Jan 01

Today’s News 1st January 2016

  • HaPPY NeW FeaR 2016





  • Slope's Best Posts of 2015

    Slope of Hope celebrated its 10th anniversary last March, and during the course of 2015, thousands of interesting charts and articles were published. Here’s a sampling of the best of them:

    • The Charlie X Solution – my response to the Charlie Hebdo killings. I think this is some of the finest writing I’ve ever done. Sadly, the world has not taken me up on my brilliant plan.
    • Perfect Palo Alto – in which I examine the hiring of guards at the train tracks to try to reduce the number of Palo Alto high school students throwing themselves in front of locomotives.
    • Learning to Learn – some lessons I took away as I tried my hand at binary trading.
    • Relativity – a very interesting success story about how my method of trading was able to prosper in the face of what seemed like very dire circumstances.
    • The Time Warp Again – if I may say so, an really good post about how much the Silicon Valley has changed since when I was in my teens.
    • Ten Years of Hope – celebrating Slope of Hope’s 10th anniversary
    • Negative Interest – in which I despair about my almost total lack of interest in the market at the time. Not surprisingly, this was almost exactly the peak of the entire world of equities.
    • Do You Want to Know a Secret? – wherein I tear apart another idiotic startup.
    • Transports Less than 2% Away From Failure – here I call for the Dow Transports to begin dropping hard. I, umm, was correct.
    • Silicon Shark Jumps the Shark – a snarky overview of the so-called Startup Castle. Out of curiosity, I clicked on the link, and it goes straight to a 404 page. Figures.

    I hope you enjoy some of these! Happy 2016, ZH-ers. Let’s some some reality starts breaking the walls down.

  • We're All Fascists Now

    Submitted by James E. Miller via TakiMag.com,

    After decades of bitterly partisan acrimony, a consensus has been forged. Americans on all sides of the political compass finally agree on something: Donald Trump is a “fascist.”

    And they say our country is too divided politically to see eye to eye on anything.

    Liberals, who are more apt to liken someone they disagree with to Hitler than any other group, get their rocks off pinning the fascist label on Trump. The Week’s Ryan Cooper is the biggest perpetrator of this linguistic stratagem. He’s written numerous articles on why Trump is a fascist threat to the nation. Democratic presidential hopeful Martin O’Malley is also fond of calling the Donald the F-word.

    Fascist-mongering is not exclusive to the left. A national security advisor for illegal-alien-loving Jeb! Bush is guilty of the verbal slander. One of Ohio governor John Kasich’s super PACs is subtly linking Trump to fascism by comparing him to Nazi Germany. Marco Rubio’s war cheerleader Max Boot called Trump a fascist while admitting it’s not a term he “uses loosely or often.” Libertarian writer Jeffrey Tucker says that Trump’s ideology “is best described as fascism.”

    With all this fashy talk, one might get the idea that the two sides of the political establishment are working in cahoots to take down the candidate who best represents all those Middle American Radicals. You might also think that Donald Trump is an anomaly—that his creeping fascistic style is new to American politics.

    But what does “fascism” even mean? The way commentators toss around the word, you’d think it came with a precise definition. And you’d think that Mr. Trump embodies that definition in his unpredictable, fuck-you-style campaign.

    But, of course, you’d be wrong to assume such veracity on the part of the media. The problem with the word “fascism” is that it’s used so much it has lost all meaning. Basically, pundits use “fascism” to describe anything or anyone who goes against their ideology. With Donald Trump rampaging Godzilla-like through all the political establishment’s sacred idols—political correctness, porous borders, the aversion to criticizing any race or religion besides white Christians—it only makes sense that he’s been attacked as an überfascist.

    In the mid–20th century, fascism actually meant something. The Old Right journalist John T. Flynn described the governing philosophy as a capricious, power-mongering dictatorship. “First we must note one important difference between Communism and Fascism which becomes clear here,” he wrote. While socialists and communists had a “definite philosophy,” fascists, on the other hand, “improvised as the movement went along.” Citing Benito Mussolini’s governing style in Italy, Flynn deduced the “essential ingredients of fascism.” They include a government unrestrained by constitutional limits, a dictator who makes it his job to lead the nation to full vitality, an economy that is overseen by a vast bureaucracy, and a society that is highly militaristic and dependent on an imperialist complex.

    Gee, don’t those all sound eerily similar to the federal gargantuan we call Washington today?

    Certainly, Donald Trump is running on a fascist campaign platform. He’s using the sheer power of his celebrity to drown out all opposition. He talks about using the Oval Office as a tool to get the country winning again, and not as a solemn duty. Plus, he boasts recklessly about bombing the shit out of our enemies.

    The critics are right, Donald Trump’s campaign is based upon fascist principles. But here’s the thing: What campaign isn’t?

    Former first lady, senator, and secretary of state Hillary Clinton is running for president based solely on her personality and connections to the country’s elite. She wants the government to play an even larger role in people’s personal lives than it does now. In a recent debate she declared, “The American president has to both keep our families safe and make the economy grow in a way that helps everyone—not just those at the top.” Control freak, much?

    Florida senator Marco Rubio is no different. The boy wonder has based his entire campaign on a muscular foreign policy and his reputation as a great communicator. He has his own plan to create an “economic renaissance in America.” And he speaks glowingly about restoring America’s leadership in the world.

    If Donald Trump is a megalomaniac salivating over taking control of American Weimar, then both Hillary Clinton and Marco Rubio are führers in the making. The same goes for the rest of the field, where each and every candidate aspires to be the Celebrity-in-Chief. Trump only looks worse because he doesn’t have the benefit of a sympathetic media on his side.

    Nobody wants to admit it, but fascism defines modern American government. Washington, D.C., isn’t just a leviathan with its controlling tentacles in, around, and on top of everything. It is the molder and shaper of nearly all public life. Corporations take their cues from the federal government. The president tells us how to behave, what norms are appropriate, and how we should feel after a national catastrophe. The American public looks with reverence to the Oval Office.

    In his book Fascism Versus Capitalism, Lew Rockwell wrote, “The state, for the fascist, is the instrument by which the people’s common destiny is realized, and in which the potential for greatness is to be found.”

    Is that not the platform of every leading presidential aspirant, including Donald Trump?

    The sensationalism of the modern presidency means that we’re all fascists now. All social systems rely on power to keep the citizenry in line. We happen to live in a constitutional republic that has fascist elements. We should thank our lucky stars that it isn’t much worse.

  • How ISIS Broadcasts Its Message To The World: Satellite Dishes Bought In Turkey

    Over the last six or so months, it’s become abundantly clear that Turkey is home to several of the key transit and supply routes utilized by Islamic State. 

    Ankara has long been suspected of turning a blind eye to the legions of foreign fighters that flow across the border into Syria and as Nafeez Ahmed noted last month, there’s voluminous evidence to support the contention that Turkey’s government is complicit in the terror group’s activities. This evidence was available long before the Russian MoD blew the whistle on Erdogan’s ties to the group’s illicit crude trade.

    Here are some key excerpts from Nafeez’s piece “NATO is harbouring the Islamic State: Why France’s brave new war on ISIS is a sick joke,” as originally published in Medium:

    A senior Western official familiar with a large cache of intelligence obtained this summer from a major raid on an ISIS safehouse told the Guardian that “direct dealings between Turkish officials and ranking ISIS members was now ‘undeniable.’”


    The same official confirmed that Turkey, a longstanding member of NATO, is not just supporting ISIS, but also other jihadist groups, including Ahrar al-Sham and Jabhat al-Nusra, al-Qaeda’s affiliate in Syria. “The distinctions they draw [with other opposition groups] are thin indeed,” said the official. “There is no doubt at all that they militarily cooperate with both.”


    In a rare insight into this brazen state-sponsorship of ISIS, a year ago Newsweek reported the testimony of a former ISIS communications technician, who had travelled to Syria to fight the regime of Bashir al-Assad.


    The former ISIS fighter told Newsweek that Turkey was allowing ISIS trucks from Raqqa to cross the “border, through Turkey and then back across the border to attack Syrian Kurds in the city of Serekaniye in northern Syria in February.” ISIS militants would freely travel “through Turkey in a convoy of trucks,” and stop “at safehouses along the way.”


    The former ISIS communication technician also admitted that he would routinely “connect ISIS field captains and commanders from Syria with people in Turkey on innumerable occasions,” adding that “the people they talked to were Turkish officials… ISIS commanders told us to fear nothing at all because there was full cooperation with the Turks.”

    Back in May, The New York Times reported that in addition to foreign fighters and weapons, ammonium nitrate also flows across the porous border between Syria and Turkey. “The open transport of ammonium nitrate into Islamic State territory points to lingering questions about Turkey’s commitment to isolating its jihadist neighbors,” The Times wrote on the way to documenting how the fertilizer (which is also used to build bombs) makes its way from Akcakale, which is home to 90,000 Turks to the Syrian town of Tel Abyad. 

    As if all of the above wasn’t enough, testimony from an ISIS fighter captured by the Kurdish YPG points to Turkey as a training ground for new ISIS recruits. “The training took place in Turkey because the Daesh command thought that it was safer there than in Syria. It wasn’t possible to carry out training in Syria because of airstrikes,” the soldier said, adding that “the media wrote that we were training in an FSA military camp, but in fact, all 60 of us were members of Daesh.”

    And then there is of course the infamous illegal crude racket in which ISIS is suspected to work closely with the Turks in trafficking stolen oil from captured fields in Syria and Iraq to the Turkish port of Ceyhan. 

    Now, thanks to an investigative report by Spiegel, we learn that Islamic State also procures satellite dishes in Turkey and before you write that off as immaterial, or inconsequential compared to everything else ISIS gets across the Syrian border, consider that without these dishes, the group could not disemminate its propaganda. “No terror organization uses the Internet as successfully when it comes to marketing itself and recruiting supporters as Islamic State (IS) does,” Spiegel begins, before asking the following: “…how is it able to do so given that the group operates in a region where telecommunications infrastructure has been largely destroyed?

    Here’s more: 

    If you need to get online in Syria or Iraq, the technology needed to do so can be purchased in the Hatay province — a corner of Turkey located between the Mediterranean Sea and the Syrian border. 


    Thousands of dishes have been installed in the region allowing users to access the Internet by satellite. There has been a huge surge in recent years in the satellite Internet business.


    In Antakya, the demand for satellite technology on the other side of the border has fueled a boom in business. Two of the numerous dealers based here say independently of each other that they each have about 2,500 users in Syria and that they have monthly revenues of around $100,000. When asked who, specifically, they are selling their equipment and services to, they cautiously answer that they provide them only to commercial partners. They say they don’t know who the end customers are.


    Syrian activists claim that satellite dishes are located all over the place — on the rooftops of IS media centers and on top of the private homes of members of the terrorist militia. Without them, IS would be cut off from the outside world.


    A number of distribution firms are involved in the sales chain of the technologies required to obtain satellite Internet access. At the beginning of this chain are the major European satellite operators, led by France’s Eutelsat, Great Britain’s Avanti Communications and Luxembourg’s SES. 


    Distribution firms then buy facilities and satellite capacity from the big companies and resell it to corporate or private customers. 


    Sales in Turkey are fairly slow too, because satellite connections are more expensive than classic DSL access.


    According to the most recent data available from Turkey’s telecommunications authority, there were 11,000 registered satellite Internet users in Turkey during the first quarter of 2015, only 500 more than the previous year.


    But during 2013 and 2014, alone, Neustadt-based Sat Internet Services exported more than 6,000 dishes to Turkey, customs agency documents obtained by SPIEGEL ONLINE show. It is likely that most of those satellite dishes did not remain in Turkey, and there’s a strong chance a good deal of them ended up in Syria. The Syrian market has a decisive advantage in that there is no alternative Internet access available, meaning prices can be set very high.

    Spiegel then asks why, given how clear it seemingly is that Islamic State is operating dishes purchased in Turkey, the companies involved in providing the service can’t simply cut the militants’ access. After noting that both SES and Eutelsat denied having any knowledge or control of who their end customers ultimately are, Spiegel says that “satellite operators and their distribution partners generally can determine the location of the equipment they are supplying.” Afterall, the German weekly continues, “when they install satellite dishes and configure Internet access, their customers are required to provide their GPS coordinates.” The fact that many of the satellite dishes are located in Raqqa, al-Bab, Deir al-Zor and along the Euphrates River into Iraq and the IS-occupied city of Mosul leads to one rather obvious question: “Why don’t the companies take action to stop it?” 

    That is of course just a reformulation of the question that has been asked over and over again with regard to Islamic State’s operations. For instance, the US knows where ISIS media centers are located but hasn’t bombed them. Similarly, it took Russia exposing the Islamic State oil trade for the whole world to see before the US moved to target the group’s oil convoys despite the fact that Washington was well aware of their locations prior to Moscow’s intervention. The excuse was always fear of “collateral damage.”

    As it relates to the satellite dishes, Spiegel suggests the answer may lie in the profit motive. It’s also suggested that perhaps the companies are passing the data along to authorities. We’ll leave you with two final quotes and leave it to readers to decide for themselves.

    Although most satellite operators do not publish their internal figures, industry analysts say it costs between €300 million and €400 million to build a satellite and to launch it into orbit. Does that explain why satellite operators might be willing to accept the fact that they provide the infrastructure needed by a terrorist group to communicate, disseminate their propaganda and possibly plan attacks? 


    Or perhaps the companies have full knowledge of who is using their services and are sharing that information with intelligence services.  

  • Russian Imperialism Meets Illusions Of Ottoman Grandeur

    Submitted by Burak Bekdil via The Gatestone Institute,

    • Earlier in 2015, President Recep Tayyip Erdogan said that he found it difficult to understand what Russia was doing in Syria, since "it does not even border Syria."

    • By that logic, Turkey should not be "doing anything" in the Palestinian territories, Somalia, Egypt, Pakistan, Afghanistan or any of the non-bordering lands into which its neo-Ottoman impulses have pushed it.

    In a 2012 speech, Turkish Prime Minister Ahmet Davutoglu, then foreign minister, predicted that Syrian President Bashar al-Assad's days in power were numbered and that he would depart "within months or weeks." Almost three and a half years have passed, with Assad still in power, and Davutoglu keeps on making one passionate speech after another about the fate of Syria.

    Turkey's failure to devise a credible policy on Syria has made the country's leaders nervous. Both Davutoglu and President Recep Tayyip Erdogan have lately resorted to more aggressive, but less convincing, rhetoric on Syria. The new rhetoric features many aspects of a Sunni Islamist thinking blended with illusions of Ottoman grandeur.

    On December 22, Davutoglu said, "Syrian soil is not, and will not be, part of Russia's imperialistic goals." That was a relief to know! All the same, Davutoglu could have been more direct and honest if he said that: "Syrian soil will not be part of Russia's imperialistic goals because we want it to be part of Turkey's pro-Sunni, neo-Ottoman imperialistic goals."

    It is obvious that Davutoglu's concern is not about a neighboring territory becoming a theater of war before it serves any foreign nation's imperialistic goals. His concern, rather, is that neighboring soil will become a theater of war and serve a pro-Shiite's imperialist goals. Hardly surprising.

    "What," Davutoglu asked Russia, "is the basis of your presence in Syria?" The Russians could unconvincingly reply to this unconvincing question: "Fighting terror, in general, and ISIL in particular."

    But then Davutoglu claims that the Russian military hits more "moderates" (read: merely jihadist killers, not to be mixed with jihadist barbarians who behead people and cheerfully release their videos). Translation: more Islamist targets and fewer ISIL targets.

    A legitimate question to ask the Turkish prime minister might be: What is the basis of "moderate" Islamists' presence in Syria — especially when we know that a clear majority of the "moderate" fighters are not even Syrians. According to Turkish police records, they are mainly Chinese Uighurs, several Europeans and even one from Trinidad and Tobago.

    Could the basis be the religious bond? Could Prime Minister Davutoglu have politely reminded the Russians that the "moderate" fighters are Muslim whereas Russia is not? But then, one should ask, using Davutoglu's logic, "What is the basis of the U.S.-led Western coalition's airstrikes in Syria?" Since when are the Americans, British, Germans and French Muslims?

    In Turkish thinking, there is just one difference between non-Muslim Russia's presence in Syria and non-Muslim allies' presence: The non-Muslim Russians seriously threaten the advancement of our pro-Sunni sectarian war in the Levant, whereas the non-Muslim allies can be instrumental in favor of it. Hence Turkey's selective objection to some of the non-Muslim players in Syria.

    Earlier in 2015, President Recep Tayyip Erdogan said that he found it difficult to understand what Russia was doing in Syria, since "it does not even border Syria." By that logic, Turkey should not be "doing anything" in the Palestinian territories, Somalia, Egypt, Pakistan, Afghanistan or any of the non-bordering lands into which its neo-Ottoman impulses have pushed it over the past several years. By the same logic, also, Turkey should be objecting to any allied (non-Muslim) intervention in Syria, or to any Qatari or Saudi (non-bordering) intervention in the Syrian theater.

    Turkish President Recep Tayyip Erdogan has said that he found it difficult to understand what Russia was doing in Syria, since "it does not even border Syria." Pictured: Russian President Vladimir Putin (left) with then Prime Minister Erdogan, meeting in Istanbul on December 3, 2012. (Image source: kremlin.ru)

    In the unrealistic imperial Turkish psyche, only Turkey and the countries that pursue regional ambitions convergent with Turkey's can have any legitimate right to design or re-design the former Ottoman lands.

    Such self-righteous and assertive thinking can hardly comply with international law. The Turks and their imperial ambitions have already been declared unwelcome in Libya, Tunisia, Egypt, Lebanon, Syria and Iraq. Nor would such ambitions be welcomed in any former Ottoman land to Turkey's west. But if, as Turkey's Islamists are programmed to believe, "historical and geographical bonds" give a foreign nation the right to design a polity in another nation, what better justification could the Russians have had for their post-imperial designs in Crimea?

    When they have a moment of distraction from their wars against Western values, the West, Israel, Jews or infidels, the Sunni and Shiite Islamists in the Middle East fight subtle-looking (but less subtle than they think) and cunning (but less cunning than they think) wars and proxy wars, and accuse each other of pursuing sectarian policies. Turkey's rulers are no exception.

  • 2015 Greatest Hits: Presenting The Most Popular Posts Of The Past Year

    One year ago, when looking at the 20 most popular stories of 2014, we were troubled by a recurring thread: “despite the just concluded 6th consecutive year of a rising S&P 500 – the longest such stretch since 1999 of what otherwise would be deemed optimism – despite what should be a steadily improving economy and improving social and economic conditions, what readers founds most fascinating, and troubling, was the increasing preponderance of social disobedience, of covert, proxy or outright wars, and of civil unrest: all phenomena that accompany a world sliding deeper into distress, not as most central banks and their puppet media would have us believe, a global recovery.”

    We will be the first to admit that while it is more difficult to find a coherent theme unifying the most popular posts on Zero Hedge as determined by you, our readers, in the past year, several major domestic socio-economic tensions all came to a head in 2015: class warfare in the US approached unprecedented levels with antagonism between races, genders, ethnicities, ideologies, age groups and incomes all approaching peak levels, and spilling over, literally, on the street as the US public was inundated with daily reports of mass shootings, of trigger-happy policemen, of petulant students demanding conformity, of a president demanding the population hand over even more constitutional rights, of a nation torn in the most volatile presidential race yet.

    All this took place as the median income across the US continued to decline: the rich got richer, the poor got poorer, and the middle class was officially put on the endangered species list, although in 2015, for the first time since the financial crisis, the market closed red in no small part due to the action of the Fed, which after seven years of ZIRP, hiked rates for the first time in nine years despite all other central banks “giving it all they’ve got.” 

    For those trading, it was a year of rising, and in many cases, brutal intraday volatility, of ever more flash crashes across virtually all asset classes, of pain for anyone who was not invested in the five largest companies, and overall a year of change and losses for those hoping the Fed would “have their back” no matter what.

    Meanwhile, the geopolitical situation outside of the U.S. got decidedly worse, with the Syrian global proxy war resulting in the first instance of a NATO nation attacking and taking down a Russian fighter jet in decades, but more importantly, in a historic refugee crisis that will alter the face of Europe for years to come, as well as unleashing a wave of terrorist events which are likely just beginning, as governments across the globe seek to exploit the crisis for their own selfish reasons.

    Overall, it was a year of flux and of dramatic change: change which was largely amorphous and chaotic in 2015 but which will crystallize over the next 12 months, in unpredictable and, sadly, violent ways. Perhaps this change is why 2015 was a record year for Zero Hedge: for the first time this website clocked in over half a billion page views thanks to record readership.

    We thank all of our readers for making this website – which has never seen one dollar of outside funding and has never spent one dollar on marketing – a small (or not so small) part of your daily routine!

    But before we get into the details of what has now become an annual tradition for the last day of the year, those who wish to jog down memory lane, can refresh our most popular articles for every year during our brief 6-year existence, starting with 2009 and continuing with 2010, 2011, 2012, 2013 and 2014.

    So without further ado, here are the articles that readers found to be the most popular over the past year.

    • In 20th place, with 560,000 page views, was the event that for millions of Greeks was the defining event of the summer, the year, and perhaps, a generation: the complete collapse of the country’s financial system, and the imposition of capital controls: a regime of financial repression that will remain with the insolvent German colony indefinitely, as we first showed in “It’s 2 In The Morning And Greeks Are Lining Up At ATMs; Alpha Limits Online Banking.”
    • In 19th place, with over 571,000 reads was a simple chart post, one which summarized “Obama’s Recovery In Just Nine Charts.” The post was popular because it succinctly captured what everyone knows too well: for the vast majority of the population there has been no recovery, just spin and propaganda. We hope the next update of these 9 charts, due some time in 2016, will show some improvement but we doubt it.
    • In 18th spot, read 604,000 times, was our explanation of a phenomenon that has perplexed none other than the career economists at the Federal Reserve, one which we solved in “The Mystery Of The “Missing Inflation” Solved, And Why The US Housing Crisis Is About To Get Much Worse.” We demonstrated how, despite persistently weak CPI, for a record number of Americans renting is now prohibitively expensive, a finding which together with the adverse effect of Obamacare, explained why despite countless predictions for a surge in consumer spending (due to “plunging gas prices”) consumers did precisely the opposite and not only did personal consumption and expenditures decline, but GDP tumbled, ending last year just under 3% and subsequently sliding to just above 2%: a confounding paradox considering the Fed recently launched a rate hiking cycle just to “demonstrate” how strong the US economy has become.
    • In 17th spot, and deservedly with over 626,000 page views, was the man who has been right all along: Ron Paul explained how “Reality Is Now Setting In For America… It Was All Based On Lies & Ignorance.” Unfortunately, his message has yet to be believed and appreciated by the majority of Americans, many of whom prefer to stick their head in the sand and pretend that all is well, but sooner or later they, and everyone else, will come to grips with the truth, unpleasant as it may be.
    • In 16th place, with an impressive 632,000 reads, we revealed the man who serves as the “ISIS connection” with the western world, and the source of funding for the Islamic State. “Meet The Man Who Funds ISIS: Bilal Erdogan, The Son Of Turkey’s President” caused shockwaves across the globe, leading to a dramatic reappraisal of the ISIS conflict in the past month. We hope that as the influence of NATO member Turkey on the Syrian conflict wanes, that peace may finally return as a handful of corrupt Turkish politicians can no longer make billions in profits from the death and misery of thousands.
    • In 15th spot, with nearly 650,000 page views, was a post touching the barely beating heart of America’s centrally-planned regime, the Fed Chairwoman herself, who entered the history books by being the first Fed head in nearly a decade to raise interest rates. Many wondered why. The answer was provided by her when “Yellen Said Negative Rates On The Table “If Outlook Worsened.” We await the Fed to realize it has committed what many admit was a “policy mistake” and for Yellen to enter the history books for another dubious achievement: lowering rates to negative for the first time in US history.
    • A curious tangent on US social commentary was found in the 14th spot, in which we and 668,000 other readers listened as a professor slammed both the “Thin-Skinned Minority Ruining This Nation”, and damning the “Political Correctness” Wave Sweeping America. Sadly, the willingness of increasingly more “smart, progressive” young men and women to trade their fundamental rights to expression just to avoid any conflict and reside in the “safety” of an emotional cocoon, is one which leads to a dangerous state of uniformity and ultimately to the failure of all individual rights and liberties. We hope this trend is reversed in the coming year.
    • In 13th spot, and reverting back to the core economic and financial malaise eating away at the US, 680,000 found out that “Texas Pulls $1 Billion In Gold From NY Fed, Makes It “Non-Confiscatable.” To be sure, 2015 was another year in which gold suffered, however with central banks around the world continuing their debasement of fiat, it is only a matter of time before the age-old question has to be finally answered: hard or soft money. Perhaps 2016 will be the year.
    • Related to that last question, was the 12th most popular post of the year, in which hedge fund legend “Paul Tudor Jones Warned that “Disastrous Market Mania” Will End In “Revolution, Taxes, Or War.” This is something we have warned since the beginning of this website, and is hardly a profound observation: history is littered with “French Revolutions” which spontaneously happen when the impoverished majority has had enough of the status quo and rebels against the tiny minority which sets the status quo. The outcome is always tragic, and is why since the beginning we have been trying to warn anyone who cares to listen that the path this nation is on will have devastating consequences unless something changes. We hope that as more people agree with us, that some tangible change will finally take place.
    • But we are pessimistic. The reason for that is while the plight of billions of people gets worse despite constant daily distraction, a handful of plutocrats continues to control everything, and does so entirely for their own benefit. We revealed this tiny group and their agents in “Meet The Secretive Group That Runs The World“, the 11th most popular post of the year. With nearly 700,000 views we are happy that the group’s actions and identities are at least a little less secret.
    • Stepping away from the secretive cabals of finance, we shift to what has been perhaps the most important geopolitical event for Germany, if not all of Europe, and judging by the US reaction, for many Americans as well: in 10th spot, 705,000 were quick to read that “10,000 Syrians Are Headed For The Following 180 US “Refugee Processing Centers.” The final number may well be greater, and while we know where many Syrians refugees will end up, what we don’t know is how they will be welcomed and treated in their newly adoptive country.
    • In 9th spot is an article we wrote in September in which we showed that “The IMF Just Confirmed The Nightmare Scenario For Central Banks Is Now In Play.” We were referring to the gradual realization by the tenured economists that both the ECB and the BOJ are increasingly more cornered and are running out of things to monetize, and thus, of ways to boost manipulated market ever higher and surprise with ever bigger bazookas. And yet, even though the post was read by 717,000, countless asset managers were “shocked” when first the ECB and then the BOJ, both expected to reveal the latest and greatest bazooka, sprayed the market with a water pistol. The FX losses for those caught on the wrong side of these trades was astounding.
    • In spot #8, with 763,000 reads was a shocking update by Vladimir Putin, who claimed that “ISIS Is Now On The Ropes As Fighters Desert After 60 Airstrikes In 72 Hours.” To be sure, Russia’s involvement in the ISIS conflict, and its “blitzkrieg”-like success against the Islamic State led to quick and dramatic consequences, chief among which was the US once again folded on its demands to replace Syrian president al Assad: the second time in two years. For a nation for which installing puppet leaders is ordinary course of action, this dramatic derailment of US national policy by Russia has led many to ask if the world is once again truly multipolar.
    • In 7th spot was an article revealing the curious congregation of tankers filled to the brim with oil off the coast of Texas. Indeed, nearly 800,000 were shocked to find that “Something Very Strange Is Taking Place Off The Coast Of Galveston, TX“, that something being that with no storage space to accommodate the millions of barrels of oversupplied crude, the oil would have to float on the ocean until either supply slowed down dramatically, which seems unlikely for the time being, or demand surges, which for a world sliding into recession is also impractical. The result: the price of oil dropped another 30% in 2015, suffering its worst back to back decline in history.
    • In 6th spot was a tragic reminder that every major geopolitical action tends to have deadly consequence, and just weeks after Russia boasted of its military success against ISIS, the Islamic terrorist organization blew up a Russian passanger jet departing Egypt. Nearly 830,000 saw the morbid video clip ISIS made of the exploding airplane. The result was an even more furious military campaign by Putin which ultimately went after what we said should be the goal all along: the Islamic State’s financial lifeline – its crude oil infrastructure and its sales of balck gold to Turkey and other willing buyers.
    • In 5th spot we go back to a prediction we made back in 2014, namely that as a result of plunging oil prices, the death of the Petrodollar had finally arrived. Many ignored our observations of the dramatic liquidation of Chinese Treasurys which started in early 2015, although eventually everyone noticed, even the biggest banks and 872,000 read that “China’s Record Dumping Of US Treasuries Leaves Goldman Speechless.” Since then, the historic liquidation of foreign reserves by petroleum exporters and sovereign wealth funds has been dubbed a “reverse QE”, something which will only accelerate in the future with dramatic results.
    • Related to the above was the 4th most popular post of 2015: over 900,000 were surprised to learn that “China Confirmed It Has Begun Liquidating Treasuries, Warns Washington.”Will China continue to strategically sell US paper, or will it use it tacticaly as a “diplomatic” tool? And will others join? Now that the seal has been broken, expect to see many more “surprises” such as this one, as it is increasingly every player for themselves in a world of currency and trade (and proxy shooting) warfare, and where mixed messages by central banks leave everyone confused.
    • It is no surprise that the third most popular article of 2015 was one which turned the official narrative of the Syrian war on its head, as it revealed just who is stoking the Syrian war. Over 1 million read that a “Secret Pentagon Report Reveals US “Created” ISIS As A “Tool” To Overthrow Syria’s President Assad.” In a world where transparency of motives of governments working on behalf of corporate interests is critical, we hope many more such articles will expose the hypocrisy and duplicity not only of the U.S. but every other regime that openly lies to its people, just so a handful can benefit from death and suffering.
    • The second most popular article of 2015 was one which followed in the aftermath of fears, that a cyber attack had taken down the NYSE. We, as well as 1.1 million others, asked “Is This What The First World Cyber War Looks Like: Global Real Time Cyber Attack Map.” Subsequently we found out that the NYSE suffered a historic outage simply because someone had “updated the software” incorrectly, although in a time when cyber terrorism is increasingly prevalent, we expect to revert to the real time map of  cyber attacks on many more occasions in the future.
    • The top post of 2015 was one in which we – and 1.2 million others – asked “Why Is WalMart Mysteriously Shuttering Stores Nationwide For “Plumbing Issues“?” The answer was revealed a few months later when WalMart shocked the investing world by revealing just how dire the financial situation at this iconic US retailer truly was, a revelation which cut the price of the largest US-based employer by a third and allowed its online competitor Amazon to finally surpass it in market capitalization, a historic moment in the tension between the old and new economies.

    With all that behind us, what is in store for 2016?

    We don’t know: as frequent and not so frequent readers know, we do not pretend to be able to predict the future and we don’t try (despite endless allegations that we constantly predict the collapse of everything): we leave the predicting to the “smartest people in the room” who year after year have been dead wrong. We merely observe and try to find what is entertaining, amusing, surprising or grotesque in an increasingly sad world.

    We do know, however, that after $14 trillion in liquidity has been conjured out of thin air by the world’s central banks, and the tens of trillions of credit money created (and misallocated) by China – a country which was the world’s growth dynamo for the past three decades and which is now rapidly slowing down – the entire world is floating on an ocean of excess money, which for one more year has succeeded in masking just how ugly the truth beneath the calm surface is. Now, with the Fed hiking, as the tide starts to come out, those swimming naked will finally be exposed. How far will the receding tide go?

    We are confident, however, this in the end it will be the very final backstoppers of the status quo regime, the central banking emperors of the New Normal, who will eventually be revealed as fully naked. When that happens and what happens then is anyone’s guess. But, as we have promised – and delivered – every year for the past seven, we will be there to document every aspect of it.

    Finally, and as always, we wish all our readers the best of luck and success in 2016, with lots of trading success, and depart with our now traditional and unwavering year-end promise: Zero Hedge will be there each and every day helping readers expose, unravel and comprehend the fallacy, fiction, fraud and farce that the system is reduced to (ab)using each and every day just to keep the grand tragicomedy going for at least one more day.

  • What's Ahead In 2016 – Key Events Of The Next 12 Months

    Elections, elections, and more elections is the 'change' meme for 2016 but, as Bloomberg details, the key events of the year ahead vary from a California marijuana referendum to Brazil's Olympics, and from Davos to SCOTUS. No matter what, 2016 holds a lot of opportunity for volatility, and without The Fed's safety net, who knows what that means for markets…

    Here's a selected calendar of key events for the year.


    Construction at Cheniere Energy Inc.'s liquified natural gas (LNG) terminal.
    Construction at Cheniere Energy Inc.'s liquified natural gas (LNG) terminal.
    Source: Cheniere Energy via Bloomberg


    Taiwan holds an election and may choose its first female president.

    U.S. begins production of liquefied natural gas for export from Cheniere Energy's terminal in Louisiana, the first since 1969. 

    World leaders gather for the World Economic Forum in Davos, Switzerland. Follow our special report.

    Vietnam's Communist Party Congress convenes to make leadership changes and set policy.

    UN monitors may conclude that Iran has implemented all steps required under July nuclear accord, allowing the U.S. and Europe to lift sanctions.



    Donald Trump.
    Donald Trump.
    Photographer: Patrick T. Fallon/Bloomberg


    The race to elect America’s 45th president kicks off with the Iowa caucuses and the New Hampshire primary. The caucuses in Nevada and the primary in South Carolina will also be closely watched.

    Pope Francis visits Mexico.

    Academy Awards in Los Angeles.



    A paramilitary police officer stands guard in front of red flags at Tiananmen Square in Beijing, China.
    A paramilitary police officer stands guard in front of red flags at Tiananmen Square in Beijing, China.
    Photographer: Tomohiro Ohsumi/Bloomberg


    U.S. begins auction of airwaves to make room for faster mobile phone connections.

    China's National People's Congress, the country's top lawmaking body, meets and the government releases details of its new five-year plan.

    Deadline for Colombian government negotiators and FARC rebels to reach a peace deal in Havana, ending a five-decade-old conflict.

    U.S holds so-called Super Tuesday primaries and caucuses in Alabama, Alaska, Arkansas, Colorado, Georgia, Massachusetts, Minnesota, Oklahoma, Tennessee, Texas, Vermont and Virginia and Wyoming.

    Fifth anniversary of the uprising that led to the civil war in Syria.



    Cranes stand at a construction site for the expansion of the the Panama Canal, on the Pacific side of the canal near Panama City on April, 24, 2014.
    Cranes stand at a construction site for the expansion of the the Panama Canal, on the Pacific side of the canal near Panama City on April, 24, 2014.
    Photographer: Susana Gonzalez/Bloomberg


    The Panama Canal is expected to open a $5.3 billion expansion.

    The United Nations holds a signing ceremony for the Paris climate accord.

    South Korea has parliamentary elections.

    Peru holds the first round of presidential elections. Unless a candidate wins more than 50 percent of the vote, there'll be a runoff in June with parliamentary elections on the same day.

    Bloomberg New Energy Finance holds its annual “Future of Energy” summit in New York.



    Photographer: Daniel Acker/Bloomberg


    The Philippines elects a legislature and president.

    Scotland votes for members of its parliament.

    A law requiring plain cigarette packaging takes effect in the U.K.

    G-7 leaders meet in Japan's Mie Prefecture, home to the 2,000-year-old Ise Shrine.

    North Korea's Workers Party holds congress. 



    The U.S. Supreme Court stands in Washington, D.C., U.S.
    The U.S. Supreme Court stands in Washington, D.C., U.S.
    Photographer: Drew Angerer/Bloomberg


    U.S. Federal Reserve releases annual stress tests of the nation’s banks.

    U.S. Supreme Court session ends, with rulings expected on closely watched cases on affirmative action, immigration reform, abortion and voting rights.

    The U.K.'s referendum on leaving the European Union could come as early as mid-2016, though no official date had been set by the end of 2015.



    Photographer: Andrew Harrer/Bloomberg


    Puerto Rico, in talks with creditors to ease its $70 billion debt burden, faces payments of $1.98 billion on bonds sold by the U.S. territory and its agencies.

    The race for the White House heats up as Republicans and Democrats select their presidential candidates at party conventions.

    Japan expected to hold upper house election. Prime Minister Shinzo Abe could also call a snap poll for the lower house.

    NASA’s Juno spacecraft begins visit to Jupiter.



    Construction of the 2016 Olympic Park continues in Rio de Janeiro, Brazil.
    Construction of the 2016 Olympic Park continues in Rio de Janeiro, Brazil.
    Photographer: Dado Galdieri/Bloomberg


    Summer Olympics in Rio de Janeiro.

    U.S. Federal Reserve’s Jackson Hole symposium.



    People look at portraits of former Chinese leaders Zhou Enlai, left, Mao Zedong, center, and Liu Shaoqi displayed in a shop on Wangfujing Street in Beijing, China, on Tuesday, Sept. 9, 2014.
    People look at portraits of former Chinese leaders Zhou Enlai, left, Mao Zedong, center, and Liu Shaoqi displayed in a shop on Wangfujing Street in Beijing, China, on Tuesday, Sept. 9, 2014.
    Photographer: Brent Lewin/Bloomberg


    Russia holds election for lower house of parliament.

    Annual meeting of the U.N. General Assembly in New York.

    G-20 world leaders hold their summit in China for the first time.

    Hong Kong Legislative Council election.

    China marks the 40th anniversary of Mao Zedong's death.




    Source: The Nobel Prize


    Nobel Prizes announced in Stockholm.

    World Bank/IMF meetings held in Washington, D.C.



    Source: Gallery Stock


    Americans elect a president and determine control of Congress. A referendum on the legalization of marijuana is expected in California.

    The Democratic Republic of Congo holds an election.

    China’s shoppers go online on Single’s Day, while retailers in the U.S. wrestle with Black Friday.

    APEC leaders head to Lima, Peru for their 28th annual gathering.

    Asean/East Asia leaders meet at a summit in Laos. 



    Photograph by Jock Fistick/Bloomberg


    75th anniversary of the bombing of Pearl Harbor.

    Russian President Vladimir Putin delivers his annual press conference in Moscow, an event that typically lasts about three hours.

    India expects to start operations at the strategic Chabahar port in Iran, which will give it access to Afghanistan and bypass rival Pakistan.

  • Donald Trump's Comprehensive 2015 Insult Highlight Reel

    Submitted by Mike Krieger via Liberty Blitzkrieg blog,

    What better way to end 2015, than with a highlight reel of Donald Trump’s more colorful insults. The Washington Post has done an excellent job of putting together “A Comprehensive Guide to Everyone Donald Trump Insulted in 2015.”

    Here are a few of my favorite clips:

    Screen Shot 2015-12-31 at 10.01.34 AM

    Screen Shot 2015-12-31 at 9.57.04 AM

    Screen Shot 2015-12-31 at 9.56.16 AM

    Screen Shot 2015-12-31 at 9.56.29 AM

    Screen Shot 2015-12-31 at 9.57.24 AM

    Screen Shot 2015-12-31 at 9.58.24 AM

    Screen Shot 2015-12-31 at 10.00.02 AM

    Love him or hate him, this is highly entertaining.

    Watch the entire video below. Enjoy.


    Happy New Year.

  • This Is What Stocks Do During Hyperinflation

    One of the classical refrains for buying stocks is that they preserve purchasing power and add value, even under such extreme monetary conditions as hyperinflation, or in other words, on a relative basis, local equities when denominated in a stable currency, will increase in value even as the local currency disintegrates.

    As one example of this phenomenon, historians and equity bulls provide the widely referenced example showing that during the Weimar period, even as the mark lost all of its value, the stock market in USD terms actually rose during the parabolic phase.


    But is that widely documented example really true, and even if it is, is it the case that stocks preserve value during hyperinflation in modern days? Luckily, we have an actual, ongoing case of currency destruction and hyperinflation in a country that was supposed to be a “socialist paradise”, but ended up just a little short: Venezuela, whose annual inflation is estimated at just shy of 400% annually according to the Troubled Currencies Project.

    The same Venezuela which as we showed yesterday, Germany’s Handelsblatt, found was the “best investment” in the world in 2015.


    Indeed, looking at the performance of the Caracas stock exchange, when denominated in the “official” currency rate, the one which is completely meaningless for virtually everyone, an equity investment in the could not be better: the index clearly soared fourfold in the past year.


    There is a problem with this chart, however: as noted above, it uses the official Venezuela exchange rate, one which is completely meaningless to the local population if they actually want to buy USD either locally or in the US.

    To get the real picture, one has to use the actual “black market” rate as calculated daily by DolarToday, which at 833 bid is quite a bit “different” from the 200 official rate.

    Here is a chart of how Venezuela’s real currency has performed in 2015:


    What happens when one shows the Caracas exchange in official “currency terms” on one hand, versus “real currency” terms on the other? The answers are shown by the green and blue lines in the chart below, respesctively.

    So to answer the original question: how did Venezuela stocks perform in the past year under the country’s hyperinflation? The answer: using a meaningless exchange rate, they rose 4x and, as Handelsblatt incorrectly concluded, “were the best investment of the year”; on the other hand using an exchange rates that actually reflects the country’s economic implosion, they lost just over 20% of their value in the past year. 

    Which, considering oil plunged by 30% in USD terms in the past year, was not the worst possible return.

    Of course, one asset which Venezuelans could have bought on December 31, 2014 and not lost any purchasing power despite the greater than fourfold plunge in the currency, is a simple one: gold.

  • 15 News Stories From 2015 You Should Have Heard About But Probably Didn't

    Submitted by Carey Wedler via TheAntiMedia.org,
    In 2015, the iron fist of power clamped down on humanity, from warfare to terrorism (I repeat myself) to surveillance, police brutality, and corporate hegemony. The environment was repeatedly decimated, the health of citizens was constantly put at risk, and the justice system and media alike were perverted to serve the interests of the powers that be.

    However, while 2015 was discouraging for more reasons than most of us can count, many of the year’s most underreported stories evidence not only a widespread pattern that explicitly reveals the nature of power, but pushback from human beings worldwide on a path toward a better world.

     1. CISA Pushed Through the Senate, Effectively Clamping Down on Internet Freedom: For years, Congress has attempted to legalize corporate and state control of the internet. In 2011, they attempted to pass PIPA and SOPA, companion bills slammed by internet and tech companies and ultimately defeated after overwhelming public outcry. Then they passed  CISPA — which the president threatened to veto, having caught wind of the public’s opposition to heavy regulation of the internet (earlier this year, Obama reversed his position). However, corporate interests, like Hollywood’s studio monopoly, kept lawmakers’ tenacity afloat.

    In October, Congress passed CISA, the Cybersecurity Information Sharing Act, but as the Electronic Freedom Foundation explained: “CISA is fundamentally flawed. The bill’s broad immunity clauses, vague definitions, and aggressive spying powers combine to make the bill a surveillance bill in disguise. Further, the bill does not address problems from the recent highly publicized computer data breaches that were caused by unencrypted files, poor computer architecture, un-updated servers, and employees (or contractors) clicking malware links.” Just before Christmas, Congress went even further, adding an amendment to the annual omnibus budget bill that strips CISA’s minimal privacy provisions even more. That budget bill was approved, though Representative Justin Amash of Michigan has vowed to introduce legislation to repeal the CISA provisions when Congress reconvenes.

    But CISA wasn’t the only attack on citizens’ privacy this year. Though lawmakers touted the USA Freedom Act as a repeal of the mass surveillance state, in reality, it simply added a bureaucratic step to the process by which government agencies obtain private information. Further, a hack on Italian security firm, aptly called Hacker Tools, revealed that various agencies — including the DEA, NSA, Army, and FBI — possess software that enables them to, as Anti-Media reported, “view suspects’ photos, emails, listen to and record their conversations, and activate the cameras on their computers…” At the same time, the United Kingdom and France moved to tighten their already comprehensive surveillance apparatuses in the wake of multiple terrorist attacks. Though governments claim systematic surveillance is necessary to protect citizens — and Snowden’s leaks endangered that safety — the United States government has been unable to produce sufficient evidence the programs work. Instead, the documents the Department of Defense released this year as proof of the alleged endangerment were entirely redacted.

    2. CIA Whistleblower Sent to Prison for Revealing Damning Information to a Journalist: While the government has no problem invading the privacy of its citizens, it offers swift backlash for those who attempt to violate its own clandestine operations. Jeffrey Sterling, a former CIA agent, had his first altercation with the CIA when he sued for racial discrimination in 2001. He was subsequently fired. Years later, the CIA filed espionage charges against him for speaking with New York Times journalist, James Risen. Sterling had revealed a botched CIA scheme, Operation Merlin, to infiltrate Iranian intelligence that ultimately worsened the situation, gave Iran a nuclear blueprint, and was deemed by some to be espionage, itself. Rather than acknowledge the woeful misstep, the CIA arrested him, charged him, and ultimately sentenced him to 42 months in prison. The trial was reportedly biased, but nevertheless, was severely underreported by the media. Sterling’s conviction reflects the ongoing war on whistleblowers, which Obama has successfully expanded during his presidency. Sterling joins the ranks of Edward Snowden, Chelsea (formerly Bradley) Manning, and others, including a whistleblower who worked for OSHA’s Whistleblower Protection Program and was fired for exposing dysfunction and incompetence within the ranks.

    3. Press Freedom Continued to Deteriorate: An annual report from the World Press Freedom Index saw the United States slip 29 spots from last year, landing 49th out of 180 total. In January, journalist Barrett Brown was sentenced to five years in prison for exposing the findings of hacker Jeremy Hammond. Brown was charged with obstructing justice, aiding and abetting, and separate charges of allegedly threatening the FBI in a rant. Hammond, who exposed severe violations of privacy on the part of Stratfor, a CIA contractor, was sentenced to ten years in prison. Brown’s experience was not an isolated incident. Journalists around the world, like several journalists who were killed while investigating ISIS in Turkey, faced increased danger. One small-town journalist in India was burned alive after exposing a corrupt politician.

    4. Multiple Activists Arrested, Charged with Felonies for Educating Jurors About Their Rights: In an ongoing trend, otherwise peaceful, non-violent individuals were harassed by police and courts — not for exposing secret information, but for providing information to potential jurors about their rights in the courtroom. One Denver jury nullification activist, followed by another, was charged with multiple felonies for handing out pamphlets that explain a juror’s right to vote “not guilty” in a verdict, even if the defendant is clearly guilty. This right was established to allow jurors to vote with their conscience and question the morality of laws, from the 19th century’s Fugitive Slave Act to Prohibition, both of alcohol in the 1920s and of marijuana today. The Denver activists are awaiting trial, while more recently, a former pastor was charged with a felony for the same reason.

    In other unjust convictions and failings of the “justice” system, an African-American man was sentenced to seven years in prison for barking at a police dog, a Kansas mother faces decades in prison for using marijuana to treat her debilitating Crohn’s disease, and a mentally ill man died in jail after being held for stealing five dollars worth of snacks from a convenience store. He had inexplicably been waiting months to be transferred to a medical facility. Ross Ulbricht, founder of the dark web marketplace, the Silk Road, was sentenced to life in prison in spite of the fact that he committed no violent crimes — though the FBI attempted to paint a false picture that he did, albeit without filing formal charges. The prosecution was rife with corruption and scandal; two FBI agents involved in the case were charged with stealing Bitcoin during the investigation. In July, one admitted to stealing $700,000 worth of the digital currency.

    5. Six-Year-Old Autistic Boy Killed by Police: 2015 established not only that the justice system remains broken, but the the enforcement class — police officers — continues to terrorize citizens. In one underreported case, a six-year-old boy was fatally caught in the crossfire of a police shootout against his father, who was unarmed. In another case, an African-American motorist was shot and killed by University of Cincinnati police over a missing front license plate. While high-profile cases of misconduct, including Freddie Gray and Sandra Bland, rightly dominated the news cycle, many more cases of police brutality received little attention. In fact, in 2015, it was revealed not only that the media-propagated “War on Cops” in America was a myth, but that American police kill exponentially more people in weeks than other countries’ police kill in years. On the bright side, many police officers did face charges — and even prosecution — in 2015, including one repeat rapist who recently cried upon being convicted of his crimes. The officers involved in the shooting of the six-year-old boy were also charged with murder.

    6. Earth Enters Sixth Mass Extinction: 2015, like many years before, was disastrous for the environment. Researchers from Stanford University, University of California, Berkeley, and Princeton determined Earth is entering its sixth mass extinction, reporting that species are disappearing at a rate 100 times faster than the normal rate between mass extinctions. Further, thanks, in part, to the widespread use of Monsanto’s glyphosate-based Roundup herbicide, populations of bees and Monarch butterflies dwindled — though, happily, the Monarchs appear to have bounced back. Polar bears also met continued endangerment.

    The much-anticipated Paris Climate Conference yielded what many environmental activists deemed weak, if not fraudulent, solutions. Meanwhile, man-made environmental catastrophes endangered humans. In Flint, Michigan, lead levels in the water led to increased rates of contamination in children’s blood, prompting the mayor to declare a state of emergency. A massive methane gas leak in the San Fernando Valley, located just north of Los Angeles, has sickened residents and forced countless families to relocate. Authorities have been unable to stop the leak.

    Thankfully, some measures to help the environment were taken in 2015, including creative solutions to stop animal poaching, the first flight of a solar-powered plane, the launch of a solar-powered airport in India, and Costa Rica’s successful effort to draw 99% of its energy from renewable sources.

    7. Civilian Casualties in Western Wars Continue: Though ISIS and other terrorist groups were rightly condemned for killing civilians in 2015, the West pointed fingers while committing the same crimes. In fact, one U.N. report released in September found U.S. drone strikes have killed more civilians in Yemen than al-Qaeda. Another analysis released this year concluded Obama’s ongoing drone wars have killed more people than were murdered during the Spanish Inquisition. Though the U.S. military’s bombing of a Doctors Without Borders (MSF) hospital received global attention and outrage, many other incidents went underreported. In May, one U.S. airstrike on Syria killed 52 civilians in one fell swoop. Additionally, U.S.-backed coalitions have bombed civilian populations, like in Yemen, where Saudi Arabia killed at least 500 children, not to mention two thousand more adult civilians. In other egregious misdeeds, it was revealed that the U.S. military sanctions pedophilia in Afghanistan.

    8. Insurrection at the Pentagon’s Defense Intelligence Agency Over Misleading Reports on ISIS: Over the summer, dissent grew within the ranks of the DIA, the Pentagon’s internal intelligence agency. In September, news broke that 50 intelligence analysts filed a report with the Department of Defense’s Inspector General to expose their superiors’ alleged manipulation of intelligence. The intention of the coverup was reportedly to downplay the threat of ISIS and the U.S.’s losing effort to fight it, all to maintain the Obama administration’s narrative the bombing campaigns have been successful.

    Similar mishandlings of foreign affairs plagued 2015. It was revealed that the Pentagon had no idea what it did with $8.5 trillion, lost track of $500 million worth of weapons and equipment, and spent $43 million on a single gas station in Afghanistan. A DIA report released in June intimated the military was aware of the rising threat of ISIS, and not only allowed it, but welcomed it. The program to train moderate rebels in the fight cost half a billion dollars but yielded only four or five fighters. Further, multiple generals spoke out this year about the U.S. military’s role in creating ISIS. Additionally, news broke in 2015 that one ISIS recruiter had previously been trained by infamous Iraq War profiteer, Blackwater.

    9. Activists Inch a Small Step Closer to Exposing the Actors Behind 9/11: Though few Americans heard about it, in August, a New York judge allowed a trial to move forward that could expose a potential government cover-up in the notorious terrorist attack. The ruling was tepid, allowing a 60 to 90 day window for the case to be dismissed or proceed. A later ruling hindered the effort, citing a lack of evidence; but activists have not stopped fighting for the release of 28 redacted pages from the 9/11 commission report that allegedly implicate Saudi Arabia (a majority of the hijackers on 9/11 were of Saudi origin).

    Whatever the truth may be, 2015 witnessed growing doubts about the Saudi government, which beheaded more people than ISIS this year. It also sentenced a poet to beheading for writing poetry about his experience as a refugee from Palestine, sentenced a young man, Ali al-Nimr, to crucifixion for participating in anti-government protests, attempted to issue 350 lashings to a British man in possession of wine (though the U.K. intervened on his behalf, and that of al-Nimr; neither will be punished), and initiated a punishment of 1,000 lashings for a pro-democracy blogger, Raif Badawi.

    10. The FDA Approved OxyContin for Use in Children: Though the approval of the powerful, addictive painkiller for use in 11-year-olds and younger children was unsurprising to those who follow the agency’s track record, the FDA’s justification was shocking. After lawmakers wrote a letter expressing concern to the FDA, the agency’s spokesperson, Eric Pahon, said the news was, in fact, not that serious because it was already standard practice. It’s important to stress that this approval was not intended to expand or otherwise change the pattern of use of extended-release opioids in pediatric patients,” Pahon said. “Doctors were already prescribing it to children, without the safety and efficacy data in hand with regard to the pediatric population.

    However disturbing, the FDA’s decision comported with other related events this year: President Obama appointed a pharmaceutical lobbyist Deputy Commissioner of medical and tobacco products, a study found swaths of heroin users graduate from prescription painkillers, and similarly, 75% of high school students who used heroin had previously abused pharmaceuticals.

    In other stories regarding the misconduct of agencies tasked with keeping people safe, the FDA continued to allow meat companies to use a pharmaceutical additive banned in 150 countries, while whistleblowers at the USDA revealed several plants were producing pork products filled with fingernails, hair, bile, and feces.

    11. The Federal Government Admitted Cannabis May Help Fight Brain Cancer: Though the government has long known about the medical benefits of cannabis — it holds patents on several medicinal qualities — the National Institute on Drug Abuse made waves this year when it published a document acknowledging the healing properties of cannabidiol, a non-psychoactive endocannabinoid. In particular, it noted “[e]vidence from one animal study suggests that extracts from whole-plant marijuana can shrink one of the most serious types of brain tumors.” Though more research is needed, the government’s admission was unexpected, albeit welcomed by many cannabis enthusiasts. Other studies this year suggested cannabis may help heal broken bones and is associated with lower rates of obesity.

    Though many Americans still faced criminal prosecution for treating themselves and their children with cannabis, 2015 demonstrated the long-term trend of decriminalization and legalization will not be reversed. Nations around the world, from Ireland to Costa Rica to Canada laid groundwork to legalize marijuana to various degrees, while a majority of Americans now support legalization.

    12. Nestle Paid $524 to Plunder the Public’s Water Resources: This year, Anti-Media reported on the insidious relationship between Nestle and the Forest Service in California. The investigation found not only that Nestle was using an expired permit to turn exponential profit on 27 million gallons of water, but that a former Forest Service official went on to consult for the company.

    While corporate exploitation ran rampant in 2015, many countries around the world fought back. India sued Nestle after finding one of its products contained lead, while nations around the world banned Monsanto and GE products. Scotland, Denmark, and Bulgaria, among others, all moved to ban GE crops, while multiple lawsuits, highlighted the serious potential health consequences of the widespread use of pesticides (though the EPA disputed that glyphosate, the key ingredient in Monsanto’s Roundup, was an endocrine disrupter in June, in November, news broke that the majority of studies the EPA used to make its decision were funded by industry). Though corporate power remains all but monolithic, 2015 saw humans across the world rise up to resist it. Most recently (and comically), a proposed initiative in California is about to enter the next phase — signature gathering — to place it on the 2016 ballot. If placed on the ballot and passed, it will force California legislators to wear the logos of their top ten donors while they participate in legislative activities. The effort has drawn widespread praise and enthusiasm.

    13. Establishment Caught Manipulating News to Fit Narratives: Following the death of Freddie Gray in Baltimore, contentious protests broke out, eventually resulting in limited rioting and looting. However, while the media attempted to paint protesters as aggressive, it failed to report officers’ prolonged prohibition of their physical movement, to say nothing of the riot gear police showed up wearing. After being unable to move, a brick was thrown, but the media failed to report the instigation and discrimination law enforcement imposed that ultimately led the students and protesters to grow unruly.

    In other manipulations, it was revealed that one Fox News contributor lied about his experience as a CIA agent; he had never been employed at the agency, and only obtained later national security jobs by lying about his CIA experience. Further, CBS edited out comments from Muslims, who discussed U.S. foreign policy as a driver of Islamic extremism during a televised focus group.

    A study by fact checker, Politifact, revealed that all the major outlets surveyed — Fox News, CNN, and MSNBC— consistently report half-truths and lies. It is little wonder, then, that another survey found only 7% of Americans still harbor “a great deal of trust” in the mainstream media.

    Still, it wasn’t just the media that lied. On multiple occasions, government employees were caught attempting to distort facts. In March, news emerged that an IP address linked to the NYPD had attempted to edit the Wikipedia page on Eric Garner. Computers inside Britain’s parliament were linked to attempted edits on pages detailing sex scandals, among other transgressions. In a related story, the FBI reported it had foiled yet another terrorist plot, and once again, it was revealed the culprits were provided support from an informant working for the bureau. Further, in August, Wikileaks released cables that showed an American lobbyist for Saudi Arabia organized a $6 million ad campaign against the president’s nuclear deal with Iran, all through a well-funded group called the “American Security Initiative.” The lobbyist, Norm Coleman, is a former Republican senator.

    14. TPP: In one of the most widely-contested pieces of legislation in recent memory, the Trans-Pacific Partnership moved forward, often in secret. The TPP has been condemned as a corporate power grab that ensures profit for pharmaceutical companies, among many other loathed industries. From clamping down on internet freedom to effectively sanctioning sex trafficking, TPP signals an ominous fate for the future of freedom.

    15. Sharp Uptick in Islamophobia: Amid the carnage of the Paris terror attacks, the recent shooting in San Bernardino, and the surge in Syrian refugees seeking asylum in Western nations, attacks against Muslims skyrocketed in 2015. In the United States, Muslims have been attacked for praying in public, wearing traditional head scarves, and for simply being out in public. Sikhs have been caught in the crossfire for the crime of being brown and wearing cloth on their heads — and thus being confused with Muslims — while at least one Christian has been terrorized as a result of the unmitigated hate currently permeating modern society. Many European nations and U.S. states have rejected the influx of refugees from war-torn Syria.

    Amid the increased hate against Muslims, however, has come an outpouring of love and tolerance. Muslim groups across the world have condemned terror attacks, raised money to help the families of victims, and promoted programs to discourage extremism. At the same time, citizens across Europe, Canada, and even parts of the United States have welcomed Syrian refugees with open arms.

    2015 was a year of chaos, violence, hate, and an ongoing struggle of freedom versus oppression. In many ways, it was like the years, decades, and even centuries and millenia that came before. But amid the conflict and often discouraging headlines, humanity has continued to persevere, offering resistance to seemingly all-powerful forces and paving the way for, if nothing else, potential peace, freedom, and respect for human life.

  • 2015 Was First Pre-Election Year to End In the Red Since the Great Depression

    The year before elections is almost always the best year for stocks.

    Investors notes:

    Pre-election years takes the top spot as the best-performing year for stocks.

    UBS reports:

    Ahead of US Presidential Elections  (Pre-Election Year or Year 3 and Election Year or Year 4) politicians often promote an accommodating and pro-business agenda so that the economy is  strong,  stock  market  is  bullish,  and  voters  are  upbeat  heading
    to the polls.

    The Stock Trader’s Almanac notes (via a press release by publisher Wiley):

    Pre-election years are notoriously the best year of the four-year cycle and fifth years of decades are the strongest, so 2015 has some solid history behind it,” says the Almanac’s Editor-in-chief Jeffrey A. Hirsch. “The Dow has not had a loss in a pre-election year since 1939.

    But in 2015, the Dow closed down for the year2.2% into the red.

  • German Police Evacuate Munich Train Stations, Warn Of Imminent Terrorist Attack

    Munich police have evacuated two train stations in the Germany city of Munich and issued a statement warning citizens of an imminent terrorist attack.

    As BNO News reports,

    The warning by police in the capital of Bavaria state was issued just before 10:45 p.m. local time, but few details were immediately available. It is unclear if any festivities will be canceled.


    "Current information indicates that a terrorist attack has been planned in Munich," police said in a statement. "Please avoid crowds and train stations. We will provide updates on the current situation."



    Both the main railway station and the Pasing station have been evacuated and police are working to identify possible suspects, the statement added.


    *  *  *

    One can only imagine what is going to happen tonight in Times Square…

  • A Year In The Fabulous Life Of Kim Jong-Un, In Pictures

    As the November attacks in Paris and the downing of a Russian passenger jet over the Sinai Peninsula vividly demonstrate, we live in a dangerous world. 

    Indeed, these are trying times for civilized society as countries across the globe struggle to comprehend the phenomenon that is Islamic State whose atrocities have reminded us all that man is capable of committing unspeakable acts of violence. 

    But by focusing squarely on ISIS or on other jihadists inspired by radical Islam, we risk forgetting about the most dangerous man on the planet, whose evil knows no bounds and whose military genius is rivaled only by the likes of Napoleon: 

    To be sure, Kim Jong Un did his best to stay in the spotlight this year in a geopolitical environment dominated by the global proxy conflicts in Syria, Ukraine, Iraq, and Yemen. 

    For instance, the young Supreme Leader nearly restarted the Korean War back in August when the North took a pot shot at a South Korean loudspeaker that was blaring propaganda across the DMZ.

    Kim also threatened to invade the US mainland on at least one occasion and reiterated that the North is prepared to use “weapons unknown to the world.”

    Oh, and he executed defense minister Hyon Yong Chol with an anti-aircraft gun for falling asleep at an official event: 

    And so, because we know everyone is wondering what Kim is up to now that the more “pressing” matters of international security have pushed Pyongyang to the backburner, we present the following 2015 Kim Jong Un photo album courtesy of Reuters:

    North Korean leader Kim Jong Un greets North Korea’s female soccer team as they arrive at Pyongyang International Airport on Monday after winning the 2015 EAFF East Asian Cup, in this photo released August 10, 2015

    Kim Jong Un provides field guidance to the Wonsan Baby Home and Orphanage in the run-up to a ceremony for their completion, in this photo released June 2, 2015.

    Kim Jong Un views the dawn from the summit of Mt Paektu April 18, 2015

    Kim Jong Un attends the 3rd Meeting of Activists in Fisheries under the Korean People’s Army (KPA) in this photo released December 29, 2015.

    Kim Jong Un visits Farm No. 1116, under KPA (Korean People’s Army) Unit 810, in this photo released June 1, 2015.

    Kim Jong Un has a photo session with participants in the second meeting of KPA logistic personnel in this photo 


    Kim Jong Un guides artillery fire and landing exercises in this photo released February 21, 2015

    Kim Jong Un visits the January 18 General Machinery Plant in this photo released December 20, 2015

    Kim Jong Un gives field guidance to the Taedonggang Combined Fruit Farm in this photo released August 19, 2015. 

    *  *  *

    Now that’s a renaissance man if we’ve ever seen one. More here.

  • Yellen, You Have A Problem: The "Rate Hike Corridor" Just Broke

    One week before the Fed hiked rates by 25 bps we warned that “nobody knows if the Fed can actually do it“, citing not only our previous post on the topic, explaining the lack of a detailed framework by the Fed on the mechanics of the rate hike, but also a Bloomberg piece in which we noted the broader logistical concern: “with so much cash sloshing around, will Fed officials be able to nudge rates as high as they want? Will the new-fangled tools they’ve created to engineer the move work, or instead sow the kind of confusion that can dent the Fed’s credibility and spur a broader market selloff?”

    The good news, at least initially, was that the Fed’s plumbing worked smoothly, and instead of the Fed draining up to the $1 trillion in excess liquidity some such as Citi had predicted, the very first fixed-rate reverse repo operation saw just $105 billion in liquidity soaked up by the Fed from 49 counterparties.


    Was there somehow too little excess liquidity, or was there something more structural at hand. It didn’t matter: after all the Federal Funds rates was solidly inbetween the 0.25% floor and 0.50% ceiling set by the Fed’s Reverse Repo and Interest on Overnight Excess Reserves, and there was no reason to worry that the Fed had made a mistake.


    However, this changed today when the Fed Funds rate just tumbled to 0.12%, far below the required 0.25% floor set by the Fed, and down 23 bps from the effective 0.35% Fed Funds rate set yesterday, confirming that indeed the rate hike corridor can and has been breached at least once, and just two weeks into the Fed’s rate hike experiment.


    To be sure, while this is clearly a structural failure of the rate hike corridor, it also reflect the quarter and year-end window dressing we discussed first well over a year ago. SMRA confirms as much:  

    the fed funds rate has dropped to 0.12% this morning, down from 0.47% yesterday. The fed funds rate has dropped at month-end for all of 2015, with some of the larger of these moves occurring at quarter end, like today.


    It appears that these drops will still occur even after the fed rate hike, and possibly that the will be even more extreme, since today’s drop was about 23 basis points, as opposed to previous declines this year, which were usually between 5 and 10 basis points.

    True, there is always an excuse, and in this case it has to do with banks window dressing their balance sheets for the quarter or year-end.

    However, the fact that there is this kind of major discontinuity in the Fed’s rate hike process, throws a huge wrench in the credibilty of the Fed tightening effort.

    After all, if banks can steamroll with impunity the Reverse Repo 0.25% floor to park hundreds of billions, or trillions, in liquidity, then the Fed’s entire experiment will be worth nothing. Keep in mind, the rate hike process only works if banks don’t get a chance to revert to an old standby liquidity regime on the last day of any quarter, in the process getting all the benefits of ZIRP even as the Fed parades just how tight financial conditions are getting.

    Just imagine what would happen on December 31, 2016 if the Fed Funds rate plunged from 1.25% to 0.12% overnight? That would suggest that while the Fed may have drained liquidity for 99% of the quarter, on the one day it matters – the day when the bank’s balance sheet snapshot is formalized for 10-Q and 10-K purposes, ZIRP regime has returned.

    What all this means is that the Fed’s attempt to allow banks to “voluntarily” return excess liquidity has failed, just as we expected it would courtesy of these kinds of dramatic rate discotninuities, and that if Yellen is indeed serious about soaking up liquidity and “bursting bubbles”, she will have to either force banks to submit far greater amounts of liquidity, or drain liquidity structurally, by unwinding the Fed’s balance sheet instead of pretending financial conditions are tighter by pushing the Fed Funds rate by 25 bps even as the Fed still own trillions in various assets. Because another way of putting all this is that the Fed is tightening bank financial conditions on all days in the quarter… except the one when it actually matters!

    And needless to say, the impact on risk assets as a result of the Fed announcing a real liquidity drain – like trimming its balance sheet by a trillion or more – would be dire.

    For now, we sit back and watch to see just how the Fed will spin this first failure of the rate hike process, because now it is no longer merely a speculation: the market knows that Yellen has a problem.

  • Now Comes The Great Unwind – How Evaporating Commodity Wealth Will Slam The Casino

    Submitted by David Stockman via Contra Corner blog,

    The giant credit fueled boom of the last 20 years has deformed the global economy in ways that are both visible and less visible. As to the former, it only needs be pointed out that an economy based on actual savings from real production and income and a modicum of financial market discipline would not build 65 million empty apartment units based on the theory that their price will rise forever as long as they remain unoccupied!

    That’s the Red Ponzi at work in China and its replicated all across the land in similar wasteful investments in unused or under-used shopping malls, factories, coal mines, airports, highways, bridges and much, much more.

    But the point here is that China is not some kind of one-off aberration. In fact, the less visible aspects of the credit ponzi exist throughout the global economy and they are becoming more visible by the day as the Great Deflation gathers force.

    As we have regularly insisted, there is nothing in previous financial history like the $185 trillion of worldwide credit expansion over the last two decades. When this central bank fueled credit bubble finally reached its apogee in the past year or so, global credit had expanded by nearly 4X the gain in worldwide GDP.

    Moreover, no small part of the latter was simply the pass-through into the Keynesian-style GDP accounting ledgers of fixed asset investment (spending) that is destined to become a write-off or public sector white elephant (wealth destruction) in the years ahead.

    Global Debt and GDP- 1994 and 2014

    The credit bubble, in turn, led to booming demand for commodities and CapEx. And in these unsustainable eruptions layers and layers of distortion and inefficiency cascaded into the world economy and financial system.

    One of these was an explosion of CapEx in the oil patch and the mining sector in response to massive price and margin gains and the resulting windfall rents on existing assets. In the case of upstream oil and gas, for example, worldwide investment grew from $250 billion to $700 billion in less than a decade.

    Needless to say, there is now so much excess supply and capacity on the world market that oil has plunged into a collapse that is likely to last for years, as old investment come on-stream while world demand falters in the face of the gathering global recession. Already, investment is estimated to have dropped by 20% in 2015, and that is just the beginning.

    This unfolding collapse of oil and gas investments, of course, will ricochet through the capital goods and heavy construction sectors with gale force. Eventually, annual investment may decline by $250 to $400 billion before balance is restored, meaning that what were windfall profits and surging wages and bonuses in these sectors just a year or two back will evaporate in the years ahead.

    Contrary to the circular logic of our Keynesian central planners and Wall Street stock peddlers, the pending massive loss of value added capital spending in the energy patch is not a part of some grand reallocation game; it won’t be made up by households—-which are already at peak debt—— borrowing even more in order to go to the restaurant or yoga studio.

    Instead, as the credit bubble begins to shrink it means that profits, incomes, balance sheets and credit-worthiness are all shrinking, too. So is the related GDP.

    The same kind of malinvestment occurred in the mining sectors where Australia’s boom in iron ore, coal, bauxite and other industrial materials provides a good proxy.  As shown below, CapEx in mining grew by nearly 6X in less than a decade.

    But given the massive oversupply and plunging prices and margins in these commodities, and the overhang of still more capacity in the pipeline coming to completion, it is fair to say that investment in the global mining industry is sinking into a depression that will last the better part of a decade.

    This is the scariest mining chart you'll see today


    Indeed, as shown above, global mining industry CapEx soared by 5X during the seven years through the 2012 peak, but the overwhelming share of that was in greenfield and brownfield investments. Yet given the massive global overcapacity in iron ore, copper, metallurgical coal, bauxite/alumina etc., those kinds of projects are likely to be few and far between in the years ahead.

    Needless to say, that means shrinking profits and the massive loss of high wage jobs and vendor service contracts. Even baristas at Starbucks do not earn a fraction of what had been paid to miners and UAW members on the Caterpillar assembly line.

    Nor was the credit-fueled CapEx boom limited to energy and metals. Bloomberg carried a story today outlining a similar super-cycle in the global rubber industry. As a result of massive rubber plantation expansion in response to soaring prices and windfall profits, the industry is now facing investment and job killing surpluses as far as the eye can see.

    Global demand for natural rubber, used mostly in tires, is slowing as the economy cools in China, the world’s largest buyer of new cars. Supplies are expanding after a decade-long rally in prices to a record in 2011 encouraged top producers like Thailand, Indonesia and Vietnam to plant more trees. Output will exceed use for two more years, with the surplus quadrupling in 2016, according to The Rubber Economist Ltd., a London-based industry researcher.


    ……Rubber traded in Tokyo, a global benchmark, has tumbled 70 percent from a record in 2011, touching a six-year low of 153 yen ($1.26) a kilogram on Nov. 6. Futures in Shanghai have slumped 22 percent in 2015. The export price from Thailand, the top producer, is down 23 percent…..


    Global production is set to exceed demand by 411,000 metric tons next year and by 430,000 tons in 2017, compared with a surplus of 98,000 tons in 2015, The Rubber Economist predicted on Dec. 9. Output will increase 3.8 percent next year to 13 million tons and will keep expanding through 2018, the researcher said. Consumption won’t grow nearly as fast, which will leave stockpiles by the end of 2017 at a record 3.7 million tons, said Prachaya Jumpasut, managing director of The Rubber Economist.


    Excess supplies may keep prices subdued for a decade, said Hidde Smit, an industry adviser who has studied the market for more than 30 years and is the former secretary-general of the International Rubber Study Group. Even with some smaller farms cutting back now, the planted area across 11 Asian countries that are the primary growers has surged 45 percent since 2004, he said.



    So with producer profits and incomes falling in commodity sectors and capital goods industries all over the world, there is no prospect of a smooth rotation into more services and consumption. Deflation means not just lower oil or steel prices; it also means the evaporation of production and incomes which were falsely inflated by the 20-year credit binge.

    And that’s not the half of it. The massive windfalls on commodities and capital goods earned by producers during the great credit inflation were not entirely reinvested in new capacity and fixed assets. As the Wall Street Journal documented recently, it also enabled a huge increase in the balance sheets of sovereign wealth funds due to state ownership or heavy taxation of oil and mineral production.

    But now the days of heady accumulation of “sovereign wealth” in Saudi Arabia, Norway, Kazakhstan and dozens of commodity producers in between is over and done. What is happening is that these funds are entering a cycle of liquidation which is unprecedented in financial history.

    Indeed, the data for Saudi Arabia, Qatar, Kuwait, the UAE and other members of the Gulf Cooperation Council (GCC) is stunning. During the global credit boom they amassed sovereign wealth funds totaling $2.3 trillion. But with deficits now estimated at 13% of GDP and rising, the level of asset liquidation is soaring.

    Thus, if crude oil prices recover to $56 per barrel next year, the GCC states will need to liquidate $208 billion of investments. Yet if prices fall to $20 per barrel, as Goldman Sachs has warned, they would need to liquidate nearly $500 billion of their booty in a single year.

    But regardless of the exact crude oil path in the years ahead, prices are sure to stay in the sub-basement for an extended period. That means that the GCC states may need to liquidate the entirety of their sovereign wealth funds by early in the next decade.


    The same is true on a worldwide basis for all of the energy and mineral based sovereign wealth funds. They will be in a liquidation mode for years to come as the great commodity deflation runs its course.

    In a word, the unnatural Big Fat Bid of the sovereign wealth funds is going All Offers as oil and commodity producers struggle to fund their budgets.

    Stated differently, just as the commodity bubble effects did not stay contained in the energy and metals markets as the global credit bubble expand, the same will be true in the deflation cycle.

    The unfolding correction of the visible excesses of the credit inflation – such as overinvestment and malinvestment – will destroy incomes and profits; the Great Unwind of the less visible effects, such as the sovereign wealth fund liquidations, are a giant pin aimed squarely at the monumental worldwide bubbles in stock, bonds and real estate.

  • Technical Analysis of the Corn Market

    By EconMatters

    Corn Market 2015


    I have been watching corn prices lately as they are getting low enough to at least pique my interest into looking at a market that usually just gets bypassed with the rest of my agricultural futures prices tab on my trading platform, more out of habit than having anything in particular against the agricultural markets. The March 2016 Futures contract was down about 16% in 2015 along with most of the commodity space on fund outflows, a weak China, and a strong dollar.


    Economics of Agricultural Space


    This goes against my intuition regarding long-term supply and demand drivers in the global economy. For example, the world population continues to grow, good farming land with proper soil management is a finite resource, and the world is going to need more food in the future. The Corn market looks like a buy over a five year time frame, unless the Midwest lobby loses big in Washington politics and the corn ethanol production market completely goes by the wayside, this probably would result in a drop before another spike as farmers readjust crop sizes to the new economics. But all else being equal I expect the corn market to go on another one of those massive runs higher sometime over the next five years given its recent history from a trading standpoint, and the broader economic drivers for the commodity over time.


    Market Timing


    But from a trading standpoint what I really want to know is are there any good trading setups because although I try to eat relatively healthy and exercise when I can for practical purposes I could be dead in five years. Maybe Warren Buffet can wait for 5 years for his investments to pay off but most of the street gets paid on an annual and quarterly basis. If a fund has a bad quarter, redemptions go up, and their assets under management go down. This is not good for fund managers as their compensation goes down from a lower management fee base, and obviously if they are having a bad quarter their percentage of profits number is headed in the wrong direction.


    The bottom line is that most people have to get the timing right in an investment or trade, at least within the same calendar year. So what do the technical look like in the corn market? The theory is that everything that is going on with the fundamentals of the corn market are reflected in the charts, along with the technical and psychological drivers of the market. The idea is that the technicals will tell me when to get back into the corn market at least for a nice trading setup, they will tell me when something regarding market sentiment is changing at least from a fund flows perspective.




    Therefore in looking at the two year futures chart I have picked out the 410.00 cents per bushel area where I start to get interested in the corn market. We are currently at the 358.00 cents per bushel area, and I am not looking for a short in this market. However, from a trader`s perspective there is a two year trend line going from the 510.00 cents per bushel area to the current price area of 358.00 cents per bushel area. If price breaks above this trend line around 370.00 cents per bushel, this could be a good buy stop entry with a relatively tight protective stop in the area of 364.00 cents per bushel to 357.00 cents per bushel depending upon your trading style.


    Overhead Resistance


    The first target on this entry would be a break of the 396.60 cents per bushel high in late October of this year on the six month chart to test overhead resistance at the 410.00 cents per bushel high last hit October 7th of 2015. The Reward to Risk profile is 6.67 Units of Reward to 1 Units of Risk with the tighter stop around 364.00 cents per bushel , and 3 to 1 with the wider protective stop at 357.00 cents per bushel. I would watch price very carefully because what I am in this trade for is a break of the 410.00 cents per bushel overhead resistance area with the next profit target around 464.00 cents per bushel last established in July of 2015.


    As long as you have a winning trade, why not let the market tell you when it is done going in your direction? Has the trade broken any key technical levels of support? These markets are a lot bigger than one would think, and once the fund flows start coming into a market, a trader or investor needs to take this into account, as often the results are binary. For example the market is either going to go your direction, and if it does expand your profit target more because it is going to move a good way on changing capital structures. Or alternatively the trade is a non-starter, and a tight stop will tell you pretty early that your timing is just not right on the trade for a relatively cheap price.


    The next overhead resistance level in the corn market is around 510.00 cents per bushel last established in late April of 2014. The five year high in the corn market was established on August 6th 2012 at around 845.00 cents per bushel. The 10-Year Corn Futures chart basically has a double top on it around the 800.00 cents per bushel area, which give or take the short squeeze effect, is good enough for a price barometer where the market starts to entertain that it is overvalued, and lots of shorts and hedges enter the market for good.


    Long Term Support


    The fifteen year chart has the 200.00 to 250.00 cents per bushel area as longer term support for those wanting to look at the trade on the short side. With the 25-Year chart reinforcing the idea that the 200.00 cents per bushel area represents solid long term support for corn futures. The problem is that a lot of this history is before modern electronic markets really took off and became global marketplaces for investors. And when inflation effects are factored into the equation, on an inflation adjusted basis corn is probably at or near a 25 year low right now at the current price.


    The Patient Investor


    And for those investors with a five year time frame and no pressure from outside investors, given the nice bull moves of the last 10 years in the corn market, it makes sense to try and anticipate the next large move in this agricultural staple. Therefore, if you want to get into the corn market now and wait for the move, one needs an instrument or asset where they can stay in the trade and not be liquidated, depreciated beyond reasonable time decay, and get the best full value of the move if it transpires.


    Corn Futures Curve


    For example, the December 2019 Corn Futures contract only has 9 contracts of open interest at the close today with a prior close at 417.40 cents per bushel with the last actual trading volume today in the December 2018 futures contract with a price of 410.00 cents per bushel with a lofty 3 contracts trading hands. Most of the open interest in the corn futures market only goes out 2 years to the December 2017 futures contract which is trading around the 400.00 cents per bushel area at the close of this year.


    For those who don`t like to roll over futures contracts the December 2017 contract probably isn`t the worst way to play it since most investors may not want to get into the complexities of buying up farm land, and are not going to have access to the swaps market for practical purposes. Thus, we will see if 2016 brings better fortune for the corn market than the past 3 years where corn futures are down nearly 50% over this timeframe.

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  • Stocks End 2015 In The Red, Worst Year With Oil Since 1984

    We end the year with a dump bump and the best analogy for US equity markets we could find all year… (Forward to 2:00)

    Never Gets Old, sorry.

    *  *  *

    WORST SINCE 2008…

    2015 ended with The S&P 500 (oops!), The Dow Industrials (weak), Dow Transports (monkey-hammered), and Small Caps (slammed) in the red, But Nasdaq well in the green…


    Thanks to FANGs…


    And not thanks to Energy stocks…


    As Breadth collapsed…


    The 140 year streak is over – a year ending with "5" closed red for the S&P 500!!



    A year of living cognitively dissonant…


    Gold, Oil, and The Dow all lower on the year for the first time since 1984…

    1985 saw WTI rally 29%, Gold rally 14%, and Dow surge 30%


    This was Apple's worst year since 2008 – down 4% (while Netflix gained 140%). This means the "no brainer" trade has made no money for investors since October 27th 2014…

    Shares have shed about a fifth of their value since touching a high of $134.54 on April 28, and are down 17.5 percent since the inclusion of the stock in the Dow Jones industrial average in March. During its six-year run of gains, the stock has risen by at least 25 percent in five of those years.

    Crude was the worst in 2015. The Dollar Index rose 9.2% and PMs dropped 10-11%. Bonds broadly speaking lost 4.3% as The Dow dropped around 2%…


    Crude had its worst 2-year drop on record…


    Leveraged Loans tumbled almost 3% YoY – the biggest drop since the financial crisis (and 2nd biggest drop on record). Lev100 is now at its lowest since August 2013…

    *  *  *

    Q4 was a big quarter for stocks… (except Trannies)


    As they outperformed bonds (-2.5%), HY (+1.3%), and PMs (-5%)

    *  *  *

    On the day every effort was made to get The S&P 500 above 2058.90 and ensure a green close for the year…


    But despite the best effort for a post-EU-close ramp, it failed…


    As USDJPY was ramped (fail)


    Crude was epically ramped (fail)


    and VIX was crushed the moment Europe closed.. but it did not last and towards the end of the day VIX went bananas…


    Shorts were instantly squeezed as soon as Europe closed… but that effort stalled once the S&P broke above breakeven for the year… and it was dumped into the close…


    *  *  *

    On the week, stocks were red as Santa's rally faded… with a very ugly close…


    Futures show the peak right at the cash close on Tuesday…


    Since The FOMC, everything is down…


    Treasury yields rose on the week but rallied into the close today…


    The Dollar Index ended the week around 1% higher driven by weakness in EUR and Swissy…


    Commodities mostly dropped this week (though copper clung to short-squeeze gains)…


    Charts: Bloomberg

    Bonus Chart: Because Fun-Durr-Mentals…


    Bonus Bonus Chart: Bad Breadth Breaking Bad-der…

  • America In 2015 (The Chart)

    2015 – the year when The Fed hiked rates for the first time in a decade to confirm its own narrative that "everything is awesome" and the US economy can handle 'normalization'.


    2015 – the worst collapse in US macro-economic data since 2008 on both an absolute and relative to expectations basis.



    It was different this time. The 'new normal' pattern has been an optimistic start to the year which then disappoints into mid-year only to resurge and surprise meteoroconomists in the second half of the year as government fiscal year-end spending and some form of stimulus invariably drove surveys back into optimistic territory.


    That didn't happen in 2015.

  • Turks Warn "We're One Step Away From Civil War" On Erdogan Crackdown

    “When Justice and Development won by a landslide — a result that Mr. Erdogan interpreted as the public’s demand for stability — many had hoped it would lead to the revival of peace talks.”

    That’s from The New York Times, who is out on Thursday with a look at Turkey’s escalating civil war. 

    To be sure, we haven’t been shy in our assessment of the conflict. We’ve branded the fighting a “civil war” since the summer, when HDP’s strong showing at the ballot box derailed Erdogan’s efforts to transition the country to an executive presidency, a move which would help to strongman consolidate his power.

    A subsequent suicide bombing in Suruc prompted the PKK to kill two Turkish policemen the group says were cooperating with Islamic State (which was blamed for the initial attack). That was more than Ankara needed to justify a crackdown on the PKK in the name of the war on “terror.” From there, it was an all-out war between Erdogan and the Kurds, a conflict which quickly transformed cities like Cizre, into warzones.

    As al-Jazeera wrote in August, government attacks ”have put Cizre, a long-defiant bastion of pro-Kurdish sentiment, back on the front lines of a conflict that has cost more than 30,000 lives since 1984.” Here’s some useful color from Vice

    Cizre has spent years on the fringes of war. The unremarkable-looking town of just over 100,000 lies on the Tigris River, around 30 miles from the tripoint where Turkey meets conflict-ravaged Syria and Iraq, and violence regularly strays over the national boundaries. Now, the cycle of airstrikes and renewed PKK attacks on Turkish troops threaten a return to the three-decade-long struggle between the two sides that claimed more than 40,000 lives. And here, residents feel like they’re at the heart of the fight. 



    “There’s a saying, ‘if there’s peace, it will start from Cizre, and if there’s war, it will start from here as well,'” the town’s co-mayor Leyla Imret, 28, told VICE News recently. “And we can say we have a civil war in Turkey.” 

    Less than a month after those words were written, two Vice journalists were arrest in Southeast Turkey.

    Sadly, Erdogan’s campaign against the Kurds did not end after AKP put on a better showing in November’s manipulated rerun elections. “Instead,” The New York Times notes, “the violence has sharply escalated, stoking fears that it might spread.”

     WSJ ran a piece last week that documented the transformation of Kurdish cities and towns into warzones. “Since the government declared what it called a ‘decisive’ campaign to end five months of limited violence between Kurds and government security forces, young Kurdish militants in the cities of Diyarbakir, Cizre, Silopi and Nusaybin have been targeted by Turkish tanks, helicopters, artillery and snipers,” The Journal wrote. 

    “Things are reaching a critical point, and it’s not clear where things are heading,” one Western official in Turkey warned. Well, according to The Times – whose piece echoes what The Journal wrote last week and what we’ve been keen on documenting for the better part of six months – “things” are headed towards civil war. 

    Earlier this week, Erdogan accused HDP co-head Selahattin Demirtas of treason after the politician suggested over the weekend that the Kurds needed to declare and defend their automony or “live under one man’s tyranny.” 

    “Where do you get the right to talk about establishing a state in east and southeast regions within Turkey’s unitary structure?,” Erdogan fumed, on his way to Saudi Arabi to discuss matters of mutual interest in Riyadh. Demirtas may have his parliamentary immunity revoked on the way to prosecution. 

    But while HDP politicians are prosecuted, PKK sympathizers are persecuted and the world is now beginning to worry that Southeast Turkey could soon end up looking a lot like Syria. Here’s more from The Times:

    For Mr. Erdogan, the Kurdish militants in Turkey are now the most important enemy.


    “You will be annihilated in those houses, those buildings, those ditches which you have dug,” he said recently, speaking about the militants to a crowd of his supporters in the central Anatolian city of Konya. “Our security forces will continue this fight until it has been completely cleansed and a peaceful atmosphere established.”


    Photographs and video clips from the region distributed by local officials show chaos and destruction, with black smoke rising above shelled buildings and neighborhoods.


    The town of Cizre, in the southeastern province of Sirnak, has been under a curfew for more than two weeks, with mounting civilian casualties. Last Friday, a 3-month-old baby and her grandfather were killed in crossfire between security forces and militants, according to local medics, who said the family was unable to reach help after its house had been shelled.



    Three soldiers were killed by the Kurdistan Workers’ Party in Cizre over the weekend, the Turkish military said in a statement. At least 200 members of Turkey’s security forces have been killed since the conflict resumed.


    In the district of Silopi, which borders northern Iraq, residents say they are trapped in a war zone.


    “The tanks fire all day and we have nowhere left to hide,” said Nurettin Kurtay, a teacher reached by phone.


    “People are dying in their own homes,” he said. “Our schools and our infrastructure has been destroyed. There is no difference between what is going on here and next door in Iraq and Syria.”


    And yet this week, Erdogan – with a straight face – accused the Assad government of “mercilessly killing” civilians. But what’s going on in Turkey is precisely the same thing that began to unfold in Syria in 2011. That is, certain elements in the country were subjected to a government crackdown when they agitated for change. In both cases, the government (Assad in Syria and Erdogan in Turkey) accused the other side of being “terrorists” and in both cases, civilian casulaties began to pile up. 

    Somehow though, Assad is a “butcher” and Erdogan is a democratically elected leader who is merely fighting to eradicate terrorist elements. 

    Needless to say, this is completely despicable at this point, especially considering the fact that the PKK’s Syrian affiliate (the YPG) are fighting the real “terrorists” (ISIS) across the border. A border which Turkey has made highly porous on purpose in order to allow for the easy flow of Sunni extremists (not to mention Islamic State oil) into and out of Syria.

    Perhaps when NATO looks back four years from now on what may by then be a genocide, someone in Washington will have the decency to admit that a disastrous foreign policy combined with the blatant hypocrisy inherent in how the US characterizes Assad’s fight against rebels and Erdogan’s crackdown on the Kurds ultimately led to the death of half a million people in the Mid-East.

    We close with the following quote from Engin Gur, a father of two who came to Istanbul from the southeastern district of Sur, and who spoke to The Times:

    “What people here in the west do not realize is that we are one step away from a civil war.”

    *  *  *

    More images from Cizre

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