in the ISM to roughly 52 or a deceleration in US economic growth of roughly 1-2 pp."

An alternative take of this relationship is that the ISM print has been artificially boosted by sentiment which is simply not justified by the hard data.

In addition to the market scare over the economic slowdown - which has been also manifest in the drubbing of homebuilders stocks which have underperformed the S&P 500 by 33% from January through September as housing affordability drops to the lowest level in 10 years, while automobile manufacturers have also significantly underperformed the S&P 500 YTD amid similar fears for a slowdown in the auto industry - Goldman notes a peculiar technical development, namely a sharp narrowing in market breadth during the recent price volatility.

Some of the large-cap stocks that have led the market in 2018 have remained relatively resilient. Our GS Breadth Index sits at 3, on a scale of 0 to 100 (page 31). A second measure of market breadth that we track compares the distance between the current price and 52-week high of the S&P 500 index versus that for the median index constituent. This measure of market breadth has rapidly declined by 5 pp during the past 12 months (11th percentile since 1985), similar to episodes in 2016 and 2007.

Why is this material? Because according to Kostin, "consistent with recent weakness in equities, rapid declines in market breadth typically precede larger-than-average drawdowns." He goes on to notes that since 1980, the typical S&P 500 peak-to-trough drawdown has equaled -4% over a six-month horizon. Following sharp declines in market breadth, the typical S&P 500 drawdown has been more than twice as large (-11%).

Having listed the negative factors, Kostin then proceeds to lay out the potential catalysts for a bounce, the chief of which is that earnings are nowhere near the disaster that the market has made them out to be. To wit, with 48% of S&P 500 companies reporting earnings, 54% have beat consensus estimates by more than one standard deviation. However, as we showed previously, the market has been punishing companies that miss while not rewarding those who beat, and the typical firm beating EPS expectations has outperformed the S&P 500 by 36 bp, below the average of 103 bp, as investors focus on the outlook for 2019 earnings.

Bank of America had a slightly different conclusion, one which showed that the market has reacted negatively to earnings beats, the first time it has done that since the launch of Reg FD in August 2000.

To Kostin, one explanation for this is the market's obsession with the upcoming negative inflection point in margins, i.e. JPMorgan's "paranoid" market thesis.

In addition to concerns about economic growth, investors and managements have focused on margin pressures from rising wages and other input costs. FY2 EPS revision sentiment is negative for the first time since the passage of tax reform. But consensus has almost always been too optimistic in its EPS estimates. This year’s positive EPS revision is only one of six years since 1985 with positive revisions.

And while the market appears to be discounting still solid earnings, amid concerns of "peak profits", one critical catalyst may prompt a substantial return of optimism this week: the return of buybacks.

As Kostin calculates, nearly half, or some 48% of S&P 500 firms are now out of their blackout windows and will be able to resume discretionary share repurchases.

To be sure, the buyback blackout period has been the subject of intense focus in recent weeks. For example, as Deutsche Bank shows the frequency of Google searches for the phrase “buyback blackout” has soared to its highest ever in October.

As the blackout period rolls off for more companies, especially those with large buyback programs, the pace of buybacks will ramp up sharply. According to Deutsche Bank calculations, this week companies with $50bn of quarterly buybacks were off their blackout periods, and the number jumps to $110bn by the end of next week and to $145bn the following.

And as we have noted previously, from a demand-supply perspective, buybacks have been the main driver of the equity rally in this cycle.

So in the absence of outflows and further positioning cuts, which would require incrementally more negative news at a time when much of the future adversity appears to be priced in, buybacks should - according to both Goldman and Deutsche Bank - finally drive equities higher.

In other words, the pain for the market may finally be over as corporations once again step in and start doing what they do best: buying back their own stock with little to no regard for price.

Published:10/28/2018 3:56:30 PM
[Markets] Where The Next Financial Crisis Begins

Via Global Macro Monitor,

We are not sure of how the next financial crisis will exactly unfold but reasonably confident it will have its roots in the following analysis... Maybe it has already begun.

The U.S. Treasury market is the center of the financial universe and the 10-year yield is the most important price in the world, of which, all other assets are priced.   We suspect the next major financial crisis may not be in the Treasury market but will most likely emanate from it.

U.S. Public Sector Debt Increase Financed By Central Banks 

The U.S. has had a free ride for this entire century, financing its rapid runup in public sector debt,  from 58 percent of GDP at year-end 2002, to the current level of 105 percent, mostly by foreign central banks and the Fed.

Marketable debt, in particular, notes and bonds, which drive market interest rates have increased by over $9 trillion during the same period, rising from 20 percent to 55 percent of GDP.

Central bank purchases, both the Fed and foreign central banks, have, on average, bought 63 percent of the annual increase in U.S. Treasury notes and bonds from 2003 to 2018.  Note their purchases can be made in the secondary market, or, in the case of foreign central banks,  in the monthly Treasury auctions.

In the shorter time horizon leading up to the end of QE3,  that is 2003 to 2014,  central banks took down, on average, the equivalent of 90 percent of the annual increase in notes and bonds.  All that mattered to the price-insensitive central banks was monetary and exchange rate policy.   Stunning.

Greenspan’s Bond Market Conundrum

The charts and data also explain what Alan Greenspan labeled the bond market conundrum just before the Great Financial Crisis (GFC).   The former Fed chairman was baffled as long-term rates hardly budged while the Fed raised the funds rate by 425 bps from 2004 to 2006, largely, to cool off the housing market.

The data show foreign central banks absorbed 120 percent of all the newly issued T-notes and bonds during the years of the Fed tightening cycle, freeing up and displacing liquidity for other asset markets, including mortgages.   Though the Fed was tight, foreign central bank flows into the U.S., coupled with Wall Street’s financial engineering, made for easy financial conditions.

Greenspan lays the blame on these flows as a significant factor as to why the Fed lost control of the yield curve.  The yield curve inverted because of these foreign capital flows and the reasoning goes that the inversion did not signal a crisis; it was a leading cause of the GFC as mortgage lending failed to slow, eventually blowing up into a massive bubble.

Because it had lost control of the yield curve,  the Fed was forced to tighten until the glass started shattering.  Boy, did it ever.

Central Bank Financing Is A Much Different Beast

The effective “free financing” of the rapid increase in the portion of the U.S debt that matters most to markets, by creditors who could not give one whit about pricing,  displaced liquidity from the Treasury market, while, at the same time,  keeping rates depressed, thus lifting other asset markets.

More importantly, central bank Treasury purchases are not a zero-sum game. There is no reallocation of assets to the Treasury market in order to make the bond buys.  The purchases are made with printed money.

Reserve Accumulation

It is a bit more complicated for foreign central banks, which accumulate reserves through currency intervention and are often forced to sterilize their purchase of dollars, and/or suffer the inflationary consequences.

Nevertheless, foreign central banks park much of their reserves in U.S. Treasury securities, mainly notes.

Times They Are A-Changin’

The charts and data show that since 2015,  central banks, have, on average been net sellers of Treasury notes and bonds, to the tune of an annual average of -19 percent of the yearly increase in net new note and bonds issued.  The roll-off of the Fed’s SOMA Treasury portfolio, which is usually financed by a further increase in notes and bonds, does not increase the debt stock, but it is real cash flow killer for the U.S. government.

Unlike the years before 2015, the increase in new note and bond issuance is now a zero-sum game and financed by either the reallocation from other asset markets or an increase in financial leverage.  The structural change in the financing of the Treasury market is taking place at a unpropitious time as deficits are ramping up.

Because 2017 was unique and an aberration of how the Treasury fnanced itself due to the debt ceiling constraint,  the markets are just starting to feel this effect.   Consequently, the more vulnerable emerging markets are taking a beating this year and volatility is increasing across the board.

The New Market Meta-Narrative 

We suspect very few have crunched these numbers or understand them, and this new meta-narrative, supported by the data, is the main reason for the increase in market gyrations and volatile capital flows this year.   We are pretty confident in the data and the construction of our analysis.   Feel free to correct us if you suspect data error and where you think we are wrong in our analysis.  We look forward to hearing from you.

Moreover, the screws will tighten further as the ECB ends their QE in December.  We don’t think, though we reserve the right to be wrong, as we often are,  this is just a short-term bout of volatility, but it is the beginning of a structural change in the markets as reflected in the data.

Interest Rates Will Continue To Rise

It is clear, at least to us, the only possibility for the longer-term U.S. Treasury yields to stay at these low levels is an increase in haven buying, which, ergo other asset markets will have to be sold.   If you expect a normal world going forward, that is no recession or sharp economic slowdown, no major geopolitical shock, or no asset market collapse,  by default, you have to expect higher interest rates.  The sheer logic is in the data.

Of course,  Chairman Powell could cave to political pressure and “just print money to lower the debt” but we seriously doubt it and suspect the markets would not respond positively.

Stay tuned.

Published:10/28/2018 3:27:09 PM
[Markets] Trump Allies Go To Bat As Critics Slam President For Synagogue Shooting

President Trump's allies are vigorously pushing back against critics attempting to link his rhetoric to a rise of violence in the United States in the aftermath of Saturday's mass murder at a Pittsburgh synagogue, and a spate of attempted pipe bombings, reports Bloomberg

"Our president has the largest microphone, he has the largest bullhorn,” said President Obama's homeland security chief, Jeh Johnson on ABC’s "This Week" on Sunday. "This particular president has a particularly large voice and a large microphone, and Americans should demand that their leaders insist on change, a more civil discourse and a more civil environment generally."

Others were less diplomatic, such as GQ's Julia Ioffe and Newsweek's Nina Burleigh and others: 

We must have missed their condemnation of the more than 600 acts of violence against Trump supporters, while Hillary Clinton, Eric Holder, Maxine Waters and more have openly called for uncivil behavior against conservatives. 

Meanwhile, mourners at a vigil for Saturday's victims in Squirrel Hill were chanting "vote, vote, vote" 

Coming to Trump's defense

Vice President Mike Pence condemned Trump's detractors in a NBC News interview which aired Sunday, dismissing suggestions that the president's rhetoric contributed to recent violence. 

"Everyone has their own style and frankly people on both sides of the aisle use strong language about our political differences but I just don't think you can connect it to threats or acts of violence," Pence said, adding "The president and I have different styles but the president connected to the American people because he spoke plainly and he spoke the way he speaks about the issues of the day in politics." 

Secretary of Homeland Security, Kirstjen Nielsen, said that Trump "has made it extraordinarily clear that we will never allow political violence to take root in this country." 

The Hill's rising conservative voice, Buck Sexton, weighed in as well: 

Mollie Hemmingway of The Federalist slammed the Washington Post over blaming Trump:

Considering that yesterday's Synagogue attacker hated Trump - who is demonstrably pro-Israel and received the "Tree of Life Award" for his support of Israel, the left's kneejerk reaction is not only misplaced, but serves no purpose but to stoke tension during what should be a time of coming together. 

Published:10/28/2018 2:56:10 PM
[Markets] Merkel's CDU Suffers Crushing Losses In Hesse Election; Worst Result For SPD In 130 Years

Two weeks after the Christian Social Union, Merkel's Bavarian sister party, suffered a crushing blow in the Bavaria regional election following the worst result for the ruling party since 1950, on Sunday Germany’s ruling Christian Democrats were hit with another heavy loss in elections in Sunday's region election in Hesse, in a result that could further destabilize Angela Merkel’s grand coalition in Berlin.

Prime Minister Volker Bouffier's CDU remained the strongest party on Sunday, but according to forecasts by German TV, the party achieved its worst result in the state in more than 50 years. The election was also a major hit for the Social Democrat party, which received its worst ever result in Hesse and saw its share of the vote fall by one-third compared to the last election in 2013.

Meanwhile, like two weeks ago, the clear winners were the left-of-centre Greens, which saw their share of the vote nearly double, while the anti-immigrant AfD continues to ride the wave of populist dissatisfaction with Germany's political establishment. The Free Democrats (FDP) and Die Linke (Left Party) also remain in the federal state parliament in Hesse's capital of Wiesbaden. That means that Hessen has a six-party parliament for the first time.

Here are the exit polls from Infratest dimap:

  • CDU-EPP: 28% (-10.5)
  • GRÜNE-G/EFA (Greens): 19.5% (+8.5)
  • SPD-S&D: 20% (-11.5)
  • AfD-EFDD: 12% (+8)
  • FDP-ALDE: 7.5% (+2.5)
  • LINKE-LEFT: 6.5% (+1.5)

According to projections on German TV, the CDU won 28%, down from 38.5% five years ago. The SPD won 20%, down a third or 11.5% from 2013, while the Green surged to 19.5%, up 8.5% from the last election with most young and university educated voters, or some 25% of those aged 18-29 and 29% of voters with a University degree voting for the Greens.  Based on exit polls, it was too close to call if the SPD would end up third in the regional election, with the Greens potentially set to take second spot.

The far-right Alternative for Germany (AfD) won 12% of the vote, taking it into the Hesse regional assembly for the first time, and after today's election, the AfD will now be represented in all 16 of Germany’s regional parliaments

In the latest blow for Germany's establishment parties, this was the worst election result for the Centre-left SPD since 1887, according to Europe Elects, disregarding Nazi time 1933-45.

The CDU currently governs the state in coalition with the Greens. Today's result suggests this could continue, but doing so could further increase tensions between the CDU and the SPD in the German chancellor's ruling coalition in Berlin. Both parties have seen their support slip nationally in recent months.

The election outcome is a big defeat for Volker Bouffier, Hesse’s CDU prime minister, who is a close confidante of Chancellor Merkel and has ruled Hesse for the past eight years. He had complained that the election campaign was completely overshadowed by the long-running quarrels between the coalition partners.

According to the FT, the result will be seized on by those in the SPD who believe the only way the centre-left party, one of the two parties that has dominated Germany’s post-war politics, can avoid further losses is by quitting Ms Merkel’s grand coalition.

The Hesse elections were the latest indirect regional referendum on Berlin's policies, with campaigning in Hesse dominated by voter dissatisfaction with the government in Berlin, which has been racked by internal conflict.

The CDU has governed Hesse, Germany's fourth most prosperous region that includes Germany’s finance capital Frankfurt, for the past 19 years, the last five of them in an unusual coalition with the Greens. But as today's results suggest, the two parties cannot now rule alone, and will likely now try to form a three-way alliance with the pro-business Free Democrats to stay in power. The FDP has already indicated it would be prepared to form such a "Jamaica" coalition, so called because the colours of the three parties match those of the Jamaican flag.

That said, and given the roughly 10% losses each for CDU/SPD, it is hard to imagine a scenario where results don't shake up Berlin coalition.

Parties like the unconventional AfD and the Greens have grown in national support following Germany's 2017 general election, as support for the major centre parties has waned. And with the CDU's party conference scheduled for December, Merkel could lose her leadership re-election bid. Merkel has said previously she could not continue as chancellor were she to lose that role.

The recent losses have provided more ammunition for critics in Merkel's party who want to get rid of Merkel, but as BBC's Jenny Hill notes, "she may face a more immediate problem" - her Social Democrat coalition partners are in electoral freefall, haemorrhaging support at federal level. The SPD's poor performance tonight in Hesse follows a drubbing in Bavaria two weeks ago. And since many in the party blame the controversial coalition with Merkel's conservatives, the SPD's leaders may decide to pull out of the alliance and bring down her fragile government.

Germans are calling this a 'schicksalswahl', or vote of destiny. It may yet seal the fate of this country's government - and perhaps even its leader.

Published:10/28/2018 2:25:30 PM
[Entertainment] Demi Moore Gets Brutally Honest About Overcoming Her "Self-Destructive" Spiral Demi MooreDemi Moore reflected on overcoming her earliest battles with gratitude. The two-time Golden Globe nominee, who was honored on Saturday with the Woman of the Year Award by the Peggy...
Published:10/28/2018 1:56:34 PM
[Markets] Complacency Continues To Collapse As Bond, Bullion, & VIX Shorts Scramble To Cover

For the fourth week in a row, 'complacency' has been squeezed out of US capital markets as short positioning in VIX, US Treasuries, and Gold have all reduced significantly.

This collapse in complacency - which appears to have a long way to go to get back to normal - has accompanies a month in US stock markets that echoes their performance 10 years ago, at the height of a financial crisis.

As Bloomberg notes, the S&P 500 Index has closed lower 15 times this month. There haven’t been that many declines in a full month since October 2008, when central banks worldwide cut interest rates and U.S. money-market funds got a bailout.

But while the drop in stocks has been somewhat unprecedented (especially amid the conditional biases forced down investors' throats by the endless intervention of central planners around the world), the modest shifts in net short positioning is only just beginning to accelerate.

Traders remain massively net short US Treasuries across the entire futures complex, but for the 3rd week in a row, the net short Treasury bond position has shrunk considerably...

Speculators pared 133K contracts in 10Yequivalents from their net short position in Treasury futures over the week ending on Tuesday, October 23. They removed 72K, 46K, 16K and 5K contracts from their net short position in 10Y, 5Y, 30Y, and Ultras respectively, while adding 57K contracts to their net short position in 2Y.

Specs also bought 15K contracts in Eurodollars, cutting their net short position to 2,577K contracts.

As U.S. stocks tumbled this week, traders ratcheted back wagers on 2019 Federal Reserve rate increases. The market is now pricing in less than two quarter-point hikes for next year, compared with the three increases policy makers project. At one point this month, before equities started to lurch lower in earnest, traders had priced in about 40% of a third quarter-point rate increase in 2019.

Even more concerning to The Fed, the market is now pricing in rate-cuts for 2020 and 2021.

'Safe-haven' buying was also evident in precious metals as Gold's almost unprecedented net short position squeezes further into net long territory (and silver is almost back to even)...

This is the biggest two-week surge increase in net positioning since Brexit (June 2016).

For now, price (in USD) and positioning remain glued together...

But gold's price in Yuan has exploded as it appears Chinese authorities have lost control of their currency's 'peg'...

One thing that Jesse (at Cafe Americain blog) noted, the sudden trend change in Gold ETF holdings looks like they are managing the physical 'gold float' fairly closely, shoving metal around the plate to make the global market seem fully functional.

"He who sells what isn't his'n, must buy it back or go to prison."

Daniel Drew


So with bonds & bullion bid, there is only one more aspect of market complacency left to consider - the Short-Volatility trade.

The last three weeks have seen net speculative short positioning in VIX futures collapse at the second fastest rate in history (only the XIV crash in Feb was bigger) as once again that steamroller snapped off a few overly-greedy fingers trying to pick up those nickels...


The VIX term structure remains inverted (for the 15th day in a row), but something very notable occurred this time...

Typically, VIX's curve will invert into backwardation with a spike, then trend back rapidly to normalized 'contango'. This time, the spike occurred, the trend back began, BUT before the curve could normalize it reaccelerated its inversion - something we have not seen the VIX complex do since Nov 2008...

So complacency is rapidly being unwound from US capital markets - after a year of pressing their luck on the back of goldilocks' hope - as bonds, bullion, and volatility is bid once again.

Of course, this should not be a surprise as the world's most systemically important banks had started to collapse, the rest of the world's stocks had started to collapse, and finally US markets start to collapse as the great unraveling of central planners' balance sheets begins to hit home...

It seems - much to the chagrin of the global synchronized recovery crowd who have now shifted to the US-is-the-cleanest-dirty-shirt narrative - that what goes up in a spuriously-correlated fashion comes back down to earth much faster (thanks to leverage and extreme positioning).


Published:10/28/2018 1:25:56 PM
[Markets] Despite Spending $185 Million On "Faculty Diversity", Columbia U. Report Finds 'Lack Of Diversity'

Authored by Celine Ryan via Campus Reform,

A Columbia University internal report has issued a 151-page “Equity Report” proposing solutions to “close salary gaps” and address “race disparities" in the university workforce.

"The report's major findings include a lack of diversity in the senior leadership of academic departments and centers; insufficient transparency about how important decisions are made; and unclear policies and decision-making processes,” according to an announcement by the university.

“There also was evidence of differences in workload and salary among women and underrepresented minorities and the persistent problem of harassment and discrimination.”

All subcommittees participating in the report reported a “lack of diversity in senior leadership” in arts and sciences, specifically a “lack of women in senior positions.”  

The report comes just weeks after Campus Reformreported that Columbia University spent $185 million in recent years on "faculty diversity." While Columbia University is a private, Ivy League school, it received a portion of more than $41 billion in taxpayer funds for the eight Ivy League U.S. colleges from 2010-2015, according to Open the Books.

“Overall women were also underrepresented as department chairs relative to their representation on the tenured faculty,” according to the report, which asserted a need that equity and diversity concerns be “embedded and interwoven” within the arts and sciences departments.  

In order to increase “diverse” faculty hires, the report recommends that Columbia establish “incentives” for individual departments to “improve diversity, particularly at the tenure level.”

One issue addressed by the initiative was that women faculty were found to serve on more committees than their male counterparts.  The report concedes that this is likely a result of a “laudable desire to have diverse committees,” but insists that actions must be taken so as not to “overburden” women faculty. 

“The additional department-level burden for women and URM [underrepresented minorities] faculty in departments where they are underrepresented was also noted in terms of ‘invisible labor,’ such as the informal advising of students, where they are seen as role models,” according to the report.  Recommendations for addressing these concerns include an established system to “recognize invisible labor, including formal and informal advising of students and low-level administrative tasks.”

The report also found “considerable differences” in male and female faculty experiences.

“In surveys, women described department climate as far less supportive and inclusive than men did, and reported having experienced or witnessed discrimination far more often,” the report explains, adding that “[i]n interviews, many women spoke of the ‘old boys club’ environment.”  Recommended solutions for this perceived bias against women faculty included required training for all faculty holding leadership positions, as well as voluntary “bystander training.”

The report also addresses “possible salary inequities” and asserts that “it is important that salary equity is considered in terms of peers at similar career stages rather than department average.”  Data collected indicated that “women and men were equally likely to obtain outside offers” but that women were two times as likely to accept other offers and leave the university.  As remedies to this problem, the report recommendations included establishing “a thorough and regular review of salary equity” and developing a “long-term strategic plan to address salary compression.”

Campus Reform reached out to the university for comment on their response to the recommendations but the university declined to comment further, referring Campus Reform to its original announcement.

Published:10/28/2018 12:57:10 PM
[Entertainment] Meghan Markle Nails Speech About Women's Right to Vote Meghan Markle, New ZealandA well-deserved round of applause for Meghan Markle. After touching down in New Zealand on Sunday for the final leg of her and Prince Harry's joint royal tour, the Duchess of Sussex...
Published:10/28/2018 12:27:40 PM
[Markets] The Boomer Bomber, Naked Emperors, And The End Of Civility

Authored by Tom Luongo,

Recently Hillary Clinton picked herself up off the couch to declare that it was time to end being civil to her political opponents.  Honestly, I thought this statement rich from someone who has so many dead bodies her scattered behind her.

Being an Enemy of Hilly has a very short lifespan.

But, her statement itself is nothing more than the latest mask being removed by the global oligarchy I like to call The Davos Crowd in their pursuit of retaining their illusion of control over the direction of the world we live in.

That’s right, illusion.  They don’t actually control anything.  If they did they wouldn’t be freaking out right now.  They wouldn’t be paying Hondurans to storm the U.S. Border, mailing fake pipe bombs to themselves or rigging elections.

In short, they wouldn’t be losing.

Always remember, control is an illusion.  The Emperor is always naked.

And no would-be-Emperor is more naked than Hillary Clinton (Yes, I apologize for the image this metaphor conjures up).

But now, at least, I have your attention.

Because the reality is that Hillary’s call for the End of Civility is one that was also always coming.  Those that have the most to lose by a shift in the power structure are always the ones who resort to ever more histrionic behavior to protect their place.

And Hillary is the very definition of that type of person.

But, this article isn’t about Hillary per se.

It is simply a reminder that Hillary is the symbol of where the Progressive left’s end game always was.  Politics is the art of masking the use of violence to achieve political and social goals.

It is the process of empowering the State, itself an instrument of violence, to impose one group’s will over that of another.

Unlike conservatives and Big-L Libertarians, Progressives are at least honest about their intentions to use the State to remake society, ie. YOU, in their image.  And if you resist that process, if you disagree with their edicts, then you are an enemy that must be destroyed.

Oh sure, they give lip service to being inclusive and nice about it while they have control over the levers of power, the State apparatus.  But, the minute they lose control of those levers, the sun goes down, the fangs come out and the bloodletting begins.

These people are vampires, sucking the life out of a society for their own ends.  They are evil in a way that proves John Barth’s observation that “man can do no wrong.”  For they never see themselves as the villain.

No.  They see themselves as the savior of a fallen people.  Nihilists to their very core they only believe in power. And, since power is their religion, all activities are justified in pursuit of their goals.

Their messianic view of themselves is indistinguishable to the Salafist head-chopping animals people like Hillary empowered to sow chaos and death across the Middle East and North Africa over the past decade.

The infidels always have to be exterminated.  Their bad ideas have to be excised from the body politic like cutting out a cancer.  And so what if lives are ruined, the people being harmed are simply a sub-human basket of deplorables or worse, brown people!

We thought they were insulting and demeaning in 2016.  It’s 2018 and now we’ve moved from throwing eggs on Trump supporters to the MAGA hat being the new Swastika.

And yet, sadly, the most important part of analyzing what is happening here is that this is still very early in this process.  The breakdown of political civility, now with open calls for violence against those they disagree with, is truly just starting.

And the people manipulating this for their own benefit, the George Soroses and the Tom Steyers, whose stated goal is to destroy the United States, have finally been outed as the puppet masters they’ve always been.

That brings me to the Boomer Bomber and his Orgy of Evidence Van.

This guy is a perfect example of why these people’s machinations no longer have the same impact they used to.  The Boomer Bomber is literally a cartoon version of what the average white, upper-middle class, smug liberal thinks every Trump supporter looks like.

He’s literally straight out of Central Casting for the latest episode of NCIS or Homeland.  They create these visions of the world in fiction and then try to make that into reality to give credence to the propaganda.

But, it’s not working anymore.  Being generous, the only people who believe this guy isn’t a patsy for a Democrat plot to derail a Republican sweep in the Mid-Terms are people who already view the world through this very narrow lens of false reality.

The willfully blind and ideologically possessed who want to believe that these barbarians are at the entrances to their gated communities coming to lynch them for being Socialists.

It’s ridiculous.

And, unfortunately, it’s only the bottom of the first inning in this slowly unfolding civil war.  Our society hasn’t reached rock bottom yet.  Most people on both sides of the political aisle don’t want that to occur.

It is only the true believers and the power mad who do.  And they will not go away lightly.  But, as their world collapses they will spend everything they have to maintain it.  Because power makes you lazy as well as stupid.

Hillary is running for president again in 2020.  Soros is daring Trump to lock him up.  The media are trying to stay relevant.  And as we continue to laugh at them, call them NPC’s and resist ignore their Outrage Porn, their tactics will only get sloppier, more strident and easier to debunk in real time.

Ye gods I love being alive right now!

As always, NSFW rules apply for the livestream.

Published:10/28/2018 11:57:40 AM
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Published:10/28/2018 11:27:44 AM
[Markets] Don't Expect A Fed Bail Out: What Convexity Flows Mean For Repricing Of The "Fed Put"

One of the major topics to emerge among financial professionals over the past week in the aftermath of the latest violent market move lower was whether the "Fed Put" would come into play, and at what level, and just as importantly, what happens to markets - both stocks and bonds - as this new put level is repriced by market participants.

As we discussed last Thursday, in one of its questions in the latest Fund Managers Survey released last week, Bank of America asked "what level on the S&P 500 do you think would cause the Fed to stop hiking rates?" What it found is that according to the respondents, the Fed would stop hiking if the S&P 500 fell to 2390, suggesting the "Powell put" strike price is about -12% below current levels.

Other banks also stepped in with: according to BNP Paribas, a 6% drop in the S&P 500 Index to 2,500 would be the resistance level that would prompt a response from Powell. "A 10 percent to 15 percent drop in equities is usually the difference between noise and signal," BNP Paribas analysts said in a note. Meanwhile, Evercore ISI has put the "Fed Put" below the 2,650 mark.

Other were more skeptical, with BlackRock and River Valley Asset Management say the real economy remains relatively insulated from the stock meltdown. "The correction that we’re seeing in the stock market obviously is something that they pay attention to,” Scott Thiel, deputy chief investment officer for fundamental fixed income at BlackRock in London said in an interview on Bloomberg TV. But “the bar is very high to change Fed monetary policy."

Andre de Silva, global head of emerging-markets rates research at HSBC, was even more blunt, telling Bloomberg TV on Thursday that the Fed needs something “more dramatic” than a stock rout to convince them to stray off course. And looking at corporate bonds - a key component of financial conditions - where the market rout has yet to inflict much pain, the HSBC analyst may have a point: the spread of junk bonds over investment grade credit has narrowed about 14 basis points this year and has barely budged wider, largely due to a sharp drop off in supply. Another place to look: rate vol, which was remained surprisingly dormant during the latest stock market rout.

All of the above opinions, however, do not change the fact that the recent drop in equities has already led to a substantial tightening in financial conditions. Last weekend, before the latest weekly rout, Goldman analysts calculated that the bank's Financial Conditions Index (FCI) has tightened by 32bp since October 2, noting that the recent stock sell-off was the major driver of the tightening, as shown in the chart below.

Summarizing these various observations, over the weekend Deutsche Bank's derivative strategist Aleksandar Kocic wrote that the recent market turbulence has been "predominantly the equity story in response to restriking of the Fed put", which while affecting all markets, when compared to other sectors, equities continue to deliver outsized moves.

He shows this in the chart below which illustrates the equity- credit interaction, and echoes what Goldman said a week ago, namely that the Fed is tightening financial conditions via equities and the market's renewed concern about the level of the "Powell put":

In terms of weekly changes/ returns, both this and last week’s corrections are comparable with the events in early February, when the first restriking of the Fed put took place. In the current context, restriking of the Fed put is a channel through which financial conditions are likely to tighten."

Another observations Kocic makes is that while for the most part during the Fed's tightening cycle the Fed has been successful in telegraphing its intentions, two distinct breaks occurred in February during the inverse VIX ETF rout and again in October. It was then that the Fed put was "restruck" with the mechanics visualized in the chart below which shows the S&P in relation to the short rate, in this case manifested by the 2Y swaps rate:

Fed hikes, but adjusts its pace not to derail the stocks -- in this way, rate hikes are collinear with the recovery and the risk-on mode. An overly aggressive pace of rate hikes, however, is bearish for stocks. This is what we saw in February and October.

According to Kocic, in the current hiking cycle, equity beta remained unusually high: # = # ln(S&P) /# Yield = 30. Normally, this number is around 10. For the DB strategist, this means that in this cycle, in which monetary policy has been protective of risk post-2014, the "Fed put had been struck very close to ATM." This also means that for those seeking to estimate the current level of the Fed put, the lowering of said "strike" price, which is consistent with a lower beta, around 20, "corresponds to S&P around 2400." As a reminder, this is the same absolute strike as what Kocic calculated back in April, but lower in relative terms.

The immediate result of this repricing has two effects: on one hand the Fed provides a traditional backstop to equities, which is also why so many analysts and traders have been so curious to find out what the new level is, or as Kocic writes, "having Fed put in place is like appending an insurance to stocks. Thus, its desirability and price should reflect it", and putting it in simplistic terms, "Lowering the strike Fed of the put is equivalent to increasing the deductible of the insurance."

Which bring us to the second effect: having concluded that the Fed put is now at a lower level, it "makes stocks potentially more vulnerable and their price should adjust lower. This is what the market is currently experiencing", according to the DB strategist.

There are other several other notable downstream effects, mostly as they relate to volatility, not only for equities but also the all-important rates market.

According to Kocic, at the same time as the new equilibrium price is negotiated, "restriking of the Fed put is played out in vol since it represents effectively a withdrawal of convexity from the equities market, i.e. it is a convexity supply shock."

As a consequence, equity volatility should increase, both in absolute term and relative to volatility of other asset classes. A new equilibrium vol levels is achieved by equating the original put at previous vol levels to the new, lower strike, put at higher vol. A back of the envelope calculation suggests equity vol rise by 5-8% as a result of restriking.

This interplay between equities and rates is shown in the chart below which shows the ratio of VIX / rates gamma and the two points of their reset corresponding to restriking of the Fed put.

Here Kocic touches on a point he made half a year ago, when he notes that with the Fed telegraphing a new, lower Fed strike price, it is very unlikely that the market will sell off in a calm, cool and collected manner from its current level to 2,400; in fact, the drop would likely be far more stormy as a result of unwinding convexity flows, which push investors out of equities and into bonds. His April explanation is below:

Restriking of the Fed put is a withdrawal of convexity from equities. It is effectively a removal of a put spread from the market. However, in the environment where everything is bound to sell off (a market mode that is a mirror image of QE), volatility is one of the key decision variables. More volatile equities are less desirable than less volatile duration. In that environment, convexity withdrawal creates a reinforcing loop where more turbulence in risk assets tends to cause stability in fixed income. The figure shows the convexity flows across the two markets.

When seen through this feedback loop of convexity flows, by withdrawing convexity from equities, "the Fed is passing it to the rates market by supplying implicit rate caps." This, to Kocic, is "the long run agenda for rates" where he sees as the main short-term effect likely to be a disruption in pension fund flows, i.e. buying, whose rebalancing on the back of equity outperformance was one of the main reasons for the strong bid for long-end (30Y) Treasurys. And now, a selloff in equities could reduce rebalancing flows and "temporarily withdraw pension funds’ sponsorship. This is the near-term rebound of the risk premium." Said otherwise, a key question for risk is whether and when the equity vol finally migrates over to the bond market and results in a spike in what has so far been relatively dormant rate volatility.

Ironically, a "shake out" in the long end may be the Fed's intention in how to further tighten financial conditions.

Picking up on the Goldman calculation from last week, DB economists estimate that a 15% decline in equities has the same impact on financial conditions as a 25bp rates hike, which would also mean that rates could potentially have less need to rise in the future, and with the long-end becoming unhinged, it could lead to further benign curve steepening which would allow the Fed to continue its rate hikes without fears of forcing an imminent curve inversion.

In this context, consider that in recent cycles, the US 10 year has tended to peak at a level close to that at which the Fed Funds rate peaks, as highlighted in the chart below, and in general some 3 to 6 months in advance of the policy rate. What is clearly different about this cycle is that the Fed now provide the market with explicit projections for the policy rate over the coming years, with their latest median projection being that the Fed Funds rate will peak at 3.3% in 2020, only 15bps above the current US 10 year yield. To the extent we can take history as a guide, therefore, the implication here is that - all else equal - there is only limited upside to US 10 year yields. The risk, as Credit Suisse writes, is that the Fed is providing us with projections for the policy path, not promises, and thus uncertainty will persist.

Seen in this light, forcing 10 and 30Yr yields higher may be just the stop-gap solution the Fed needs in order to allow itself breathing room to extend its hiking cycle, which according to its dots will see another three to four 25bps hike before the end of the hiking cycle, an outcome that would be impossible without equity vol spreading to the long end of the curve, and leading to a selloff in the 10 and 30 Year Treasury.

Finally, we come to the more pressing - to some - question whether the recent drop in stocks will be enough to satisfy the Fed that conditions are now tight enough. As noted above, Deutsche Bank economists estimate that a "sticky" decline in the S&P500 to 2450 would be necessary to exert the same drag on the economy through financial conditions as a 25 bp hike.

And whereas traditionally the Fed has stepped in to offset any stock weakness, either through direct action (delaying of rate hikes, or verbal jawboning), this time the imperative for the Fed is different: as Kocic explained above, weaker equities are consistent with ongoing term premium recovery because of the implications for pension investor flows.

Or, in simpler terms, the Fed wants higher long-term yields:

Stable equities slow corporate plan convergence to full funding, and obviate the need to rebalance equity gains into fixed income. Historical evidence suggests that state and local pension investors might “re-risk” on the margin given equity underperformance relative to fixed income.

Which brings us to the big question, namely whether given the recent equity rout, the Fed might deviate from its own median projections to the dovish side.  As the discussion above suggests, which if accurate would imply that the Fed hopes to push yields higher through the equity vol channel, this is unlikely to happen if all the Fed can "force" is a 25bps equivalent tightening in financial conditions (via a 16% drop in stocks).

And sure enough, as we noted late last week, Cleveland Fed President Mester commented on exactly this concern, stating that "while a deeper and more persistent drop in equity markets could dash confidence and lead to a significant pullback in risk-taking
and spending, we are far from this scenario."

Deutsche Bank agrees, and as its credit strategists argue "tightening financial conditions are one of the policy goals currently being pursued by the Fed to discourage excessive risk taking and promote financial stability." In other words, don't expect any rescue from the Fed for another several hundreds S&P points.

The tell? Keep an eye on rate vol: if and when it shoots up, that's when the Fed may finally panic. And, as BofA's CIO Michael Hartnett likes to remind his readers, "markets stop panicking when central banks start panicking."

Published:10/28/2018 10:54:46 AM
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Published:10/28/2018 10:26:37 AM
[Markets] Markets Are Getting 'Crashier'

Authored by Lance Roberts via,

Over the last three weeks, as interest rates surged above 3%, we explored the question of whether something had “just broken” in the market.

As I stated last week:

“This past week has been a decidedly tough struggle for stocks to pick themselves up after last week’s drubbing. While we saw a sharp reflexive bounce earlier this week, that bounce quickly faded as stocks returned to retest support at critically important levels.”

While the market was oversold last week, there was no follow through on bounces which ultimately led to “crash”open on Friday morning.

Now, all this SOUNDS terrible. And, after having THE single longest uninterrupted bull run in the history of the market with record low volatility it FEELS even worse. 

So, before we get into the not so good news, let’s keep this all in perspective for a minute.

For the year:

  • The S&P 500 index, not including dividends, is down 0.56%.
  • The S&P 500 Total Return index is still positive by 0.98%
  • A 60/40 model (60% Vanguard S&P 500 and 40% Vanguard Bond Fund) is down 1.72%

What has been different this year so far, is that bonds, while they have reduced the volatility of the recent decline in the S&P 500 index, have not contributed to portfolio returns this year so far. So, the only place to hide has been cash.

However, if we take a look at the market from 2009 to present, we can gain some better context.

The recent decline is very much like the previous corrections in the market. The red circles denote when both “sell signals” align (a correction of overbought conditions and a triggered sell signal). These corrections have specifically coincided with periods where the market was extremely deviated above the running bullish trend line (gold boxes.)  

Currently, the correction, while painful in the short-term has been nothing more than a correction back to the running bullish trend.

So why worry?

The “difference this time,” is significant:

  • The Fed is hiking rates versus either lowering or keeping them at zero.

  • The Fed is reducing rather than increasing their balance sheet.

  • The current Administration is insisting on a “trade war” which slows global growth.

  • The economic cycle is mature rather than recovering.

  • Record levels of debt at risk of rising rates versus a re-leveraging cycle with ultra-low rates.

  • A mature housing, auto, and consumption cycle versus a recovery.

  • Global central bank interventions have begun to taper versus expansion

  • Peak earnings growth versus expansion

  • Peak valuations versus expanding valuations

I could go on, but since you want “short and to the point,” I will stop there.

Here are some simple observations from Doug Kass (click here for recent interview) which dovetails into the following market analysis.

  • The S&P Index and most non U.S. equity markets are broken technically.

  • The worldwide fundamental outlook (economies and profits) are worse than are generally expected by the consensus.

  • Few still believe a large equity markdown is likely.

  • The consequences of a pivot in monetary policy in the U.S. (and elsewhere) is understated and not understood by many.

  • There are now legitimate alternatives to stocks available in risk-free Treasuries. Those yields only recently have exceeded the S&P dividend yield.

  • Stocks don’t go down in a straight line – it usually looks like a jagged line.

  • We are in a new regime of volatility.

  • A changing market structure – in which passive money overwhelms active money – remains a significant market risk and disruptive influence.

Daily View

In early October, the market broke the bottom of the previous short-term bullish trend channel and tested initial support at the 61.8% retracement level of the push higher from the April lows. That move failed at the 38.2% retracement level and has now violated previous support this past week. This is not a good development and suggests that a failed rally back to that previous support will set the markets up for a retest of the April lows.

Action: Sell any rally next week.

Weekly View

On a weekly basis, the view doesn’t improve much. With the trendline from the 2016 lows now violated, the tenor of the market has changed from bullish to bearish. While the current selloff technically looks a lot like what we saw in late 2015 when the market fretted over Yellen’s decision to start hiking rates, this time is very different. As noted above, global Central Banks are not coming to the rescue, yet anyway, to inject liquidity into the markets, earnings have likely peaked, and global growth is contracting.

While technically there is a weekly confirmed sell-signal in place, the very oversold condition continues to suggest a short-term rally back to the top of the current trading range is likely.

Action: Sell any rally which gets near the top of the current trading range.

Monthly View

On a monthly basis, the backdrop has also worsened.  RSI has dropped into correction territory along with a confirmed monthly sell signal. As I noted back in both December and September, extensions of the market that move 3-standard deviations above the long-term mean are unsustainable. Currently, a reversion back to the longer-term monthly average would entail a drop currently to 2300. A break below the February lows will likely confirm such a move is in process.

Action: Reduce risk on rallies, as detailed above, and look to add hedges on any breaks of long-term support

Actions To Take Next Week

With the market exceeding 3-standard deviations below the 50-dma currently, the extreme oversold condition still sets the market up for a fairly strong bounce. That bounce SHOULD be sold into.

Portfolio management processes have now been switched from “buying dips” to “selling rallies” until the technical backdrop changes.

  1. Re-evaluating overall portfolio exposures. It is highly likely that equity allocations have gotten out of tolerance from the original allocation models. We will reduce overall allocation models from 60/40 to 50/50 or less.

  2. Look to add bond exposure to mitigate volatility risk. (Read:The Upcoming Bond Bull Market)

  3. Use rallies to raise cash as needed. (Cash is a risk-free portfolio hedge)

  4. Review all positions (Sell losers/trim winners)

  5. Look for opportunities in other markets (Gold is showing signs of life.)

  6. Add hedges to portfolios (Short term treasuries, cash, and short positions on breaks of support)

  7. Trade opportunistically (There are always rotations that can be taken advantage of)

  8. Drastically tighten up stop losses. (We  had previously given stop losses a bit of leeway as long as the bull market trend was intact. Such is no longer the case.)

If I am right, the conservative stance and hedges in portfolios will protect capital in the short-term. The reduced volatility allows for a logical approach to further adjustments as the correction becomes more apparent. (The goal is not to be forced into a “panic selling” situation.)

If I am wrong, and the bull market resumes, we simply remove hedges, and reallocate equity exposure.

Published:10/28/2018 10:26:37 AM
[Markets] Gab Booted By Hosting Company After Synagogue Shooting

Following the Pittsburgh synagogue shooting, social media network Gab was given notice by its hosting provider, Joyent, that they have until Monday to move the website elsewhere before they would disable it. 

In a Sunday tweet, Gab said: "@joyent, Gab’s new hosting provider, has just pulled our hosting service. They have given us until 9am on Monday to find a solution. Gab will likely be down for weeks because of this. Working on solutions."

Gab came under fire immediately after the shooting when it was revealed that suspected attacker Robert Bowers was an active user who frequently ranted against Jews and President Trump. His last post on Gab reads in part: "Screw your optics, I'm going in" shortly before killing 11 people at the Tree of Life congregation in Squirrel Hill. 

Hours after the shooting, PayPal severed ties with Gab with no explanation: 

In August, Microsoft threatened to cease hosting services for Gab over two anti-Semitic posts, according to founder Andrew Torba, who deleted the posts and subsequently moved hosts to Joyent.  

Reactions to Gab's "deplatforming" have ranged from shock to applause. 

They've already received at least one offer for a new host: 

As Gab and others noted yesterday following PayPal's decision, Robert Bowers posted to other social media networks, while plenty of bigoted, threatening and "hateful" content exists on the likes of Twitter, Facebook, Instagram and elsewhere. 

Published:10/28/2018 10:01:23 AM
[Markets] U.S. Completes Largest Ammo Shipment To Europe Since NATO Bombing Of Yugoslavia

Is something big coming related to heightened tensions either with Russia, Iran, or Syria? It appears the U.S. military is publicizing a "show of force" of sorts, but not exactly in the conventional way of deploying tanks, ships, and aircraft.

Instead the official US Air Force website,, has announced to the world late this week that Ramstein Air Base in Germany has received its largest shipment of ammo in 20 years. The official government Air Force website announced

The 86th Munitions Squadron on Ramstein Air Base, Germany, received its largest shipment of ordnance in recent history. Approximately 100 containers with a variety of munitions rolled into Ramstein during the month of October. 

Master Sgt. David Head, 86th MUNS Munitions Operations section chief, noted that a delivery of such magnitude has not taken place since the late 20th century.

This, according to the press release, is so that the Department of Defense (DoD) will have the "ability to provide a rapid response against threats made by aggressive actors."

Image source: US Air Forces in Europe-Air Forces Africa

It comes amidst dangerously heightened rhetoric from both the White House and NATO which are threatening to finally pull out of the Intermediate-Range Nuclear Forces (INF) treaty, something which Russia says it will refused to renegotiate. The build-up of ordinance in the heart of Europe also comes after months of back-and-forth threats between Washington and Iran as the latter attempts to survive an aggressive US sanctions regimen. 

An Air Force spokesman said of the unusual size of the munitions transfer: “This is the largest shipment of its kind since Operation Allied Force, which took place in 1999,” according to

The spokesman, Master Sgt. David Head, referred to the 78-day NATO operation over Yugoslavia to bomb Serbian military positions and cities like Belgrade. “The munitions that we received will be used for future theater operations and the evolving U.S. European Command presence,” he added. 

Interestingly, the press release even mentioned potentially supplying operations in Africa where US AFRICOM has been expanding rapidly, according to a separate official: “We’re a major airlift hub for U.S. Air Forces in Europe-Air Forces Africa, so our main job is to get munitions where they need to be on time.”

International arms monitors and reports have frequently commented on a build-up of US and NATO forces and military equipment since the 2014 Russian annexation of Crimea after a referendum there saw a vast majority of the population vote to unite with Russia.

Thousands of NATO troops and heavy weapons have since been deployed to Baltic States, Poland and southeastern Europe, also involving large scale and regular drills. Washington and NATO officials have cited "aggressive behavior" from Moscow as the reason for the concentration of forces. 

Last Monday President Trump significantly upped the ante in terms of escalating rhetoric with Moscow when he said of the INF treaty that “Russia has not adhered to the agreement,” and warned that the United States intends to build up its nuclear arsenal until “people come to their senses.”

The INF treaty is expected to be at the top of the agenda when Presidents Vladimir Putin and Donald Trump are set to meet in Paris on November 11 on the sidelines of commemorative events of the 100th anniversary of the end of the First World War.

Until then we expect the build-up both in terms of rhetoric and possibly weapons transfers into Europe to continue. 

Published:10/28/2018 9:24:34 AM
[Entertainment] Hailey Baldwin's Cozy Look and More Outfits You Can Netflix and Chill In ESC: Hailey BaldwinAlthough the chill may be driving everyone inside, you don't have to closet your style. When celebrities aren't on the red carpet or runway, dazzling the world in designer...
Published:10/28/2018 8:25:43 AM
[Markets] Losing The War On Cash - Swedish Central Bank U-Turns On 'Cashless Society' Agenda

Authored by Don Quijones via,

Cash is less of a threat to central bank policies when interest rates rise above zero...

Sweden’s Riksbank has become the first central bank in the 21st century to take concrete measures to ensure that cash does not disappear as a means of payment from the financial system. To that end, the Riksbank proposes, in a document published on its website, to make it mandatory for all banks and financial institutions to offer cash services.

The pronouncement comes in response to a recent policy suggestion by the Riksbank Committee that only the country’s six major banks should be obligated to continue offering cash services.

That prompted a backlash from Sweden’s competition watchdog, which argued that the plan would distort competition as it would affect only a few of the nation’s banks. In response, the Riksbank has opted to apply the rule to “all banks and other credit institutions that offer payment accounts.”

There was also a difference of opinion between the Riksbank Committee and the central bank’s senior management on the issue of deposit facilities. While the Committee recommended that banks should only be obligated to provide deposit facilities to businesses, the Riksbank believes it is important for banks to also offer deposit services to individual citizens:

“This is a service that consumers can reasonably expect of credit institutions. There must also be symmetry between withdrawal and deposit facilities. In the Riksbank’s view, there is otherwise a risk that the possibilities for individuals to make deposits will decrease even further in the future. For most consumers, it would also be difficult to understand why they can withdraw cash from an account but not make deposits.”

For years, the government and the Riksbank have been pushing for a “cashless society.” The Riksbank has over 1,000 articles posted on its website on the “cashless society“. The emphasis worked: between 2013 and 2017, the amount of cash in circulation dropped by 35%, earning Sweden a reputation as the world’s “most cashless nation”:

Many of Sweden’s bank branches had stopped handling cash altogether. Now, they will have to begin doing so all over again. Many of them are not happy about it. Nor indeed are Sweden’s competition and financial watchdogs, which both oppose the proposal, arguing that access to cash should be the sole responsibility of the state and not private banks.

“To secure access to cash is a collective good that the state should reasonably be responsible for,” the Swedish Financial Supervisory Authority said. It’s an opinion that’s shared by ATM provider Bankomat, which argued that it should be the state’s responsibility to ensure that citizens have access to cash since the handing of notes and coins is such an important — and expensive — part of a country’s infrastructure. Bankomat is jointly owned by the five largest banks in Sweden.

It’s not just banks that are complaining. Shops and restaurants, many of which now only accept plastic or mobile payments, could also be affected by a Riksbank proposal that retail operations deemed important to the public good, such as pharmacies, special transport services, food shops and petrol stations, should also “be included in an obligation to accept cash.”

One likely result of this is that many people who struggle to navigate the digital system, or who don’t have credit cards, in particular the elderly, no longer have to fear finding themselves locked out of the country’s payment system. Sweden’s parliament has also launched a review on the impact of going cashless too quickly as it dramatically excludes the financial needs of the elderly, children and tourists who rely on cash.

It is a dramatic u-turn for a country that not so long ago was further along the path toward eliminating cash than just about any other advanced economy. Sweden was the first European country to enlist its citizens as largely willing guinea pigs in a brave new economic experiment — negative interest rates. But a negative interest rate policy (NIRP) has its limits with consumers as long as cash remains an alternative; hence the efforts to eliminate cash.

But since then, doubts have begun to set in. In a survey earlier this year, 68% of respondents stated that they would not like to live in a fully cashless society. The survey, commissioned by Bankomat, polled over 2,000 people aged 18-65.

Incredibly, the country’s central bank, once at the forefront of the global cashless revolution, appears to agree with them. The Riksbank is now even talking about raising rates either this December or in February 2019, after keeping the benchmark repo rate at minus 0.5% since February 2016.

As the age of NIRP “gradually” comes to a close, much of the excitement about ushering in a cashless nirvana appears to be fading with it. Following on the heels of comments by senior ECB board members in defense of cashas well as an open admission by the European Commission that physical cash is perhaps not quite the source of all evil, the Riksbank’s decision to safeguard the role of cash in the financial economy is the biggest sign yet that Europe is giving up on its war on cash, and is instead allowing people switch to cashless payments systems at their own pace, however long that may take. By Don Quijones.

And in Canada: a cashless society could have “adverse collective outcomes.” Read…  Backlash Against War on Cash Reaches the Bank of Canada 

Published:10/28/2018 8:25:43 AM
[Markets] Billionaire Thai Owner Of Leicester City Was On Board Helicopter When It Crashed Outside Stadium

The helicopter belonging to Vichai Srivaddhanaprabha, the Thai billionaire owner of Leicester City Football Club, crashed outside the King Power Stadium in a ball of flames after a Premier League match on Saturday. According to unconfirmed reports the Thai tycoon was on board the helicopter.

Sources close to the club later told Reuters that his daughter was also in the helicopter during the crash, along with two pilots and a fifth person. There were no confirmed details on whether anyone on board survived and neither Srivaddhanaprabha’s representatives, nor the police, have yet released an official statement.

Multiple videos from the scene show a massive fire at the stadium’s car park and emergency services arriving.

The helicopter crashed just yards from the pitch in the club’s car park. Team manager Claude Puel was not on the helicopter, the source said. According to witnesses, the helicopter just cleared the top of the stadium before it started to spin. It then plummeted to the ground and burst into flames.

A Sky Sports News reporter said that witnesses saw the helicopter taking off from the pitch inside the stadium “as it does after every game.” The pilot then apparently lost control of the helicopter.

John Butcher, who was near the stadium at the time of the crash, told the BBC his nephew saw the helicopter spiral out of control apparently due to a faulty rear propeller. “Within a second it dropped like a stone to the floor ... Luckily it did spiral for a little while and everybody sort of ran, sort of scattered. As far as we are aware nobody around the car park was caught up in this problem.”

Ben Jacobs, a journalist with BeIN, ESPN and TalkSport, confirmed the Reuters report that Srivaddhanaprabha was on board the helicopter when it crashed into the car park. The King Power Stadium is expected to release a statement later.

Freelance photographer Ryan Brown was covering the game and saw the helicopter clear the stadium before it crashed.

“Literally the engine stopped and I turned around, and it made a bit of a whirring noise,” Brown told BBC Radio 5 Live. “It turned silent, blades started spinning and then there was a big bang.”

Vichai, a father of four and the founder of duty-free giant King Power International, is a huge favorite with the fans after he bought the unfancied Leicester City club from central England in 2010 and then went on to stun the soccer world by winning the Premier League title in 2016.

Vichai Srivaddhanaprabha's helicopter seen above the King Power Stadium. Photo: Global Look Press

Vichai helped steer Leicester back into the top flight in 2014 after pumping millions into the club before it stunned the sport by beating the likes of Manchester United, Liverpool and Chelsea to become champions of England.

The self-made businessman Vichai founded Thai duty-free giant King Power in 1989. According to Forbes magazine he is the fifth richest person in Thailand with an estimated net worth of $4.9 billion. The duty-free business got a big boost in 2006 when it was granted an airport monopoly under the government of then prime minister Thaksin Shinawatra, and it continued to prosper even after Thaksin’s ousting in a coup that year.

The family’s empire also includes Belgian football club, Oud-Heverlee Leuven.

Leading Leicester players, including Jamie Vardy and Harry Maguire, sent messages of support on Twitter while rival clubs including Manchester City also voiced their concern.

Leicester had played a league match at home against West Ham United earlier on Saturday, drawing 1-1.

Published:10/28/2018 7:54:12 AM
[Markets] RBS Shares Plunge As Bank Announces $130 Million 'Hard Brexit' Contingency Buffer

With Brexit talks effectively frozen as Theresa May battles her cabinet ministers over the details of the "backstop" deal that's needed to avert a "hard" Brexit - that is, a separation wherein the UK would leave the EU customs union and single market, forcing it to fall back on WTO rules governing trade - UK banks are joining their European peers in bracing for the worst. After reporting lackluster Q3 profits on Friday, shares of RBS helped drag the FTSE to its lowest level since 2016 as CEO Ross McEwan warned analysts that the bank has set aside 100 million pounds ($128 million) as a buffer to reflect "greater uncertainty" surrounding Brexit negotiations.


According to Bloomberg, McEwan said although his meeting last week with Prime Minister Theresa May and other UK CEOs left him with an "optimistic sense" regarding Brexit, he still felt some extra precautions were warranted. The bank's shares dropped nearly 6% on its earnings report, its largest one-day decline in two years.

While McEwan tried to reassure analysts that the provision was "very low," they remained unconvinced.

"Impairments were worse than expected," wrote Joseph Dickerson, an analyst at Jefferies International Ltd. "The incremental charge is not explained well."

Questioners on conference calls concurred, pressing McEwan and interim chief financial officer Katie Murray for more detail. Murray referred to the IFRS 9 accounting rules, which require companies to take a more forward-looking view. "Risk of a disorderly Brexit has increased," Murray said. "We’re not where we thought we would be as a nation by this time this year."

McEwan has warned that a recession could result if the UK leaves the EU without a treaty, while other UK bank executives have warned that a no-deal Brexit could disrupt supply chains and hurt their customers. The UK is set to begin the process of leaving the EU at the close of the first quarter, which will begin a modest transition period.

McEwan has previously said a "bad Brexit" could result in a recession. May is racing against time to secure an agreement with the European Union and battling some of her own cabinet ministers before Britain formally leaves the bloc on March 29, and businesses are increasingly getting nervous. A no-deal Brexit reverting to World Trade Organization rules would slash economic growth to just 0.3 percent in 2019, the National Institute of Economic and Social Research said on Friday.

Among other bank executives who addressed Brexit this quarter, Lloyds Banking Group Plc finance chief George Culmer acknowledged the uncertainty, but expects May to reach a deal. Barclays Plc CEO Jes Staley has said he’s concerned that disruption to supply chains and the economic fallout from a hard Brexit could eventually hurt his business customers.

Bloomberg explained why a hard Brexit would be such a nightmare for banks in a recent QuickTake: In addition to the increased capital requirements that EU banks operating in the UK would face, a no-deal Brexit would create confusion about derivatives clearing, licensing and market infrastructure. Read the full explanation here. 

Published:10/28/2018 7:23:41 AM
[White House Watch] Watch Live: President Trump and The First Lady host Halloween at the White House

By R. Mitchell -

White House Halloween

President Donald Trump and First Lady Melania Trump host a Halloween event at the White House Sunday evening. The event is scheduled to begin at 5:30 p.m. EDT.

Watch Live: President Trump and The First Lady host Halloween at the White House is original content from Conservative Daily News - Where Americans go for news, current events and commentary they can trust.

Published:10/28/2018 5:53:29 AM
[Entertainment] Julia Roberts Has Been a Movie Star for 30 Years--but Don't Let That Bother You Julia RobertsThough we could swear that Pretty Woman just came out on VHS, like, last week, apparently it's a little older than that. The R-rated rom-com actually hit theaters in 1990, ushering...
Published:10/28/2018 5:25:15 AM
[Markets] Retired Green Beret Warns Mainstream Media Is A Tool For Destroy America

Authored by Jeremiah Johnson (nom de plume of a retired Green Beret of the United States Army Special Forces) via,

A deliberate attempt is being made by the MSM (Mainstream Media) to destroy the remaining fabric of American society and force the country’s disintegration and absorption into a global government.

They don’t have very far to go: since the 1960s, a family-centered culture that was the “hub” of the greatest nation this world has ever seen...that bastion of the family has been eroded and all but destroyed. The replacement “culture” has been one of drug use, pornography, “sloth” within all the generations... young, middle-aged, and elderly, and a fostered unwillingness to take responsibility for anything of value. The country is an entitlement nation that “asks not what you can do for your country, but what can you take from it.” The family is not even referred to in that manner anymore. I have read the term “consumer units” to refer to households, as well as “household groupings.”

Communities... true communities where individuals and families contribute to the overall welfare of the area and each other... are almost nonexistent. This has been replaced with Communism, currently undergoing its “genesis” from the soft form of socialism and the semi-laissez faire authoritarianism that is exemplified by the surveillance state. The socialism will turn into communism, as Lenin (Ulyanov, if you prefer) pointed out to us. A forced “communal” mindset is being blared at us by every weapon the Media has in its arsenal: the radio, newspapers, television, and the Internet/Social Media monster.

Daily, the paradigm is shifted, and the consciousness of the people is being battered with wave after wave of unrelenting actions. No publication better exemplifies the heinous nature of the Media’s intentions than Time Magazine. A Feminist Agenda is being peddled under the guise of “equality,” but in reality it is a sinister operation carried out by nefarious individuals masquereding as “reporters,” “editors,” and “columnists,” meant to polarize groups and to foster a sense of “blame” or “guilt” with every action.

As an example, the September 18, 2017 issue of Time Magazine has an Editorial Page (page 4) by Nancy Gibbs, Editor-in-Chief, that explains how 12 women were on the cover of Time as “Firsts,” or “groundbreaking” women who the magazine holds up as positive examples. Hillary Clinton and Ellen Degeneres are two of those examples that are upheld and lauded. Funny how they didn’t  slap a picture of Hillary Clinton on the cover around the time of Benghazi, Libya, or when she resigned her position as Secretary of State. They didn’t put one up there of Victoria Nuland, either, or Rosanne Barr. Paula Deen was also left out.

Time didn’t skip a beat with it’s cover of its December 18, 2017 issue entitled “The Silence Breakers: the voices that launched a movement,” with the theme being women who came forward with stories of sexual harassment.  Missing from that ensemble was Asia Argento, who was accused of sexually harassing a man. January 29, 2018 issue with the photos of 48 women on the cover, with the lead article entitled “The Avengers: First they marched. Now they’re running.” This issue is all about women running for public office.

Not “Public Servants,” but Avengers: the characterization of every one of these articles.

If a woman takes that stance when running for office…the stance of an “Avenger” instead of a public servant, then she is doing more than a disservice to her constituents: she is committing fraud. Underlying the public oath she will take if she wins is the fact that it is done for a nefarious reason…to exact revenge against male dominance or discrimination, whether real or imagined. This is not the characterization needed by someone who holds public office, a public servant who is supposed to champion the interests of all.

But the true crime is committed by the magazine: this is a form of hate speech treading upon eggshells.  Under the guise of freedom of speech and freedom of the press (and protection under the 1st Amendment of the Constitution) they can say anything they want, right? How about where these pieces by time were meant to polarize groups and set off one group (in this case men) to be vilified…would not this be a form of “hate speech?” Just as you are not allowed to shout “fire” in a movie theater when there is none…an action that will lead to an arrest…how are these MSM people able to force this nonsense on the rest of us? Every cover, and every article has an agenda.

To be sure, there is no such thing as perfect reporting, because that would mean that complete objectivity has been attained, and there is no such thing. The problem lies in the fact that this is not a matter of objectivity: it is a matter of complete “slant” and deliberate obfuscation of the facts in order to mold public consciousness (they have no “conscience”) and shift it toward Communism. They trick you: they uphold “community,” but what they really mean is Communism, plain and simple. You’re a part of the group, complete with slogans and “groupthink,” until you do something as an individual, and then you either are ostracized, punished, or cast out.

In a sheer case of reverse discrimination, males...Caucasian males, to be exact, are denounced, ridiculed, and degraded at every turn. The President of the United States is the most visible Caucasian male, and he has been the lead “scapegoat” for all of the ills that befall the “woe is me!” crowd of whining entitlement-centered voters whose only true qualification for voting is being born in the United States (we hope). Mueller is a white male, and here is how they did it: pitted two white males against one another, and the Left wins, no matter who wins!

Mueller and his witch hunt have been a relentless, circuitous pursuit with no clear-cut objectives and no end to the hunt.  If he “found” something, it makes the President look bad. If nothing happens, then it still casts a “shadow of doubt” on the President…sometimes equally damaging as an action…and Mueller ends up appearing as a bumbling clown….two white males in a negative light, no matter what the result.

On various Time Magazine covers are an assortment of males who are vilified: The President, Steve Bannon, Vladimir Putin. They also put one up of Harvey Weinstein, the vehicle to open the door and charge all human males in the United States who have ever looked at a woman. Amazing how the charges did not surface and Weinstein was not “quite so villainous” before the 2016 election when he was contributing heavily to the Democrats and to Hillary Clinton.

We have focused on one magazine, but this same pattern is rampant in all of the publications.  September 21, 2018’s issue of “The Week” depicts the President with his back towards us, and in front of him are six black masked-and-garbed individuals staring at him. The caption reads, “The Resistance: Why Trump’s own staff is conspiring to thwart his impulses.”

See this, and see it for what it is:  “…Trump’s own staff is conspiring to thwart his impulses.”

His impulses? That the President acts on impulse, and not on thought-out decisions with deliberation behind them...that is the lie this magazine wishes to push on the public. It is not only in this regard that the country is being destroyed. You don’t see anything of any worth in these publications that contributes to the overall good of society, because they don’t wish that.

The Media does not want a “good” society: they want a degenerate society that is either cowed into compliance, or so focused within and upon all its filthy acts that it does not care what goes on around it. Such leads to submission and enables control

The Media has blinded the people by showing them what they wish to see: themselves. The Media has purposefully, deliberately lowered the standards. The Media (inclusive of Hollywood, mind you, and the movies and television) have presented aberrant behaviors and actions that denigrated and destroyed the former social fabric. They have enabled others of their ilk (Communists in Politics and in Business) to foster a new “Third World” society, including the abolition of the middle class and the ending of where government is the final answer and solution to all problems.

Read. Read the “Communist Manifesto,” and the Planks of Communism, and you will see in print what was written decades ago, that is happening here and now in the U.S. Read Alexander Sozhenitsyn’s works to see what happens at the “final tipping point” of the full-blown change of a nation into a Communist totalitarian society.

And read the newspapers, the magazines, and the like: it will all jump right out at you. We are at a tipping point where the economy is not stable, where there are many elements that could turn into tremendous social conflicts and upheavals domestically, and the rest of the world is little by little “decoupling” from the Petrodollar and reliance upon American markets.

Throughout all of this, the Media has been there to make it worse, to skew the news, and to force societal transformation and paradigm shift through its propaganda toward a Communist society and the relegation of American sovereignty toward global governance.

Published:10/27/2018 10:23:31 PM
[Markets] Most Americans See A Sharply Divided Nation; The Fourth Turning Is Here 

The October 2018 AP-NORC Poll national survey with 1,152 adults found 8 in 10 Americans believe the country is divided regarding essential values, and some expect the division to deepen into 2020.

Only 20% of Americans said they think the country will become less divided over the next several years, and 39% believe conditions will continue to deteriorate. A substantial majority of Americans, 77%, said they are dissatisfied with the state of politics in the country, said AP-NORC. 


The nationwide survey was conducted on October 11-14, using the AmeriSpeak Panel, the probability-based panel of NORC at the University of Chicago. Overall, 59% of Americans disapprove of how Trump is handling his job as president, while 40% of Americans approve. 

More specifically, the poll said 83% of Republicans approve of how Trump is handling the job, while 92% of Democrats and 61% of Independents strongly disagree. 

More than half of Americans said they are not hearing nor seeing topics from midterm campaigns that are important to them. About 54% of Democrats and 44% of Republicans said vital issues, such as health care, education, and economic activity, Social Security and crime, were topics they wanted to hear more. 

Looking at their communities, most American (Republicans and Democrats) are satisfied with their state or local community. However, on a national level, 58% of Americans are dissatisfied with the direction of the country, compared to 25%, a small majority who are satisfied. 

Most Americans are dissatisfied with the massive gap between rich and poor, race relations and environmental conditions. The poll noticed there are partisan splits, 84% of Democrats are disappointed with the amount of wealth inequality, compared with 43% of Republicans. On the environment, 77% of Democrats and 32% Republicans are dissatisfied. Moreover, while 77% Democrats said they are unhappy with race relations, about 50% of Republicans said the same. 

The poll also showed how Democrats and Republicans view certain issues. About 80% of Democrats but less than 33% of Republicans call income inequality, environmental issues or racism very important. 

AP-NORC Poll - Which issues are extremely or very important? 

"Healthcare, education and economic growth are the top issues considered especially important by the public. While there are many issues that Republicans and Democrats give similar levels of importance to (trade foreign policy and immigration), there are several concerns where they are far apart. For example, 80% of Democrats say the environment and climate change is extremely or very important, and only 28% of Republicans agree. And while 68% consider the national debt to be extremely or very important, only 55% of Democrats regard it with the same level of significance," said AP-NORC. 

Although Democrats and Republicans are divided on most values, many Americans consider the country's diverse population a benefit. 

Half said America's melting pot makes the country stronger, while less than 20% said it hurts the country. About 30% said diversity does not affect their outlook. 

"However, differences emerge by party identification, gender, location, education, and race. Democrats are more likely to say having a population with various backgrounds makes the country stronger compared to Republicans or Independents. Urbanities and college-educated adults are more likely to say having a mix of ethnicities makes the country stronger, while people living in rural areas and less educated people tend to say diversity has no effect or makes the country weaker," said AP-NORC. 

Overall, 60% of Americans said accusations of sexual harassment with some high-profile men forced to resign or be fired was essential to them. However, 73% of women said the issue was critical, compared with 51% of men. The data showed that Democrats were much more likely than Republicans to call sexual misconduct significant. 

More than 40% of Americans somewhat or strongly disapprove of Supreme Court Justice Brett Kavanaugh's confirmation to the Supreme Court after allegations of sexual harassment in his college years. 35% of Americans said they heartily approved of Kavanaugh's confirmation. 

The evidence above sheds light on the internal struggles of America. The country is divided, and this could be a significant problem just ahead. 

Why is that? Well, America's future was outlined in a book called "The Fourth Turning: What Cycles of History Tell Us About America's Next Rendezvous With Destiny."

In the book, which was written in the late 1990s, authors William Strauss and Niel Howe theorize that the history of civilization moves in 80-to-100 year cycles called "saecula." 

The idea behind this theory dates back to the Greeks, who believed that at given saeculum's end, there would come "ekpyrosis," or a cataclysmic event. 

This era of change is known as the Fourth Turning, and it appears we are in the midst of one right now. 

The last few Fourth Turnings that America experienced ushered in the Civil War and the Reconstruction era, and then the Great Depression and World War II. Before all of that, it was the Revolutionary War. 

Each Fourth Turning had similar warning signs: periods of political chaos, division, social and economic decay in which the American people reverted from extreme division and were forced to reunite in the rebuild of a new future, but that only came after massive conflict. 

Today's divide among many Americans is strong. We are headed for a collision that will rip this country apart at the seams. The timing of the next Fourth Turning is now, and it could take at least another decade to complete the cycle. 

After the Fourth Turning, America will not be the America you are accustomed to today. So, let us stop calling today the "greatest economy ever" and start preparing for turbulence. 

Published:10/27/2018 9:56:27 PM
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[Markets] Facebook Censorship Of Alternative Media "Just The Beginning," Warns Top Neocon Insider

Authored by Max Blumenthal and Jeb Sprague via,

At a Berlin security conference, hardline neocon Jamie Fly appeared to claim some credit for the recent coordinated purge of alternative media...

This October, Facebook and Twitter deleted the accounts of hundreds of users, including many alternative media outlets maintained by American users. Among those wiped out in the coordinated purge were popular sites that scrutinized police brutality and U.S. interventionism, like The Free Thought Project, Anti-Media, and Cop Block, along with the pages of journalists like Rachel Blevins.

Facebook claimed that these pages had “broken our rules against spam and coordinated inauthentic behavior.” However, sites like The Free Thought Project were verified by Facebook and widely recognized as legitimate sources of news and opinion. John Vibes, an independent reporter who contributed to Free Thought, accused Facebook of “favoring mainstream sources and silencing alternative voices.”

In comments published here for the first time, a neoconservative Washington insider has apparently claimed a degree of credit for the recent purge — and promised more takedowns in the near future.

“Russia, China, and other foreign states take advantage of our open political system,” remarked Jamie Fly, a senior fellow and director of the Asia program at the influential think tank the German Marshall Fund, which is funded by the U.S. government and NATO.

“They can invent stories that get repeated and spread through different sites. So we are just starting to push back. Just this last week Facebook began starting to take down sites. So this is just the beginning.”

Fly went on to complain that “all you need is an email” to set up a Facebook or Twitter account, lamenting the sites’ accessibility to members of the general public. He predicted a long struggle on a global scale to fix the situation, and pointed out that to do so would require constant vigilance.

Fly made these stunning comments to Jeb Sprague, who is a visiting faculty member in sociology at the University of California-Santa Barbara and co-author of this article. The two spoke during a lunch break at a conference on Asian security organized by the Stiftung Wissenschaft und Politik in Berlin, Germany.

In the tweet below, Fly is the third person from the left who appears seated at the table.

The remarks by Fly — “we are just starting to push back” — seemed to confirm the worst fears of the alternative online media community. If he was to be believed, the latest purge was motivated by politics, not spam prevention, and was driven by powerful interests hostile to dissident views, particularly where American state violence is concerned.

Jamie Fly, rise of a neocon cadre

Jamie Fly is an influential foreign policy hardliner who has spent the last year lobbying for the censorship of “fringe views” on social media. Over the years, he has advocated for a military assault on Iran, a regime change war on Syria, and hiking military spending to unprecedented levels. He is the embodiment of a neoconservative cadre.

Like so many second-generation neocons, Fly entered government by burrowing into mid-level positions in George W. Bush’s National Security Council and Department of Defense.

In 2009, he was appointed director of the Foreign Policy Initiative (FPI), a rebranded version of Bill Kristol’s Project for a New American Century, or PNAC. The latter outfit was an umbrella group of neoconservative activists that first made the case for an invasion of Iraq as part of a wider project of regime change in countries that resisted Washington’s sphere of influence.

By 2011, Fly was advancing the next phase in PNAC’s blueprint by clamoring for military strikes on Iran. “More diplomacy is not an adequate response,” he argued. A year later, Fly urged the US to “expand its list of targets beyond the [Iranian] nuclear program to key command and control elements of the Republican Guard and the intelligence ministry, and facilities associated with other key government officials.”

Fly soon found his way into the senate office of Marco Rubio, a neoconservative pet project, assuming a role as his top foreign policy advisor. Amongst other interventionist initiatives, Rubio has taken the lead in promoting harsh economic sanctions targeting Venezuela, even advocating for a U.S. military assault on the country. When Rubio’s 2016 presidential campaign floundered amid a mass revolt of the Republican Party’s middle American base against the party establishment, Fly was forced to cast about for new opportunities.

He found them in the paranoid atmosphere of Russiagate that formed soon after Donald Trump’s shock election victory.

PropOrNot sparks the alternative media panic

A journalistic insider’s account of the Hillary Clinton presidential campaign, Shattered, revealed that “in the days after the election, Hillary declined to take responsibility for her own loss.” Her top advisers were summoned the following day, according to the book, “to engineer the case that the election wasn’t entirely on the up-and-up … Already, Russian hacking was the centerpiece of the argument.”

Less than three weeks after Clinton’s defeat, the Washington Post’s Craig Timberg published a dubiously sourced report headlined, “Russian propaganda effort helped spread ‘fake news.'” The article hyped up a McCarthyite effort by a shadowy, anonymously run organization called PropOrNot to blacklist some 200 American media outlets as Russian “online propaganda.”

The alternative media outfits on the PropOrNot blacklist included some of those recently purged by Facebook and Twitter, such as The Free Thought Project and Anti-Media. Among the criteria PropOrNot identified as signs of Russian propaganda were “Support for policies like Brexit, and the breakup of the EU and Eurozone” and “Opposition to Ukrainian resistance to Russia and Syrian resistance to Assad.” PropOrNot called for “formal investigations by the U.S. government” into the outlets it had blacklisted.

According to Craig Timberg, the Washington Post correspondent who uncritically promoted the media suppression initiative, Propornot was established by “a nonpartisan collection of researchers with foreign policy, military and technology backgrounds.” Timberg quoted a figure associated with the George Washington University Center for Cyber and Homeland Security, Andrew Weisburd, and cited a report he wrote with his colleague, Clint Watts, on Russian meddling.

Timberg’s piece on PropOrNot was promoted widely by former top Clinton staffers and celebrated by ex-Obama White House aide Dan Pfeiffer as “the biggest story in the world.” But after a wave of stinging criticism, including in the pages of the New Yorker, the article was amended with an editor’s note stating, “The [Washington] Post… does not itself vouch for the validity of PropOrNot’s findings regarding any individual media outlet.”

PropOrNot had been seemingly exposed as a McCarthyite sham, but the concept behind it — exposing online American media outlets as vehicles for Kremlin “active measures” — continued to flourish.

The birth of the Russian bot tracker — with U.S. government money

By August, a new, and seemingly related initiative appeared out of the blue, this time with backing from a bipartisan coalition of Democratic foreign policy hands and neocon Never Trumpers in Washington. Called the Alliance for Securing Democracy (ASD), the outfit aimed to expose how supposed Russian Twitter bots were infecting American political discourse with divisive narratives. It featured a daily “Hamilton 68” online dashboard that highlighted the supposed bot activity with easily digestible charts. Conveniently, the site avoided naming any of the digital Kremlin influence accounts it claimed to be tracking.

The initiative was immediately endorsed by John Podesta, the founder of the Democratic Party think tank the Center for American Progress, and former chief of staff of Hillary Clinton’s 2016 presidential campaign. Julia Ioffe, the Atlantic’s chief Russiagate correspondent, promoted the bot tracker as “a very cool tool.”

Unlike PropOrNot, the ASD was sponsored by one of the most respected think tanks in Washington, the German Marshall Fund, which had been founded in 1972 to nurture the special relationship between the US and what was then West Germany.

The German Marshall Fund is substantially funded by Western governments, and largely reflects their foreign-policy interests. Its top two financial sponsors, at more than $1 million per year each, are the U.S. government’s soft-power arm the U.S. Agency for International Development (USAID) and the German Foreign Office (known in German as the Auswärtiges Amt). The U.S. State Department also provides more than half a million dollars per year, as do the German Ministry of Economic Cooperation and Development and the foreign affairs ministries of Sweden and Norway. It likewise receives at least a quarter of a million dollars per year from NATO.

The US government and NATO are top donors to the German Marshall Fund

Though the German Marshall Fund did not name the donors that specifically sponsored its Alliance for Securing Democracy initiative, it hosts a who’s who of bipartisan national-security hardliners on the ASD’s advisory council, providing the endeavor with the patina of credibility. They range from neocon movement icon Bill Kristol to former Clinton foreign policy advisor Jake Sullivan and ex-CIA director Michael Morell.

Jamie Fly, a German Marshall Fund fellow and Asia specialist, emerged as one of the most prolific promoters of the new Russian bot tracker in the media. Together with Laura Rosenberger, a former foreign policy aide to Hillary Clinton’s 2016 campaign, Fly appeared in a series of interviews and co-authored several op-eds emphasizing the need for a massive social media crackdown.

During a March 2018 interview on C-Span, Fly complained that “Russian accounts” were “trying to promote certain messages, amplify certain content, raise fringe views, pit Americans against each other, and we need to deal with this ongoing problem and find ways through the government, through tech companies, through broader society to tackle this issue.”

Yet few of the sites on PropOrNot’s blacklist, and none of the alternative sites that were erased in the recent Facebook purge that Fly and his colleagues take apparent credit for, were Russian accounts. Perhaps the only infraction they could have been accused of was publishing views that Fly and his cohorts saw as “fringe.”

What’s more, the ASD has been forced to admit that the mass of Twitter accounts it initially identified as “Russian bots” were not necessarily bots — and may not have been Russian either.

“I’m not convinced on this bot thing”

A November 2017 investigation by Max Blumenthal, a co-author of this article, found that the ASD’s Hamilton 68 dashboard was the creation of “a collection of cranks, counterterror retreads, online harassers and paranoiacs operating with support from some of the most prominent figures operating within the American national security apparatus.”

These figures included the same George Washington University Center for Cyber and Homeland Security fellows — Andrew Weisburd and Clint Watts — that were cited as experts in the Washington Post’s article promoting PropOrNot.

Weisburd, who has been described as one of the brains behind the Hamilton 68 dashboard, once maintained a one-man, anti-Palestinian web monitoring initiative that specialized in doxxing left-wing activists, Muslims and anyone he considered “anti-American.” More recently, he has taken to Twitter to spout off murderous and homophobic fantasies about Glenn Greenwald, the editor of the Intercept — a publication the ASD flagged without explanation as a vehicle for Russian influence operations.

Watts, for his part, has testified before Congress on several occasions to call on the government to “quell information rebellions” with censorious measures including “nutritional labels” for online media. He has received fawning publicity from corporate media and been rewarded with a contributor role for NBC on the basis of his supposed expertise in ferreting out Russian disinformation.