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Oct 09

Today’s News October 9, 2015

  • Dollar Demolition Extends To 6th Day As EM/Asian FX Soars Most In Over 6 Years

    As the odds of a Fed rate-hike this century drift asymptotically back towards zero, the stability-desirous central bankers of the emerging world are suddenly facing soaring currencies as hot money floods back into Emerging Asian markets. The Rupiah and Ringgit are up almost 3% overnight as everything from the Baht to the Won are surging against the USD. Asian FX is up 6 straight days against the USD (and 8 of the last 9) for the biggest 9-day gain since May 2009.

     

    The China devaluation spike in The USD against Asian FX is rapidly being unwound…

     

    The Dollar Demolition of the last 9 days is the biggest since May 2009.

     

    As all EM FX is soaring…

     

    Led by a massive spike in Indonesia's Rupiah…

     

    So now what will the talking-heads say about a weaker USD? Especially in light of the fact that they crowed about a strong USD being indicative of a strong US economy… is The US now the dirtiest dirty shirt?

     

    Charts: Bloomberg

  • "Neutralizing" John Lennon: One Man Against The "Monster"

    Submitted by John Whitehead via The Rutherford Institute,

    “You gotta remember, establishment, it’s just a name for evil. The monster doesn’t care whether it kills all the students or whether there’s a revolution. It’s not thinking logically, it’s out of control.”—John Lennon (1969)

    John Lennon, born 75 years ago on October 9, 1940, was a musical genius and pop cultural icon.

    He was also a vocal peace protester and anti-war activist and a high-profile example of the lengths to which the U.S. government will go to persecute those who dare to challenge its authority.

    Long before Chelsea Manning and Edward Snowden were being castigated for blowing the whistle on the government’s war crimes and the National Security Agency’s abuse of its surveillance powers, it was Lennon who was being singled out for daring to speak truth to power about the government’s warmongering, his phone calls monitored and data files collected on his activities and associations.

    For a little while, at least, Lennon became enemy number one in the eyes of the U.S. government.

    Years after Lennon’s assassination it would be revealed that the FBI had collected 281 pages of files on him, including song lyrics, a letter from J. Edgar Hoover directing the agency to spy on the musician, and various written orders calling on government agents to set the stage to set Lennon up for a drug bust. As reporter Jonathan Curiel observes, “The FBI’s files on Lennon … read like the writings of a paranoid goody-two-shoes.”

    As the New York Times notes, “Critics of today’s domestic surveillance object largely on privacy grounds. They have focused far less on how easily government surveillance can become an instrument for the people in power to try to hold on to power. ‘The U.S. vs. John Lennon’ … is the story not only of one man being harassed, but of a democracy being undermined.”

    Indeed, as I point out in my book Battlefield America: The War on the American People, all of the many complaints we have about government today—surveillance, militarism, corruption, harassment, SWAT team raids, political persecution, spying, overcriminalization, etc.—were present in Lennon’s day and formed the basis of his call for social justice, peace and a populist revolution.

    For all of these reasons, the U.S. government was obsessed with Lennon, who had learned early on that rock music could serve a political end by proclaiming a radical message. More importantly, Lennon saw that his music could mobilize the public and help to bring about change. Lennon believed in the power of the people. Unfortunately, as Lennon recognized: “The trouble with government as it is, is that it doesn’t represent the people. It controls them.”

    However, as Martin Lewis writing for Time notes: “John Lennon was not God. But he earned the love and admiration of his generation by creating a huge body of work that inspired and led. The appreciation for him deepened because he then instinctively decided to use his celebrity as a bully pulpit for causes greater than his own enrichment or self-aggrandizement.”

    For instance, in December 1971 at a concert in Ann Arbor, Mich., Lennon took to the stage and in his usual confrontational style belted out “John Sinclair,” a song he had written about a man sentenced to 10 years in prison for possessing two marijuana cigarettes. Within days of Lennon’s call for action, the Michigan Supreme Court ordered Sinclair released.

    What Lennon did not know at the time was that government officials had been keeping strict tabs on the ex-Beatle they referred to as “Mr. Lennon.” FBI agents were in the audience at the Ann Arbor concert, “taking notes on everything from the attendance (15,000) to the artistic merits of his new song.”

    The U.S. government was spying on Lennon.

    By March 1971, when his “Power to the People” single was released, it was clear where Lennon stood. Having moved to New York City that same year, Lennon was ready to participate in political activism against the U. S. government, the “monster” that was financing the war in Vietnam.

    The release of Lennon’s Sometime in New York City album, which contained a radical anti-government message in virtually every song and depicted President Richard Nixon and Chinese Chairman Mao Tse-tung dancing together nude on the cover, only fanned the flames of the conflict to come.

    The official U.S. war against Lennon began in earnest in 1972 after rumors surfaced that Lennon planned to embark on a U.S. concert tour that would combine rock music with antiwar organizing and voter registration. Nixon, fearing Lennon’s influence on about 11 million new voters (1972 was the first year that 18-year-olds could vote), had the ex-Beatle served with deportation orders “in an effort to silence him as a voice of the peace movement.”

    Then again, the FBI has had a long history of persecuting, prosecuting and generally harassing activists, politicians, and cultural figures, most notably among the latter such celebrated names as folk singer Pete Seeger, painter Pablo Picasso, comic actor and filmmaker Charlie Chaplin, comedian Lenny Bruce and poet Allen Ginsberg.

    Among those most closely watched by the FBI was Martin Luther King Jr., a man labeled by the FBI as “the most dangerous and effective Negro leader in the country.” With wiretaps and electronic bugs planted in his home and office, King was kept under constant surveillance by the FBI with the aim of “neutralizing” him. He even received letters written by FBI agents suggesting that he either commit suicide or the details of his private life would be revealed to the public. The FBI kept up its pursuit of King until he was felled by a hollow-point bullet to the head in 1968.

    While Lennon was not—as far as we know—being blackmailed into suicide, he was the subject of a four-year campaign of surveillance and harassment by the U.S. government (spearheaded by FBI Director J. Edgar Hoover), an attempt by President Richard Nixon to have him “neutralized” and deported. As Adam Cohen of the New York Times points out, “The F.B.I.’s surveillance of Lennon is a reminder of how easily domestic spying can become unmoored from any legitimate law enforcement purpose. What is more surprising, and ultimately more unsettling, is the degree to which the surveillance turns out to have been intertwined with electoral politics.”

    As Lennon’s FBI file shows, memos and reports about the FBI’s surveillance of the anti-war activist had been flying back and forth between Hoover, the Nixon White House, various senators, the FBI and the U.S. Immigration Office.

    Nixon’s pursuit of Lennon was relentless and in large part based on the misperception that Lennon and his comrades were planning to disrupt the 1972 Republican National Convention. The government’s paranoia, however, was misplaced.

    Left-wing activists who were on government watch lists and who shared an interest in bringing down the Nixon Administration had been congregating at Lennon’s New York apartment. But when they revealed that they were planning to cause a riot, Lennon balked. As he recounted in a 1980 interview, “We said, We ain’t buying this. We’re not going to draw children into a situation to create violence so you can overthrow what? And replace it with what? . . . It was all based on this illusion, that you can create violence and overthrow what is, and get communism or get some right-wing lunatic or a left-wing lunatic. They’re all lunatics.”

    Despite the fact that Lennon was not part of the “lunatic” plot, the government persisted in its efforts to have him deported. Equally determined to resist, Lennon dug in and fought back. Every time he was ordered out of the country, his lawyers delayed the process by filing an appeal. Finally, in 1976, Lennon won the battle to stay in the country when he was granted a green card. As he said afterwards, “I have a love for this country…. This is where the action is. I think we’ll just go home, open a tea bag, and look at each other.” 

    Lennon’s time of repose didn’t last long, however. By 1980, he had re-emerged with a new album and plans to become politically active again.

    The old radical was back and ready to cause trouble. In his final interview on Dec. 8, 1980, Lennon mused, “The whole map’s changed and we’re going into an unknown future, but we’re still all here, and while there’s life there’s hope.”

    That very night, when Lennon returned to his New York apartment building, Mark David Chapman was waiting in the shadows. As Lennon stepped outside the car to greet the fans congregating outside, Chapman, in an eerie echo of the FBI’s moniker for Lennon, called out, “Mr. Lennon!”

    Lennon turned and was met with a barrage of gunfire as Chapman—dropping into a two-handed combat stance—emptied his .38-caliber pistol and pumped four hollow-point bullets into his back and left arm. Lennon stumbled, staggered forward and, with blood pouring from his mouth and chest, collapsed to the ground.

    John Lennon was pronounced dead on arrival at the hospital. He had finally been “neutralized.”

    Yet where those who neutralized the likes of John Lennon, Martin Luther King Jr., John F. Kennedy, Malcolm X, Robert Kennedy and others go wrong is in believing that you can murder a movement with a bullet and a madman.

    Thankfully, Lennon’s legacy lives on in his words, his music and his efforts to speak truth to power. As Yoko Ono shared in a 2014 letter to the parole board tasked with determining whether Chapman should be released: “A man of humble origin, [John Lennon] brought light and hope to the whole world with his words and music. He tried to be a good power for the world, and he was. He gave encouragement, inspiration and dreams to people regardless of their race, creed and gender.”

    Sadly, not much has changed for the better in the world since Lennon walked among us. Peace remains out of reach. Activism and whistleblowers continue to be prosecuted for challenging the government’s authority. Militarism is on the rise, with police acquiring armed drones, all the while the governmental war machine continues to wreak havoc on innocent lives. Just recently, for example, U.S. military forces carried out airstrikes in Afghanistan that left a Doctors without Borders hospital in ruins, killing several of its medical personnel and patients, including children.

    For those of us who joined with John Lennon to imagine a world of peace, it’s getting harder to reconcile that dream with the reality of the American police state. For those who do dare to speak up, they are labeled dissidents, troublemakers, terrorists, lunatics, or mentally ill and tagged for surveillance, censorship or, worse, involuntary detention.

    As Lennon shared in a 1968 interview:

    I think all our society is run by insane people for insane objectives… I think we’re being run by maniacs for maniacal means. If anybody can put on paper what our government and the American government and the Russian… Chinese… what they are actually trying to do, and what they think they’re doing, I’d be very pleased to know what they think they’re doing. I think they’re all insane. But I’m liable to be put away as insane for expressing that. That’s what’s insane about it.”

    So what’s the answer?

    Lennon had a multitude of suggestions.

    “If everyone demanded peace instead of another television set, then there’d be peace.”

     

    “Produce your own dream. If you want to save Peru, go save Peru. It’s quite possible to do anything, but not to put it on the leaders….You have to do it yourself. That’s what the great masters and mistresses have been saying ever since time began. They can point the way, leave signposts and little instructions in various books that are now called holy and worshipped for the cover of the book and not for what it says, but the instructions are all there for all to see, have always been and always will be. There’s nothing new under the sun. All the roads lead to Rome. And people cannot provide it for you. I can’t wake you up. You can wake you up. I can’t cure you. You can cure you.”

     

    “Life is very short, and there’s no time for fussing and fighting my friends.”

     

    “Peace is not something you wish for; It’s something you make, Something you do, Something you are, And something you give away.”

    “If you want peace, you won’t get it with violence.”

     

    “Say you want a revolution / We better get on right away / Well you get on your feet / And out on the street / Singing power to the people.”

    And my favorite advice of all: “All you need is love. Love is all you need.”

  • Fukushima Kids Suffer Thyroid Cancer Up To 50x Normal Rate, New Study Finds

    Children living near the Fukushima nuclear meltdowns have been diagnosed with thyroid cancer at a rate 20 to 50 times that of children elsewhere, according to a new study. As AP reports, most of the 370,000 children in Fukushima prefecture have been given ultrasound checkups since the meltdown and thyroid cancer is suspected or confirmed in 137 of those children. "This is more than expected and emerging faster than expected," according to the lead author of the study, and raises doubts about the government's less fearful view.

     

    Right after the disaster, the lead doctor brought in to Fukushima, Shunichi Yamashita, repeatedly ruled out the possibility of radiation-induced illnesses. The thyroid checks were being ordered just to play it safe, according to the government. But, as AP reports, a new study says children living near the Fukushima nuclear meltdowns have been diagnosed with thyroid cancer at a rate 20 to 50 times that of children elsewhere, a difference the authors contend undermines the government's position that more cases have been discovered in the area only because of stringent monitoring

    Most of the 370,000 children in Fukushima prefecture (state) have been given ultrasound checkups since the March 2011 meltdowns at the tsunami-ravaged Fukushima Dai-ichi nuclear plant. The most recent statistics, released in August, show that thyroid cancer is suspected or confirmed in 137 of those children, a number that rose by 25 from a year earlier. Elsewhere, the disease occurs in only about one or two of every million children per year by some estimates.

     

    "This is more than expected and emerging faster than expected," lead author Toshihide Tsuda told The Associated Press during a visit to Tokyo. "This is 20 times to 50 times what would be normally expected."

     

     

    But Tsuda, a professor at Okayama University, said the latest results from the ultrasound checkups, which continue to be conducted, raise doubts about the government's view.

     

    Thyroid cancer among children is one sickness the medical world has definitively linked to radiation after the 1986 Chernobyl catastrophe. If treated, it is rarely fatal, and early detection is a plus, but patients are on medication for the rest of their lives.

    Scientists are divided on Tsuda's conclusions. Conclusions about any connection between Fukushima radiation and cancer will help determine compensation and other policies. Many people who live in areas deemed safe by the government have fled fearing sickness, especially for their children.

    An area extending about 20 kilometers (12 miles) from the nuclear plant has been declared an exclusion zone. The borders are constantly being remapped as cleanup of radiated debris and soil continues in an effort to bring as many people back as possible. Decommissioning the plant is expected to take decades.

     

    Noriko Matsumoto, 53, who used to work as a nurse in Koriyama, Fukushima, outside the no-go zone, fled to Tokyo with her then-11-year-old daughter a few months after the disaster. She had initially shrugged off the fears but got worried when her daughter started getting nosebleeds and rashes.

     

    "My daughter has the right to live free of radiation," she said. "We can never be sure about blaming radiation. But I personally feel radiation is behind sicknesses."

    *  *  *

    So once again, despite all the promises from officials that everything is under control, the fact is that Fukushima has devastated a generation and continues to leak radioactive material into the groundwater (and ocean).

    Still… at least The 2020 Olympians won;t be swimming in shit like in Brazil next year.

  • Liquidity Strains Reappear As China's "Golden Week" Stock & Housing Market Disappoints

    Despite last night's disappointingly weak China re-open (notably less than US ADRs had implied), it appears everyone and their pet rabbit levered up as China margin-buying rose CNY21bn – the most in 2 months. It appears China's housing market also disappointed hope-strewn expectations as Golden Week home sales slowed dramatically YoY (blamed on weather). All is not well in the liquidioty stress department as despite ongoing injections, o/n HIBOR spiked 240bps overnight. China stocks are mixed at the open as PBOC strengthens the Yuan fix for the 5th day in a row to 2 month highs. Concerns are also growing in China's corporate bond market where bubble flows have greatly rotated from stocks to drive yields on risky firms to record lows.

     

    The China (Stock) Bubble Is Dead, Long Live The China (Bond) Bubble…

    As a rout in Chinese stocks this year erased $5 trillion of value, Bloomberg notes that investors fled for safety in the nation’s red-hot corporate bond market. They may have just moved from one bubble to another.

     

    China margin-buying surged 129% off 13 month lows, the biggest daily rise in almost 3 years…

     

    Overall, Chinese stocks re-opened notably weaker than US ADRs expected…

     

    And there is not much further gains today, despite US equity exuberance…

    • *CHINA'S CSI 300 STOCK-INDEX FUTURES RISE 0.2% TO 3,241.4

    And PBOC strengthens the Yuan fix further…for the 5th day in a row to 2 month highs

    • *CHINA SETS YUAN REFERENCE RATE AT 6.3493 AGAINST U.S. DOLLAR

     

    And just as the stock market disappointed, so did the housing market… Golden Week property mkt in major cities weaker than expected due to bad weather, limited time for developers to react to supportive measures, analyst Jinsong Du says in note, citing data collected by Credit Suisse.

    • Recommends shrhldrs of lower-tier city developers take profit given increasing downside risks
    • Agile, Guangzhou R&F among lower-tier city players
    • Y/y growth in subscription sales slowed during holiday
    • Sales in Sept.to early Oct. weaker than May to early June’s
    • NOTE: Sunac leads Chinese developers retreat today, down 3.6%; Sino-Ocean Land -3.4%, Fantasia -3.2%

    And Hong Kong Existing Home Prices Snap 5-Mo. Rising Streak

    Overnight HIBOR rates surged 242bps to 4.11% as China re-opened, suggesting more than a little liquidity stress remains…

    *  *  *

    Japanese stocks are holding their heads just above water despite a major miss by Fast Retailing (parent of UNIQLO):

    • *FAST RETAILING FALLS AS MUCH AS 8.9% AS FORECASTS LAG ESTIMATES

     

    Charts: Bloomberg

  • Edward Snowden's New Revelations Are Truly Chilling

    Submitted by Sophie McAdam via TrueActivist.com,

    Former intelligence contractor and NSA whistleblower Edward Snowden told the BBC's Panorama that the UK intelligence centre GCHQ has the power to hack phones without their owners’ knowledge.

    In an interview with the BBC’s ‘Panorama’ which aired in Britain last week, Edward Snowden spoke in detail about the spying capabilities of the UK intelligence agency GCHQ. He disclosed that government spies can legally hack into any citizen’s phone to listen in to what’s happening in the room, view files, messages and photos, pinpoint exactly where a person is (to a much more sophisticated level than a normal GPS system), and monitor a person’s every move and every conversation, even when the phone is turned off. These technologies are named after Smurfs, those little blue cartoon characters who had a recent Hollywood makeover. But despite the cute name, these technologies are very disturbing; each one is built to spy on you in a different way:

    • “Dreamy Smurf”: lets the phone be powered on and off
    • “Nosey Smurf”:lets spies turn the microphone on and listen in on users, even if the phone itself is turned off
    • “Tracker Smurf”:a geo-location tool which allows [GCHQ] to follow you with a greater precision than you would get from the typical triangulation of cellphone towers.
    • “Paranoid Smurf”: hides the fact that it has taken control of the phone. The tool will stop people from recognising that the phone has been tampered with if it is taken in for a service, for instance.

    Snowden says: “They want to own your phone instead of you.” It sounds very much like he means we are being purposefully encouraged to buy our own tracking devices. That kinda saved the government some money, didn’t it?

    His revelations should worry anyone who cares about human rights, especially in an era where the threat of terrorism is used to justify all sorts of governmental crimes against civil liberties. We have willingly given up our freedoms in the name of security; as a result we have neither. We seem to have forgotten that to live as a free person is a basic human right: we are essentially free beings. We are born naked and without certification; we do not belong to any government nor monarchy nor individual, we don’t even belong to any nation or culture or religion- these are all social constructs. We belong only to the universe that created us, or whatever your equivalent belief. It is therefore a natural human right not to be not be under secret surveillance by your own government, those corruptible liars who are supposedly elected by and therefore accountable to the people.

    The danger for law-abiding citizens who say they have nothing to fear because they are not terrorists, beware: many peaceful British protesters have been arrested under the Prevention Of Terrorism Act since its introduction in 2005. Edward Snowden‘s disclosure confirms just how far the attack on civil liberties has gone since 9/11 and the London bombings. Both events have allowed governments the legal right to essentially wage war on their own people, through the Patriot Act in the USA and the Prevention Of Terrorism Act in the UK. In Britain, as in the USA, terrorism and activism seem to have morphed into one entity, while nobody really knows who the real terrorists are any more. A sad but absolutely realistic fact of life in 2015: if you went to a peaceful protest at weekend and got detained, you’re probably getting hacked right now.

    It’s one more reason to conclude that smartphones suck. And as much as we convince ourselves how cool they are, it’s hard to deny their invention has resulted in a tendency for humans to behave like zombies, encouraged child labor, made us more lonely than ever, turned some of us into narcissistic selfieaddicts, and prevented us from communicating with those who really matter (the ones in the same room at the same time). Now, Snowden has given us yet another reason to believe that smartphones might be the dumbest thing we could have ever inflicted on ourselves.

     

  • Carmageddon: This Is What 750 Million Chinese Hitting The Road Looks Like

    If you've ever complained about your commute, or the traffic jams on your way to vacation destinations, here is some context from China…

     

    As RT reports, the carmageddon took place on the 2,273-kilometer Beijing-Hong Kong-Macau Expressway that links the cities of Beijing and Shenzhen in the Guangdong province, at the border with Hong Kong on Tuesday.

    According to China's National Tourism Administration, more than 750 million Chinese were on the roads between October 1 and 7.

  • Why This Feels Like A Depression For Most People

    Submitted by Jim Quinn via The Burning Platform blog,

    “And the little screaming fact that sounds through all history: repression works only to strengthen and knit the repressed.” John Steinbeck, The Grapes of Wrath

     

    Everyone has seen the pictures of the unemployed waiting in soup lines during the Great Depression. When you try to tell a propaganda believing, willfully ignorant, mainstream media watching, math challenged consumer we are in the midst of a Greater Depression, they act as if you’ve lost your mind. They will immediately bluster about the 5.1% unemployment rate, record corporate profits, and stock market near all-time highs. The cognitive dissonance of these people is only exceeded by their inability to understand basic mathematical concepts.

    The reason you don’t see huge lines of people waiting in soup lines during this Greater Depression is because the government has figured out how to disguise suffering through modern technology. During the height of the Great Depression in 1933, there were 12.8 million Americans unemployed. These were the men pictured in the soup lines. Today, there are 46 million Americans in an electronic soup kitchen line, as their food is distributed through EBT cards (with that angel of mercy JP Morgan reaping billions in profits by processing the transactions).

    These 46 million people represent 14% of the U.S. population. There are 23 million households on food stamps in a nation of 123 million households. Therefore, 19% of all households in the U.S. are so poor, they require food assistance to survive. In 1933 there were approximately 126 million Americans living in 30 million households. The government didn’t keep official unemployment records until 1940, but the Department of Labor estimated 12.8 million people were unemployed during the worst year of the Great Depression or 24.9% of the labor force. By 1937 it had fallen to 14.3% or approximately 8 million people.

    The number of people unemployed during the 1930’s is an excellent representation of the number of households on government assistance during the Great Depression because 79% of all households were occupied by married couples with 4 people per household versus 48% married couple households today with 2.5 people per household. The unemployment rate averaged 19% during the heart of the Great Depression. Therefore, approximately 19% of all the households in the U.S. needed government assistance to feed themselves. That happens to be the exact percentage of households currently needing food stamps to feed themselves.

    We are now supposedly five years into an economic recovery. The unemployment rate, according to the government, has fallen from 10% to 5.1%. Maybe a comparison to the the Great Depression in 1937, five years after the worst of it, would reveal some truth. It is not easy to do an apples to apples comparison because very few women worked outside the home in 1937 and the average life expectancy in the 1930s was 60 years old. Today, the majority of women are theoretically in the work force and the average life expectancy is 78 years old. In 1937 only 5% of the population was over 65 years old versus 13% today.

    There were approximately 55 million Americans in the labor force in 1937, according to the DOL, and approximately 47 million of them were employed. So 85% of the eligible work force was working. There was no BLS to massage, manipulate, seasonally adjust, or fake the data to make things appear better than they were in 1937. Edward Bernay’s Propaganda techniques and methodologies weren’t perfected for a few more years. According to Census information there were 52 million Americans between the ages of 18 and 44, along with another 21 million between the ages of 45 and 64 in 1937. So even considering that very few women worked and many people died by the age of 60, we had a workforce of 55 million out of an age eligible population of 73 million at a maximum. That yields a participation rate of 75%.

    These facts reveal the utter falsity of the propaganda drenched duplicitous data dumped by the BLS on behalf of vested interests who have captured our government and have an agenda requiring the public to be kept in the dark regarding their own dire financial situation. No matter how you slice the data, it reveals an absolute parallel to the situation during the Great Depression. There are 251 million Americans of working age and only 149 million are employed, of which 20 million are part-time and 8 million are self employed. Only 59% of working age Americans actually work. The BLS has the cajones to declare that only 157 million of the 251 million working age Americans are actually in the labor force.

    This outrageous assumption flies in the face of all reasonableness, facts, and truth. In 1937, even with women not working outside the home and very few people living past 65 years old, the participation rate was 75%. Today, with the majority of women capable and willing to work and older Americans working well into their 60s, the BLS actually expects a critical thinking person to believe the participation rate is only 62.4%, the lowest since 1977. It’s a pure and simple despicable lie. The true participation rate should exceed the rate in 1937, based on the facts. Using the 75% participation rate today, yields a true unemployment rate of 21%, not the preposterous 5.1% shoveled by the bullshit artists at the BLS. The 21% rate ties very closely to the figure arrived at by John Williams at Shadowstats. An unbiased assessment of the facts reveals unemployment numbers and people on government assistance numbers that match or exceed those of the Great Depression.

    I also wonder whether the corporate mainstream media purposely chooses not to show pictures of the poor waiting in long lines to be fed because their function is not to report facts and truth, but to perpetuate the lie that all is well in America.  I pass the Grace Lutheran church at 36th and Haverford Avenue in West Philly everyday on my way to work. Every Thursday is when the church, in partnership with the Philabundance food bank, distributes free food to the people of West Philly. The line stretches around the block at 7:30 am awaiting the Philabundance truck to arrive. There are old, young, black, white, Latino, and Asian in the line. It looks exactly like the line pictured in the Great Depression above. I’m sure there are similar scenes across every city in America on a daily basis. People dependent on food banks and living in homeless shelters are at record levels. Where are the mainstream media pictures? How does that jive with Ben Bernanke’s self congratulatory book tour about how he saved America by secretly handing Wall Street and foreign bankers $16 trillion?

    For the average American family, the US economy has been in recession since 2000, with the Greater Depression arriving in 2008. The working age population has grown by 40 million since 2000, with only 12 million jobs added over that time frame. Of those, 10 million were in the government controlled health, education, social services (HES) sectors, with millions of good paying manufacturing jobs destroyed, replaced by a couple million low paying services jobs. As David Stockman points out, Bernanke and the vested interests he serves continue to spew disingenuous propaganda  to cover up the fact average American households continue to experience depression-like conditions. When your real household income is lower than it was in 1989, while your basic living costs for food, energy, transportation, rent, housing, healthcare, taxes, and education have skyrocketed, you just might be experiencing a depression.

    “The Fed’s balance sheet has grown from $500 billion to $4.5 trillion or 9X during that span, but job growth outside the HES Complex amounts to less than 2%. For crying out loud, that’s a 12,000 per month rounding error in an economy which has 250 million adults. Virtually every job gained since December 2009 shown in the chart below was not a “new” job at all; it was just a “born-again” job that Greenspan had claimed credit for a few years earlier. Yet Bernanke has the nerve to boast about the Fed’s success on jobs and claim that the “labor market is close to normal”!”

    Edward Bernays wrote the book Propaganda in 1928. It was utilized quite well by Goebbels and Hitler over the next decade or so. But the corporate fascist oligarchy, disguised as American democracy, puts Goebbels efforts to shame. Bernays would be thrilled by the efficiency and professionalism with which the invisible Deep State governing power is able to utilize mass media, the internet, public schools, and academia to shape, mold, manipulate and alter the minds of the masses. The unholy alliance between shadowy billionaires, a private bank owned by Wall Street and controlling our currency, the military industrial complex, the sick care complex, mega-corporations peddling consumer goods, and politicians who are easily bought, has left a hollowed out rotting carcass of a nation, with the peasants experiencing a depression, while the lords of the manor feast like there is no tomorrow. But at least the 103 million peasants who aren’t working believe only 5.1% of them are unemployed. It’s a Bernaysian Miracle!!!

    “The conscious and intelligent manipulation of the organized habits and opinions of the masses is an important element in democratic society. Those who manipulate this unseen mechanism of society constitute an invisible government which is the true ruling power of our country. …We are governed, our minds are molded, our tastes formed, our ideas suggested, largely by men we have never heard of. This is a logical result of the way in which our democratic society is organized. Vast numbers of human beings must cooperate in this manner if they are to live together as a smoothly functioning society. …In almost every act of our daily lives, whether in the sphere of politics or business, in our social conduct or our ethical thinking, we are dominated by the relatively small number of persons…who understand the mental processes and social patterns of the masses. It is they who pull the wires which control the public mind.” Edward Bernays – Propaganda

  • Goldman "Picks Apart" The Labor Paradigm: 50 Years Of A Productivity Paradox

    “Let me put this in perspective. For the total economy, productivity growth was 2.7% from 1920 to 1970, 1.6% from 1970 to 1994, 2.3% from 1994 to 2004 during what we call the dotcom era, and just 1.0% from 2004 to the second quarter of 2015.1 So the productivity growth of the last 11 years was not only slower than in the dotcom era, but even slower than in the so-called slowdown period beginning in the early 1970s.”

    That’s from Robert Gordon, a professor of economics at Northwestern University and it comes courtesy of Goldman who has taken a close look at declining labor productivity in the US.

    As the Vampire Squid notes, falling productivity is something of a paradox. That is, better technology and advances in efficiency should by all rights have increased productivity but apparently, a number of factors are intervening to short circuit the system. Here’s Goldman’s full interview with Gordon.

    The reason for the slowdown after 1970 is straightforward: we simply exhausted the productivity benefits of prior innovations. In the late 19th century, hugely important “general purpose” technologies, like electricity and the internal combustion engine, were invented. Then there were major developments in entertainment and communication in the form of the telephone, telegraph, radio, motion pictures and television. We made major breakthroughs in health. And we vastly improved working conditions. All of that came together between 1920 and 1970. The last three spin-offs of the great inventions— interstate highways, commercial air travel, and air conditioning in most businesses—were also largely complete by 1970.So at that point we had run through the productivity payoffs. 

     

     

    Allison Nathan: Why has productivity growth stalled?

     

    Robert Gordon: Let me put this in perspective. For the total economy, productivity growth was 2.7% from 1920 to 1970, 1.6% from 1970 to 1994, 2.3% from 1994 to 2004 during what we call the dotcom era, and just 1.0% from 2004 to the second quarter of 2015.1 So the productivity growth of the last 11 years was not only slower than in the dotcom era, but even slower than in the so-called slowdown period beginning in the early 1970s. The reason for the slowdown after 1970 is straightforward: we simply exhausted the productivity benefits of prior innovations. In the late 19th century, hugely important “general purpose” technologies, like electricity and the internal combustion engine, were invented. Then there were major developments in entertainment and communication in the form of the telephone, telegraph, radio, motion pictures and television. We made major breakthroughs in health. And we vastly improved working conditions. All of that came together between 1920 and 1970. The last three spin-offs of the great inventions— interstate highways, commercial air travel, and air conditioning in most businesses—were also largely complete by 1970. So at that point we had run through the productivity payoffs.
    We have also now run through the payoffs of the digital revolution that followed. Between 1980 and 2005 there was a total transformation of business practices from paper and filing cabinets to flat screens and search engines. But that transition is over. And the temporary revival of productivity during the dotcom era was uniquely concentrated in a very short span, with remarkably few gains in productivity growth since. We’re using software and computers now that are very similar to the ones we used ten years ago. So it is no surprise that productivity growth has been slower over this decade.

     

    Allison Nathan: Are the productivity statistics simply failing to account for the impact of new technologies?

     

    Robert Gordon: Many consumer benefits are clearly missing from the GDP statistics. But GDP has always suffered from this fault. For example, GDP completely failed to capture the transition from the horse to the motorcar and the enormous benefits that resulted from an environment free of horse manure droppings in the streets. If anything, I think a case could be made that what productivity statistics failed to capture 1 Note from GS Research: The figures cited here are for the overall economy; corresponding numbers for the US nonfarm business sector (the conventional measure) tend to run about 0.4 pp higher. in the first 50 years of the 20th century was larger and more important than what is missing now. At that time, we left out the benefits of conquering infant mortality; of going from the 60-hour work week to the 40-hour work week; of the new ability to travel with a car. In any case, what we’re seeing now is more of the same: a general failure to translate new inventions into GDP, and therefore into productivity measures.

     

    Allison Nathan: Should we be measuring productivity differently?

     

    Robert Gordon: I think it’s impossible to quantify the benefits of new inventions. Economists have done experimental work on specific inventions like tractors, and it is possible to come up with ballpark estimates. But quantifying those improvements has always been difficult. And the hypothetical measurement of the benefits of more recent inventions like smartphones and tablets is probably more difficult than most.

     

    Allison Nathan: Could we be experiencing delays in seeing the effects of new technologies on productivity?

     

    Robert Gordon: Yes, we could be seeing some of this dynamic. For example, the rollout of electronic medical records has been very slow even though we have had the necessary technology for a good 15 years. But the real delay happened in the early 2000s. Despite the sharp drop in the stock market and a tremendous collapse in high-tech investment from 2000 to 2003, productivity growth was very rapid throughout the whole decade from 1994 to 2004, reflecting the delay in learning how to make full use of the internet, which was first introduced in the early 1990s. My favorite example is the introduction of airport check-in kiosks, which took place between 2001 and 2005 using technology that had been invented a decade earlier.

     

    Allison Nathan: You argue that recent technological developments don’t hold a candle to the breakthroughs of the past. Are the world’s best innovations truly behind us?

     

    Robert Gordon: In my view, the inventions of the century from 1870 to 1970 utterly changed human life in a way that now is taken for granted. When you consider the immense progress in getting rid of disease, filth, manure; the advances in health with antibiotics and treatments for heart disease and cancer; the liberation of women from the chores of doing laundry with a scrub board; the transition away from steel workers working 12 hours a day, six days a week, there really is no comparison with the inventions taking place today. Smartphones and social networks are entertainment and not basic to human life. But “best” is subjective. Some people may think it is more important to have a social network than indoor plumbing.

     

    Allison Nathan: Some would say that the productivity contributions of past inventions, particularly during the industrial revolution, did not properly account for environmental or other costs. What are your thoughts? Robert

     

    Gordon: More than overstating productivity growth during the industrial revolution, I think we have understated the growth of productivity from 1970 to the turn of the 21st century when we had major improvements in air and water quality mandated by legislation. We have incorporated part of this clean-up into productivity statistics in a very subtle way by accounting for emissions control devices on auto engines. But most of the improvements in the environment are missing from GDP. That being said, the costs of current technology are probably lower than the costs of past industrialization, so these types of omissions are likely less prevalent today. Allison Nathan: Are there any areas of innovation that hold substantial promise in your view? Robert Gordon: Most of the excitement is centered on artificial intelligence and robots. Robots are nothing new. The first industrial robot was introduced by General Motors in 1961. Since then, robots have steadily replaced human labor in manufacturing, and they continue to create more rapid productivity growth in the manufacturing sector than in most of the service sector. Another place where robots are gradually appearing is warehousing. But they don’t fetch individual items and bring them to a station for packing; they simply pick up an entire tier of shelves and bring it to a person who selects the right item and manually packs it. Developments in robotics have so far been unable to duplicate the actions of the human hand, even for many tasks that human beings do intuitively. So the gradual arrival of robots in the economy is very slow. As far as artificial intelligence, computer technology has already steadily replaced human jobs. Think of the disappearing travel agent and reservation clerk, or, more recently, the legal associate. So there is a lot of excitement about technological change, but it is taking place at a very measured pace, especially to the extent that it is replacing human labor.

     

    Allison Nathan: Will these innovations be sufficient to boost productivity?

     

    Robert Gordon: Not meaningfully. I expect productivity growth over the next quarter-century of 1.2%, slightly above the 1.0% growth rate of the last 11 years but still below the 1.4% rate over the past 45 years if you take out the dotcom decade, which was an unusual period that I don’t think will be repeated. That difference of 0.2% is the contribution of slower innovation compared to history. Keep in mind that this slowdown already occurred in the last ten years. So I am basically predicting more of the same, not some new arrival of stagnation.

     

    Allison Nathan: How important is the pace of productivity to your overall outlook for US economic growth?

     

    Robert Gordon: It’s absolutely central. By definition, growth in real GDP is equal to growth in productivity plus growth in hours of work. The growth in hours of work is limited by population growth and growth in the number of hours that each member of the population works. The latter is going to be shrinking over the next 25 years due to the retirement of the baby boomers. So while US population growth should be about 0.8% per year, we can only expect growth in hours of work of 0.4%, much lower than what we observed in the latter part of the 20th century. Adding that to the 1.2% I expect for productivity growth, my projection for growth in real GDP is 1.6% a year. This is just the same as the last 11 years, but it is only half of the 3.2% growth rate we experienced from 1970 to 2004. Allison Nathan: You seem skeptical of technological tailwinds and more focused on economic headwinds. Which headwinds concern you the most?

     

    Robert Gordon: I see four main headwinds to economic growth. The first is rising inequality. Our winner-take-all society provides very high payoffs to the top rock stars, CEOs, lawyers, and so forth. And at the bottom, we have machines gradually but steadily replacing workers, and an erosion of manufacturing jobs from globalization and trade. So the gap between the very top and the mass of people in the middle and the bottom continues to widen inexorably. The second headwind is the end of the great expansion of education that brought Americans from completing only an elementary school education in 1900 to a great majority having a high school education by around 1970. There has been a gradual increase in the share of young people going to college, but the United States has fallen from its previous position of leadership in global education and now ranks about 16th among nations in the percentage of its young people completing a four-year college degree program. The third headwind is the demographic shift I mentioned of baby boom retirement pushing down overall hours worked. And the final headwind, also related to aging, involves federal government expenditures on Social Security and Medicare increasing faster than the shrinking workforce’s ability to provide the tax revenue to finance these benefits. This will eventually necessitate tax increases and/or benefit reductions, which will cause people’s after-tax disposable income to grow even more slowly than their pre-tax income. Allison Nathan: Does your outlook owe more to a measured pace of innovation or to these headwinds?

     

     Robert Gordon: Quantitatively, the headwinds are more important. That said, there is a whole list of policies that would help address them, from a more progressive tax system and increased spending on pre-school education to massive immigration reform. And many of those proposals also deal with productivity by raising the quality of human capital.

     

    Allison Nathan: You are often described as a “technopessimist.” Is that a fair characterization?

     

    Robert Gordon: I would certainly classify myself as a technopessimist. But, if you think about it, the terms techno-optimist and techno-pessimist belie the meaning of the words optimism and pessimism. Techno-“optimists” are predicting a future of massive technological unemployment with a quarter or half of the labor force unable to find jobs. Under the hood of their optimism, they are deeply pessimistic about the future of work. I think that technological change is proceeding slowly, just as it has over the past decade, which should allow us to keep our unemployment relatively low. So under the hood of my technopessimism, I’m very optimistic about the future of work. Where I see the real problem is not in finding a job for everybody, but in finding good jobs for people, and in dealing with the inevitable rise of inequality.

  • The Real Reason For The Refugee Crisis You Won't Hear About In The Media

    Submitted by Nick Giambruno via InternationalMan.com,

    There’s a meme going around that the refugee crisis in Europe (the largest since World War II) is part of a secret plot to subvert the West.

    I completely understand why the locals in any country wouldn’t be happy about waves of foreigners pouring in. Especially if they’re poor, unskilled, and not likely to assimilate.

    It leads to huge problems. Infrastructure gets strained. More people are sucking at the teat of the welfare system. The unwelcome newcomers compete for bottom-of-the-ladder jobs. Things easily turn nasty and then turn violent.

    But the idea that the refugee crisis in Europe is part of a hidden agenda – rather than a predictable outcome – strikes me as strange. And it’s a notion that conveniently deflects blame away from the people and factors that deserve it.

    Interventions Destabilize the Middle East

    The civil war in Syria has turned the country into a refugee-maker.

    Syria’s neighbors have reached their physical limit on their ability to absorb refugees.

    That’s one of the reasons so many are heading to the West.

    Lebanon has received over 1 million Syrian refugees. That’s an enormous number for a country with a population of only 4 million – a 25% increase. Jordan and Turkey also have millions of Syrian refugees. They’re saturated.

    The number of refugees heading to the West, by contrast, is in the hundreds of thousands. So far.

    But it’s not just Syria that’s sending refugees. Many more come from Iraq and Afghanistan, two other countries shattered by bungled Western military interventions.

    Then there are the refugees from Libya. A country the media and political establishment would rather forget because it represents another disastrous military decision.

    Actually, it’s not just Libyan refugees. It’s refugees from all of Africa who are using Libya as a transit point to reach Europe.

    Before his overthrow by NATO, Muammar Gaddafi had an agreement with Italy, which is directly to Libya’s north, across the Mediterranean Sea. Gaddafi agreed to prevent refugees heading for Europe from using Libya as a transit point. It was an arrangement that worked. So it’s no shocker that when NATO helped a coalition of ambitious rebels overthrow the Gaddafi government, the refugee floodgates opened.

    When there’s war, there are refugees. It’s a predictable outcome.

    It’s like kicking a bees’ nest and being surprised that bees fly out. Nobody should be surprised when that happens. And nobody should be surprised that people are fleeing war zones in Libya, Syria, Iraq, and Afghanistan.

    If Western governments didn’t want a refugee crisis, they shouldn’t have been so eager to topple those governments and destabilize those countries. The refugees should camp out in the backyards of the individuals who run those governments.

    I also have to mention the Saudis. They were very much involved in the Libyan war. They’ve also devoted themselves to ousting the Assad government in Syria, for geopolitical and sectarian reasons.

    Then there’s the war in Yemen that the Saudis have sponsored. It’s another mess the media doesn’t discuss often. But it will likely produce even more refugees.

    The Saudis make no secret about not welcoming refugees, even though the Kingdom is a primary instigator of the wars that are forcing people to flee their homelands. One reason is the Saudis don’t want more people leeching off their welfare system, especially amid budget crunches from lower oil prices.

    This brings up another interesting point. For the first time in decades, observers are calling into question the viability of the Saudi currency peg of 3.75 riyals per US dollar.

    The Saudi government spends a ton of money on welfare to keep its citizens sedated. But with lower oil prices cutting deep into government revenue, there’s less money to spend on welfare. Then there’s the cost of the wars in Yemen and Syria.

    There’s a serious crunch in the Saudi budget. They’ve only been able to stay afloat by draining their foreign exchange reserves. That threatens their currency peg.

    The next clue that there’s trouble is Saudi officials telling the media that the currency peg is fine and there’s nothing to worry about. An official government denial is almost always a sign of the opposite. It’s like the old saying…“believe nothing until it has been officially denied.”

    If there were a convenient way to short the Saudi riyal, I would do it in a heartbeat.

    Don’t Give the Welfare State a Pass

    It’s no coincidence that the refugees are flowing to the countries with the most generous welfare benefits, especially Germany and the Scandinavian nations.

    If there weren’t so many freebies in these countries, there wouldn’t be so many refugees showing up to collect them.

    The whole refugee crisis was easily predictable. It was the foreseeable consequence of shortsighted interventions in the Middle East and the welfare-state policies of nearby Europe.

    Instead of facing facts, blaming it all on a scheme to subvert the West conveniently deflects any responsibility from the authors of the mess.

    If the individuals who run Western governments really wanted to solve the refugee problem, they would throttle way back on welfare-state policies and then stay out of the Middle East free-for-all. It’s really as simple as that.

    But don’t count on the mainstream media to figure this out. They effectively operate as an organ of the State. I bet they’ll keep prescribing more of the same bad medicine that caused this crisis to begin with.

    This will help to cover the tracks of the real perpetrators, and it will obscure other real problems. I expect the media to ramp up the “blame the foreigner” sentiment, as it helps the US and EU governments distract the anger of their citizens from the sputtering economy and the shrinking of their civil liberties. From the politicians’ perspective, it’s a win-win. But it’s a lose-lose for citizens hoping for accountable government.

    And this brings up another uncomfortable truth for Americans and Europeans. The way the political and economic winds are blowing, things could get much worse.

    Central banks around the globe have created the biggest financial bubble in world history.

    The social and political implications of this bubble bursting are even more dangerous than the financial consequences.

    An economic depression and currency inflation (perhaps hyperinflation) are very much in the cards. These things rarely lead to anything but bigger government, less freedom, and shrinking prosperity. Sometimes they lead to much worse.

    One day the shoe could be on the other foot. We could see American and European refugees fleeing to South America or other havens to escape the problems in their home countries. It would be an ironic twist.

    Now, this outcome isn’t inevitable. But the chance it will happen isn’t zero, either, and the risk seems to grow each day.

  • Inflation Watch: Retiree Health-Care Costs Are Soaring

    Despite 'promises' of lower healthcare costs (from President Obama) and 'promises' of a comfortable retirement (if only you invest all your savings in stocks), Bloomberg reports the average 65-year-old couple retiring this year will face health-care costs of $245,000 in the years ahead, up 11% from 2014.

     

     

    As Bloomberg notes,

    The higher number stems in part from a change in assumptions about how long we'll live. In the wake of updated mortality tables put out by the Society of Actuaries last year, Fidelity Investments raised life expectancies in its annual Retiree Health Care Cost Estimate. For 2015, it assumes that a 65-year-old man will live to 85, and a 65-year-old woman to 87. In 2014, the estimate was 82 for a man and 85 for a woman.

     

    The estimated annual increase in medical and prescription expenses stands at 4 percent to 5 percent, about the same as last year. Prescription costs are trending higher than medical, at slightly above 7 percent, said Sunit Patel, senior vice president of Fidelity's Benefits Consulting group. Prescription drug costs account for 23 percent of that $245,000 figure. Money spent on deductibles and cost-sharing with an insurer make up 43 percent, and 34 percent goes to Medicare Part B and D premiums.

    *  *  *

    No wonder the older generation is staying at work longer… that's alarming if you're 65, and maybe more alarming if you're 25 – imagine what the cost will be when you're ready to retire.

  • The US Government Just Crossed The Rubicon

    Submitted by Simon Black via SovereignMan.com,

    In 49 BC, a defiant Julius Caesar stood in front of his army at the River Rubicon and made the biggest decision of his life.

    It was strictly forbidden by Roman law for a general lead his army out of its province and into Rome. And the Rubicon marked the boundary.

    “Alea iacta est!” (The die is cast!) he said, and led his army across the river into civil war.

    The phrase “crossing the Rubicon” has stuck for more than 2,000 years, signifying a risky and dangerous point of no return.

    This week, the United States government crossed the Rubicon.

    In a fit of complete arrogance, a federal judge ruled that he has ‘jurisdiction’ over one of the biggest banks in mainland China, Bank of China (BOC), and demands that the bank turn over financial records to his court.

    The judge is hearing a case brought by the luxury brand Gucci against an alleged Chinese counterfeiting ring for selling fake handbags in the United States.

    The claim is that the Chinese defendants are sending their ill-gotten gains back to Bank of China in the mainland. And the judge wants to see their account activity.

    Bank of China, as you can probably guess, is predominantly owned by the Chinese government.

    So it goes without saying that this demand (not a request) is a direct affront at China’s sovereignty.

    The only leverage the judge has is that Bank of China has a branch in New York City; it is officially a licensed bank in the US.

    So if Bank of China doesn’t comply, the judge could theoretically order that their US license be revoked.

    Once again, the United States is using its financial system as a weapon.

    Since US dollars are the most widely used reserve currency in the world, every bank on the planet needs some access to the US banking system.

    Whether you’re in London, Riyadh, Sydney, or Shanghai, the most widely traded commodities, bonds, and financial contracts in the world are primarily denominated in US dollars.

    Plus most global trade takes place in US dollars.

    So not only are banks forced to hold US dollars, they require access to the US banking system in order to clear and settle US dollar transactions.

    Large international banks have what are known as ‘correspondent bank accounts’ or ‘nostro accounts’ with US banks.

    So a big bank in Denmark, for example, may have a correspondent account with JP Morgan or Citibank in New York in order to facilitate its dollar transactions.

    And sometimes foreign banks may even apply for their own US banking license, as in the case of Bank of China.

    But if a bank were to be kicked out of the US banking system, it would be incredibly detrimental to its ability to hold and transact in US dollars. And hence quite difficult to participate in global trade and finance.

    This financial leverage is an unbelievable advantage for the United States, and is a result of the rest of the world placing a great deal of trust in the US government.

    But the government has shown time and time again that they are willing to abuse that trust and use their advantage as a weapon– one that is more powerful than the US military.

    Just last year, the Treasury Department fined French bank BNP Paribas a whopping $9 billion for doing business with countries that the US doesn’t like, such as Cuba.

    Of course, Cuba and the US are BFFs now. But I doubt BNP is getting a refund anytime soon.

    And naturally, if BNP didn’t pay up, the US could threaten to evict them from its financial system.

    It’s simply amazing that the US did that to its own ally.

    Now they’re going after China, its biggest competitor.

    The Chinese are already working on a parallel, competitive financial system.

    They set up the Asian Infrastructure Investment Bank to compete with the vestigial IMF and World Bank.

    And they’re nearing completion on an international payment system and clearing network to compete with SWIFT and the US financial system.

    It’s called CIPS.

    And once it’s up and running, there will likely be a rapid increase in the worldwide use of China’s currency for financial transactions– transactions that used to be executed in US dollars.

    Sticking it to Bank of China like this only gives the Chinese government even more reason to wage war on the US financial system through CIPS.

    The reduced demand for US dollars completely destroys America’s last remaining advantage.

    If they can’t force the rest of the world to use the US banking system, then they won’t be able to force the rest of the world to hold US dollars or buy US government debt.

    It weakens America considerably.

    And when future historians write the history of the decline of the United States, there will no doubt be a chapter on how the US government made it a matter of national policy to consistently abuse the power entrusted to them by the global banking community.

    Of course, Julius Caesar didn’t learn that lesson either.

    After crossing the Rubicon, he won a long civil war, after which the Roman Senate made him dictator for life.

    And fearing he would abuse it, he was assassinated just a few weeks later by the very people who entrusted him with that power.

  • Oct 9 – FOMC Mins: Fed Held Off On Hike Amid Worries About Low Inflation

    EMOTION MOVING MARKETS NOW: 42/100 FEAR

    PREVIOUS CLOSE: 37/100 FEAR

    ONE WEEK AGO: 18/100 EXTREME FEAR

    ONE MONTH AGO: 13/100 EXTREME FEAR

    ONE YEAR AGO: 4/100 EXTREME FEAR

    Put and Call Options: GREED During the last five trading days, volume in put options has lagged volume in call options by 31.29% as investors make bullish bets in their portfolios. However, this among the lowest levels of put buying seen during the last two years, indicating greed on the part of investors.

    Market Volatility:  NEUTRAL The CBOE Volatility Index (VIX) is at 17.42. This is a neutral reading and indicates that market risks appear low.

    Stock Price Strength: FEAR The number of stocks hitting 52-week lows exceeds the number hitting highs and is at the lower end of its range, indicating fear.

     

    PIVOT POINTS

    EURUSD | GBPUSD | USDJPY | USDCAD | AUDUSD | EURJPY | EURCHF | EURGBPGBPJPY | NZDUSD | USDCHF | EURAUD | AUDJPY 

    S&P 500 (ES) | NASDAQ 100 (NQ) | DOW 30 (YM) | RUSSELL 2000 (TF) Euro (6E) |Pound (6B)

    EUROSTOXX 50 (FESX) | DAX 30 (FDAX) | BOBL (FGBM) | SCHATZ (FGBS) | BUND (FGBL)

    CRUDE OIL (CL) | GOLD (GC) | 10 YR T NOTE | 2 YR T  NOTE | 5 YR T NOTE | 30 YR TREASURY BOND | SOYBEANS | CORN

     

    MEME OF THE DAY – NO HIKE! TOLD YOU FOOL!

     

    UNUSUAL ACTIVITY

    QCOM OCT WEEKLY2 56 PUTS 5500+ @$.55 on offer

    MJN NOV 75 CALL Activity 3300+ @$2.66-2.80

    X NOV 14 CALL Activity continues over 10k+ @$.42 on the offer

    YUME SC 13D/A Filed by AVI Partners

    SPRT SC 13D Filed by Vertex Capital

    More Unusual Activity…

    HEADLINES

     

    FOMC Mins: Many Fed officials expected liftoff later this year

    FOMC Mins: Fed held off on hike amid worries about low inflation

    Fed’s Kocherlakota: Fed should cut interest rates

    GOP in disarray as McCarthy drops out of Speaker race

    ECB Mins: ECB Opted for More Time to Analyze Economic Risks

    ECB’s Praet: Seeping pessimism hindering recovery

    ECB’s Weidmann rejects calls for easier monpol

    BoE holds policy, signals rate can stay lower

    BoE’s Carney: Timing of Fed hike not decisive for BoE

    UK Citi/YouGov 1-Year Inflation Expectations (Sept): 1.5% (Prev 1.4%)

    Germany to press UK for EU negotiation details

    IMF Lagarde urges global policymakers to support eco growth

    OECD Leading Indicator: Growth outlook moderating

    Moody’s: China’s sovereign rating can withstand slower growth

    Fitch: Sharp China slowdown is top global rating risk

     

    GOVERNMENTS/CENTRAL BANKS

    FOMC Mins: Fed held off on hike Amid worries About low inflation –WSJ

    FOMC Mins: Many Fed officials expected liftoff later this year –ForexLive

    Kocherlakota: Fed should cut interest rates –Rtrs

    Moody’s Zandi: Fed to hike In December, sees four hikes in 2016 –Rtrs

    Republicans in disarray as Kevin McCarthy drops out of House speaker race –Guardian

    McCarthy exits house speaker race –FT

    BoJ Kuroda: EM slowdown hitting Japan economy and exports –ForexLive

    Lagarde urges global policymakers to support economic growth –Guardian

    OECD Leading Indicator: Outlook Of Moderating Growth In Most Major Economies

    ECB Minutes: ECB Opted for More Time to Analyze Economic Risks –BBG

    ECB’s Praet: Seeping pessimism hindering recovery –BBG

    ECB’s Praet: Premature to Judge Emerging Market Impact on EMU Growth –MNI

    ECB’s Weidmann: Core EMU Growth Projections Remain Intact –MNI

    ECB’s Weidmann Rejects Calls For Easier MonPol ?-Welt

    Germany Leading Institutes Cut 2015 GDP Growth view To 1.8% From 2.1% –ForexLive

    BoE votes 8-1 to hold policy, signals rate can stay lower –ET

    BoE’s Carney: Timing of Fed hike not decisive for BoE –BForexLive

    Angela Merkel to press David Cameron for EU negotiation details

    Riksbank Skingsley: Riksbank remains ready to act –FXstreet

    Pimco updates global growth forecasts

    FIXED INCOME

    Treasury yields take a dive after Fed minutes –CNBCz

    US sells 30-year bonds at 2.914% vs 2.920% WI –ForexLive

    PBOC to sell up to 5bn yuan of 1y bills in London –Rtrs

    HSBC: Get set for a chunky rally in bonds –FT

    ENERGY/COMMODITIES

    EIA Nat Gas Storage Number (Oct 2): 95 (est 99, prev 98)

    WTI surpasses $50 for first time since July –FT

    Saudi Arabia Said to Order Spending Curbs Amid Oil Price Slump –BBG

    Goldman Sachs makes the case for crude downside –ForexLive

    Gartman says commodity prices have bottomed –BBG

    BoE checks commodity exposures of UK banks –FT

    Gold prices rebound on dovish central banks, silver slumps on China –ForexLive

    EQUITIES

    M&A: Blackstone to buy BioMed Realty in $8 bln deal –Rtrs

    M&A: Dell, EMC in talks to merge –CNBC

    AUTOS: GM recalls 32k SUVs, says wipers could cause motor to catch fire –AP

    AUTOS: Volkswagen’s U.S. head: individuals did emissions cheating –Beeb

    LEGAL: Bill Gross to sue PIMCO for $200m –CNBC

    TELECOMS: Vodafone joins calls for BT to be broken up –FT

    MEDIA: Sony Is Said to Weigh Sale of Portion of Music Catalog –NYT

    EARNINGS: Goldman to release results on website, drops BusinessWire –CNBC

    UNIONS: Fiat, UAW reach deal; union claims ‘significant gains’ –USAT

    TRADING: Nasdaq launches tool to monitor dark pool trading –Rtrs

    EMERGING MARKETS

    Moody’s: China’s sovereign rating can withstand slower growth

    Moody’s: Slower growth and rising credit risk are symptoms of China’s challenge of structural rebalancing

    Fitch Radar: Sharp China Slowdown is Top Global Ratings Risk

     

    Alibaba’s Ma says concerns about China consumption overdone –Rtrs

  • NATO Talks Tough On Troop Deployment As Kremlin Calls West's Bluff

    For years, NATO has relied upon tough talk and promises of support for its member nations in order to reinforce an image of invincibility.

    That image is supported by the implicit backing of the US military and Washington has been keen to perpetuate it in the past 48 hours by presenting the straw man argument that Moscow is set to inexplicably bomb Turkey (and if you follow geopolitics you know that that makes absolutely no sense at all) and so the West must do it what it has to in order to support its friends in Ankara in the face of “Soviet” (and we use that term on purpose because that’s how this is being pitched now by Western media) aggression.

    To be sure, keeping up appearances was easy in the wake of Russia’s annexation of Crimea. It was simply a matter of saying publicly that the West wouldn’t allow Moscow to overrun Kiev and re-establish the Soviet Union. 

    But it doesn’t take a foreign policy genius or a lion-hearted NATO general to maintain that line.

    That is, some of this was just posturing, because no matter what one wants to say about The Kremlin’s support for the separatists at Donetsk, Moscow wasn’t and isn’t about to invade every state in the Balkans which means that NATO’s excuses for stationing heavy artillery in Poland (to cite just one example) and for conducting very public war games that look quite a bit like preparations for a Ukrainian invasion, are largely bogus. 

    Well, now that Washington is scrambling to find the right spin tactic to explain why Russia has done to ISIS in a week what the US hasn’t been able to do in over a year, NATO is now going all-in on the “we’ll defend Turkey” narrative even though i) no one is attacking Turkey, and ii) Ankara is waging a horribly bloody civil war on its own people with NATO’s blessing. Here’s AP:

    NATO talked tough Thursday about Moscow’s expanding military activity in Syria, but the U.S.-led alliance’s chief response to the Russian airstrikes and cruise missile attacks was a public pledge to help reinforce the defenses of member nation Turkey if necessary.

     

    “NATO is able and ready to defend all allies, including Turkey, against any threat,” alliance secretary-general Jens Stoltenberg declared at the onset of a meeting of NATO defense ministers.

     

    The meeting attended by U.S. Defense Secretary Ash Carter and counterparts from NATO’s other 27 countries was overshadowed by concerns about Russia’s recent military actions in Syria. On Wednesday, Russian warships fired a volley of cruise missiles in the first combined air-and-ground assault with Syrian government troops since Moscow began its military campaign in the country last week.

     

    U.S. officials said Thursday that some of those missiles missed their targets and landed in Iran.

     

    Over the weekend, Turkey reported back-to-back violations of its airspace by Russian warplanes.

     

    Stoltenberg said NATO had already increased “our capacity, our ability, our preparedness to deploy forces, including to the south, including in Turkey, if needed.”

     

    However, pressed about what NATO precisely intended to do to aid Turkey, which shares a border with Syria, Stoltenberg told a news conference the mere existence of a beefed-up alliance response force, as well as a new and highly nimble brigade-sized unit able to deploy within 48 hours, may suffice.

     

    “We don’t have to deploy the NATO Response Force or the spearhead force to deliver deterrence,” Stoltenberg said. “The important thing is that any adversary of NATO will know that we are able to deploy.”

    Oh, ok. “Any adversary of NATO will know that we are able to deploy.” Well you know what NATO? You have an “adversary” that doesn’t seem to understand that and they are called “ISIS,” and either you are incapable of eradicating a rogue band of Nike-wearing militants, or else you’re not really trying, and if the latter is the case, then the world needs to start asking serious questions about who the “bad” guys are here. 

    We’ll close with the following from … well, let’s just be honest, from Russia (via RT) and from Maria Zakharova, who is quietly turning into quite the geopolitical powerplayer:

    Vladimir Putin’s press secretary has said that the excuses used by NATO to move its infrastructure to Russian borders were nothing but camouflage and warned that none of such steps would be left unanswered.

     

    “An invented excuse about the suggested threat coming from Russia is possibly just camouflage used to disguise the plans to further expand NATO toward our borders,” RIA Novosti quoted Dmitry Peskov as saying.

     

    “We are talking about a buildup, there have been statements about larger contingent, we are talking about an increase of military presence. And it is military presence practically near the Russian borders,” he said, adding that this project was not new and that it could cause no other feelings but regret.

     

    “Of course, any plans to bring NATO’s military infrastructure closer to the Russian Federation lead to reciprocal steps needed to restore the necessary parity,” Peskov said.

     

    Earlier Thursday, NATO Secretary-General Jens Stoltenberg announced the alliance’s plans to boost its Response Force and set up two more headquarters in Hungary and Slovakia. Stoltenberg admitted that this will be the biggest reinforcement since the end of the Cold War as six more, smaller headquarters had already appeared in Eastern Europe.

     

    Russian Foreign Ministry spokesperson Maria Zakharova commented on NATO’s buildup of forces in Eastern Europe, saying that these steps were not contributing to peace and stability on the continent.

     

    “First of all, we need to hear and understand the position of those who take such actions. They need to tell us about their goals and objectives so that we could comment on them. So far, none of the latest events added stability to the European continent. On the contrary, this stability is being put in jeopardy,” Zakharova said.

  • The Stock Market Rally… To Nowhere

    Submitted by Lance Roberts via STA Wealth Management,

    Has Consumer Confidence Peaked?

    The latest reading of consumer confidence (103 for September) was a bit of head-scratcher. With the market in the midst of a 10% correction, layoffs rising, job, wage growth stalling, and China on the verge of implosion, how could confidence rise? 

    While the media, and the Federal Reserve, focus on lifting asset prices to spur consumer confidence, as I discussed previously, such actions have relatively little impact on the vast majority of American's currently. However, there is a very high correlation between actual economic activity and consumer's confidence as shown in the chart below.

    Consumer-Confidence-GDP-100715

    This should not be a surprise since consumers drive roughly 70% of economic growth. When the economy slows down enough to curtail consumer actions, confidence will once again drop. 

    For investors, however, the question of the relationship between confidence and market behavior is more important. The chart below shows consumer confidence as compared to the S&P 500 index.

    Consumer-Confidence-SP500-100715

    Sharp contractions in confidence have historically been coincident with sharp declines in the market and the onset of economic recessions. Currently, the decline in the market has not resulted, yet, in a decline in confidence as only a small portion of the economic makeup has been affected by the drop. Furthermore, the drop in the markets has not been dramatic or sustained long enough to break the "hope" of a continued "bull market."

    However, if we look at the annual rate of change in the S&P 500 as compared to confidence, a potential warning signal emerges. 

    Consumer-Confidence-SP500-2-100715

    Declines in the rate of change of the financial markets have generally preceded more marked declines in confidence as well as economic activity. Due to the rapid onset of the recession and market decline in 2008, the declines in both measures were more coincident.  

    Currently, the annual rate of change in market performance has been declining since the beginning of 2014 when the Federal Reserve began extracting excess liquidity from the financial markets. This suggests that the current levitation of confidence will likely be transient unless market performance begins to reaccelerate. 

    While there is indeed a correlation between rising asset prices and consumer confidence, the relationship between confidence and economic activity is significantly more important. With the recent decline in asset prices, a slowdown in economic activity in the quarters ahead will likely have a bigger impact on confidence than currently anticipated. 

    GDP Forecasts Remain Weak

    The Federal Reserve Bank of Atlanta publishes a weekly, "real-time" look at the economy in their GDPNow economic forecast model. As shown below, the model, currently forecasts a significantly weaker 3rd quarter GDP than even the most bearish current consensus estimate.

    GDP-Now-100715

    This is important because it confirms the Chicago Fed National Activity Index (CFNAI) which, as I have discussed in the past, is the single most important, and overlooked, economic number. To wit:

    "And of all the indicators I've tested, the CFNAI has the best track record of forecasting future GDP. Since 1980 the CFNAI has explained roughly 40% of the variation in the following quarter's GDP, an extremely high proportion for a single indicator.

     

    To assess that predictive capability I have created a second 4-panel chart with the four CFNAI subcomponents compared to the four most common economic reports of Industrial Production, Employment, Housing Starts and Personal Consumption Expenditures. For comparative purposes I used the annual percentage change for each of the four components."

    CFNAI-4-Panel-Chart-100715

    "The correlation between the CFNAI subcomponents and the underlying major economic reports do show some very high correlations. This is why, even though this indicator gets very little attention, it is very representative of the broader economy."

    Importantly, as with the GDPNow indicator, the CFNAI is showing that the economy is running weaker than headlines have suggested.

    Despite Central Bank interventions, suppressed interest rates, and a surging stock market, the economy has failed to gain any significant traction. This is an anomaly that we can also see in the CFNAI data.

    If we break the CFNAI down into a "supply" and "demand" model we see a very interesting, and telling, picture emerge.

    CFNAI-Supply-Demand-10071515

    As shown the supply side of the index has historically had an extremely high correlation to the demand side. That ended with the financial crisis. Since then the supply components have far outpaced the actual underlying demand in the economy. This goes a long way to explaning the ongoing weakness in economic growth as the lack of aggregate demand continues to weigh on labor and wage growth. 

    Until demand rises to a level strong enough to absorb the existing supply, economic growth will continue to "muddle" along. 

    Stock Market Rally To….Nowhere?

    This past Tuesday, I discussed the potential for a short-term rally in the market stating:

     "As you can see, the markets did retest the late August lows, and when combined with the very oversold conditions, led to a frantic 'short covering' rally back to previous resistance. It is worth noting that the recent market action is very similar to that of the August decline and initial rebound as well."

    SP500-TechnicalUpdate-100715

    Importantly, while the market has rallied back to its previous resistance levels, it has also become extremely overbought once again as well. This suggests that a bulk of the rally from the lows is complete, and investors should continue to "fade rallies" until a more bullish trend resumes.

    However, for that more "bullish" outlook to take root, the market will need to rise above 2060 currently. The problem will be the strong level of resistance provided by the two long-term moving averages that have only crossed during more severe market corrections. 

    With a large number of technical indicators currently suggesting that the easiest path for prices is downward, investors should remain cautious of overly aggressive exposure in the short-term. If the market is still confined within a more "bearish" trend, the current rally, like the ones that preceded it, will be a "rally to nowhere."

    Just something to think about.

  • Spoofer Complains About Spoofing, Is Ignored, Starts Spoofing, Gets Busted

    In light of Blackrock’s Hillary Clinton’s sudden interest in taming high frequency trading and imposing a fee on order cancellations, something we have said is imperative ever since 2009 and now is far too late to make a difference, it is worth highlighting that just today the SEC cracked down on yet another spoofing mastermind, no not Citadel, but another “basement” trader, Eric Oscher, 47, a former NYSE specialist and his firm Briargate Trading (an anagram of Arbitrage), who were busted earlier today for making the gargantuan profit of $525,000.

    While the argumentation in the complaint is by now familiar to most  – someone spoofs a given stock or index, then quickl takes the other side, and cancels the spoofing order –  there are three very notable items in this latest crackdown on said spoofing “mastermind.”

    The first explains why in a market in which volumes are contracting at a record pace, and where liquidity is so scarce flash crashes have become a virtually daily event, exchanges continue to proliferate like weeds. The reason is because spoofers like Oscher use one exchange in which they “telegraph” their spoof orders, they use another exchange in which to take the opposite side of the trade thus leaving no readily available trail of evidence exposing their conduct.

    This is how the SEC explains it:

    • The Imbalance Messages Begin: At 8:30 a.m., the NYSE sent the first Imbalance Message for stocks expected to open with an imbalance (buy or sell). The NYSE continued to send Imbalance Messages with increasing frequency until the open of each stock; by 9:20 a.m., Imbalance Messages
      were sent every 15 seconds.
    • The Entry of the Non-Bona Fide Orders: Between 8:30 a.m. and the NYSE open, Oscher typically placed non-bona fide orders on the NYSE in securities that the Imbalance Messages identified as having large order imbalances. Oscher’s non-bona fide orders were reflected in the next Imbalance Message for that stock. Oscher’s non-bona fide orders often impacted the price of the stock on other exchanges. For example, for a NYSE-listed stock with a sell imbalance, Oscher’s non-bona fide buy orders reduced the sell imbalance and increased the price of that stock on other exchanges.
    • Briargate Obtains Positions on Other Exchanges: After Oscher placed spoof orders for a stock on the NYSE (but before cancelling them); Briargate also traded the same stock on the opposite side of the market on other exchanges. For example, if Oscher placed a non-bona fide buy order, Briargate generally sold the same stock short on other exchanges. Doing so often allowed Briargate and Oscher to take advantage of any price change on other exchanges following Oscher’s non-bona fide orders on the NYSE.
    • The Cancellation of the Non-Bona Fide Orders: Next, Oscher cancelled the non-bona fide orders on the NYSE prior to the open. This had the effect of changing the imbalance minutes before the stock opened on the NYSE and typically reversed the effect the non-bona fide orders had on the stock’s price.
    • Briargate Unwinds its Position on Other Exchanges: To complete the spoofing scheme, Briargate’s last step was to liquidate its position in that same stock on other exchanges. Briargate was typically flat by the end of the stock’s opening auction on the NYSE.

    The key phrase here is “on other exchanges” which explains precisely why HFTs are in love with the idea of an infinite number of lit exchanges, as well as dark ATS, which they can latency arbitrage to generate the highest profits. None of this has anything to do with providing liquidity – it has everything to do with maximizing collocation efficiency which exchanges gladly sell to HFTs for a hefty fee, a fee which the HFTs then more than promptly make up in perfectly legal frontrunning of slower orders courtesy of Reg NMS.

    * * *

    As an aside, here is how the SEC explains why spoofing is illegal:

    During the Relevant Period, Oscher placed and cancelled non-bona fide orders in 242 instances with an average aggregate size of approximately 200,000 shares. These orders impacted the Imbalance Message that other traders received through their NYSE data feeds. Unlike other traders that viewed the Imbalance Message, Respondents knew that the changes in the Imbalance Message resulting from their non-bona fide orders were artificial. In nearly every instance that Oscher placed non-bona fide orders in the NYSE pre-market, Respondents placed profitable trades in the same stocks, but on the opposite side of the market, from their non-bona fide orders. In total, Respondents derived approximately $525,000 in profits from trading stocks in which they placed non-bona fide orders during the Relevant Period.

     

    Respondents benefited from non-bona fide orders that brought about an artificial change in the NYSE Imbalance Messages, and in the prices of the same securities on other exchanges. Respondents profited from this manipulative trading by sending orders on the opposite side of the market, which were executed on the other exchanges or the NYSE. Respondents traded in these stocks across multiple Briargate accounts.

     

    Oscher did not intend to execute the non-bona fide orders he placed during the NYSE pre-market trading. Respondents had no legitimate economic purpose to engage in trading involving non-bona fide orders.

     

    Respondents knew that these orders affected the Imbalance Message and impacted the same stock’s best bid and best offer on other exchanges. Despite this knowledge, Respondents took advantage of the artificial change in the Imbalance Message to trade the same securities at artificial prices on the opposite side of the market on other exchanges and on the NYSE.

    The violation in question:

    Briargate and Oscher violated Section 9(a)(2) of the Exchange Act, which makes it unlawful “to effect, alone or with one or more other persons, a series of transactions in any security . . . creating actual or apparent active trading in such security, or raising or depressing the price of such security, for the purpose of inducing the purchase or sale of such security by others.”

    Clearly this Section has an exemption when the “respondent” is Chicago hedge fund Citadel acting under advisement of the New York Federal Reserve when the mandate is a very simple one: spoof the S&P higher, without ever taking the other side of the trade.

    * * *

    But the second, and far more entertaining part of the complaint against Oscher is the following:

    Briargate’s inter-market arbitrage trading strategy depended in part on its ability to predict the opening price of a security on the NYSE. Beginning in 2009, Briargate believed there were instances where other market participants placed what Briargate believed were non-bona fide orders that were then canceled during pre-market trading. As a result, Briargate began to doubt the integrity of the information in the Imbalance Message.

     

    After identifying these concerns about other market participants’ conduct, Briargate complained to the NYSE that other market participants were engaging in manipulative conduct involving large cancelled orders. For example, in the spring of 2011, Briargate complained to the NYSE that the data feeds provided by the NYSE were “susceptible to manipulation where parties look to gain advantage by entering non bona fide orders to entice others to trade.”

    He got not reply so starting in 2011 “Oscher used his Briargate account to place large, non-bona fide orders.” Or, as they say, if you can’t beat them, join them… which is precisely what Oscher did.

    So to summarize: a veteran NYSE specialist noticed manipulation in the NYSE market open Imbalance, loudly complained to the NYSE, was ignored, then decided to profit from said manipulation himself… and got busted. 

    Come to think of it, that almost exactly what happened to Nav Sarao.

    * * *

    But the third, and surely funniest, part of this whole story is that the name Eric Oscher is not new to this website, but one has to dig far back to track him down… all the way back to our September 2010 post explaining “Why Nobody Trades During Regular Hours Any More (And How Prop Funds Just Stop Trading When Volatility Spikes).” This is what we said over 5 years ago:

    Why Nobody Trades During Regular Hours Any More

     

    For those who follow our periodic updates on intraday stock volume, today’s article by the Wall Street Journal which focuses on the dramatic decline in activity during regular working hours will come as no surprise. In a piece looking at prop trading shop Briargate (oh so witty anagram of arbitrage), founded by several former NYSE specialists, we learn that at least one firm (and likely many more) now no longer does any trading during the hours of 11 to 2. As this creates a feedback loop of inactivity, pretty soon the core of daily stock market activity will merely be the half an hour of action at the open, and the dark pool-ETF-open exchange rebalance at the very close, with everything inbetween deemed obsolete. Of course, what this will do, is create even more volatility in trading, force an even greater decline in stock trading volumes (and pain for Wall Street firms), and a further divergence between stocks and fundamentals, as momentum trading gains an even more prominent role in determine “price discovery.”

    From the WSJ:

    On the day the “flash crash” bludgeoned the stock market and chaos swept over the floor of the New York Stock Exchange, the founders of Briargate Trading were at the movies.

     

    Rick Oscher and Steven Rubinstein weren’t playing hooky. Briargate, a proprietary-trading firm that the two former NYSE floor “specialist” traders started in 2008, is mostly active at the stock market’s open and close.

     

    In between, when market activity typically drops, the Wall Street veterans play tennis in Central Park, take leisurely lunches, visit their children’s schools and work out at the gym. Dress shoes have been replaced with flip-flops, slacks with cargo shorts. Once during market hours, they walked about five miles and crossed the Brooklyn Bridge to try Grimaldi’s pizza.

     

    “We actually planned on working a full day,” says Mr. Oscher, wearing a white polo shirt and blue-plaid shorts. “But from 11 to 2, the markets are pretty quiet—what’s the point? As a specialist, you have to stand in your spot all day and we did that for 20 years.”

     

    Briargate—an anagram of “arbitrage”—isn’t the only firm taking an extended recess during the 6½-hour U.S. trading day. Trading has become increasingly concentrated in the first and last hours of the session.

     

    Those two hours now make up more than half of the entire day’s trading volume, according to an analysis of data provided by Thomson Reuters. In August, the first and last hour generated nearly 58% of New York Stock Exchange primary volume, up from 45% in August 2005, the analysis shows. The rise of high-frequency trading, where algorithms are used to exploit small discrepancies in high-volume situations, amplifies the concentration of trading at the beginning and end of the day, analysts say.

     

    Heavy trading in the first hour is largely due to the accumulation of orders placed by individual investors and their brokers after the previous day’s close, mutual-fund activity and new strategies deployed by institutional investors based on the latest research and overseas trading, says Adam Sussman, director of research at Tabb Group, a financial-markets research firm. Meanwhile, funds that track stock indexes often wait until the final hour to execute trades to better reflect the benchmark measures’ last prices.

     

    Focusing trading on those times could limit gains, but Messrs. Oscher and Rubinstein are at peace with that. “Would you rather play tennis or make an extra $80? It’s a lifestyle question,” says Mr. Rubinstein, who sometimes works remotely from Florida. “I can go play 18 holes of golf and then come back and trade and that’s a workday.”

    As for how this strategy of avoiding “noise” trading is working out, the answer is – apparently not too bad. Which can only mean that many more lazy copycats will soon emerge.

    While the firm declined to disclose their returns, Messrs. Rubinstein and Oscher say they make more than they did in their later, leaner years as specialists, though not as much as they did in the late 1990s before the industry started to consolidate.

    Oh and remember that selective “HFT Off” switch pulled during the flash crash? The same that many HFTs said is what helped them avoid massive losses (and which makes all their statements of providing liquidity moot)? It shows up again, this time helping Briargate avoid losses. We are confident all retail investors and readers will be able to stop trading at precisely the right moment as well (in addition to selling all their holdings at the very top of the bear market rally).

    Mr. Oscher said the firm, which trades only its own money, hedges its risks “so there isn’t any scenario that would move our profit and loss beyond boundaries of comfort.” Briargate says it didn’t sustain losses during the May 6 flash crash because it closes its books when the market tends to be volatile. “We actually had a pretty good day,” Mr. Oscher says.

    Indeed, with everyone not only not trading between 11 and 2, but completely shutting down when vol passes a threshold, someone please remind us what the Chicago School of Fraud case for an efficient stock market was again?

    That was a useful flashback because it explains not only why Messrs. Rubinstein and Oscher “made more than they did in their years as specialists”, but also why “Briargate didn’t sustain losses during the May 6 flash crash” and had a pretty good day.

    The good news for Mr. Oscher, now that his whole life has gone done the toilet,  will be able to play 18 holes of golf all day after day.And just like that, one more spoofing “mastermind” is gone. As for the real spoofing “manipulators of scale”, the Citadels of the world, don’t worry: they are untouchable until the market suffers its final crash. At that point the HFTs, from the favorite technology of the pro-cyclical status quo, will become the culprit on which everything will be blamed.

  • John Boehner To Stay On As Speaker After All, Fox Reports

    As The GOP lurches from turmoil to chaos, following speaker-in-waiting McCarthy's pulling out, Fox News' Bret Baier reports that Speaker John Boehner has agreed to stay on as Speaker – not just until the Caucus nominates someone – but, until that person can confirm 218 votes on the House floor (needed to take the Speaker’s gavel).

     

     

    As Fox News Bret Baier reports,

    Having Talked to several senior aides on Capitol Hill  (along with Chris Stirewalt and his sources on the Hill tied to the leadership) here is the picture that is beginning to form.

     

    Speaker John Boehner has agreed to stay on as Speaker–not just until the Caucus nominates someone –but, until that person can confirm 218 votes on the House floor (needed to take the Speaker’s gavel).  Short of that – Boehner will stay on for the rest of this Congress and steer legislation that is pending.

     

    What does this mean?   Moderates and leadership types are cheering and saying Boehner is the only one they will support.   Conservatives will go ballistic since they know this signals that Boehner will make ALL kinds of deals to get big ticket legislation through the House even if it means using Democrats votes to do it.

     

    The news… short of another candidate that can get 218 votes (and that looks like a long shot with leadership and moderates lining up behind Boehner)

     

    Looks like he may be here to stay to handle the very tough debt ceiling and next CR.

    *  *  *

    Perhaps The Pope spoke to him again?

  • Do You See What Happens, Alcoa, When Your "Restructuring" Non-GAAP Addbacks Tumble

    Moments ago, the company that traditionally kicks off earnings season did just that, and sent the ball into a throw in. The reason: just like all the other companies that have reported and pre-reported so far in the third quarter, its results were a huge miss: AA reported non-GAAP EPS of $0.07 missing expectations of $0.13, on revenues of $5.57 billion, a 10% drop Y/Y, also missing top-line estimates of $5.75.

    And while the company did have some justifications for the collapse, blaming what else but China…

    In China, Alcoa lowered its estimate for 2015 automotive production growth to up 1 to 2 percent, from up 5 to 8 percent; reduced its projection for 2015 heavy duty truck and trailer production growth to down 22 to 24 percent, from down 14 to 16 percent; reduced its 2015 commercial building and construction sales growth to up 4 to 6 percent from up 6 to 8 percent; and kept its 2015 packaging estimate unchanged at up 8 to 12 percent.

    … the real culprit is none of that. Because, as regular readers know very well, with Alcoa it is all about the Non-GAAP addbacks…. and the problem here is that while in previous quarters Alcoa’s “restructuring” charges were vast, usually eclipsing the actual GAAP earnings number, in Q3 they tumbled to “only” $66 million – the lowest since March 2013.

    They are shown as follows:

     

    Because that $0.07 EPS, that was non-GAAP. On a GAAP basis, Alcoa generated a paltry $44 million in Net Income, down 70% from a year ago, which translates into 2 cents per share.

    And just to show what Alcoa’s true EPS picture looks like, now that its restructuring charge “addbacks” are finally grinding to a halt, in the past year, GAAP Net Income was just $538 million. What about non-GAAP net income: more than double that or $1.154 billion. And that’s why, as Alcoa’s Non-GAAP myth is about to collapse into the company’s GAAP reality, its P/E is about to double… just as the company’s topline is tumbling.

  • "Market-Watching" Fed Watches Market Surge After Fearing Market Purge

    Having admitted that markets' drop played a key role in their decision-making process, the reflexivity of Central Bankers be like…

    And to the outside world…

     

    This will help to explain the stock market…

    Welcome to The Farce… Dow +1050 Points off payrolls lows…

     

    Stocks are the most overbought since the epic Bullard ramp from October 2014…

     

    As The S&P pushes back to unchanged post-QE3…

    *  *  *

    This is what happened after the dovish FOMC Minutes…

     

    Futures were weak overnight as China opened notably below expectations…

     

    Leaving stocks all higher for the day (note early decoupling between Nasdaq and rest)…

     

    The epic ramp continues to extend off the payrolls lows… just look at Small Caps!!

     

    VIX fat-fingered in its usual "Signalling" way after FOMC Minutes…

     

    The S&P broke above its 50-day moving average (and the figure 2000) as the post-FOMC Minutes buying frenmzy took hold… (and Dow tops 17k)

     

    The S&P 500 is now above Goldman, BofA year-end revised price targets of 2000. Time to revise them higher again…

    Since The September FOMC Statement, bonds & bullion remain the winners but stocks jerked up to near them today…

     

    Treasury yields surged once again today (after an initial rally/drop in yields after FOMC Minutes)…

     

    The USD slipped most of the day (led by AUD strength), then dumped and pumped on the FOMC Minutes…

     

    Commodities were very volatile today with crude and silver trading somewhat chaotically…

     

    Crude ramped back to yesterday's highs on OPEC comments about demand

     

    And silver was dumped and dumped and pumped and dumped…

     

    Charts: Bloomberg

    Bonus Chart: We now know what happened to the record short-interest…

     

  • "I'm Not Here To Beg You To Open Your F##king Eyes"

    Submitted by Thad Beversdorf via FirstRebuttal.com,

    So I’m often asked whether I really believe that government and policymakers intentionally create laws and policies that hurt the people and help themselves.  My answer is typically that

    “if you’re asking me this question you know I do but you don’t believe me; so either do your own research or continue to live in the world as you wish to perceive it.  I’m not here to beg you to open your fucking eyes”.

    I started this blog about 18 months ago and I have chosen to provide my research with no income attached to it.  It means I have no axe but the truth.  I spent 13 years in major international banks and have been on both sides of the double edged sword that makes the financial services sector a place to reap riches and also to be thrown to the wolves.  That is, I am intimately familiar with the system.  That said, what I’ve discovered is that really very little effort is required to see the world for what it is.

    The closest analogy is probably best left to Orwell with Animal Farm.  Humans around the world have been molded to believe they are part of a system to enable them to get ahead.  While some do manage to find a path that has substantial monetary rewards the vast majority (and growing) have, whether they realise it or not, succumb to a role of Boxer, the cart-horse.

    That is, our lives revolve around putting in 8 to 10 hours of labour each day for which we receive enough to feed ourselves and our families, have a warm place to sleep and some of us are able to obtain some credit from which we can enjoy things like new cars every few years (while rarely actually owning them).  However, in terms of reaping rewards we sew, it is simply not reality.  The current system has a clear economic hierarchy which began taking shape centuries ago in Europe.  The problem which seems to exist is that people are willing to look at a calendar, see that it’s Thursday but believe almost any (false) figure of authority who says it’s Wednesday.  Let me give you an example.

    The official’s unemployment figure is now down to 4.9%.  However, the U3 unemployment calculation, which is the one touted in mainstream media, excludes anyone unemployed that has not looked for work in the last 4 weeks.  That’s right, so if you don’t have a job but you looked for a job 3.5 weeks ago then you are considered unemployed.  However, if you are unemployed and haven’t looked for a job in 4.5 weeks you are no longer considered unemployed, you simply no longer exist according to the U3 figure.  The result is that after 4 weeks of not looking you fall off the radar and the U3 figure goes down.  Wonderful metric eh?

    In order to see if people falling off the radar have found work or simply no longer exist we can look to labour force.  When we do it becomes clear that while U3 is moving down so too is labour force.

    Screen Shot 2015-10-08 at 10.05.21 AM

    This means people are not finding work they simply disappear out of the labour force and so no longer exist according to the unemployment figure we all follow.

    Looking at the U3 chart we find another interesting pattern.

    Screen Shot 2015-10-08 at 8.45.22 AM

    Notice that there does not appear to be a steady state of ‘full employment’.  That is, unemployment declines until it explodes higher into a recession.  So the argument that simply appealing to the U3 figure as a forward looking gauge is nonsense.  Currently we are in the second longest pattern of decline (peak to trough) without entering a recession.  This is concerning because all hard indicators are now showing recession.  So in this sense the historical U3 figure too is signaling we are overdue for a recession.

    But isn’t it just easier to accept whatever meme of happiness is being disseminated by those in charge?  Well let me bring this back to Animal Farm.  We are sold the American dream.  We are told the market is at all time highs and are led to believe that means Americans are doing fine.  We are told to continue to do our part to keep America strong and that means get out there and buy stuff and if it’s debt you need to do so well then it’s debt you shall have!  As long as you have stuff you should be happy.

    And this continuous message of “you are doing just fine but if you’re not, well everyone else is so it must just be you” prevents most of us from even attempting to explore the truth. For what if it is just me that is failing??  I surely wouldn’t want to expose myself as not keeping up.  But the real message is there in the background.

    Screen Shot 2015-10-08 at 9.23.09 AM

    While the Pigs whisper words of encouragement into your ear their real message sits ever so faintly behind the facts.  The truth so very clearly is that we have become nothing more than Boxer, the cart-horse for whom the Pigs recognize must be kept warm with belly full but beyond that all equity from your labour and all profits from your debt will go to them.   Remember true capitalism has a natural relationship between profit and labour, but our existing policies have nothing to do with capitalism. Our policies are designed by the Pigs for the Pigs.  Why can we not see that??  It’s right there, now in front of you, have a look.  Stare at it for a moment and contemplate the implications if what I’m saying is true.

    So continue to accept that unemployment is 4.9%, continue to accept a Fed manipulated all time high market indicates American workers are strong, continue to accept that 30 years of debt inflated GDP defines economic prosperity, continue to ignore the furnished facts and continue to accept the lies from the Pigs and you will continue to forge the chains of which your grandchildren will wear.  And while I recognize this all sounds very dramatic I expect you haven’t seen nothing yet.

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