Today’s News 24th December 2016

  • Tucker Carlson Takes on Ivanka Trump Hater, Then Drops Mic on Her

    This wasn’t all that crazy, until the very end when he dimmed the lights and executed a fatality move on her. The look on her face was priceless.

    Watch the full vid for full effect, so that you can appreciate the fatality move all the more.

    I’m all about spreading the holiday cheer. Enjoy this with your families by the fireside.

     

    Content originally generated at iBankCoin.com

  • This Is How The US Government Destroys The Lives Of Patriotic Whistleblowers

    Submitted by Mike Krieger via Liberty Blitzkrieg blog,

    We live in a time and within a culture where the best amongst us are thrown in jail, demonized or destroyed, while the worst are celebrated, promoted and enriched. Nothing more clearly crystalizes this sad state of affairs than the U.S. government’s ruthless war on whistleblowers who expose severe constitutional violations by those in power. This war knows no political affiliation, and has be waged with equal vigor by the administrations of George W. Bush and Barack H. Obama.

    Earlier this morning, I read one of the most enlightening articles on the subject to-date. It was published back in May, and should be read by every single American citizen. We need to admit to ourselves what we have become before we can make changes.

    What follows are excerpts from the Guardian piece, How the Pentagon Punished NSA Whistleblowers, but you should really take the time to read the entire thing.

    If you want to know why Snowden did it, and the way he did it, you have to know the stories of two other men.

     

    The first is Thomas Drake, who blew the whistle on the very same NSA activities 10 years before Snowden did. Drake was a much higher-ranking NSA official than Snowden, and he obeyed US whistleblower laws, raising his concerns through official channels. And he got crushed.

     

    Drake was fired, arrested at dawn by gun-wielding FBI agents, stripped of his security clearance, charged with crimes that could have sent him to prison for the rest of his life, and all but ruined financially and professionally. The only job he could find afterwards was working in an Apple store in suburban Washington, where he remains today. Adding insult to injury, his warnings about the dangers of the NSA’s surveillance program were largely ignored.

     

    But there is another man whose story has never been told before, who is speaking out publicly for the first time here. His name is John Crane, and he was a senior official in the Department of Defense who fought to provide fair treatment for whistleblowers such as Thomas Drake – until Crane himself was forced out of his job and became a whistleblower as well.

     

    His testimony reveals a crucial new chapter in the Snowden story – and Crane’s failed battle to protect earlier whistleblowers should now make it very clear that Snowden had good reasons to go public with his revelations.

     

    During dozens of hours of interviews, Crane told me how senior Defense Department officials repeatedly broke the law to persecute Drake. First, he alleged, they revealed Drake’s identity to the Justice Department; then they withheld (and perhaps destroyed) evidence after Drake was indicted; finally, they lied about all this to a federal judge.

     

    “Name one whistleblower from the intelligence community whose disclosures led to real change – overturning laws, ending policies – who didn’t face retaliation as a result. The protections just aren’t there,” Snowden told the Guardian this week. “The sad reality of today’s policies is that going to the inspector general with evidence of truly serious wrongdoing is often a mistake. Going to the press involves serious risks, but at least you’ve got a chance.”

     

    “None of the lawful whistleblowers who tried to expose the government’s warrantless surveillance – and Drake was far from the only one who tried – had any success,” Devine told me. “They came forward and made their charges, but the government just said, ‘They’re lying, they’re paranoid, we’re not doing those things.’ And the whistleblowers couldn’t prove their case because the government had classified all the evidence. Whereas Snowden took the evidence with him, so when the government issued its usual denials, he could produce document after document showing that they were lying. That is civil disobedience whistleblowing.”

     

    Crane’s testimony is not simply a clue to Snowden’s motivations and methods: if his allegations are confirmed in court, they could put current and former senior Pentagon officials in jail. (Official investigations are quietly under way.)

     

    But Crane’s account has even larger ramifications: it repudiates the position on Snowden taken by Barack Obama and Hillary Clinton – who both maintain that Snowden should have raised his concerns through official channels because US whistleblower law would have protected him…

     

    Within weeks of the September 11 attacks, Drake was assigned to prepare the NSA’s postmortem on the disaster. Congress, the news media and the public were demanding answers: what had gone wrong at the NSA and other federal agencies to allow Osama bin Laden’s operatives to conduct such a devastating attack?

     

    As Drake interviewed NSA colleagues and scoured the agency’s records, he came across information that horrified him. It appeared that the NSA – even before September 11 – had secretly revised its scope of operations to expand its powers.

     

    Since its inception, the NSA had been strictly forbidden from eavesdropping on domestic communications. Drake’s investigation persuaded him that the NSA was now violating this restriction by collecting information on communications within as well as outside of the United States. And it was doing so without obtaining legally required court orders.

     

    Drake’s descent into a nightmare of persecution at the hands of his own government began innocently. Having uncovered evidence of apparently illegal behaviour, he did what his military training and US whistleblower law instructed: he reported the information up the chain of command. Beginning in early 2002, he shared his concerns first with a small number of high-ranking NSA officials, then with the appropriate members of Congress and staff at the oversight committees of the US Senate and House of Representatives.

     

    Drake spent countless hours in these sessions but eventually came to the conclusion that no one in a position of authority wanted to hear what he was saying. When he told his boss, Baginski, that the NSA’s expanded surveillance following 9/11 seemed legally dubious, she reportedly told him to drop the issue: the White House had ruled otherwise.

     

    John Crane first heard about Thomas Drake when Crane and his colleagues at the Pentagon’s Office of the Inspector General received a whistleblower complaint in September 2002. The complaint alleged that the NSA was backing an approach to electronic surveillance that was both financially and constitutionally irresponsible. The complaint was signed by three former NSA officials, William Binney, Kirk Wiebe and Edward Loomis, and a former senior Congressional staffer, Diane Roark. Drake also endorsed the complaint – but because he, unlike the other four, had not yet retired from government service, he asked that his name be kept anonymous, even in a document that was supposed to be treated confidentially within the government.

     

    Binney, Wiebe, Loomis and Roark shared Drake’s concerns about the constitutional implications of warrantless mass surveillance, but their complaint focused on two other issues.

     

    The first was financial. The whistleblowers contended that the NSA’s surveillance programme, codenamed Trailblazer, was a shameful waste of $3.8 billion – it had been more effective at channelling taxpayer dollars to corporate contractors than at protecting the homeland.

    Of course it was.

    Second, the whistleblowers warned that Trailblazer actually made the US less secure. They acknowledged that Trailblazer had vastly expanded the amount of electronic communications NSA collected. But this avalanche of raw data was too much – it left NSA’s analysts struggling to distinguish the vital from the trivial and thus liable to miss key clues.

     

    Drake had discovered a shocking example while researching his postmortem report on the September 11 attacks. Months beforehand, the NSA had come into possession of a telephone number in San Diego that was used by two of the hijackers who later crashed planes into the World Trade Center. But the NSA did not act on this finding.

     

    As Drake later told the NSA expert James Bamford, the NSA intercepted seven phone calls between this San Diego phone number and an al-Qaida “safe house” in Yemen. Drake found a record of the seven calls buried in an NSA database.

     

    US officials had long known that the Yemen safe house was the operational hub through which Bin Laden, from a cave in Afghanistan, ordered attacks. Seven phone calls to such a hub from the same phone number was obviously suspicious. Yet the NSA took no action – the information had apparently been overlooked.

    Incredible.

    The Bush administration’s mass surveillance efforts were partly exposed in December 2005, when the New York Times published a front page article by reporters James Risen and Eric Lichtblau, which revealed that the NSA was monitoring international phone calls and emails of some people in the US without obtaining warrants.

     

    Eight years later, that story would be dwarfed by Snowden’s revelations. But at the time, the Bush White House was furious – and they were determined to find and punish whoever had leaked the details to the New York Times.

     

    According to Crane, his superiors inside the Pentagon’s Inspector General’s office were eager to help. Henry Shelley, the general counsel – the office’s top lawyer – urged that the IG office should tell the FBI agents investigating the Times leak about Drake and the other NSA whistleblowers.

    This Shelley character is a particularly heinous cretin in this entire saga.

    After all, the NSA whistleblowers’ recent complaint had objected to the same surveillance practices described in the Times article – which made them logical suspects in the leak. Crane objected strenuously. Informing anyone – much less FBI investigators – of a whistleblower’s name was illegal.

     

    After debating the matter at a formal meeting in the personal office of the inspector general, Shelley and Crane continued arguing in the hallway outside. “I reached into my breast pocket and pulled out my copy of the Whistleblower Protection Act,” Crane recalled. “I was concerned that Henry was violating the law. Our voices weren’t raised, but the conversation was, I would say, very intense and agitated. Henry [replied] that he was the general counsel, the general counsel was in charge of handling things with the Justice Department and he would do things his way.”

     

    There the disagreement between Crane and Shelley stalled. Or so it seemed until 18 months later. On the morning of 26 July, 2007, FBI agents with guns drawn stormed the houses of Binney, Wiebe, Loomis and Roark. Binney was towelling off after a shower when agents accosted him; he and his wife suddenly found themselves with guns aimed directly between their eyes, the retired NSA man recalled.

     

    Crane smelled a rat. The investigation that his staff had conducted into the whistleblowers’ complaint had been highly classified: very few people could have known their names, and they would have been inside the IG’s office. After the raids, Crane confronted Shelley and demanded to know whether the IG’s office had given the names to the FBI. Shelley refused to discuss the matter, Crane says.

     

    The battle soon escalated. Four months later, FBI agents stormed Drake’s house in an early morning raid, as his family watched in shock.

     

    After Drake was indicted in 2010, his lawyers filed a Freedom of Information Act request to obtain documents related to the investigation Crane’s office had conducted into the claims of the NSA whistleblowers. According to Crane, he was ordered by his superiors in the IG’s office to delay releasing any documents – which could have exonerated Drake – until after the trial, which was expected to take place later in 2010.

     

    Crane alleges that he was ordered to do so by Shelley and Lynne Halbrooks – who had recently been named the principal deputy inspector general (in other words, the second-highest ranking official in the IG’s office). Crane protested but lost this skirmish as well. (Halbrooks did not respond to repeated requests for an interview.)

     

    Crane was at once alarmed and revolted. The complaint from Drake’s lawyers seemed to confirm his suspicion that someone in the IG’s office had illegally fingered Drake to the FBI. Worse, the indictment filed against Drake had unmistakable similarities to the confidential testimony Drake had given to Crane’s staff – suggesting that someone in the IG’s office had not simply given Drake’s name to the FBI, but shared his entire testimony, an utter violation of law.

     

    Drake’s complaint demanded investigation, Crane told Halbrooks. But Halbrooks, joined by Shelley, allegedly rejected Crane’s demand. She added that Crane wasn’t being a “good team player” and if he didn’t shape up, she would make life difficult for him.

     

    But there was even worse to come. As Drake’s trial approached in the spring of 2011, Crane knew that the law required the IG’s office to answer the retaliation complaint filed by Drake’s lawyers. But, Crane says, Shelley now informed him it would be impossible to respond – because the relevant documents had been destroyedLower level staff “fucked up”, Crane said Shelley told him: they had shredded the documents in a supposedly routine purge of the IG’s vast stores of confidential material.

     

    Crane could not believe his ears. “I told Henry that destruction of documents under such circumstances was, as he knew, a very serious matter and could lead to the inspector general being accused of obstructing a criminal investigation.” Shelley replied, according to Crane, that it didn’t have to be a problem if everyone was a good team player.

     

    On 15 February, 2011, Shelley and Halbrooks sent the judge in the Drake case a letter that repeated the excuse given to Crane: the requested documents had been destroyed, by mistake, during a routine purge. This routine purge, the letter assured Judge Richard D Bennett, took place before Drake was indicted.

     

    “Lynne and Henry had frozen me out by then, so I had no input into their letter to Judge Bennett,” Crane said. “So they ended up lying to a judge in a criminal case, which of course is a crime.”

     

    With Drake adamantly resisting prosecutors’ pressure to make a plea deal – “I won’t bargain with the truth,” he declared – the government eventually withdrew most of its charges against him. Afterwards, the judge blasted the government’s conduct. It was “extraordinary”, he said, that the government barged into Drake’s home, indicted him, but then dropped the case on the eve of trial as if it wasn’t a big deal after all. “I find that unconscionable,” Bennett added. “Unconscionable. It is at the very root of what this country was founded on … It was one of the most fundamental things in the bill of rights, that this country was not to be exposed to people knocking on the door with government authority and coming into their homes.”

     

    We are now becoming a police state,” Diane Roark said in a 2014 television interview. Referring to herself and the other NSA whistleblowers, she added, “We are the canaries in the coal mine. We never did anything wrong. All we did was oppose this programme. And for that, they just ran over us.”

     

    “They’re saying, ‘We’re doing this to protect you,’” Roark’s fellow whistleblower William Binney told me. “I will tell you that that’s exactly what the Nazis said in Special Order 48 in 1933 – we’re doing this to protect you. And that’s how they got rid of all of their political opponents.”

     

    These are strong statements – comparing the actions of the US government to Nazi Germany, warning of an emerging “police state” – so it’s worth remembering who made them. The NSA whistleblowers were not leftwing peace nuts. They had spent their professional lives inside the US intelligence apparatus – devoted, they thought, to the protection of the homeland and defence of the constitution.

     

    They were political conservatives, highly educated, respectful of evidence, careful with words. And they were saying, on the basis of personal experience, that the US government was being run by people who were willing to break the law and bend the state’s awesome powers to their own ends. They were saying that laws and technologies had secretly been put in place that threatened to overturn the democratic governance Americans took for granted and shrink their liberties to a vanishing point. And they were saying that something needed to be done about all this before it was too late.

    Let’s all make a resolution to do whatever we can to alter this situation and restore constitutional values to the land. Let’s also give thanks to all the incredibly courageous American patriots who have been relentlessly and despicably persecuted by their government.

  • Irrational Exuberance in US Stock Market Grasps at 20K for Dow

    This article by David Haggith was first published on The Great Recession Blog:

    Celebrate because the Epocalypse is here!

    Since Trump’s election, the US stock market has climbed unstoppably along a remarkably steep path to round off at a teetering height. Is this the irrational exuberance that typically marks the last push before a perilous plunge, or is the market reaching escape velocity from the relentless gravity of the Great Recession? 

    This burst of enthusiasm in response to Trump’s victory, flew in the face of almost everyone’s predictions. That it lifted the market from seven months of languor certainly makes 20K on the Dow look like the elevation marker of a breathtaking summit.

    While breaking 20k, if it happens, may be as meaningless as one more mile on the odometer when all the numbers roll over, it is psychologically potent for many. Breaking through it, could cause fear as eyes turn down and see how far below the earth now is, or the rarified air up here may bring euphoria that lifts the market to even greater levels on a rising current of hot air.

    Investors have been buying and selling with as much frenzy as Christmas shoppers. Now there will be much eating and drinking to celebrate this record-setting Santa-Clause rally, even if it doesn’t top 20, before Christmas, as investors take a brief rest to enjoy their surprise gains, fat and happy in belief that 2017 will be a prosperous new year.

    There is almost no evidence of fear amongst all the cheer. According to Gallop, economic confidence has never been higher in the general population. Some are calling it Trumphoria as people seem to be relieved that eight years of Obamanomics are ending, and business is seizing the reins of government, guided by one of the world’s richest and most dazzling developers.

     

    The first positive double-digit index score since the inception of Gallup Daily tracking in 2008 reflects a stark change in Americans’ confidence in the U.S. economy from the negative views they expressed in most weeks over the past nine years.

     

    A similar CNBC survey indicates this is the greatest breath of fresh air for consumer confidence since Obama was elected in 2008, and it is not just stocks that are soaring. The US dollar has reached its highest peak in fourteen years. TechonoMetrica also says consumer confidence has just hit its highest level since 2006 (just in time for Christmas shopping).

     

    The surge in consumer confidence is primarily due to a collective sense of relief among Americans over the conclusion of the contentious 2016 presidential election season, as well as a feeling of hope regarding the prospect of a new administration taking office…. Consumers are ecstatic that the election is finally over.

     

     

    Will this exuberant ride continue in 2017?

     

    Many analysts believe the push through a major milestone, if it happens, confirms a strong new market trend; but what does history say about breaking past such major psychological resistance barriers? When the Dow first broke past the 100 level in 1916, it tumbled below the line immediately and then sputtered along that ceiling for almost ten years. It didn’t break through with any continuance again until the mid 20s! When the Dow flirted with the 1,000 mark for the first time in 1966, it tumbled down and again stumbled along near that ceiling for seven years. When it finally passed it at the end of 1972, it did continue a tiny ways higher; but in less than three months the market fell for the next two years, eventually plumbing a depth 44% lower, while the nation sank into recession. The Dow didn’t permanently break through 1,000 again until 1982! And, after the Dow broke major, major milestone of 10,000 in 1999, it made it about 10% above that and then fell about 30% from 2001 to 2003 in what became known as the dot-com crash.

    What if we look at what history has to say about irrational exuberance by using other measures than the Dow? The ratio of stock prices against corporate earnings is one of the most common ways of assessing the relative height of a market peak. Here again, there are only a few times in history that the S&P 500 has climbed to prices that are 27.9 times more than corporate earnings of the last ten years, which is where the S&P stands now. Once was in 1929 just before the Great Depression, then again in an ill-fated boom of the 60’s, and only one other time in 2002.

    The altimeter I’m using here to assess our present peak is called the CAPE (the Cyclically Adjusted Price-Earnings ratio that won Yale’s Robert Schiller his Nobel Prize). In market terms, our present mark on the gauge means we’re entering the stratosphere! Even in 2007, the market was not this overpriced by the CAPE’s measure, and irrational exuberance has always accompanied this level: (Some will argue otherwise, but hang with me a minute.)

     

    Early 1929 was actually a fantastic time to get into the US stock market — so long as you didn’t stick around. So were the late 1990s. Someone who sold their stocks in late 1996, when the CAPE hit 28, missed out on the biggest free-money bubble bonanza in recorded history…. Nonetheless … over the past 150 years, it has generally been an extremely poor move to invest in U.S. stocks with the CAPE at these levels. (Market watch)

     

    Not everyone thinks passing this mark on the CAPE matters. In fact, apparently many don’t, or the stock market wouldn’t have kept climbing into the CAPE’s red zone this month, but according to Valentin Dimitrov of Rutgers University and Prem Jain of Georgetown, the measure has been applied too simplistically by those who disregard it:

     

    In a nutshell: Investors shouldn’t flee stocks simply because the Shiller PE is above average. They shouldn’t flee stocks even when the Shiller PE is way above average. But history has said they should flee stocks when the Shiller PE is at extreme levels — like now. Only when the CAPE is “higher than 27.6”, they conclude, has the stock market proven to be a really bad investment. (Marketwatch)

     

    It is, however, not just the height of this peak, but the rate of rise that evidences irrational exuberance. This month, the US stock roller coaster ratcheted its way relentlessly up its highest hill one clanky link at a time. If the Dow closes above 20,000 this week, it will be the fastest 1,000-point rise in market history! The previous record rate of rise came in 1999 in the run-up to the dot-com bubble crash. Of course, the higher the market is, the less meaningful a thousand-point rise is.

     

    Do these graphs look like irrational exuberance?

     

    Sometimes a visual says more than words:

     

     

    Irrational exuberance in stock market?

    Fastest, longest rise of the Dow in the past two years. Irrational exuberance?

     

     

     

    Notice that it is not just prices that have shot up. Sometimes prices soar while trading volume treads flatly. In other words, there are very few traders, but those that are buying are willing to pay more. This time, trading volume has gone astronomical (lower part of graph) as money floods  into stocks. That means it’s a flurry of high-stakes trading. The last time we saw this kind of trading volume was …

     

     

     

    Irrational exuberance in stock market seen in steepest rise and highest volume in a decade

    Is the steepest climb in a decade irrational exuberance, particularly when accompanied by the highest trading volume since the Great Recession began?

     

     

    Yes, the last time trading volume (lower graph) reached this frenzy was in 2008 and 2009 when we experienced the greatest stock market crash since the Great Depression. And look how long and steep the post-Trump rally (right end of upper graph) looks compared to any other climb during the past decade, including the run-up to the Great Recession. It’s almost a straight-up wall!

     

    How irrationally exuberant are investors right now?

     

    Forget about measures for a moment, let’s look at forecasts by the revered experts in the industry because if everyone is running with glee in the same direction …

     

    Some market experts are espousing an unequivocally bullish outlook for equities. That level of enthusiasm was on full display after Robert Doll, Nuveen Asset Management’s chief equity strategist, on Wednesday said he was “fully invested” in the market. Asked by one CNBC reporter if he recommended keeping any cash holdings … Doll had this to say: Hold cash? “What for? Market’s going up!” (Marketwatch)

     

    Clearly, Doll sees no top to the hill in sight. Apparently neither do others: in spite of our present nose-bleed heights, Wall Street’s gauge of investor fear, the CBOE Volatility Index VIX, rests comfortably at a 16-month low. Seems almost no one sees any reason for concern at all.

    Lance Roberts writes,

     

    Over this past weekend, Barron’s Magazine published its big story the “2017 Market Outlook….” After 8-years of a bull market advance not one of the forecasters had a “bearish” outlook. In fact, as the article concludes: “If all goes smoothly, our experts’ forecasts might even prove too tepid. The old bull isn’t ready to call it quits yet….” Of course, since it is rising asset prices which drives their business – being “bullish” is good for business…. However … it is extremes in both “psychology” and “behaviors” that tend to give us the best indications as to future outcomes. The legendary Bob Farrell had two rules specifically relating to today’s topic. The first was … “When all the experts and forecasts agree – something else is going to happen.”

     

    Barron’s panel of ten experts (from JPMorgan, Goldman Sachs, Barclays, Citi, Morgan Stanley, BofA, Blackrock and others) were unanimous in their cheer that the US stock market will ascend well beyond its present record heights.

    But, if everything is so rosy, Wolf Richter asks, why are bank insiders and big industrials selling their own company’s stocks faster than ever: (Someone has to be selling for all that buying to happen.)

     

    Why are insiders at banks and industrial companies selling their shares as if there were no tomorrow? Banks had a blistering run. The shares of Wells Fargo, the most hated bank in America these days, soared 28% over the past 30 days, Citigroup 25%, JP Morgan 26%, Goldman Sachs, which is successfully placing its people inside the Trump administration, 37%. It has surged 50% since the end of October…. But high-ranking insiders have been dumping their shares faster than at any time in the data going back to 2003. These executives are considered the “smart money.”

     

    Have market insiders just lost their appetite for dizzying heights, or do they have reason to believe they are selling into the stock market’s last hurrah? Are their banks, perhaps, getting clobbered by the bond crisis that is now developing on the other side of all this trading?

    Even the Wall Street Journal, notes Richter, saw this high-volume trading as a bullish sign. They couldn’t, however, say why it was bullish, but only that it might be profit-taking. Well, why take profits now if you’re confident your bank has room to run? Is WSJ’s bullish note just more irrational exuberance from all market experts who can smell nothing but roses since Trump’s victory?

     

    This is how BofA’s Michael Hartnett explains it: Wall St. is bullish: expectations of “above trend” growth at five-year highs … global inflation expectations at second highest % since Jun 2004 … global bank stock positioning has hit record highs. (Zero Hedge)

     

    Bonds are smarter … and far from exuberant

     

    One old adage says that bond traders are the smart money. Money is now fleeing bonds at a record rate of fall that matches the record rate of rise we are seeing in the stock market. Bond money has to go somewhere; so, it could easily be that stocks are going up less because of Trumphoria and more because of bond phobia, triggered by Trump.  Fear of what could easily turn into the biggest bond-bubble crash in the history of the world makes stocks look like the safest haven.

    The global realization that central banks are not so enthusiastic about additional stimulus anymore, has bond investor’s realizing that the longest bull market in bond history may finally be waning. At the same time Trump’s plan of spending somewhere between half a trillion and one trillion dollars on infrastructure investments (financed on national credit) means interest rates will have to rise in order to attract enough creditors, which they are already doing in anticipation. In many nations, investors’ money is trapped in bonds near zero-percent interest. Knowing higher interest on new bonds is almost inevitable now, these investors want to get their money out of current bonds. Even in the US, who wants to be stuck in bonds at 2.5% for ten years when two to three years from now, interest may be at 5%?

    The prevalent thinking is that Trump’s credit-card spending spree will heat the economy with numerous new jobs, and those new jobs will raise wages in order to attract enough workers. The increased demand for great amounts of materials will also drive up the cost of materials for everyone. The combination of many more workers flush with new cash and rising demand for materials means inflation will rise significantly; and inflation eats away at the value of money stored in bonds. So, one more reason to exit bonds. Goldman Sachs believes the main effect from fiscal stimulus this late in the employment recovery curve will be to drive up interest and inflation.

    In my view, all of that means the Fed’s statement that it will be raising interest more often next year is now irrelevant. I said that before the Fed’s last meeting, and I think we see it is true in the stock market’s relative indifference to what the Fed said. Interest rates are already rising everywhere in the US economy, regardless of the Fed’s target. So, the Fed is clearly failing to accomplish anything with its stated target rate because the market is finally taking over and driving interest. That is why it was easy for the Fed to say it will increase its number of rate increases. I suspect its stated target will play catchup all year in 2017 to what the market is already doing with interest rates.

    So the bond bull is breaking; but that break can cause major bond funds to wind up in liquidity traps where they cannot pay off investors who want out fast enough because the more they sell bonds that people don’t want anyway to raise cash and pay out investors, the more they have to lower the price to make a sale, driving down the value of the bonds they continue to hold, causing more investors to want out. The breaking of the longest and highest bond bull market in history could become a financial vortex, and bond values have already been falling at their fastest rate in history.

    David Gundlach, the bond king who manages the DoubleLine Total Return Bond Fund, sees trouble if bonds get about half a percent higher than they are today:

     

    We’re getting to the point where further rises in Treasurys, certainly above 3 percent, would start to have a real impact on market liquidity in corporate bonds and junk bonds…. Also, a 10-year Treasury above 3 percent in my view starts to bring into question some of the aspects of the stock market and of the housing market in particular. (Newsmax)

     

    If bond funds go bust, they will likely take banks and retirement funds and ultimately the whole economy down with them, since almost everyone has been parking large amounts of money in bond funds because they are typically viewed as safe havens in uncertain times. If all of that goes down, the stock market likely does, too. It’s hard to see how it wouldn’t. It’s always been hard for me to see which would go first in the next big drop back into the Great Recession because both look so dangerous, and it is still hard to say. Will the insolvency of bond funds wipe out some banks and hedge fund managers, taking their stocks down to nothing, or will irrational exuberance in the stock market give way to panic? Right now, it appears to me that bonds will lead the crash.

    Of course, I predicted the Epocalypse of 2016, so you might not want to listen to me. (Though I did say it might not happen until after the election when the Fed gives up and lets Trump take the fall.) I also predicted a second plunge in the price of oil in 2016, and that didn’t happen either. My predictions for 2016 were apparently badly off (at least in timing) for the first time in almost a decade. I started writing regularly on eonomics after predicting the crash of the housing market nearly to the month back in 2007, which I said would quickly become an enduring global catastrophe, the likes of which few people alive had ever seen.

    That said, I anticipate the remainder of this December will go something like last year’s transition into the new year where the market crashed in the manner I said it would by going up first (due to euphoria that the Fed’s interest rate increase didn’t bring down the house), then rounds off and then falls off a cliff; but we’ll see. I’m not certain of that this year, as I was last year, and the fall off the cliff last year was not as severe as I thought it would be … though it was the worst January in the history of the stock market. This year, the euphoria is MUCH higher, so the fall could be much greater and be the kind that I anticipated for 2016.

     

    Is it irrational for stocks to rise due to betting on the Trump card?

     

    It could be. Consider that the entire marketplace began shifting overnight out of bonds and into stocks when Trump won, and it’s still shifting like a huge landslide. What if it repositions to this large degree, and then Trump changes his positions … again? As a matter of fact, he’s already started to backpedal from his infrastructure pledge just as he has been doing from almost all of his stated campaign pledges since being elected:

     

    Trump made rebuilding the nation’s aging roads, bridges and airports very much part of his job-creation strategy in the presidential race. But lately lobbyists have begun to fear that there won’t be an infrastructure proposal at all, or at least not the grand plan they’d been led to expect…. Senate Majority Leader Mitch McConnell tried to tamp down expectations last week, telling reporters he wants to avoid “a $1 trillion stimulus.” And Reince Priebus, who will be Trump’s chief of staff, said in a radio interview that the new administration will focus in its first nine months with other issues… He sidestepped questions about the infrastructure plan. In a post-election interview with The New York TimesTrump himself seemed to back away, saying infrastructure won’t be a “core” part of the first few years of his administration…. He acknowledged that he didn’t realize during the campaign that New Deal-style proposals to put people to work building infrastructure might conflict with his party’s small-government philosophy. “That’s not a very Republican thing — I didn’t even know that, frankly,” he said. (Newsmax)

     

    Seriously? Wow! How could he not know this, given that Republicans have resisted doing any infrastructure stimulus plans for eight years? He is either scarily out of touch if he didn’t realize he’d have a fight from the Republican congress, or this statement is proof that Trump was a Trojan horse from the beginning. This is a remarkably rapid turn from the New-Big-Deal plan that Steve Bannon advocated as being the economy’s salvation, given that Trump is not even in office yet.

    We could have one wild roller coaster ride in 2017 since the market is entirely repositioning itself toward Trump’s infrastructure pledge if that plan takes a few years to come about or doesn’t make it through congress at all … or maybe doesn’t even get presented. It certainly never had a chance of making it through congress unless Trump pushed hard and leveraged his campaign victory toward that end, and the above statements don’t sound like Trump has any push left!

    Zero Hedge recently reported on growing Republican resistance to Trump’s tax and infrastructure plans:

     

    [In an article titled] “A “Big Problem” Emerges For Trump’s Economic Plan” … we reported that while the market may (still) be blissfully unaware about the emerging conflict between Trump’s debt-fueled vision for the future, Republican politicians had started to notice…. Republican lawmakers warned “that there could be a major obstacle to enacting President-elect Donald Trump’s agenda: the national debt.” “I was disappointed that it wasn’t brought up in the campaign,…” Sen. Jeff Flake (R-Ariz.) said of deficits and debt. “So I’m very concerned about it. It’s going to be tough to address if there’s no push from outside of the Congress,” he added. “I’m very concerned about it. It’s the biggest problem we face, by far.”

     

    Rapidly rising interest rates already mean the infrastructure program will become much harder to finance. If Trump waits three years to get seriously started, interest rates could make the plan nearly impossible, plus he will likely have expended all his political capital that comes from a surprise election victory, which will be ancient news by then. He will need that capital to get the plan through a reluctant congress.

    Rising interest rates already mean the mammoth national debt that came about as the result of the Great Recession will become much harder to finance over the next few years, even without taking out another trillion for new infrastructure. So, that will be a new and serious burden on the economy unless so much money flees Europe to bond and stock safety in the US that we’re saved by dumb luck … as once again being the best horse in the glue factory.

    So, is the stock market irrational in its exuberance for shifting so much just because of Trump’s pledges, which are far, far from becoming reality? I think so. I haven’t even talked about Democrat resistance to Trump’s plans, and he’s already got resistance from the Republican leader of the senate. He is already fading back on his own push for the plan … before he is even in office. He has faded back on almost everything he has promised.

    So, I think it is extremely irrational for the market to completely reposition from bonds to stocks — especially banking stocks — when Trump is hedging his words on all of his pledges … backpedaling hard on immigration enforcement and on putting Hillary in jail and now even on infrastructure spending.

    David Rosenberg, chief investment strategist at Gluskin Sheff & Associates Inc., agrees:

     

    The bullish run “probably can get extended into the new year,” but “we’ve just taken a very big leg up here, and levels of sentiment, levels of market positioning and levels of valuation do have me a bit worried that if we see any disappointment at all, it could lead to the sort of pullback we had last year….” Rosenberg calls current valuation levels “extreme.” (Newsmax)

     

     

    1929 stock market crash

    Gathering around the stock ticker in the US stock market crash of 1929.

     

    That doesn’t mean the market won’t keep going up. Who knows what the maximum height or duration of irrational exuberance is (because who knows how crazy people can get); but I am certain of this much: the higher stock market rockets upward on such irrationality, the harder it falls into the chasm of ever-growing debt from which it has been constructed. NO significant economic reforms have happened since the start of the Great Recession. There has been no significant improvement in corporate earnings, just a lot of expanded debt to buy back shares in order to improve Price-Earning ratios, which still look terrible. The entire market is but a poof of speculative hot air.

    But, for the time being, Merry Christmas. If you’re not heavily invested in stocks or bonds, raise a glass of cheer and party on because you have less to fear. There is nothing you’re going to do that can stop the markets (in stocks and bonds) from having their hangover when the bubbly stuff is over and irrational exuberance suddenly looks like delirium. Our greatest economic crashes have always happened when least expected.

  • Hillary Voters Ate Their Feelings On November 9th – Cheesecake Orders Surged 72%

    On Novemer 9, 2016, America’s pampered, Hillary-supporting snowflakes chose to express their complete devastation in a variety of ways.  Some took to the streets to riot and burn down entire city blocks of private property…

     

    …Lena Dunham, in a letter entitled “Don’t Agonize, Organize,” gave us excruciating details of how she simply lay in the shower “crying,” “mumbling incoherently” and “clutching herself”…which is way more than any of us needed to know.

    By the time we’d made it over the bridge, a friend called. “It’s over,” she said. “I love you.” I was frozen. We stopped at the diner. No one was speaking as they ate, no one in the whole place.

     

    At home I got in the shower and began to cry even harder. My boyfriend, who had already wept, watched me as I mumbled incoherently, clutching myself. “It wasn’t supposed to go this way. It was supposed to be her job. She worked her whole life for the job. It’s her job.”

    Lena Dunham

     

    Still others wandered aimlessly in the Arizona desert on shroom-induced “vision quests” seeking guidance from the “big red rock”oh wait, that was Lena Dunham too.  Oh well, you get the idea.

    Lena

     

    Finally, new evidence from the calorie counting app, Lose It!, and meal-ordering app, Caviar, suggest that the majority of America’s disaffected millennial democrats simply lay in bed eating their feelings. 

    According to the CEO of Lose It!, the number of active users going to the gym on the Wednesday after election day this year declined by over 4x the typical mid-week decline.  Per Bloomberg:

    So they did what Americans do best: They ate. And ate. And ate.

     

    Lose It!, a calorie counting app that helps users track their daily food intake, says there’s always a Tuesday to Wednesday drop-off of active users, as dieters lose motivation they had earlier in the week. (Ever notice how the gym is always more crowded on Monday?) But something funny happened the Wednesday after Election Day. The drop-off rate was four times as much as usual.

     

    “There was definitely a post-election slump,” said Charles Teague, chief executive officer of Lose It!. The company doesn’t record its users’ political leanings, but it says 75.8 percent are female and 77 percent are aged from 18 to 44—demographics that swung to Clinton.

    Meanwhile, meal-ordering app Caviar, which operates in 15 urban markets like Boston, New York and Seattle that all swayed massively towards Hillary, said that orders of cheesecake, pie and ice cream surged 72% the day after Hillary lost.

    Meanwhile, orders for desserts such as cheesecake, pie, and ice cream were up 72 percent on Caviar, a meal-ordering app operating in 15 urban markets, including Boston, New York, Dallas, and Seattle. Clinton also carried cities with 50,000 residents or more with a strong margin, even in deep-red Texas.

    On the bright side, unintentional pregnancies collapsed in the days following November 8th.

    Eating Feelings

  • Geopolitics, Globalization, And World Order: Part 1

    Submitted by Federico Pieraccini via Strategic-Culture.org,

    Understanding the objectives and logic that accompany the expansion of nations or empires is always of paramount importance in helping one draw lessons for the future

    In this series of four articles I intend to lay a very detailed but easily understandable foundation for describing the mechanisms that drive great powers. To succeed, one must analyze the geopolitical theories that over more than a century have contributed to shaping the relationship between Washington and other world powers. Secondly, it is important to expound on how Washington’s main geopolitical opponents (China, Russia and Iran) have over the years been arranging a way to put a stop to the intrusive and overbearing actions of Washington. Finally, it is important to take note of the possibly significant changes in American foreign policy doctrine that have been occurring over the last twenty years, especially how the new Trump administration intends to change course by redefining priorities and objectives.

    The first analysis will therefore focus on the international order, globalization, geopolitical theories, their translations into modern concepts, and what controlling a country’s sovereignty means.

    Before examining geopolitical theories, it is important to understand the effects of globalization and the changing international order it entails, a direct consequence of US strategy that seeks to control every aspect of the economic, political and cultural decisions made by foreign countries, usually applying military means to achieve this objective.

    Globalization and the International Order

    It is important to first define the international order among nations before and after the collapse of the Berlin wall, especially focusing on the consequences of existing in a globalized world.

    For the first half of the twentieth century the world found itself fighting two world wars, then, during the Cold War, lasting from 1945 to 1989, the balance of power maintained by the US and USSR held the prospect of a third world war at bay. With the dissolution of the USSR, the United States, the only remaining world superpower, thought it could aspire to absolute domination over the globe, as was famously expressed through the Project for A New American Century. Putting aside for a moment perpetual wars, one of the key strategies towards fulfilling this objective was the so-called experiment of globalization, applied especially in trade, economics and finance, all of course driven by American interests.

    Having achieved victory in the Cold War over its socialist rival, the world went from a capitalist system to a turbo-charged capitalist system. US corporations, thanks to this model of world globalized economy, have experienced untold riches, such as Apple and other IT corporations generating amounts of cash flow equivalent to that of small countries.

    Banks and US financial institutions such as Wall Street incrementally increased their already considerable influence over foreign nations thanks to the rise of computer technology, automation and accounting deceptions such as derivatives, just to give one example. The FED implemented policies that took advantage of the role of the dollar in the globalized economy (the dollar is the premier world reserve currency). Over the years this has caused economic crises of all kinds all over the world, defrauding the entire economic system, consisting of schemes such as being able to print money at will, allowing for the financing massive wars, even going so far as lowering interest rates to 0% to keep banks and big corporations from failing – all a repudiation of the most basic rules of capitalism. All this was made possible because the US being the sole world power after 1989, allowing Washington to write the rules of the game in its favor.

    Since the fall of the Berlin Wall, Wall Street, Big Oil and military corporations, health-care providers, the insurance and agricultural industries slowly replaced national governments, managing to dictate agendas and priorities. A political form of globalization has led to an expropriation of national sovereignty in Europe, with the creation of the Euro and the Lisbon Treaty signed by all EU nations in 2007.

    Globalization has forced the concept of sovereign states directed by their citizens to be replaced with an international superstructure led by the United States, driving away even more citizens from the decision-making process. The European Union, and in particular the European Commission (not elected, but appointed), is unpopular not only for the decisions it has taken but also for the perception that it is an imposter making important decisions without ever having been elected.

    Basically, with the end of the USSR, the international order went from a relationship between states made up of citizens to a relationship between international superstructures (NATO, UN, IMF, WTO, World Bank, EU) and citizens, with the weight of the balance of power decisively in favor of the globalists with the economic burden resting on the people.

    The international order and globalization are therefore to be interpreted according to the logic of Washington, always looking for new ways to dominate the globe, preserving its role of world superpower.

    It is also for this reason that it is important to understand some geopolitical theories that underlie US strategic decisions in the pursuit of world domination. These theories are some of the most important with which Washington has, over the last 70 years, tried to pursue total domination of the planet.

    MacKinder + Spykman + Mahan = World Domination

    Heartland

    The first geopolitical theory is the so-called Heartland theory, drawn up in 1904 by English geographer Sir Halford Mackinder. The basic principle was the following:

    «Heartland or Heartlands (literally: the Heart of the Earth) is a name that was given to the central zone of the Eurasian continent, corresponding roughly to Russia and the neighboring provinces, by Sir Halford Mackinder, the English geographer and author of Democratic Ideals and Reality; the Heartlands of the theory was submitted to the Royal Geographical Society in 1904.

     

    The Heartland was described by Mackinder as the area bounded to the west by the Volga, the Yangtze River to the east, from the Arctic to the north and south from the western Himalayas. At the time, this area was almost entirely controlled by the Russian Empire.

     

    For Mackinder, who based his theory on the geopolitical opposition between land and sea, Heartland was the "heart" button of all the earth civilization, because logistically unapproachable by any thalassocracy. Hence the phrase that sums up the whole concept of Mackinder’s geopolitics: ‘Who controls East Europe commands the Heartland: Who controls the Heartland commands the World-Island: Who controls the World-Island commands the world’».

    In terms of countries, the Heartland consists mainly of Russia, Kazakhstan, Afghanistan, Mongolia, the Central Asian countries, and parts of Iran, China, Belarus and Ukraine.

    Rimland

    The second geopolitical theory, another important lodestar for US foreign policy, was developed in the 1930s by the American Nicholas J. Spykman, also a student of geography as well as a scholar of MacKinder’s theory. Spykman, thanks to advancing naval technology, added to the definition of the Heartland theory the Rimland theory. The Rimland is divided into four main areas: Europe, North Africa, Middle East and Asia.

    «For ‘world island’ it means the Eurasian region, ranging from Western Europe to the Far East. If for Mackinder the Tsarist empire represents the aforesaid area-pin, Spykman instead focuses on the area around Heartland, i.e. Rimland, recognizing it as a strategic point of great importance. The Rimland is characterized by the presence of rich countries, technologically advanced, with great availability of resources and easy access to the seas. Its size at the same time makes sea and land attacked by both sides. On the other hand this means that its dual nature as a possible mediating zone between the two world powers: the United States and Russia. The greatest threat from the geopolitical point of view lies in the union between Heartland and Rimland under one power».

    The Rimland essentially consists of Europe (including eastern Europe), Turkey, the Middle East, the Gulf States, India, Pakistan, Southeast Asia (Brunei, Cambodia, Laos, Malaysia, Myanmar, the Philippines*, Thailand, Vietnam) and Japan.

    As one can see from observing a map, the United States is not physically close to either the Rimland or the Heartland. They are both on the other side of two 6,000-mile oceans. The US is undeniably protected in this way, almost impervious to attack, with an abundance of resources and powerful allies in Europe. These are all characteristics that have favored the rise of the American superpower throughout the twentieth century.

    But world domination is a different matter and, given the geographical location of the US compared to the Heartland and Rimland, first requires a large capacity to project power. Of course with two oceans in between, it is naval power through which power has been conveyed, especially in the early part of the last century.

    Mahan and Maritime Power

    The third geopolitical theory is based on the importance given to maritime (or naval) power. The author of this theory, propounded towards the end of 1800, was US Admiral Alfred Thayer Mahan.

    «Mahan was a ‘precursor’ to international organizations. He assumed that through a union between the United States and Britain, being two maritime powers, they could unite to share the conquest of the seas. The key concept is that ‘the maritime powers are united in opposition to those continental.’ Mahan explains the concept of naval doctrine, which is the policy that states pursue in the maritime and military arenas. In order for a state to have a naval doctrine, it must possess a substantial navy, as well as of course access to the sea, adequate projection capability, adequate means, and have strategic objectives to be protected (such as security zones exposed to risk)».

    As one can easily understand, these three doctrines are central to controlling the whole world. Dominating the Heartland is possible thanks to the control of the Rimland, and in order to conquer the Rimland it is necessary to control shipping routes and dominate the seas, relying upon the Mahan theory of maritime supremacy.

    In this sense, seas and oceans of great geographic importance are those that encircle the Rimland: The East and South China Seas, the Philippine Sea, the Gulf of Thailand, the Celebes Sea, the Java Sea, the Andaman Sea, the Indian Ocean, the Arabian Sea, the Gulf of Aden, the Red Sea, and finally the Mediterranean.

    In particular, straits such as Malacca, between Indonesia and Malaysia, or the Suez Canal, are of strategic importance due to their role as a transit route and connection between all the seas adjacent to the so-called Rimland.

    A bit of history. Route to global domination

    It was Hitler's Germany during World War II that tried to put into practice the theory of geopolitics MacKinder was describing, managing to seize the Heartland but ultimately amounting to nothing with the final victory of the Red Army, who rebuffed and destroyed the Nazis.

    After the end of World War II, the United States placed the Soviet Union in its crosshairs, with the intention of conquering the Heartland and thereby dominating the world. Alternatively, Plan B was to prevent other nations from teaming together to dominate the Heartland. This explains the historical conflicts between the US and Iran and between Russia and China, the three most important nations composing the Heartland.

    Russia, since Tsarist times and throughout the Soviet period to today, has always been in the crosshairs of the United States, given its geographical location central to the Heartland.

    Iran also constitutes a valuable piece of the 'Heart of the World', which was gifted to the Anglo-Americans courtesy the Pahlavi monarchy lending itself to the American plan to conquer the heart of the land. It was only after the 1979 revolution, which ousted the Pahlavi monarchy and installed an Islamic Republic, that Tehran became an enemy of Washington.

    The reason why Afghanistan was invaded and Ukraine destabilized, and why the Belarusian leadership is hated almost as much as is the Russian one, is the same, namely, the geographical positions of these countries in composing the Heartland compels the US to conquer them as part of its grand strategy to dominate the world through the control of the Heartland.

    The Republic of China, another constituent part of the Heartland theory, was during the Cold War the great Asian pivot thanks to Kissinger’s policy aimed at curbing the USSR and preventing the birth of a possible alliance between Tehran, Moscow and Beijing that would dominate the Heartland, especially in the late 1980s. The United States, instead of directly attacking China, used it against the Soviet Union. Washington's primary goal, as well as to expand its influence everywhere, was to prevent any kind of alliance that would control the Heartland, specially preventing any alliance or understanding between Moscow and Beijing; but this will be very well explained in my third analysis on how Eurasia reunited to reject the American global empire.

    Control of a nation

    Historically, control of a nation takes place through military power that allows for a variety of impositions. Also, culture is part of the process of conquering a nation. Today, other than militarily, it is mainly economic power that determines the national sovereignty of a nation. In the modern world, especially in the last three decades, if you control the economy of a nation, you control the rulers of that nation. The dollar and neoliberal experiments like globalization are basically the two most powerful and invasive American tools to employ against geopolitical opponents. The application of military force is no longer the sole means of conquering and occupying a country. Obligating the use of a foreign currency for trade or limiting military supplies from a single source, and impeding strategic decisions in the energy sector, are ways the globalist elites are able to dominate a foreign country, taking control over its policies. The European Union and the NATO-member countries are good examples of what artificially independent nations look like, because they are in reality fully dispossessed of strategic choices in the areas mentioned. Washington decides and the vassals obey.

    It is not always possible to employ military power as in the Middle East, or to stage a color revolution as in Ukraine. Big and significant nations like Russia, India, China and Iran are virtually impossible to control militarily, leaving only the financial option available. In this sense, the role of central banks and the de-dollarization process are a core strategic interest for these countries as a way of maintaining their full sovereignty. In going in this direction, they deliver a dramatic blow to US aspirations for a global empire.

    The next article will focus on how the United States has tried to implement these strategies, and how these strategies have changed over the last seventy years, especially over the last two decades.

  • In His Latest Letter, Odey Refuses To Throw In The Towel

    With his fund down ~50%  YTD, one wonders if Crispin Odey should be thinking about quietly exiting stage left after along and mostly illustrious career. However, as his latest letter suggests, Odey is just getting his second, or maybe third, wind and is confident that he will ultimately win the war against central bankers, although as he himself points out, the risk is not so much his own fund blowing up as much as LPs saying enough to active investing altogether, and cautioned that “skilled investors are being driven out by mindless (passive) investing.”

    Putting it mildly (especially for his own fund), Odey said that “this has been a difficult year for active managers,” and added that “passive investing has taken money which typically would have been in the bond market and deposited it in the equity market.”

    While it remains to be seen if active management is on the endangered list, Odey has bigger troubles with his own LPs in the coming weeks, although his fortune may change in 2017 when as he warns, “central bankers will have to respond to what their governments are doing fiscally, rather than bolstering asset prices with low interest rates. There could be trouble ahead.”

    There could, indeed, which simply means the cycle starts from scratch and central banks LBO even more of the global capital markets, until the 0.01% own all the assets while the rest “own” the debt.

    His full November letter below:

    This is not the beginning of a new cycle. This recovery which began in 2009 on the back of zero interest rates is long in the tooth. After 7 years, the benefits of low interest rates – cheaply financed cars and houses – are played out, whilst oil is now a conundrum. For half the world, the problem is that oil has fallen 50% and for the other half the problem is that the price of oil is up 50%.

    What is true is that there are two problems for the developed world that have not gone away. They are that house prices, and assets in general, are too expensive to be bought out of income. The disparity between the “Haves” and the “Have-nots” is too great. Secondly and relatedly is the brutal difference in lifestyle of the young and the old.

    QE has resulted in very high asset prices and ushered in weaker and weaker productivity gains. Low growth cannot sit alongside rising inequality.

    Brexit, Trump, the Italian referendum came about because the problems seem impossible to solve. Everyone is now looking to any individual who believes he can solve the problem.

    A world fuelled by government spending initiatives, as demanded by voters, promises to undermine the careful husbandry of the developed economies crafted by the policies of central banks.

    If unemployment is already at cyclical lows, new expansionary policies will get reflected in higher inflation reasonably quickly.

    At present markets are just pleased to see a yield curve coming back, but there is no thought that inflation will truly come through.

    Part of this is a belief in the USA that Trump is like Reagan and 2017 is like 1981. However, Reagan was elected after a re-cession. Interest rates were over 20% when he took office. Indebtedness for the whole economy was at 0.9x GNP and the P/E for the stockmarket was 12x. Trump comes in with indebtedness at 3.5x GNP and the stockmarket on 22x current earnings.

    Leverage means every 1% rise in interest rates demands a 3% rise in incomes to keep debt serviceable.

    This has been a difficult year for active managers. 70% of turnover is now accounted for by passive managers. Passive investing has taken money which typically would have been in the bond market and deposited it in the equity market. Naturally skilled investors are being driven out by mindless (passive) investing.

    Is this the time to dump the active managers? One imagines that their time comes again when this sea of money starts to ebb, driven by inflation and higher interest rates. The UK is already facing it. Companies are encountering higher import prices, which is increasing the working capital requirement as well as wage pressures. Is this the beginning of a new cycle?

    Beware leap years! 1994 was the year that deflation came to the world, and a difficult year then was the prelude to many hap-pier years because the skill set required for the subsequent years was exactly the opposite of what was required for 1994.

    Similarly a world of inflation and default is a world in which active managers should outperform.

    Certainly, politicians are no longer interested in higher prices for assets. Politics demands the solution of the “Haves” and “Have-nots”, the young and the old.

    Stockmarkets since the Trump victory have merely served to put cyclical sectors on the same high ratings of growth compa-nies. Whether it is the oil price or other commodities, spot prices are now almost flat going out along the curve. There is little to go for in this area unless inflation comes through.

    China is now the source of inflation. Tax changes in the USA involving raising import prices by 20% effectively and lowering export prices by 12%, will also increase inflationary pressures.

    2017 looks to be a year when central bankers will have to respond to what their governments are doing fiscally, rather than bolstering asset prices with low interest rates. There could be trouble ahead.

    * * *

    Curious what Odey’s biggest positions were as of November 30? The answer is  below.

  • Here Are The Countries Where Millennials Will Have To Work Until They Die

    It turns out there is a downside to spending 120% of your annual income every year from the time you graduate college until that day you turn 40 and finally realize that you’re getting old and have absolutely no liquid assets and no hopes of ever retiring.  While the above strategy seemingly makes sense to our elitist, Ivy League-educated central planners at the Fed who have waged a nearly decade-long war on saving (because how can we have economic growth if people aren’t willing to lever their income 5x and spend every dollar they make?), the roughly 19% of Americans who are over the age of 65 and are still forced to work are probably wishing they could go back and do things slightly differently. 

    As Bloomberg points out, the percentage of 65 years olds working in the U.S. today is higher than at any point going back to at least 1965.

    Millennials

     

    Unfortunately, this looks to be a record that millennials are destined to beat.  As we recently pointed out (see “Most Millennials Have Less Than $1,000 In Savings, Live Paycheck-to-Paycheck“), the majority of millennials are living paycheck to paycheck.

    A recent survey of millennials by HowMuch.net found that 51.8% of those aged 18-34 have less than $1,000 held between bank accounts and cash savings.

    As Visual Capitalist’s Jeff Desjardins notes, this echoes previous data we’ve seen – not just on millennials, but Americans in general. For example, we know that 14% of Americans have “negative” wealth. We also know that 62% of Americans don’t have emergency savings that could cover a $1,000 hospital visit or a $500 car repair.

    Taking that into consideration, here’s a deeper dive into the more recent millennial data…

    Courtesy of: Visual Capitalist

     

    Meanwhile, as a testament to their strong work ethic, a study by ManpowerGroup recently found that roughly 30% of millennials envisioned taking an “extended break” from work at some point in their careers to “relax/travel/vacation” while another ~20% said they’d take a break to “pursue a life dream or hobby.”  Sure, why not?  If everything goes horribly wrong then taxpayers will be waiting to payoff your student loans for you…so no worries.

    Millennials

     

    And, unless you thought this was just a phenomenon limited to America’s snowflakes, turns out millennials all over the world have very little confidence in their ability to save.

    Millennials

     

    Well, at least we’re not alone…misery loves company as they say.

  • Forget Monte Paschi, Italy May Have A Far Bigger Problem

    While the metaphorical 'earthquake' of a systemic banking crisis is coming to a head, it appears Italy may have a far more existential problem on its hands. As The Independent reports, one of the world’s most dangerous supervolcanoes is showing signs of reawakening under the Italian city of Naples.

    The Campi Flegrei may be nearing a critical pressure point necessary to drive an eruption for the first time in 500 years, according to scientists.

    Researchers say the volcano is moving towards a threshold beyond which rising magma could spark the release of fluids and gases at 10 times the normal rate.

    This surge would cause an injection of extremely hot steam into surrounding rocks, Giovanni Chiodini, lead author of the study, told AFP.

    This could ultimately trigger a “very dangerous” eruption for the three million people living in the area.

    Since 2005, the Campi Flegrei  has been undergoing “uplift”, which is the accumulation of magma under the surface of a volcano.

    In response, Italian authorities raised the threat level from green to yellow in 2012, signalling the need for the supervolcano to be actively monitored.

    Four years ago, scientists warned any eruption could kill millions living near or on top of the volcano.

    "These areas can give rise to the only eruptions that can have global catastrophic effects comparable to major meteorite impacts," said Giuseppe De Natale, head of a project to monitor the volcano's activity.

    Nearby Mount Vesuvius, whose massive eruption buried Roman settlements including Pompeii in AD79, is also considered an active volcano.

  • 6 Charts That Make The Case We Are In Long-Term Secular Bear

    Submitted by John Mauldin via MauldinEconomics.com,

    As I look out over the coming years, I am convinced that we’ll see the blowing up of the biggest bubbles in history – including those of government debt and government promises. And it’s not just in the US, but all over the world.

    That will lead to an eventual global crisis of biblical proportions. Although, it isn’t clear what the immediate cause of the crisis will be.

    Let’s start with some basics

    The most common way to measure valuation is with the price-to-earnings ratio (P/E). Analysts compile P/E and other indicators from many companies to give us valuation metrics on entire markets and indexes.

    You can see overvaluation and undervaluation in this chart from my friend Ed Easterling of Crestmont Research.

    The red line is the combined P/E ratio of the S&P 500 as originally reported. The green and blue lines are adjusted Crestmont and Shiller versions, which occasionally diverge. The P/E ratio spent most of the last century between 10 and 25.

    Presently, all three P/E versions are near or above 25, indicating overvaluation. This doesn’t mean the end is near—though it could be. But it does suggest that we are not at the beginning of another long-term bull market.

    P/E adjusted to economic growth

    The next chart illustrates the past and present trend in a different way.

    Direct your attention to the dashed line.

    It’s Ed’s long-term earnings baseline, which he adjusts to reflect the relationship of earnings to economic growth. Reported earnings per share go below the baseline during bear markets and above it in bullish periods. Currently, it is way above trend and is projected by S&P and many others on Wall Street to become even more so.

    The Buffett indicator

    The Buffett Indicator is essentially the market value of all publicly traded securities as a percentage of GDP. Intuitively, it seems odd that the combined value of every public stock would be worth more than the country’s annual production. But sometimes it is. Those periods tend to mark overvaluation, as you can see here.

    The interesting thing here is that right now, the Buffett Indicator—while down from its late 2014 peak—is still higher than it was before the 2008 financial crisis. That should not be encouraging if you’re a bull.

    S&P 500 median since 1964

    The next chart is from Ned Davis and shows us the S&P 500 median P/E back to 1964, which is 16.9 (dotted green line). The distance we are above or below the median is a valuation clue.

    Could the market get more overvalued? Absolutely. It did in the tech bubble.

     

    Household equity percentage vs. S&P 500 total return

    The following chart takes some explaining.

    It shows the percentage of household financial assets invested in stocks (blue line) versus the S&P 500 total return for the following 10 years (dotted line).

    Notice that the right axis is inverted and the dotted line tracks pretty close to the solid blue one. The correlation is 0.91, which is extraordinarily high.

    What the chart shows us is that a higher percentage of household assets in equities points to a lower annualized return over the next 10 years.

    Note the green arrow at the 2009 low. It points off to the right scale just below 15. That suggests that someone who bought stocks at that low point and holds them until 2019 will realize a roughly 15% annualized return.

    That’s the good news. The bad news is that the red arrow at 6-30-2016 means that the 10 years ending 6-30-2026 should produce a 3.25% annual gain. That’s not awful, of course, but it is nowhere near the 7% or more that many pensions and insurance companies think they can earn on their portfolios.

    We are way overdue for a correction

    Bottom line: We are way overdue for a correction. Again, our situation is not the worst it’s ever been, but we are beginning to bump up against historical lines in the sand.

    Here’s the chart, which shows the number of days before the start of 5%, 10%, and 20% corrections.

    Here is how you read this chart:

    The top section shows the history of the S&P 500 Index from 1928 to present. The next three sections show the number of days prior to the start of 5%, 10%, and 20% corrections.

    I think we are still in a very long-term secular bear, although there has been a clear cyclical bull market since 2009. I think the next global recession (hopefully not a depression) will potentially give us a vicious bear market that will mark the end of this secular bear.

    You can see that it has been 116 days since we had a 5% correction. Since 1928, the average number of days before a 5% correction occurred was 50. In secular bull periods, the average number of days was 84. In secular bear periods, the average number of days was 31.

    Note that we have been 210 days without a 10% correction. Since 1928, the average number of days before a 10% correction occurred was 167. In secular bull periods, the average number of days was 331, while in secular bear periods, the average number of days was 91.

    It has been 1955 days since we suffered a 20% correction. Since 1928, the average number of days before a 20% correction occurred was 635. In secular bull periods, the average number of days was 1105. In secular bear periods, the average number of days was 486.

    The current case of 1955 days without a 20% correction is more than three times the average of 635 days (for the whole period from 1-3-1928 to 12-8-2016).

    For this record number of days, let us all join hands and exclaim, “Thank you, Fed, BOJ, and ECB!”

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Today’s News 23rd December 2016

  • TUCKER CARLSON CRUCIFIES CNN REPORTER FOR RETWEETING ADAM SALEH PRANK

    How dare Brian Stelter, so called ‘journalist’ at CNN, retweet an obvious prank by some dipshit named Adam Saleh — over what he sensationalized to be ISLAMOPHOBIA at the hands of a fine American company called Delta Airlines.

    The claim by the very flamboyant and effeminate Adam Saleh was that he was merely talking a barbarous version of Arabic to his Mother, to which was met with an unrelenting form of ISLAMOPHOBIA by the employees at Delta, who quickly ferreted him off the fucking plane for obvious fears that he was about to stage a terrorist event by way of hijacking or shoe bomb detonation.

    Little did the plebian employees know that Adam was just an effete member of the youtube theatre, playing tricks on the people, hoping to cash in on his adsense ads on his stupid videos. In other words, he was full of shit. A simply cursory google search would’ve produced such valuable information, something the CNN journalist named BRIAN STELTER didn’t bother to do.

    Mr. Stelter didn’t bother to do a cursory search on Adam Saleh, instead opting to RETWEET his salacious story, because he’s a very dumb man — a stone aged type of person with savage qualities occupying a very low station in life. Most of the time Mr. Stelter is busy putting out stories about FAKE NEWS, while at the same time creating his own FAKE NEWS. The main stream media today is an active practice of a nonsensical nature, very Kafkaesque for you literary and Orsen Welles aficionados.

    Here’s Brian making fun of himself.
    loser

    The bow-tie less Tucker Carlson calls out Mr. Stelter, and the media as a whole, for being very stupid, falling for the oldest tricks in the book.

    Content originally generated at iBankCoin.com

  • Bitcoin Soars Above $900 As China Opens

    For the 3rd night in a row, China opens with a panic bid for Bitcoin. The cryptocurrency is now up over 14% in less than 3 days, topping $900 for the first time since December 2013. Interestingly yuan is not moving much tonight.

    The USD price for a Bictoin has soared over 14% in the last 2 days. We first warned of this 'outlet' for Chinese capital in September 2015 when Bitcoin was trading around $200…now it is topping $900…

     

    And volume is very heavy once again from China…

     

    Getting very close to record highs…

     

    As a reminder, back in 2013, the government classified bitcoin as a commodity and not currency, placing it outside the purview of the foreign-exchange regulator, the people said.  That does not mean, however, that China is powerless at limiting bitcoin's upside.

    Several Chinese government bodies including the People’s Bank of China and the financial regulators said in a joint notice that year that bitcoin functioned like a digital commodity without the legal status of a currency. The central bank said in January it is studying the prospects of issuing its own digital currency and aims to roll out a product as soon as possible.

    While China dominates bitcoin mining and trading, the government has shown caution over its spread in the nation. In 2013, the PBOC barred financial institutions from handling bitcoin transactions.

  • Federal Reserve Initiates End Game As Trump Heads To White House

    Submitted by Brandon Smith via Alt-Market.com,

    For years, alternative economic analysts have been warning that the “miraculous” rise in U.S. stock markets has been the symptom of wider central bank intervention and that this will result in dire future consequences. We have heard endless lies and rationalizations as to why this could not be so, and why the U.S. “recovery” is real.  At the beginning of 2016, the former head of the Dallas branch of the Federal Reserve crushed all the skeptics and vindicated our position in an interview with CNBC where he stated:

    “What the Fed did — and I was part of that group — is we front-loaded a tremendous market rally, starting in 2009.It’s sort of what I call the “reverse Whimpy factor” — give me two hamburgers today for one tomorrow. I’m not surprised that almost every index you can look at … was down significantly.” [Referring to the results in the stock market after the Fed raised rates in December.]

    Fisher continued his warning (though his predictions in my view are wildly conservative or deliberately muted):

    “…I was warning my colleagues, “Don’t go wobbly if we have a 10-20 percent correction at some point. … Everybody you talk to … has been warning that these markets are heavily priced.”

    Here is the issue stocks are a mostly meaningless factor when considering the economic health of a nation. Equities are a casino based on nothing but the luck of the draw when it comes to news headlines, central banker statements and algorithmic computers. Today, as Fischer openly admitted, stocks are a purely manipulated indicator representing nothing but the amount of stimulus central banks are willing to pour into them through various channels.

    Even with the incredible monetary support pooled together by international financiers, returns on equities investments continue to remain mostly flat.  It would seem that the propping up of indexes like the Dow has been only for the sake of keeping up appearances. For many people, revenue is barely being generated.

    Unfortunately, the majority of Americans do not care to educate themselves on the finer points of finance. Their only relation to the health of the economy is their daily glance at the Dow. If it is green, or at all time highs, they assume that all is well, even if their gut is telling them something is not quite right.

    The elites that stand at the helm of the Federal Reserve understand this dynamic very well. They are not stupid. They know that the whole of the global economy could be in a shambles but as long as stocks remain positive the masses will continue to ignore reality until the flames of destabilization are at their very doorsteps.

    With this fact in mind one might think that the Fed would consider it in their best interest to keep stimulus measures operating indefinitely; but that is not what they are doing.

    In fact, the Fed along with other central banks like the ECB has been slowly peeling back pillars of support from markets that have been in place since 2008-2009 and leaving the system open to a crisis event that should have been dealt with years ago. I examined this process of deliberate destabilization in my article 'The Global Economic Reset Has Begun.'

    In that piece I outlined the three major pillars holding up the U.S. market system and certain parts of our economy and how they were being systematically removed.

    The first pillar was the use of bailouts and quantitative easing measures. These were diminished through the implementation of the Fed “taper,” which I predicted would happen three months prior that year.

    The second pillar was the use of near zero interest rates, which allowed numerous banks and corporations to access low-cost and no-cost overnight loans from the Fed. These companies then used these loans in large part to support a never-ending program of stock buybacks, which reduced the stock pool and artificially boosted the values of the remaining stocks.  I predicted in August of 2015 that the Fed would hike interest rates and that this would be the beginning of the end for the stock buyback bonanza. The Fed hiked rates in December of that year.

    This process of removing backdoor manipulation through low interest rates should be our main concern right now. Early in 2016 I believed that the Fed would reach a position in which it would finally unleash a series of rate hikes. I did not think they would be so blatant as to wait until right after the U.S. presidential election to do so. I was wrong.

    This is why I eventually predicted the launch of a series of rate hikes starting right after the election of Donald Trump in my article 'World Suffers From Trump Shell Shock  Here’s What Will Happen Next.' The Fed has now once again hiked interest rates with assertions that they will be “accelerating” such hikes throughout 2017.

    As I have been arguing for most of the past year, the election of Donald Trump was inevitable and would precede the triggering of the final stage of our ongoing economic crisis. I came to realize that the Fed’s timing of their latest rate hike is highly strategic. Not only does it set the stage for a series of hikes that will crush U.S. stock markets this coming year and finally shock the public out of their fiscal stupor, but it also maneuvers the crisis right into the lap of Donald Trump and the conservative movements that support him.

    Beyond this, it perpetuates an increasing Left/Right division in America. Think about it  during a fiscal crisis under Trump, tiggered by accumulating Fed rate hikes, liberals will immediately set upon Trump as the culprit, while conservatives will immediately defend Trump as a victim of Federal Reserve meddling.

    The Federal Reserve and the mainstream media are already composing the narrative by stating that Trump's potential economic policies and a widening budget deficit would REQUIRE higher rates at a faster pace in order to be accommodated.

    I have heard arguments from some that this tactic would simply not work. That people would “never buy” a narrative in which Trump and conservatives are blamed for a market collapse that was at least eight years in the making. I have to say, this view is incredibly naive.

    I understand why people would want to embrace the notion that the public is as savvy as the liberty movement when looking at economic events, but this simply isn’t reality. A large portion of the U.S. population identifies with the “Left” end of the political spectrum. We have already seen how they react in the face of a Trump election win. They are predisposed to believe that Trump is responsible for a market crash regardless of the facts. Not to mention, much of the rest of the world is economically ignorant and will likely jump on the anti-conservative bandwagon during a crisis as well.

    But the real master stroke of this strategy on the part of the elites is that it creates the perfect platform for the destruction of the U.S. dollar’s world reserve status  the third and final pillar I mentioned months ago that is supporting our economic system.

    Imagine that the Fed’s rate hike frenzy sparks an open feud between the central bank and Trump? Some people might say “Good! Shut the bastards down!” However, this is exactly what the elites want. With the Fed “at odds” with the president of the U.S., faith in the U.S. dollar will plummet. Its world reserve status will be destroyed. And instead of being blamed on central banks, the majority of people around the world will claim it was the fault of Trump.

    With a historically sufficient excuse for the end of dollar dominance in hand, the elites can move forward with their great global reset, which includes the replacement of the dollar with the IMF’s special drawing rights as the go-to reserve currency mechanism. The SDR basket is an essential bridge in the formation of a single global monetary authority and a true single global currency.

    I believe that the Fed will not only continue hiking interest rates throughout 2017, but that some of these rate hikes may be LARGER than many people expect (50 basis points or more). I believe this will be designed to foster extreme tensions between the executive branch and the central bank.

    A few months ago I would have said that Trump may or “may not” be aware of this dynamic and the potential that he is a scapegoat. Now that I have seen Trump’s cabinet picks which include neo-con and Goldman Sachs alumni, I have little doubt that he is fully cognizant of the plan.  I will be writing more on the issue of Trump as a "Trojan horse" in my next article.  In the meantime I would point out that all of the elements of psychological support for stock markets will also disappear in the face of a Trump verses establishment narrative.

    All those leftist media outlets cherry picking economic stats and telling half truths to support the recovery lie now have no reason to continue cheerleading for the economy. I expect that propaganda rags like Reuters and Bloomberg will quickly change their tune with Trump in the Oval Office and begin a consistent chorus of negative financial data. Not only will the Fed remove all support from the system, but the mainstream media will be pounding day traders with the kind of “doom and gloom” headlines that they have been criticizing us for over the years.

    Make no mistake, the election of Trump may have some in the liberty movement ready to pack up their preps and forget about any national crisis in their lifetimes, but the truth is, vigilance is needed now more than ever. I said it before the election and I’ll say it today  do not get comfortable; the times are about to get even more interesting.

  • Royal Mint And CME Make A Mint On The Blockchain?

    Royal Mint And CME Make A Mint On The Blockchain?

    The last fortnight has been an exciting one in the gold and blockchain space. Earlier this week Euroclear and Paxos announced that a group which included Société Générale, Citi, Scotiabank had completed the first pilot of the blockchain-based gold trading platform as being developed by Euroclear. In Canada, the Royal Canadian Mint became the latest sovereign mint to announce a blockchain product with GoldMoney.

    gold-bullion-sovereign-2017Royal Mint Gold Sovereigns 2017

    The Royal Mint in the UK had beaten the Royal Canadian Mint and GoldMoney to it by announcing at the end of November that they were launching a blockchain project, one which will be in direct competition with the Euroclear project.

    We will be looking at this week’s development in more detail shortly but today focus on the UK Royal Mint announcement and ask what this means for the 1,000 year old institution, the gold market and blockchain technology.

    The Royal Mint and CME Group announced a gold and blockchain ‘solution’ three weeks ago. As one would expect from a trading solution using blockchain, it will ‘log each transaction’. The two parties will collaborate on a digital gold asset called Royal Mint Gold (RMG) and will ‘transform the way traders and investors trade, execute and settle gold.’

    In a conference call quoted by the Internatonal Business Times, there was very little said about what made the plans any different to what is already being offered by the likes of Goldcore. Bars will be held in secure storage, represented on an online trading platform and then traded. But, a blockchain will be in place.

    Despite the fanfare and considerable PR benefit surrounding the announcement there is very little information on the hows and the whys of the decision by HM Treasury owned Royal Mint and the world’s largest futures exchange operator to launch a joint blockchain offering. Instead this appears to be about encouraging physical gold ownership, facilitated by a government who happen to own a storage facility.

    But what does it mean?

    Blockchain has to be the most hyped technology in a very long time. Even AI, IoT and VR, all of which are creating a lot of excitement, are not experiencing the same level of fuss.

    blockchain-gold
    Solutions for trading physical assets, based on the blockchain are becoming more popular and as a result more sophisticated. Many are autonomous which is obviously attractive to those who choose to invest in gold.

    This is where there is an interesting point when it comes to the Royal Mint and their interest in blockchain. It is too easy for someone unfamiliar with blockchain technology and the gold market to assume that this move by the 1,000 year old institution is to offer some kind of autonomy to the gold market.

    It seems that we live in a world where we shout ‘got a problem? Blockchain’ll fix it!’

    Take health records, for example. There is little doubt that blockchain technology really could transform the systems and processes that are currently in place. However those problems exist because of a multitude of reasons location, legacy systems, interest of invested parties to name a few.

    None of which will disappear with the appearance of a blockchain.

    The case is the same for gold and the blockchain. I do believe that blockchain could play a big role in the international gold market. But, in this case for the end customer and for the wider gold market I believe this will not have a significant positive impact. As explained earlier, this is a gold trading platform that happens to be using blockchain.

    Economist Ashe Whitener agrees

    “In my opinion, this is only news because the Royal Mint is basically a government-owned entity experimenting with blockchain. Just because something tangible like gold has a serial number on a blockchain, doesn’t mean that it is any more secure, safe or less risky.

    Since the underlying asset is still physical, we still must place our trust with the Mint in terms of vaulting the gold. So nothing here really changes.”

    What is it good for?

    This is likely better news for the blockchain industry than for the gold market. For the blockchain space an announcement by a 1,000 year-old, government owned institution along with the world’s largest futures exchange operator is another tick in the legitimacy box for this relatively new and much hyped technology.

    The announcement has lead to even more discussions about how the distributed ledger technology can be used in the world of gold trading.

    As Michael Scott wrote upon hearing the announcement:

    “It reflects blockchain’s ability to adroitly track and authenticate data, secured by a global ecosystem of computers which ensure that recorded transactions are tamper resistant and unalterable.”

    Does the Royal Mint need a blockchain?

    Blockchain’s abilities to remove uncertainties could be particularly beneficial to the gold market, a market that is so overrun with uncertainty and opacity that companies such as GoldCore go to great lengths to put systems and processes in place in order to guarantee transparency and accessibility.

    At present, very little information has been released by CME Group and the Royal Mint on the specifics of what kind of blockchain will be used, and in what capacity it will play a role.

    As Sandra Ro of CME said in the conference call

    “We will go into further details about exactly how a lot of process will work and the finer details around the platform at a later date.”

    What we do know (thanks to Ro) is that the blockchain in place will be a permissioned network. This effectively means that Joe Bloggs cannot decide he would also like to participate in the Royal Mint’s blockchain and start approving transactions. Instead, all actors will be known and ‘and there will be a mechanism by which validators will validate the transactions.’

    As the two parties have themselves said, this is not about a blockchain product, this is an investment platform that happens to use blockchain. However, be sure that both the Royal Mint and CME Group will have full oversight and likely control over the blockchain.

    The attraction of blockchain technology in the gold market, is similar to that in any other marketplace where there is an exchange of information (which may or may not lead to an exchange of an asset). A central database, or registry, is not needed thanks to the decentralised network of records.

    This creates some significant cost and time savings, as well as boosting the efficiencies in how information is recorded, updated and shared.

    One of the claims by the Royal Mint is that by using a blockchain solution, they will not have to pass storage fees onto clients. How using the blockchain means that storage fees no longer have to be charged is something that is not yet clear. If RMG is fully-backed by gold then who is covering the storage and insurance costs for participants?

    Is it not of interest as to why an institution owned by a heavily indebted government would be making a lot of noise about it’s gold trading platform that just so happens to be connected to some storage vaults?

    Boost to London?

    The decision to use blockchain technology is, according to the UK’s Daily Telegraph “a bid to broaden London’s appeal as a place to buy and sell bullion.”

    Currently the London Gold market, along with the COMEX is the biggest price creator in the gold market. Around $5 trillion of gold deals are done in the capital city, per year. The City is not currently struggling in terms of appeal, to the mainstream at least.

    However of late a series of moves across the globe may have current gold market influencers thinking about what the future may hold.

    The move to blockchain by both groups is not surprising.

    The Royal Mint has been looking at the space for the last couple of years, whilst CME Group have investments in two blockchain companies. Both will no doubt be feeling the pressure from the developments that are going on in London. We recently discussed the increasingly fragmented London gold market, which has new players offering blockchain solutions for various aspects of gold trading.

    In the US, CME Group will also be carefully watching TradeWindMarkets, a spin off from IEX Group (of Flashboys fame) which will also be launching a blockchain supported gold exchange.

    Outside of London announcements by Singapore and China, plus the setting of the Sharia Gold Standard likely has current price setters in the gold market, anxious about how they can maintain their stronghold.

    But this is unlikely to just be about increasing awareness of the London Gold market. The big gold trading institutions are already aware of, and are using the OTC market.

    Royal Mint gold is not diversification

    Gold investors buy gold to diversify their portfolio. There are more detailed reasons, and further reasons for doing so, but this is the one that covers most gold investors. You might also invest in gold because you read that it would perform well in the next five years, your colleague might invest in gold because of concerns over the cashless society and it goes on. But ultimately we all do it to diversify our investments and as a form of financial insurance.

    We want some portfolio diversification because we want to protect (and grow) our wealth as much as possible. What are we protecting it from? Changes in the economy. This in turn is affected by a multitude of factors from financial developments, economic policies, governments, geopolitical events and even the weather.

    When we invest in an asset that is designed to reduce our exposure to global risk, it’s probably a great idea to choose one which is as far removed from the system as possible.

    This is why we choose gold. It is a border less, autonomous asset, a gold bar or coin cannot be printed many times over at the will of government or central bank, it cannot be eaten away by negative interest rates, if held non bank, non government, safer jurisdictions, a government will find it very hard to remove it through bail-ins or asset confiscation. History has shown how its value remains and it is an invaluable wealth preservation tool.

    This is also why a lot of people like bitcoin, and why many are interested in the benefits a blockchain can bring to a system that represents exchange of value.

    So when we invest in gold, it flummoxes me why many people choose to do so with the help of the very system that has created the need to hold safe haven assets e.g. gold and silver. Why place your gold in the custody of a heavily indebted national government?

    We like the Royal Mint and their bullion coins, including Gold Sovereigns and Gold Britannias, are some of  our best selling gold coins. However, for those looking to own gold for diversification, safe haven and financial insurance purposes it is prudent to opt for owning such bullion coins and bars in allocated and segregated storage in large, stable, creditor nations.

    It is unlikely that a blockchain solution will give those Royal Mint users greater automony over their gold. The gold will still be stored in Royal Mint vaults, in the UK and, therefore, the custodian will remain the British Government which is under considerable stress and faces many challenges including Brexit and a massive national debt.

    To begin to promote gold ownership, via the hype of the blockchain, at a zero-storage fee cost leads to obvious questions as to whether this is a win for the investor or for the Royal Mint.

    Gold and Silver Bullion – News and Commentary

    Gold steady as dollar edges away from 14-year peak (Reuters.com)

    India Said to Consider Lowering Gold Import Tax to 6% From 10% (Bloomberg.com)

    Gold Futures Little Changed, But Lower Dollar Lends Some Support (EconomicCalendar.com)

    Investors shun Italian bank Monte Paschi’s share offer (Reuters.com)

    Italy approves €20 billion bailout fund – MPS closer to collapse (MarketWatch.com)

    Yuan Collapse Sends China Physical Gold Premium Soaring To 3-Year Highs (ZeroHedge.com)

    Gold: The Wait For Inauguration Day (321Gold.com)

    The Most Hated Asset On The Planet – Gold (TheMacraTourist.com)

    Krugman’s Latest Conspiracy: Trump Is A Gold Bug (Mises.org)

    Why modern monetary policy doesn’t work – the models it uses are horribly out of date (MoneyWeek.com)

    7RealRisksBlogBanner

    Gold Prices (LBMA AM)

    22 Dec: USD 1,130.55, GBP 916.20 & EUR 1,080.47 per ounce
    21 Dec: USD 1,134.40, GBP 919.20 & EUR 1,091.07 per ounce
    20 Dec: USD 1,132.75, GBP 915.94 & EUR 1,090.84 per ounce
    19 Dec: USD 1,137.60, GBP 913.15 & EUR 1,089.14 per ounce
    16 Dec: USD 1,134.85, GBP 911.17 & EUR 1,084.80 per ounce
    15 Dec: USD 1,132.45, GBP 904.37 & EUR 1,080.70 per ounce
    14 Dec: USD 1,160.95, GBP 917.38 & EUR 1,091.99 per ounce

    Silver Prices (LBMA)

    22 Dec: USD 15.77, GBP 12.78 & EUR 15.10 per ounce
    21 Dec: USD 16.03, GBP 12.96 & EUR 15.40 per ounce
    20 Dec: USD 15.80, GBP 12.80 & EUR 15.22 per ounce
    19 Dec: USD 16.00, GBP 12.89 & EUR 15.34 per ounce
    16 Dec: USD 16.05, GBP 12.91 & EUR 15.36 per ounce
    15 Dec: USD 16.14, GBP 12.95 & EUR 15.51 per ounce
    14 Dec: USD 17.11, GBP 13.52 & EUR 16.07 per ounce


    Recent Market Updates

    – China Gold and Precious Metals Summit 2016 – GoldCore Presentation
    – Trumpenstein ! Who Created Him and Why?
    – Bail-Ins Coming? World’s Oldest Bank “Survival Rests On Savers”
    – Fed’s “Fool Me…”, Silver Suppression, Euro Contagion In 2017?
    – Fed Raised Rates 0.25% – Rising Rates Positive For Gold
    – Shariah Gold Standard Is “Revolutionary” – Mobius
    – Silver Fixing By Banks Proven In Traders Chats
    – Euro Crisis and Contagion Coming In 2017
    – ECB ‘Bazooka’ Reloaded Until At Least December 2017 – Euro Gold Rises 1%; 13% YTD
    – UK £6 Billion Worse Off After Multi Billion Pound Gold “Accounting Error”
    – Buy Silver – May Replace Gold As Money In India
    – Shariah Gold Standard Approved for $2 Trillion Islamic Finance Market
    – Potential “Systemic Crisis In Eurozone” After Italy Votes No, Renzi Resigns

  • Ron Paul: "US Interferes In Foreign Elections All The Time"

    When asked whether all the “Russian hacking” allegations were just a simple “political stunt” or whether a serious investigation needed to be conducted, Ron Paul offered up a startling bit of reality pointing out that America has a long history of interfering with elections and even invading countries “to have our guy in.”  We suspect the following response was a bit more truth than Fox Business News expected.

    “I think it is politics more than anything else.  It’s really is nothing new. It’s like, guess what – somebody might have done A, B, C.”

     

    “The very rarely, if ever, compare what we do with election around the world.  We are interfering all the time.” 

     

    “I’m sure the Russians are interfering.  But when you lose, you can jump on that and make a big point of it. But I don’t think it made any difference.  I think it’s insignificant.”

     

    “If you review the history of how many elections we’ve been involved with, how many countries we’ve invaded and how many people we’ve killed to have our guy in, I’ll tell you what – we don’t have very much room for condemning anybody else.”

     

    “I think the spying and interference is sort of the nature of our governments. That’s why I’d like to see government much smaller.”

    Here is the full interview:

  • Save The Snowflakes

    Our nation’s snowflakes are being cared for by colleges and universities across the country. These schools – no, HEROES – are financially supporting cry-ins, hot chocolate, bubbles, kittens, puppies and ponies, crayons, and Play-Doh to comfort these wounded snowflakes. Some schools even canceled exams and classes to ensure that America’s youth are treated with extra care and understanding during these difficult times.

    But clearly, state funding – tax-payer dollars – are simply not enough.

    State budgets cannot be expected to bear this burden alone. It’s going to take a far more sustainable funding source to ensure special snowflakes have the emotional support they need. In response, we here at the Media Research Center have launched the Save the Snowflakes project to respond to this emergency and bring crucial attention to this devastating human crisis.

    The media may not choose to expose this atrocity, but the folks at Media Research Center, through their Save the Snowflakes initiative, is doing much more…

    "We won’t rest until we save each and every special snowflake from the horrors of exposure to … things they simply do not agree with."

    A testimonial will tug at your heart- and purse-strings…

     

    Source: SaveTheSnowflakes.org

  • Tennessee Man Gets $75 Check To "Restart His Life" After Being Wrongfully Imprisoned For 31 Years

    In October 1977, a Memphis, Tennessee woman was raped in her home by two intruders.  The woman subsequently identified one of the perpetrators as her neighbor, 22 year old Lawrence McKinney.  One year later, McKinney was convicted on rape and burglary charges and sentenced to 115 years in prison.

    The only problem is that he didn’t do it.  After spending 31 years in prison, DNA evidence cleared Mckinney of any wrongdoing in 2008 and he was later released in 2009 with a very “generous” check of $75 from the Tennessee Department of Corrections to help “restart his life.”  To add insult to injury, McKinney told CNN that “because I had no ID it took me three months before I was able to cash it.”

    McKinney

     

    Now, a 61-year-old McKinney is asking Tennessee Governor Bill Haslam to exonerate him, a move that would clear a path to pursue up to $1 million in compensation from the state Board of Claims for 3 decades of wrongful imprisonment. The Tennessee Board of Parole, which makes recommendations to the governor on such issues, denied McKinney’s request for exoneration by a 7-0 vote at a hearing in September saying they could not “find clear and convincing evidence of innocence.”

    “The (parole) board reviewed all relevant information related to the crime, conviction and subsequent appeals, as well as all information provided by the petitioner,” said Melissa McDonald, spokesperson for the Tennessee Board of Parole. “After considering all of the evidence, the board did not find clear and convincing evidence of innocence and declined to recommend clemency in this matter.”

     

    One of McKinney’s attorneys, Jack Lowery, believes the decision should rest solely with Haslam.

     

    “The parole board is not qualified to make these decisions and should not,” he said. “For the parole board to step in when many (of them) are not trained in the law is ridiculous.”

    Apparently the parole board based their decision, in part, on McKinney’s admission to the 1977 burglary charge, an admission his lawyer at the time told him he needed to make if he wanted any shot at an early parole.

    According to John Hunn, McKinney’s pastor and most ardent supporter, the board cited a list of 97 infractions that McKinney incurred while he was in jail, including the alleged assault of a fellow inmate, who testified against McKinney at the hearing. McKinney told the board he’d been in prison for years, and that “only the strong survive,” Hunn said. Hunn testified at the hearing on McKinney’s behalf.

     

    “Lawrence has told that story at our church,” Hunn said. “He doesn’t deny that story. He was in prison, man.”

     

    The parole board also knew that 28 years into his sentence, McKinney admitted to the burglary charge he was convicted of. McKinney said his lawyers at the time told him that if he wanted any chance of being released early, he would need to admit to something.

    Despite being forced to waste more than half his life behind bars, Mckinney says he’s not bitter and just wants to “be treated right and fair for what has happened to me.”

    “Although I’ve spent more than half of my life locked up for a crime I did not do, I am not bitter or angry at anyone, because I have found the Lord and married a good wife,” McKinney said. “All I ask is that I be treated right and fair for what has happened to me. I didn’t do nothing, and I just want to be treated right.”

    Perhaps the “commuter-in-chief” could take a little break from pardoning hardened drug dealers to help clear someone that seemingly actually deserves a break.

  • Deutsche Bank Settles With DOJ: Will Pay $3.1 Billion Civil Penalty

    With analyst expectations/hopes in the $2 to $5 billion range (against the initial $14 billion fine), Deutsche Bank said it has reached settlement with US authorities to pay a $3.1 billion civil penalty (and provide $4.1bn in relieef to consumers). Removing considerable uncertainty about Deutsche’s capital position, one wonders how much this remarkably low-ball settlement had to do with Donald Trump’s current loan re-negotiations with the “world’s most systemically dangerous bank.”

    As a reminder, the Wall Street Journal noted that DB’s attorneys had privately suggested that a $2 – $3 billion settlement with the DOJ was probably in the ballpark.  Meanwhile, wall street analysts had estimated settlements in the $2-$5 billion range.  Any fines paid pursuant to current negotiations would be in addition to the $1.9 billion already paid in 2013 to settle other U.S. claims related to mortgage-backed securities.

    Per the table below, as of June 30, DB had reserved a total of €5.5 billion for civil litigation and regulatory penalties on it’s balance sheet.

    DB

    And so this lower than expected penalty has sent US equity futures higher…

    As Bloomberg reports, Deutsche Bank said it has reached a $7.2 billion agreement to resolve a years-long U.S. investigation into its dealings in mortgage-backed securities, removing a major legal hurdle for the bank.

    Deutsche Bank will pay a $3.1 billion civil penalty and provide $4.1 billion in relief to consumers under a settlement in principle with U.S. authorities, which was announced by the Frankfurt-based bank in a statement early Friday. The deal compares with the Justice Department’s opening request of $14 billion, which the firm has said it expected to whittle down.

     

    While the agreement removes significant uncertainty hanging over Deutsche Bank, Germany’s biggest lender remains under Justice Department investigation in several other matters and also faces potentially expensive civil suits. Chief Executive Officer John Cryan has made resolving major litigation a priority as he seeks to restore confidence in the Frankfurt-based lender.

     

    The Obama administration is pressing to wrap up investigations of Wall Street firms for creating and selling the subprime mortgage bonds that fueled the 2008 financial crisis. Authorities have already extracted more than $46 billion in fines from six U.S. financial institutions over their dealings in mortgage-backed securities. Bank of America Corp., which had the largest such settlement, agreed to pay $16.7 billion over bonds that were worth four times what Deutsche Bank’s bonds were worth.

    While Obama’s legacy played its part, no doubt; we just can’t help but wonder how much the fact that, as Bloomberg reports, the bank is trying to restructure some of Trump’s roughly $300 million debt as part of an attempt to reduce any conflict of interest between the loan and his presidency, according to a person familiar with the matter.

    Normally, the removal of a personal pledge might lead to more-stringent terms. But there is little normal about this interaction. Trump’s attorney general will inherit an investigation of Deutsche Bank related to stock trades for rich clients in Russia — where Trump says he plans to improve relations — and may have to deal with a possible multibillion-dollar penalty to the bank related to mortgage-bond investigations.

     

    Whatever terms a restructured loan might include, they will reflect the complex new relationship spawned between Germany’s largest bank and its highest-profile client. Ethicists say this concerns them.

     

    “When you have political appointees making decisions about banks that the president owes a lot of money to, it looks terrible,” said Richard Painter, a law professor at the University of Minnesota who was the chief ethics lawyer for President George W. Bush. “The U.S. government is dealing with regulatory and criminal issues with the big banks all the time, and if he owes them a lot of money, there might be an incentive to favor less regulation and less enforcement for the banks.”

     

    Deutsche Bank declined to comment.

    Even better news, Deutsche Bank expects to record a pretax charge of about $1.17b in 4Q.

    So between Obama’s legacy and Trump’s loan mods, the department of Justice settled for 22c on the dollar of their original demand? That is around 10% of 2016’s revenues… “cost of doing business”?

    Where did the number come from? That’s easy…

  • Deep State Desperation

    Submitted by Robert Gore via StraightLineLogic.com,

    The pathetic attempts to undo Donald Trump’s victory are signs of desperation, not strength, in the Deep State.

    The post World War II consensus held that the USSR’s long-term goal was world domination. That assessment solidified after the Soviets detonated an atomic bomb in 1949. A nuclear arms race, a space race, maintenance of a globe-spanning military, political, and economic confederation, and a huge expansion of the size and power of the military and intelligence complex were justified by the Soviet, and later, the Red Chinese threats. Countering those threats led the US to use many of the same amoral tactics that it deplored when used by its enemies: espionage, subversion, bribery, repression, assassination, regime change, and direct and proxy warfare.

    Scorning principles of limited government, non-intervention in other nations’ affairs, and individual rights, the Deep State embraced the anti-freedom mindset of its purported enemies, not just towards those enemies, but toward allies and the American people. The Deep State gradually assumed control of the government and elected officials were expected to adhere to its policies and promote its propaganda. Only John F. Kennedy directly challenged it, firing CIA Director Allen Dulles after the Bay of Pigs disaster. He was assassinated, and whether or not CIA involvement is ever conclusively proven, the allegations have been useful to the agency, keeping politicians in line. The Deep State also co-opted the media, keeping it in line with a combination of fear and favor.

    Since its ascension in the 1950s, the biggest threat to the Deep State has not been its many and manifest failures, but rather what the naive would regard as its biggest success: the fall of the Soviet Union in 1991. Much of the military-industrial complex was suddenly deprived of its reason for existence—the threat was gone. However, a more subtle point was lost.

    The Soviet Union has been the largest of statism’s many failures to date. Because of the Deep State’s philosophical blinders, that outcome was generally unforeseen. The command and control philosophy at the heart of Soviet communism was merely a variant on the same philosophy espoused and practiced by the Deep State. Like the commissars, its members believe that “ordinary” people are unable to handle freedom, and that their generalized superiority entitles them to wield the coercive power of government.

    With “irresponsible” elements talking of peace dividends and scaling back the military and the intelligence agencies, the complex was sorely in need of a new enemy. Islam suffers the same critical flaw as communism—command and control—and has numerous other deficiencies, including intolerance, repression, and the legal subjugation of half its adherents. The Deep State had to focus on the world conquest ideology of some Muslims to even conjure Islam as a plausible foe. However, unlike the USSR, they couldn’t claim that sect and faction-ridden Islam posed a monolithic threat, that the Islamic nations were an empire or a federation united towards a common goal, or that their armaments (there are under thirty nuclear weapons in the one Islamic nation, Pakistan, that has them) could destroy the US or the entire planet.

    There was too much money and power at stake for the complex to shrink. While on paper Islam appeared far weaker than communism, the complex had one factor in their favor: terrorism is terrifying. In the wake of the 9/11 attacks, Americans surrendered liberties and gave the Deep State carte blanche to fight a war on terrorism that would span the globe, target all those whom the government identified as terrorists, and never be conclusively won or lost. Funding for the complex ballooned, the military was deployed on multiple fronts, and the surveillance state blossomed. Most of those who might have objected were bought off with expanded welfare state funding and programs (e.g. George W. Bush’s prescription drug benefit, Obamacare).

    What would prove to be the biggest challenge to the centralization and the power of the Deep State came, unheralded, with the invention of the microchip in the late 1950s. The Deep State could not have exercised the power it has without a powerful grip on information flow and popular perception. The microchip led to widespread distribution of cheap computing power and dissemination of information over the decentralized Internet. This dynamic, organically adaptive decentralization has been the antithesis of the command-and-control Deep State, which now realizes the gravity of the threat. Fortunately, countering these technologies has been like trying to eradicate hordes of locusts.

    The gravest threat, however, to the Deep State is self-imposed: it’s own incompetence. Even the technologically illiterate can ask questions for which it has no answers. Why has the US been involved in long, costly, bloody, and inconclusive wars in Afghanistan and Iraq? Why should the US get involved in similar conflicts in Syria, Libya, Somalia, Yemen, Iran, and other Middle Eastern and Northern African hotspots? Isn’t such involvement responsible for blowback terrorism and refugee flows in both Europe and the US? Have “free trade” agreements and porous borders been a net benefit or detriment to the US? Why is the banking industry set up for periodic crises that inevitably require government bail-outs? (SLL claims no special insight into the nexus between the banking-financial sector and the Deep State, other than to note that there is one.) Why does every debt crisis result in more debt? How has encouraging debt and speculation at the expense of savings and investment helped the US economy? The Deep State can’t answer or even acknowledge these questions because they all touch on its failures.

    Brexit, Donald Trump, other populist, nationalist movements catching fire, and the rise of the alternative media are wrecking balls aimed at an already structurally unsound and teetering building that would eventually collapse on its own. The shenanigans in the US after Trump’s election—violent protests, hysterical outbursts, the vote recount effort, the proof-free Russian hacking allegations, “fake news,” and the attempt to sway electoral college electors—are the desperate screams of those trapped inside.

    Regrettably, the building analogy is imperfect, because it implies that those inside are helpless and that the collapse will only harm them. In its desperation, incompetence, and corrupt nihilism, the Deep State can wreak all sorts of havoc, up to and including the destruction of humanity. Trump represents an opportunity to strike a blow against the Deep State, but the chances it will be lethal are minimal and the dangers obvious.

    The euphoria over his victory cannot obscure a potential consequence: it may hasten and amplify the destruction and resultant chaos when the Deep State finally topples. Anyone who thinks Trump’s victory sounds an all clear is allowing hope to triumph over experience and what should have been hard-won wisdom.

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Today’s News 22nd December 2016

  • Paul Craig Roberts Warns "As the Coup Against Trump Fails, the Threat Against His Life Rises"

    Authored by Paul Craig Roberts,

    The use of the presstitute media to deny Trump the Republican presidential nomination failed.

    The use of the presstitute media to deny Trump victory in the presidential election failed.

    The vote recount failed.

    The effort to sway the Electoral College failed.

    But the effort continues.

    The CIA report on Russia’s alleged interference in the US presidential election ordered by Obama is in process. Faked evidence is a hallmark of CIA operations.

    In their determination to seal Trump’s ears against environmental concerns, a group of environmentalists plan to disrupt the inauguration. This in itself is of little consequence, but chaos presents opportunity for assassination.

    Trump himself seems to think he is in danger. According to MSNBC, Trump intends to supplement his Secret Service protection with private security. As there is evidence of CIA complicity in the assassination of President John F. Kennedy (film shows Secret Service agents ordered away from JFK’s limo immediately prior to his assassination), Trump, who is clearly seen as a threat by the military/security complex, is not being paranoid. MSNBC implies that Trump’s private security is to suppress protesters, as if government security forces have shown any compunction about suppressing protesters.

    This provides an indication of the threat that the CIA sees in Trump:

    John F. Kennedy famously threatened to "smash the CIA into a thousand pieces." But ultimately, the 35th president lost his solitary battle to completely break the power of the deep state.

     

    Though I respect Kennedy, I believe Donald Trump is a much more serious proposition.

     

    Donald Trump is Michael Corleone. He will keep his friends close, and his enemies closer (including the likes of John Bolton). But those he doesn't keep closer, he will ruthlessly "screw against the wall" for targeting him.

     

    The no-nonsense Mike Pompeo, Trump's nominee for CIA director, will be the hatchet man for this merciless house cleaning operation.

     

    Come January 20th, the reckoning begins.

    Global Research’s Michel Chossudovsky has explained that Trump’s peaceful approach to Russia aligns him with oligarchs, whose wealth benefits from business deals with Russia, and puts Trump at odds with the military/security oligarchs, who benefit from the one trillion dollar annual military/security budget. The latter group have been in control since President Eisenhower warned us about them and can muster deep state forces against a Trump presidency.

    To take on a group like this requires a tough SOB. Anything less than Trump wouldn’t have a chance. Indeed, if Douglas Valentine’s just published book, The CIA As Organized Crime (Clarity Press, 2017) is even half true, Trump’s life is certainly at risk.

    Donald Trump is clearly no saint. Given what we are up against—dangerous tensions between nuclear powers and the military/security complex’s stake in these tensions—a saint is not what the situation calls for.

    The military/security complex has been entrenched since NATO’s formation on April 4, 1949, a provocation that preceded by six years the formation of the Warsaw Pact on May 14, 1955. Any president willing to confront this entrenched deep state superpower deserves the support of all of us.

  • San Fran Billionaire Luanches Plan To House Homeless In Shipping Containers

    Last year we noted, via the Liberty Blitzkrieg blog, that rents in San Francisco and surrounding areas had grown so out of control that even Ivy Leaguers, like 31 year old Luke Iseman of The Wharton School, were having a hard time making ends meet.  After growing tired of renting a run down, tiny apartment for $4,200 per month, Iseman decided to take a novel approach to housing.  So he rented out a warehouse space and filled it with 11 steel shipping containers that he now rents out as makeshift apartments for $1,000 per month.  We learn more from Bloomberg:

    Luke Iseman has figured out how to afford the San Francisco Bay area. He lives in a shipping container.

     

    The Wharton School graduate’s 160-square-foot box has a camp stove and a shower made of old boat hulls. It’s one of 11 miniature residences inside a warehouse he leases across the Bay Bridge from the city, where his tenants share communal toilets and a sense of adventure. Legal? No, but he’s eluded code enforcers who rousted what he calls cargotopia from two other sites. If all goes according to plan, he’ll get a startup out of his response to the most expensive U.S. housing market.

     

    Iseman collects $1,000 a month for each of the 11 structures parked in the 17,000-square-foot warehouse he rents for $9,100. Tenants include a Facebook Inc. engineer, a SolarCity Corp. programmer and a bicycle messenger.

    Screen Shot 2015-08-03 at 10.41.45 AM

     

    Now, billionaire California real estate developer John Sobrato is looking to implement a similar plan in Santa Clara to house a portion of the city’s 6,500 homeless.  The plan calls for converting 200 steel shipping containers into a mix of 160 and 240 square foot micro apartments that could then be rented out homeless and low-income families. 

    Sobrato, who has spent much of his career building office space for many of Silicon Valley’s technology giants, asked the Santa Clara City Council for exclusive negotiating rights to lease a 2.5-acre plot of city-owned land, three miles south of the San Francisco 49ers football stadium and currently leased to a Hyundai dealership. His plan for the lot calls for a mix of 160- and 240-square-foot units, large enough for a kitchenette and bathroom with shower, which he said could be fashioned out of re-purposed shipping containers.

     

    Under the plan, the developer asked for a 57-year lease at the cost of $1 a year. In return, the Sobrato Organization, based in Cupertino, would build and own the apartments, then lease them back to Santa Clara County, which would hire property management and homeless service providers. The project, called Innovation Place, could open as soon as 2018, with half the units rented to homeless and half offered to renters earning between 50 and 80 percent of the area’s median income.

    Mock ups of the proposed housing complex were presented at the Santa Clara city counsel meeting:

    Container Homes

    Container Homes

    Container Homes

     

    Of course, not everyone is supportive of Sobrato’s efforts.  Nearby neighbors, who are undoubtedly paying $1,000’s of dollars per month for their shoe boxes, have already started an online petition to shut down the project.

    What has not been stated in this proposal, is how the nearby neighborhood is already being negatively affected by the mismanaged apartment complexes to the north of this potential landing spot for the homeless. Nearly 5 blocks of mismanaged, high density, low-income housing already exists across the street. Due to these apartments and the high density living that accompanies these apartments, nearby neighborhoods are experiencing a spike in crime, drug use, alcohol use, litter and lack of available parking. The nearby neighborhood streets, which at one time were quiet are now being used as a main thoroughfare for vehicles and pedestrians. Cars are being broken into and keyed and houses are being burglarized. There have been multiple hit-and-runs associated with the extra foot and vehicle traffic and the police have been called out multiple times for “suspicious” individuals either loitering around the neighborhood or sleeping in their cars.

    NIMBY

     

    Isn’t it so interesting how the liberal elites of San Francisco are always the most vocal supporters of any number of federal subsidy programs for low-income families…but we guess that only applies to the extent those low-income families stay far away from their posh, suburban, “safe places.”

  • Mass Deception

    Submitted by 720Global's Michael Lebowitz via RealInvestmentAdvice.com,

    Janet Yellen

    At the December 14, 2016 FOMC press conference, Federal Reserve Chairwoman Janet Yellen responded to a reporter’s question about equity valuations and the possibility that equities are in a bubble by stating the following: “I believe it’s fair to say that they (valuations) remain within normal ranges”. She further justified her statement, by comparing equity valuations to historically low interest rates.

    On May 5, 2015, Janet Yellen stated the following: “I would highlight that equity-market valuations at this point generally are quite high,” Ms. Yellen said. “Not so high when you compare returns on equity to returns on safe assets like bonds, which are also very low, but there are potential dangers there.”

    In both instances, she hedged her comments on equity valuations by comparing them with the interest rate environment. In May of 2015, Yellen said equity-market valuations “are quite high” and today she claims they are “within normal ranges”? The data shown in the table below clearly argues otherwise.

    Interestingly, not only are equity valuations currently higher than in May of 2015 but so too are interest rates.

    Further concerning, how does one define “normal”? Does a price-to-earnings ratio that has only been experienced twice in over hundred years represent normal? Do interest rates near historical lows with the unemployment rate approaching 40-year lows represent normal? Is there anything normal about a zero-interest rate monetary policy and quadrupling of the Fed’s balance sheet?

    Does the Federal Reserve, more so than the collective wisdom of millions of market participants, now think that it not only knows where interest rates should be but also what equity valuations are “normal”?

    One should expect that the person in the seat of Chair of the Federal Reserve would have the decency to present facts in an honest, consistent and coherent manner. It is not only her job but her duty and obligation.

    Homebuilders

    On December 15, 2016, CNBC reported the following:The National Association of Home Builders/Wells Fargo Housing Market Index (HMI) rose to 70, the highest level since July 2005. Fifty is the line between positive and negative sentiment. The index has not jumped by this much in one month in 20 years.”

    The graph below shows how much house one can afford at various interest rates assuming a $3,000 mortgage payment.

    Over the past two months U.S. mortgage rates increased almost a full percent from 3.50% to 4.375%. Given such an increase, a prospective homeowner determined to limit their mortgage payment to $3,000 a month would need to seek a 10% reduction in the price of a house. In the current interest rate environment, this equates to drop from $668,000 to $601,000 in order to achieve a $3,000 a month mortgage payment. One would expect that homebuilders temper their optimism, given that a key determinant of housing demand and ultimately their companies’ bottom lines is facing a sturdy headwind.

    Advice/Summary

    The point in highlighting these examples is to remind you that people’s opinions, especially those with a vested interest in a certain outcome, may not always be trustworthy. We simply urge you to examine the facts and data before blindly relying on others.

    We leave you with historical insight from a few so-called experts:

    • “We will not have any more crashes in our time.”: John Maynard Keynes 1927
    • There is no cause to worry. The high tide of prosperity will continue” : Andrew Mellon 1929
    • Stock prices are likely to moderate in the coming year but that doesn’t mean the party is coming to an end.” : Phil Dow 1999
    • The Federal Reserve is not currently forecasting a recession.” : Ben Bernanke 2008

  • Goldman Warns "China Remains A Key Risk", Sees Yuan Downside Accelerating

    With Bitcoin at 3 year highs, China’s renewed efforts to curb declines in its currency are doing little to stop yuan bears who have sent forward devaluation expectations to record highs and options positioning to six-month lows. And judging by Goldman Sachs' outlook – a potential resurgence in Chinese growth fears early next year, but more broadly, a continued bumpy deceleration – things are not getting better anytime soon.

    As Bloomberg notes, traders have turned increasingly negative amid tighter liquidity, sending bets for further losses soaring. The gap between forward contracts wagering on the offshore yuan a year from now versus its current level is heading for a record monthly jump…

     

    Just as the extra cost for options to sell the currency against the dollar hit a six-month high relative to prices for contracts to buy.

     

    The currency is facing a triple whammy of accelerating capital outflows, faster U.S. interest-rate increases and concerns over domestic financial markets as liquidity tightens. Strategists say its weakening, set to be the biggest this year in more than two decades, may accelerate as the government restores the annual quota for citizens to convert yuan holdings into foreign exchange. And Goldman Sachs warns, China remains a key risk to watch…

    Where we stand now:

    Broader concerns about China risk derailing global growth and markets proved somewhat short-lived. After the S&P 500 hit its low for the year on February 11, two days after we published, better economic data and a sense that the Fed would react to global concerns—confirmed by the dovish March FOMC meeting—helped improve market sentiment. Political events in the western hemisphere have since broadly taken center stage in global markets, leaving China concerns in the background. But the reality is that growth—on some level—did take a hit; for example, US GDP growth came in at an anemic 1.1% annualized in 1H2016, owing in part to weakness in the industrial sector and energy-related activity but largely due to tighter financial conditions primarily in the wake of China concerns. China growth itself also remained relatively weak in 1H as measured by the GS China Current Activity Indicator, which declined towards 4% in 1Q and began to climb slowly thereafter.

     

    Stabilizing growth in China has helped push China to the background of investor concerns. In order to stabilize growth and meet official GDP targets, China’s policymakers continued to pursue an ambitious stimulus plan begun in early 2015 that entailed pausing fiscal reforms, sharply cutting interest rates, loosening housing policies, and increasing credit growth. The result: GDP growth looks set to meet the target of 6.5%-7% for 2016, and producer prices are rising after years of deflation.

     

    But policies that re-ignited growth in the short-term just increase concern about the future, especially in terms of credit. We estimate that total credit growth adjusted for muni bond issuance accelerated from 13% yoy in 1Q15 to 17% yoy as of 2Q16, and to 20% yoy when including shadow lending not captured in official statistics. In short, the potential credit problems in China have not receded, and indeed have likely grown given the very fast pace of credit expansion.

     

    Policymakers have taken note of these potentially destabilizing dynamics and have refocused on risk management; indeed, China’s recent Central Economic Work Conference to plan for next year’s economic policy included strong statements on controlling financial risks. Risk management measures employed in recent months include increasing short-term repo rates, reining in off-balance sheet exposures such as wealth management products, and rolling out measures to try to curb home price appreciation. Fiscal policy also seems likely to tighten at least slightly in coming months. But any tightening will likely prove short-lived given that meeting growth targets will remain critical in 2017—a year of leadership transition.

     

    Our RMB view has also become more negative, presenting risk to the US dollar and S&P 500. When we published at the height of market anxiety around China, we were relatively constructive on the RMB, arguing that a large, one-off devaluation was unlikely and envisioning only a “mild” trade-weighted depreciation (against the CFETS basket, the CNY has depreciated 4.5% since then). But capital outflow pressures have remained, particularly in the context of US dollar strength. Despite the government’s official focus on a trade-weighted currency basket, higher $/CNY fixings are still a powerful signal that can easily re-ignite capital flight, as households and firms anticipate a faster pace of depreciation.

     

     

    Indeed, the PBOC’s FX reserves fell US$69bn to US$3,052bn in November, the largest decline since January. The US election has reinforced these dynamics given the strengthening dollar and potential for trade frictions, motivating tighter restrictions on capital flows. Global markets have so far taken these developments in stride, but the risk of a repeat of related equity market volatility remains, which could impact the pace of Fed tightening and dollar strength.

    What to look for in 2017 (and beyond):

    A potential resurgence in Chinese growth fears early next year, but more broadly, a continued bumpy deceleration. We expect sequential GDP growth to decelerate into 1Q17 to c.5.5% annualized on recent tightening measures. But we expect a rapid pivot back to stimulus should the growth target look at risk, especially given next year’s leadership transition.

     

    Continued concerns about China credit growth. Although policymakers have introduced tightening measures to reduce the risk of asset price bubbles, China’s reliance on credit growth, which undermines financial stability, remains a key risk.

     

    RMB downside, posing potential risk to the stronger US dollar and global stock markets. We forecast a $/CNY fix of 7.00, 7.15 and 7.30 in 3, 6 and 12 months, respectively, and long $/CNY is one of our 2016 Top Trades. The pace of capital outflows and the evolution of the fix warrant monitoring; in our view, as long as the fix simply offsets dollar strength and capital outflows are contained, global risk appetite should hold up.

    China remains a key risk to watch.

  • College Student Earns 4.0 GPA, Then Drops Out: "You Are Being Scammed!"

    Submitted by Lance Schuttler via TheMindUnleashed.com,

    Billy Williams just finished his first college semester and did so with the all-impressive 4.0 GPA. Instead of celebrating his accomplishments with friends and family, he decided to drop out of college entirely.

    willson

    Billy made a facebook post that is now going viral in which he explains his reasoning for dropping out:

    “Now that I’ve finished my first semester I think it’s safe to say… FUCK COLLEGE. Now before all you of you go batshit crazy… I have a few points to make.

     

    1. Yes I have dropped out after finishing my first semester (with a 4.0 GPA). And it’s one of the best choices I’ve ever made. Not because I am averse to learning, but actually the exact opposite.

     

    2. YOU ARE BEING SCAMMED. You may not see it today or tomorrow, but you will see it some day. Heck you may have already seen it if you’ve been through college. You are being put thousands into debt to learn things you will never even use. Wasting 4 years of your life to be stuck at a paycheck that grows slower than the rate of inflation. Paying $200 for a $6 textbook. Being taught by teacher’s who have never done what they’re teaching. Average income has increased 5x over the last 40 years while cost of college has increased 18x. You’re spending thousands of dollars to learn information you won’t ever even use just to get a piece of paper. I once even had an engineer tell me “I learned more in my first 30 days working than in my 5 years of college.” What does that tell you about this system? There are about a million more ways you’re being scammed into this.. just watch the video i’m gonna comment if you want to see more.

     

    3. Colleges are REQUIRING people to spend money taking gen. ed. courses to learn about the quadratic formula (and other shit they will never use) when they could be giving classes on MARRIAGE and HOW TO DO YOUR TAXES.

     

    4. Gosh there are so many more reasons I could add, but just comment if you disagree or have reasons to add. I’d love to add to the discussion. TAG a friend in college, Tag your parents, share this if you agree, disagree. Let’s just talk about it. Heck post a picture of yourself flipping off something you think is unjust in our society.”

    Billy is right too that the price of college continues to soar.

    Ray Franke, a professor of Education at the University of Massachusetts, Boston said:

    “If you look at the long-term trend of college tuition, it has been rising almost six percent above the rate of inflation. That’s brought immense pressure from the media and general public, asking whether college is still worth it.

    In 2015, Harvard’s annual tuition and fees (not including room and board) would cost a person $45,278, which is more than 17 times the 1971-72 cost. If annual increases of tuition had simply tracked the inflation rate since 1971, 2016’s tuition would be just $15,189.

    According to CNBC, college enrollment peaked in 2011, and has been decreasing ever since. This is no doubt in part to a family’s ability to pay the tuition, room and board and other related expenses. For example, in order to pay for a year of college at Harvard today would take the median household income nearly one year of paychecks. Back in 1971, it would have taken about 13 weeks of paychecks per the household median income.

    Today the student debt is over $1.26 trillion dollars with over 44 million Americans in debt from student loans. 2016’s graduates on average are over $36,000 dollars in debt, which is up 6% from just one year ago.  

    What can be done to alleviate this situation? Why do banks get bailed out (2008 Lehman crisis) for cheating the world, while students must continue to pay a debt? Why is a private institution (The Federal Reserve) in charge of this nation’s money and finances? How will students continue to be able to go to college when the price continues to skyrocket as the federal minimum wage stays stuck at $7.25 an hour? At some point soon, the masses won’t take it anymore from the banking cartel. The education system is in for some major changes very soon.

  • Mysterious Military Flyover Above Manhattan Was A Trump "Emergency Relocation Drill"

    One week ago, New Yorkers were captivated, and unnerved, by a 40-minute long military exercise in which one USAF C-130 and several HH-60 Pave Hawk helicopters could be seen circling at very low altitudes above Manhattan. While the US military kept silent about the overflight, U.S. Air Force Col. Nicholas Broccoli, the vice commander of the Air National Guard’s 106th Rescue Wing, said the aircraft were conducting “standard military training.”  However, one look at the flight pattern of the plane shows there was seemingly little that was “standard” about a C-130 making dozens of circles over midtown Manhattan.

    Today we learn that the overflights were far more than simply “standard military training.” According to DNAinfo, the military airplane and two helicopters doing loops over Midtown last week were conducting an “emergency relocation” planning mission in case they needed to extract President-elect Donald Trump during an emergency or attack.

    Citing sources, DNAInfo said that the flyovers were part of an “emergency relocation drill” designed to identify locations, primarily in Central Park, where a chopper could touch down near Trump’s home inside Trump Tower on Fifth Avenue and 56th Street, and safely evacuate Trump and others from the city.

    “It was the military doing their homework,” one source said. “They were making plans how to remove him, mapping plans and strategizing,” added a second source.

    In the event of an emergency, the president would be whisked by the Secret Service north to the park, and then flown in a helicopter to the nation’s capital or a secret government site in Virginia or West Virginia, sources said. The aircraft models spotted during the exercise can fly long distances without refueling and can also refuel in mid-air if necessary, sources said.

    Surprisingly, the NYPD was given only short notice about the flyovers, and were never informed that the military would be using a plane as large a C-130 with its 130-foot wing span. “They should have told people they were doing recon, and going to fly at low altitudes, instead of keeping it a secret,” a law enforcement source said. “People were scared, and rightly so.”

    “Trump is the president and people would understand that they are doing a recon mission for an emergency,” the source continued.

    One day after the flyover, NYPD Commissioner James O’Neill told reporters that the city was working on improving notification procedures. “Usually when there is a flyover, we get something through our Operations unit. It’s sent out to everybody,” O’Neill said last Wednesday at an unrelated press conference. “That notification is supposed to go out through OEM [the Office of Emergency Management], so I know OEM is working with the military to make sure the proper notifications are made. [OEM Commissioner] Joe Esposito is going to have to make sure he stays in contact with the military for future notifications.”

    “The public should know about that. What’s transpired in New York City over the last 15 years, we need to know that,” O’Neill added.

    DNAinfo further adds that according to a federal agent who witnessed the circling aircraft, and who spent most of his career protecting presidents, “the park is the closest place to land, even if they keep a Marine 1 helicopter up here in the city, or in base in New Jersey.” The ex-agent said last week’s aircraft basically conducted a dozen loops from 42 Street west to Riverside Park, then headed to the East River and south back to 42nd Street.

    “I have never seen a military training maneuver in the city,” the agent observed. “That type of rescue work is usually done by the NYPD, the FDNY, or the Coast Guard, not the military.”

    The C-130 which was the airplane confuicting the drills, travels up to 300 mph, is fundamentally a cargo transport plane that can be filled with everything from armed personnel to armored vehicles, including presidential limousines. The plane can also land on short runways.

    Meanwhile, the military continued to deny the purpose of the exercise: a spokesman for the New York State Division of Military and Naval Affairs said last week only that the maneuver was part of a “routine training mission” that originated from the 106th Rescue Wing at the Francis S. Gabreski Airport in Westhampton Beach on Long Island. He reiterated the same today. A spokesman for the US Secret Service in Washington did not immediately respond to a call seeking comment.  As a matter of policy, however, the agency routinely says it does not discuss specifics of Presidential security.

  • Baby Boomers Increasingly Having Social Security Checks Garnished To Cover Student Loan Payments

    According to a new report from the Government Accountability Office, the federal government is increasingly garnishing Social Security benefits to help cover student loans payments owed by baby boomers.  According the Wall Street Journal, a total of $1.1 billion has been garnished since 2001 with $171 million being collected in 2015 alone. 

    The government has collected about $1.1 billion from Social Security recipients of all ages to go toward unpaid student loans since 2001, including $171 million last year, the Government Accountability Office said Tuesday. Most affected recipients in fiscal year 2015—114,000—were age 50 or older and receiving disability benefits, with the typical borrower losing about $140 a month. About 38,000 were above age 64.

     

    The report highlights the sharp growth in baby boomers entering retirement with student debt, most of it borrowed years ago to cover their own educations but some used to pay for their children’s schooling. Overall, about seven million Americans age 50 and older owed about $205 billion in federal student debt last year. About 1 in 3 were in default, raising the likelihood that garnishments will increase as more boomers retire.

     

    “I believe this is the tip of the iceberg of what may be to come if we don’t work harder on this problem,” said Sen. Claire McCaskill of Missouri, the top Democrat on the Senate Special Committee on Aging.

    Student Loans

     

    Of course, the mere suggestion that people should be responsible for repaying debt they’ve incurred was enough to throw Elizabeth Warren into a tailspin as she described the idea of garnishing social security benefits as “predatory.”

    The report showed garnishments left thousands with Social Security checks below the poverty line, prompting Sen. Elizabeth Warren (D., Mass.) to call the practice “predatory.” Both lawmakers said they will push legislation to ban it.

     

    But consumer advocates and some congressional Democrats say the government’s tactics have become too aggressive, targeting many borrowers who are destitute and have no hope of repaying. Most Social Security recipients rely on their checks as their primary source of income, other research shows.

    Meanwhile, the WSJ points out that Obama’s “income-driven repayment” (IDR) plans only serve to make the student loan problem worse.  Since the payment plans only cover a portion of monthly interest payments, debt balances continue to grow over time leaving borrowers with even larger debt balances as they reach retirement age. 

    Daniel Pianko, a managing director of University Ventures, which invests in for-profit and nonprofit schools, says the government may be worsening the troubles of older borrowers by promoting programs that set monthly payments as a share of borrowers’ earnings. Payments under “income-driven repayment” programs frequently cover only part of the interest and not the principal, allowing balances to grow.

     

    In that sense, the income-driven repayment programs have the same effect as payday lenders, trapping poor borrowers in a growing amount of debt.

     

    “Every month and every year the loan balances go up, which means by definition this problem will only get worse,” Mr. Pianko said.

    We just wrote about another Government Accountability Office report that blasted the Education Department’s understanding of basic mathematics and accounting concepts after finding the department drastically underestimated the costs of Obama’s student loan forgiveness programs.  The 100-page report entitled “Federal Student Loans:  Education Needs to Improve Its Income Driven Repayment Plan Budget Estimates” found that taxpayers could be on the hook for $137BN of student loans to be forgiven over the coming years as a result of Obama’s executive actions on IDR plans.

    Student Loans

     

    Oh well, what’s another $50 billion or so…we hear a lot of baby boomers vote so better give them what they want.

    Baby Boomers 

  • CalPERS Board Votes To Maintain Ponzi Scheme With Only 50bps Reduction Of Discount Rate

    A few weeks ago we asked whether CalPERS would rely on sound financial judgement and math to set their rate of return expectations going forward or whether they would cave to political pressure to maintain artificially high return hurdles that they'll never meet but help to maintain their ponzi scheme a little longer (see "CalPERS Weighs Pros/Cons Of Setting Reasonable Return Targets Vs. Maintaining Ponzi Scheme").  The decision faced by CALPERS was whether their long-term assumed rate of return on assets should be lowered from the current 7.5% down to a more reasonable 6%.  Well, we now have our answer and it seems the board erred on the side of maintaining the ponzi with a decision to reduce the fund's discount rate by only 50 bps, to 7%, to be phased in over 3 years.

    Of course, this decision should come as little surprise to our readers as we concluded our previous post with the following prediction:

    We've seen this battle between math/logic and politicians played out numerous times in states all across the country.  Somehow we suspect that "math/logic" will continue to lose…better to bury your head in the sand for a couple of more years and pretend there is no problem.

    Per The Sacramento Bee, the CalPERS board approved the discount rate adjustment with a vote of 6-1 and the reduction will be phased in over 3 years starting next July. 

    CalPERS moved to slash its official investment forecast Tuesday, a dramatic step that will translate into billions of dollars in higher annual pension contributions from the state, local governments and school districts.

     

    Employees hired after January 2013, when a statewide pension reform law took effect, will also have to kick in more money. Older employees could see higher contributions, too, although that would be subject to contract bargaining.

     

    CalPERS’ Finance and Administration Committee voted 6-1 to lower the forecast from 7.5 percent to 7 percent in phases over three years, starting next July. Although the committee’s vote must be ratified by the entire board Wednesday, most other board members indicated they support the move as well.

     

    It would be the first adjustment to the forecast in four years.

     

    The move is a recognition that investment returns are falling and that the California Public Employees’ Retirement System, which is just 68 percent funded, needs higher contributions from government agencies to solve its long-term problems.

     

    “We’re in a low-growth (investment) environment, and it’s expected to remain that way the next five to 10 years,” board member Henry Jones said.

    While a 50bps decrease to a 7% discount rate will still trigger roughly $1 billion in incremental annual contributions from various California government entities according to Eric Stern of the California Department of Finance, it is still a long way from the fund's estimated returns of just 6.2% over the next decade which happens to match exactly their returns from the past decade.

    Calpers

     

    Of course, mathematical realities have to be weighed against the risk of disrupting the ponzi scheme and forcing several California cities to the brink of bankruptcy.

    But a CalPERS return reduction would just move the burden to other government units. Groups representing municipal governments in California warn that some cities could be forced to make layoffs and major cuts in city services as well as face the risk of bankruptcy if they have to absorb the decline through higher contributions to CalPERS.

     

    “This is big for us,” Dane Hutchings, a lobbyist with the League of California Cities, said in an interview. “We've got cities out there with half their general fund obligated to pension liabilities. How do you run a city with half a budget?”

     

    CalPERS documents show that some governmental units could see their contributions more than double if the rate of return was lowered to 6%. Mr. Hutchings said bankruptcies might occur if cities had a major hike without it being phased in over a period of years. CalPERS' annual report in September on funding levels and risks also warned of potential bankruptcies by governmental units if the rate of return was decreased.

    Meanwhile, Richard Costigan, chairman of the CalPERS finance committee, who vowed that "this is just a start," more or less admits that the decision was politically motivated to allow "municipalities and other government agencies some breathing room before they absorb the impact."

    Board members, however, defended the action as a compromise; it will help stabilize the fund while giving municipalities and other government agencies some breathing room before they absorb the impact. Richard Costigan, chairman of the finance committee, said CalPERS officials will continue to look at the fund’s investment strategies over the next year.

     

    “This is just a start,” Costigan said.

    Now all eyes will turn to the 37.6% funded Illinois pension fund, as well as many others, to see if they follow suit. 

  • Nearly 3,000 US Communities Have Lead Levels Higher Than Flint

    Submitted by Nadia Prupis via TheAntiMedia.org,

    A Reuters investigation this week uncovered nearly 3,000 different communities across the U.S. with lead levels higher than those found in Flint, Michigan, which has been the center of an ongoing water contamination crisis since 2014.

    click image for link to interactive map…

    The investigation found that many of the hot-spots are receiving little attention or funding. Local healthcare advocates said they hope the reporting will spur action from influential community leaders.

    All of the communities Reuters investigated had lead levels at least two times higher than Flint’s; more than 1,000 were four times higher. In most cases, the local data covered a 5- to 10-year period through 2015, the analysis states.

    Areas affected by lead poisoning populate the map from Texas to Pennsylvania, reported Reuters‘ M.B. Pell and Joshua Schneyer. The available data charts 21 states that are home to about 61 percent of the U.S. population.

    Despite the massive drop in lead poisoning rates since the 1970s—when heavy metals were phased out of paint and gasoline—many communities throughout the country are still at risk.

    “The national mean doesn’t mean anything for a kid who lives in a place where the risks are much higher,” said Dr. Helen Egger, chair of Child and Adolescent Psychiatry at NYU Langone Medical Center’s Child Study Center.

    Like Flint, many of the communities are mired in “legacy lead,” Reuters reported—old industrial waste, crumbling paint, or corrosive pipes. But few have received help or attention.

    Contamination in children can cause cognitive difficulties, which in turn can lead to low school performance, few job opportunities, and trouble with the law. That cycle was examined last year when 25-year-old Baltimore resident Freddie Gray died after his spine was severed in police custody. Amid protests against brutality and racism, many noted that Gray experienced lead poisoning as a child while living in an area with persistently high exposure levels.

    But the problem is nationwide and affects a vast spectrum of communities, Reuters writes. Milwaukee, Wisconsin still has “135,000 prewar dwellings with lead paint, and 70,000 with lead water service lines,” and $50 million has already been spent to protect the city’s children. Many families do not have the funds to make the repairs themselves, and laws requiring owners to remove lead from their properties are not consistent state by state.

    “Reporters visited several of the trouble spots: a neighborhood with many rundown homes in South Bend, Indiana; a rural mining town in Missouri’s Lead Belt; the economically depressed North Side of Milwaukee,” Pell and Schneyer write. “In each location, it was easy to find people whose lives have been impacted by lead exposure. While poverty remains a potent predictor of lead poisoning, the victims span the American spectrum—poor and rich, rural and urban, black and white.”

    In St. Joseph, Missouri, one of the most contaminated neighborhoods included in the study, even a local pediatrician’s children had lead poisoning.

    Earlier this month, the U.S. Senate approved a $170 million aid package to repair Flint’s corrosive pipes and fund recovery efforts. But that is 10 times the budget the U.S. Centers for Disease Control and Prevention (CDC) allotted for lead poisoning assistance this year, Reuters notes.

    “I hope this data spurs questions from the public to community leaders who can make changes,” epidemiologist Robert Walker, co-chair of the CDC’s Lead Content Work Group, told Reuters. “I would think that it would turn some heads.”

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Today’s News 21st December 2016

  • MTV Removes Racist ‘Hey Fellow White Guy’s Video’; But the Internet Remembers

    I can go a lot of ways with this material. I could trigger many of you to breathe fire over the racist MTV video that mocked and demonized white males, but what’s the point? These people are irrelevant and ineffective. They’re losing the culture wars, targeting the largest group of people (white males) in the country in a feeble attempt to make them feel like shit, and the being mocked to death for it. In this case, following the release of a video which the cucks at MTV figured would be well received, they were roundly humiliated for their lameness and outward hatred for white men — forcing them to remove the video from their infantile channel.

    Remember the days when MTV only played music videos? Those were the good days.

    Now they want to delve into social engineering, but their pedigrees aren’t very good and their cognitive thinking is weak– which is why they lose.

    Tucker Carlson broached the subject this evening, talking about how wrong it was to label any race as bad, etc, etc. All of that is a secondary issue here when discussing the failed agitprop of the left. Bear in mind, this is a party that has shed over 900 legislative seats since 2010 and holds just 18 governorships and no meaningful leadership in both the house and senate.

    The left is failing, worldwide, because they’re weak, ineffective, and intellectually lazy. We can only hope for more MTV videos of this sort, in order to expedite the pushback against establishment shills.

     

     

    Content originally generated at iBankCoin.com

  • 5 Arrested After Egyptian Police Bust Staged Photo Shoot Of "Wounded Aleppo Children"

    Readers who have been following the crisis in Aleppo have seen media reports of videos and photos allegedly originating from innocent children victims, pleading against the advance of the Assad forces. And while there have been various accusations that these clips, like the infamous “chemical attack” YouTube clip from 2013, were staged, such reports were promptly slammed by the mainstream media as “fake news” and roundly ignored. However, if one ever needed a reason to be skeptical of claims, photographs, and/or videos coming out of the region, and the MSM’s appeals to readers emotions based on fabricated facts, Egyptian authorities have just provided it.

    Egyptian police arrested five people in Port Said, Egypt for making staged “wounded children” photos, which they were planning to use to misrepresent on social media as photos of destruction and injured people in Syria’s Aleppo, the Egyptian Interior Ministry said on Monday. The group also made fake videos that purport to show the wreckage of air strikes in Aleppo.

    The shooting team, which included the photographer’s assistants and parents of the children, was detained in the Egypt’s province of Port Said,” the Ministry said on Facebook.

    According to the Ministry, the police witnessed the shooting process, which was taking place near the vestiges of a building destroyed as illegal under the decision of the local authorities. A girl standing in a white dress covered in “blood” that later proved to be paint, drew attention of a police officer driving by. The girl held a teddy bear covered in the same “blood” and had her arm “bandaged”.

    The Facebook statement said the videographer, his assistants, and the parents of two children who appear in the footage were detained after a trail led police to them at a building site awaiting demolition. The five have reportedly admitted they were planning to distribute their footage on social media, which was supposed to show an eight-year-old girl in a white dress and bandages, covered in red stains while holding a teddy bear.

    “A 12-year-old boy is also interviewed about what life is like under intensive Russian-backed Syrian government air strikes,” reported
    The Independent

    The photographer also admitted that he was going to publish these photos on social media as pictures of Aleppo.

    To be sure, this one instance does not mean all footage coming out of the region is fake. It also does not mean every claim made by Russian, Syrian, and Iranian officials about the conflict is true in comparison. Still, the fact remains that journalists aren’t going to rebel-held areas for fear of execution. Instead, they rely on the Syrian Observatory for Human Rights, which is run by one anti-Assad dissident in Coventry, England. So-called Syrian activists and the shady group known as the White Helmets make up the rest of the reports in Syria, even though they both have also been largely criticized and discredited.

    Also troubling is the willingness of the conventional media to accept most of these reports at face value without ever questioning their authenticity.

    The fact the mass media disproportionately focuses on Aleppo while turning a blind eye to the horrendous crimes being committed in Yemen courtesy of the United States, the United Kingdom, and an inexperienced Saudi-led coalition indicates the media’s concerns for human rights in Syria are disingenuous, as the AntiMedia correctly notes.

  • Brandon Smith Warns The System Is Crashing: "Prepare For Bank Confiscations, Shortages, Insurgency"

    Submitted by Mac Slavo via SHTFPlan.com,

    us-army-riot

    Military, police and homeland security units have all long been preparing for riots and widespread civil unrest during a prolonged collapse.

    What is the anatomy of a breakdown?

    The past eight years have been extremely difficult for the real economy. Central bank intervention has propped up the stock market at the expense of the main street economy, at the expense of middle class security, at the expense of jobs.

    And everyone knows that game can’t continue. The question is how it will play out, and how long the game will be.

    The Federal Reserve finally announced rate hikes – planning one incremental increase after another throughout the coming Trump Administration.

    Close to a decade of stimulus, quantitative easing, zero interest rates and easy money for those on top is coming to an end. For all those who have borrowed, it means that the burden of debt is coming due – and the biggest borrower of all, the U.S. government, will face huge new costs in the form of increased interest on $14 trillion in debt:

    Rising interest rates help savers and hurt borrowers. As the biggest borrower on the planet, the U.S. government will soon begin paying more to investors holding roughly $14 trillion in Treasury debt.  “As debt continues to grow and interest rates return toward more normal levels, interest spending is slated to be the fastest growing part of the budget.” (source)

    This crunch could impact state, businesses, municipalities and individual households in a big way as well. Meanwhile, the presidency of Donald Trump has changed the surface of the political landscape entirely, and no one is quite sure what will happen – though plenty on the left have been casting Trump as a neo-Hitlerian figure.

    Brandon Smith, who runs Alt-Market.com, may not know the future either, but he has developed a very strong track record for predicting the “surprise” victories for Brexit in the UK, and for Trump in the U.S.

    But he didn’t just predict their win at the polls, but that these new signposts of the conservative, populist uprising would be used by the elite – who allowed these electoral changes – in order to scapegoat the coming financial collapse.

    As things continue to play out, he has been so far proven stunningly accurate, and should not be readily ignored.

    Will Trump’s presidency be better understood in hindsight as what has already been dubbed: ‘Operation Shift Blame’?

    Here’s what Brandon Smith said a couple of weeks ago in a focused interview with the X22 Report:

    The Elite Already Have The Collapse Planned, ‘Operation Shift Blame’ Is A Go: Brandon Smith

    As Brandon Smith argues in the interview, the Trump presidency, if he is right, is all about having a scapegoat for the crash of the economy during his watch.

    If the populists, nationalists, and conservatives are blamed, then their views are discredited, and momentum to control the aftermath – and restore order to the system – falls back to the establishment that has, until now, been the target of growing disdain by a population over-run by the status quo and its series of disasters.

    But with Trump – undeniably a spectacle to all Americans – the elite have a narrative that will keep people fighting among themselves, divided by race, gender, politics and ideology.

    Though President Obama and the circles in Washington keep insisting the economy is recovering, improving and providing, nothing could be further from the truth.

    The economy has been “kept on life support” since 2008, when there should have been a bigger crash… but that, too, will come due. They’ve been artificially propping up the system with stimulus measures, and simply stopping that intervention will usher in a collapse. According to Brandon Smith:

    “They’re setting it up to where a crash occurs during a Trump presidency, and Trump and conservatives are blamed in the process.”

    It won’t happen overnight. The economic collapse is a “process, not an event” – one that takes place over the course of several years, even a decade. According to Brandon Smith, 2017 will likely see a major acceleration of that collapse.

    As the fiscal situation becomes more and more untenable, and the government more desperate to pay the bills, we will likely see government pensions confiscated, promises benefits reduced or delayed, and other measures to pay debts.

    On the pretext of sustaining the financial stability of the system, banks may end up “locking out” accounts, seizing funds and account holders and investors could face severe haircuts.

    America may well see credit freezes, shortages on the shelves, deliveries could stop, and people could lose their minds as ordinary life is interrupted. As Smith argues,

    “Removing stimulus and ‘turning off the spigot’ will initiate collapse on its own…. and end up being worse than the Great Depression

     

    Smith: “Whatever’s going to happen is going to happen between now and early 2018, because that’s their window of time to create enough chaos and desperation in order to convince people, to rationalize the idea of switching to a global currency system. After that, I would expect there would be a process of acclimating the public to this new system, and I would expect that a lot of countries would be in third world conditions for a while after that.”

    A combination of hyperinflation, and deflationary pressures could further wreck the economy, and even decimate the value of the dollar. Further consequences could spiral out of control from there.

    Already, there are plans on the books for government to use its nearly-unlimited powers to seize private assets at a personal or institutional level in order to meet the needs, perceived or real, of society. Numerous executive orders give fiat authority to the executive branch to wield dictatorial control and violate private property and personal assets – not the least of which will be private holdings in gold and silver.

    The elites have long suggested that the rise of a truly global currency will replace the crash of the dollar system, and the severe economic decline of the United States.  This has been in the works for a long, long time.

    The system is going to crash regardless… so, arguably, this is how they are planning for it to play out.

    The only question left, is: how will you prepare?

    For those who want to survive, and be as unscathed as possible, that means building up a supply of food, water, guns, gold, alternative heating and power, medicine, barter items and other essential supplies. It also means preparing psychologically to deal with the loss of income, the breakdown of groceries, supplies and easily-available goods; and it means to distancing oneself from the most vulnerable – and potentially unstable – segments of society.

    In particular, it may be wise to leave major urban centers, or have a viable exit strategy to a place that is both rural and self-sustaining. Of course, these are major preparations that have to be made according to the individual needs of each family.

    However, the time is past to pretend that these things are not happening; it is time to make some very serious plans for what you will do during what happens next.

    Just look to Venezuela or India for a glimpse of how raw things can become once the fiat paper currency ceases to flow freely, or provide for the life that most have become accustomed to living.

    As Brandon Smith argues:

    “I think the plan is to kill the dollar’s world reserve status, and that will severely limit the dollar’s value on the global market. We’ll still have our green dollars, with the presidents, but the value will no longer be controlled by the Federal Reserve… I think the Federal Reserve will step aside for the IMF, and the IMF will become the new global mediator of currency values.”

     

    The United States will be hit the hardest, with the reliance upon the dollar’s reserve currency status…. “and an extreme shift from first world down to third world living conditions. It will be a disaster, there will be people who will die during this process, [just as people did] during the Great Depression. It’s going to be a disaster.”

    Because people in the general public aren’t prepared even to sustain a few days without power, food and water, people will be pushed into extremes – desperate, rioting, looting, violence, and other destructive behaviors that are hallmarks of a breakdown.

    In short, the United States will see a debased situation that is unprecedented in its more than 200 year history. Even the Great Depression could be eclipsed by the extreme events to come – but again, it won’t happen overnight.

    “Some will react violently, but I think the elites have staged the situation in such a way that a lot of people will be confused as to who to blame. And that’s the great advantage that they have, is that they’ve staged the situation to where, especially people on the left, they have an automatically built-in bias to blame either Donald Trump, or Republicans, or conservatives in general. On the right, I think you’re going to have a lot of conservatives blaming the left as [for] sabotaging Trump and ruining his chances of fixing things.”

     

    “You’re also going to have all kinds of different, I think, events in between – black swan events, terrorist attacks – that really keep people confused and looking every other direction, except at the global bankers. That’s what they want… they don’t want anyone focused on them. They’re going to create as much gas as possible during all this to keep people at each other’s throats. They’re going to be sitting on the Riviera… and watching.”

     

    “Because we are getting to a point in history where the globalists are more exposed than ever before – their schemes, who they are, the organizations they’ve built. If the general public becomes aware of who they are, and the fact that they’re behind this crash, it would be all over for them. You’re talking torches and pitchforks – so they need to keep mass confusion, and keep everyone focused on each other, and not them, or the entire apparatus falls apart.”

     

    “If we can get enough people aware of, and focused on the bankers first… then we might be able to, at least, remove them from the picture and rebuild in a proper manner. What this is really all about is who is going to rebuild. The system is going to crash regardless, but we still can determine who rebuilds afterwards. If it’s them rebuilding, then we’re kind of done for, because they’re going to use the crisis as a rationale for centralizing everything into their one world system. If we can remove them from the picture, then we might have the chance to rebuild a freer system.”

    If things get bad enough, there could be an actual civil war again in America – in fact, it may become unavoidable.

    People are at extremes right now, and the divisions between the left and right are, in many respects, deeper than they have ever been.

    Those who are addicted to government assistance are in for a rude awakening, and those who work for a living face the very real possibility of seeing the American Dream crushed once and for all, in an era from which there will be no turning back.

    But the pages of history have not been written, and if they have, they still stand to be edited by real world events. If people get their heads wrapped around what is really happening, perhaps the true villains can be addressed, and power can be kept out of the hands in whom it is most dangerous.

    Perhaps, there is a chance that liberty could one day be restored, but first, people must prepare to endure a long, hard fight.

  • 71% Of Americans Don't Believe Russia Was Responsible For Election-Related Hacks

    The mainstream media has orchestrating a month-long propaganda blitz to convince the American people that “Russian hackers,” led by Vladimir Putin, stole the election from Hillary Clinton.  They endlessly quoted “anonymous sources” from inside the CIA, while never actually presenting a single shred of tangible evidence, to advance their narrative.

    But, in an epic illustration of just how little credibility the mainstream media has, despite their best efforts, over 70% of the American public still doesn’t think Russia influenced the 2016 election. Per a new poll conducted by Morning Consult, only 29% of Americans feel they “know with near certainty that Russia is responsible” for the hacking of DNC and Podesta emails…of course, we would question how anyone could possibly know with “near certainty” given that no actual evidence has been presented but we’ll take their word for it.

    Russia Influence

     

    Not surprisingly, results were largely split along party lines with only 14% of Republicans attributing the election hacks to Russia versus 50% of Democrats. 

    Meanwhile, “Democrats in Congress” won the prize for the “least trusted” group in Washington D.C. while the CIA, NSA and FBI are still viewed as credible organizations by nearly two-thirds of Americans…so much for Snowden’s efforts to reveal the massive illegal spy operations conducted by the NSA on pretty much every American citizen on a daily basis…no one seems to care much anymore.

    Morning Consult Poll

     

    So, does this story now qualify as “fake news” given that the mainstream media failed to present a single page of tangible evidence and 71% of Americans don’t believe it?

  • US Population Grows At Slowest Pace Since The Great Depression; Residents Flee Illinois Again

    According to data released by the US Census, in 2016 the U.S. population grew at the lowest rate since the Great Depression, while the state of New York shrank for the first time in a decade. The biggest loser, again, was Illinois which shrank for a third consecutive year, losing 38,000 people, mostly from the Chicago area.

    The overall slowdown was due to uptick in deaths, a slowdown in births and a fractional drop in immigration, all of which damped American population growth for the year ended July 1. The 0.7% increase, to 323.1 million, was the smallest on record since 1936-37, according to William Frey, a demographer at the Brookings Institution.

    New York State, whose loss of 1,900 people put its population at 19.7 million, is shrinking because residents are leaving for other states. It has an aging population that is retiring in warmer places such as Florida, or staying put and dying, as the WSJ put it. “As a state that has more people leaving than going [in], that is not a good thing,” said Jan Vink, a researcher at Cornell University’s program on applied demographics. “People claim it’s about the taxes, it’s about the weather. There are many reasons.”

    It’s not just New York which saw a modest exodus: the figures showed Americans continue to leave the North for Western states, with Utah, Nevada, Idaho and several others in that region topping the country in percentage growth.  About 593,000 people left the Northeast and Midwest to move to the South and West this year, slightly more than during the prior one-year period, as the retiring cohort gets bigger.

    However, the biggest state loser in population terms by a big margin was Illinois, which lost more residents in 2016 than any other state, losing 37,508 people, which puts its population at the lowest its been in at least a decade. This year marks the third consecutive year in which Illinois is among the few states to lose residents, putting its population at 12,801,539 people. Illinois had only the second-greatest decline rate in 2016, however, as even with the population drop it continues to be the fifth-most populous state. West Virginia had the greatest decline rate this year.

    Illinois’ population first began to drop in 2014, when the state lost 7,391 people. That number more than tripled in 2015, with a loss of 22,194 people, and further multiplied in 2016. The plunge is mainly a result of the large number of residents leaving the state in the past year — about 114,144 in all — which couldn’t be offset by new residents and births, according to census data measuring population from July 2015 to July 2016.

    Making matters worse for the state’s various semi-solvent pension plans which are dependent , by almost every metric Illinois’ population will continue to sharply decline in the coming years as more residents call it quits on the state they call home according to the Chicago Tribune. The Tribune last year surveyed dozens of former residents who had fled within the past five years, and all offered their own list of reasons for doing so. Common reasons included high taxes, the state budget stalemate, crime, the unemployment rate and the weather.

    Census data released last year suggested the root of the problem was the Chicago area, which in 2015 saw its first population decline since at least 1990, having lost 6,263 residents. A simple cause for that could be that, as reported earlier, Chicago’s surging murder rates are single-handedly driving up the overall national average, which in turn is forcing much of the local population to flee.

    In addition to Illinois and New York, a total of eight states saw population outflows this year, including West Virginia, Connecticut, Vermont, Wyoming and Mississippi.

    And then there are the winners, chief among which was Utah, the fastest-growing state this year with a 2% gain, added nearly 61,000 people to lift its population to 3.1 million. Gains in technology and other jobs have led to tighter labor markets, housing shortages and rising school enrollment, said Pamela Perlich, director of demographic research at the University of Utah’s Kem C. Gardner Policy Institute.

    “There is a new economy being created out of the carnage of the Great Recession, and in a lot of those new growth areas, Utah seems to be at the forefront,” Ms. Perlich said. “You roll back 40 years ago, and we were really pretty isolated and much more parochial here.”

    Another big gainer was Texas, whose addition of about 433,000 people accounted for 19% of the country’s growth. The state, with 27.9 million people, grew from a relatively strong flow of immigrants and people relocating there from other states.

    North Dakota, a fast grower in recent years, saw its population barely edge up this year as the state struggles with a slowdown in its oil industry. Among factors weighing on overall population growth is that the number of babies women are having—which plummeted in the 2007-09 recession—hasn’t picked up as much as demographers had expected during the recovery. The mortality rate for Americans is also creeping up, in part due to stalled progress in preventing people from dying of heart disease.

    The Census Bureau revised downward its estimates of immigration for each year since 2010 by an average of 10%. For this year, it estimated that 999,000 immigrants arrived, down 4% from the prior year.

  • Why Trump's "Border Tax Proposal" Is The "Most Important Thing Nobody Is Talking About"

    While the market, and various pundits and economists have been mostly focused on the still to be disclosed details of Trump’s infrastructure spending aspects of his fiscal plan, “one of the least talked about but possibly most important tax shifts in the history of the United States” is, according to DB, House Speaker Paul Ryan’s and President-elect Trump’s “border tax adjustment” proposal.

    This is part of the “Better Way” reform package and also figures prominently in the writings of senior Trump administration officials.

    What is it?

    Put simply, the proposal would tax US imports at the corporate income tax rate, while exempting income earned from exports from any taxation. The reform would closely mirror tax border adjustments in economies with consumption-based VAT tax systems. If enacted, the plan will likely be extremely bullish for the US dollar. What’s more, it would have a transformational impact on the US trade relationship with the rest of the world. Consider the below:

    • A “border tax adjustment” would, roughly speaking, be equivalent to a 15% one-off devaluation of the dollar. Imports would be 20% more expensive, because corporates would have to pay the new 20% corporate tax rate on their value. Exports would be roughly 12% “cheaper”, because for every $33 of earnings earned from $100 of exports (we use the 33% gross margin of the S&P), there would be a 12% tax cost ($33 earnings*35% current tax rate) that would no longer be imposed on corporates. Taking the average impact on the prices of exports and imports is equivalent to a 15% drop in the dollar.
    • A border tax adjustment would be very inflationary. The price of exports doesn’t affect the US consumption basket so would have no impact on CPI. However, the cost of imports would go up by 20%, which based on a simple relationship between import PPI and US inflation would be equivalent to a 5% rise in the CPI. Corporates may of course choose to absorb part of the rise in import costs in their profit margins. But either way, the order of magnitude is large.
    • A border tax adjustment would be very positive for the US trade balance. Similarly to the dollar calculations, a border tax adjustment would be equivalent to an across the board import tariff of 20% and an export subsidy of 12%. Keeping all else constant and applying standard trade elasticity impact parameters to an average of the two estimates results in a more than 2% drop in the trade deficit equivalent to more than 400bn USD, or equivalently, an almost complete closing of the US trade deficit.

    In other words, should the “border tax proposal” pass, it would not only send inflation soaring, while eliminating the US trade deficit – a long-time pet peeve of Trump  – it would also be the trade-equivalent of a 15% USD devaluation, even as it leads to an offsetting surge in the actual value of the dollar.

    To be sure, there are uncertainties related to all estimates above. First, there is a question mark on whether a border tax adjustment based on a territorial corporate tax system (as opposed to VAT) would be allowable under WTO rules. The question is highly complex, but senior Trump advisers have stated they would be willing to take the issue to the WTO.

    It is also not clear what types of goods the new tax would cover – the broader the coverage the bigger the impact and vice versa.

    Second, the impact on trade highlighted above should be considered an upper bound, as the post-crisis responsiveness of current account balances to relative price shifts has proven to be much lower.

    Still, it is hard to argue that such a fundamental shift in tax treatment of US exports and imports would not have a material impact on trade relations and flows with the rest of the world. More importantly, Saravelos argues, the second-order impact of “re-shoring” may be more material given that US corporate activity has been disadvantaged due to the current unfavorable tax treatment of offshore profits.

    * * *

    Taking all of the above into account, the academic literature is unambiguous in its conclusion that the dollar should rally strongly in the event a “border tax adjustment” is put in place. An appreciating dollar would be a natural response to an improving US trade balance and the competitiveness gains achieved by the shift in the relative prices of exports over imports. In extremis, the dollar would rally by 15% to fully offset the price changes caused by the tax. This analysis is partial however, with the knock-on consequences on the Fed, US corporate off-shoring and global trade relations likely making the impact even more material.

    Deutsche Bank concludes that combined with potential changes to the treatment of unrepatriated earnings, “the proposed changes to the US corporate tax code could be one of the most important shifts in US tax and international trade policy in a generation.”

    We wholeheartedly agree with DB’s assessment in this particular case.

  • Is India The Next Venezuela?

    Submitted by Jayant Bhandari via Acting-Man.com,

    India’s Currency Ban, Part VII

    This article continues right where Part VI left off (for earlier updates on the demonetization saga see Part-I, Part-II, Part-III, Part-IV, and Part-V).

    There is still huge support for Modi even among the poor.  A big carrot is dangled before them, which makes many stay numb to their current suffering.  During his election campaign in 2014, Modi promised to deposit more than Rs 1.5 million (~$22,000) in each poor person’s account once the government had seized all black money.

     

    Massive problems have been reported with the new bills. Some have been printed on defective paper and are simply falling apart. The inferior quality of the print job is generally often on the appalling side of deplorable. The new notes are counterfeited with great abandon, quite likely to a much greater extent than they ever were in the past. So much for Modi’s plan to stop counterfeiting.

    Photo credit: The Hindu

    How he arrived at this fantastic figure is anyone’s guess. But given India’s GDP of $1,718 per capita, Modi has promised to deposit 1,300% of annual GDP in individual bank accounts. The total amount would be larger than the entire GDP of the US. Evidently, this does not even remotely add up.

    So what is really motivating the anti-corruption feelings of so many Indians — including the salaried middle class —  simply seems to be a mixture of greed and envy. There have also been hints that India’s income tax might be repealed. This is very appealing to the salaried middle class.

    Banned bank notes must be deposited by 31st December 2016.  Modi supporters widely expect that the windfall he has promised them will be announced soon thereafter. Not only isn’t there going to be any  free stuff, but bank accounts are likely to stay frozen, because the Indian government is incapable of printing all the cash needed to re-liquefy the economy.

    On January 1st 2017,  when members of the salaried middle class start waking up to the reality that they have been scammed, Modi’s support should begin to crumble.  Anecdotal evidence indicates that not only the opposition, but even members of Modi’s own party are unhappy with the demonetization scheme. These politicians have been left holding bags of banned currency, on which they have had to take a cut of 20% to pay for the services of the mafia.

    They cannot oppose Modi openly, as that entails the risk that they might be seen as corrupt and unpatriotic. It seems likely that Modi will eventually lose his political support. But by then he may well have established himself independent of his party. He could easily be an autocrat in the making.

     

    Vegetable prices have declined by 25% to 50%. Electronic transactions fail even in big cities, as connections are often bad. How is this supposed to ever work in rural places, where electricity and internet connections might not even exist? One needs to be mindful of the fact that prices are not going down due to excess supply, but because poor people cannot buy anything. Are they going hungry?

    Photo via indianexpress.com

     

    Is India the Next Venezuela?

    India, the world’s largest democracy, is surrounded by banana republics as the accepted narrative has it: Pakistan, Bangladesh, Nepal, Sri Lanka, Myanmar, Thailand, and Afghanistan. The situation in the Middle East and in Africa is considered yet worse.

    There seems to be a lot to celebrate about India. Its democracy has been sustained over the 70 years following independence. The army has remained  fully under civilian control. Today India is also seen as an information technology juggernaut. It is claimed to be the fastest growing large economy. India is the next China, so the story goes.

    The reality is very different from the perception of those who only see India through the lens of the international media.  India has a population of 1.34 billion people with a GDP of $1,718 per capita. Almost 50% of India’s citizens have no access to toilets, electricity or running water.  48% of children under the age of five are stunted, a percentage greater than in any other major country in the world.

    Contrary to the perceptions created by the international media, if Africa were a country, it would actually look better than India with respect to these metrics. India has lower GDP per capita and a proportionately greater number of Indian children are exhibiting stunted growth.

    As a second step in trying to understand India, it makes sense to split the population in two parts: the 25% that have benefited — directly or indirectly — from the internet and cheap telephony over the past three decades, and the remaining 75%, whose lifestyle is comparable to a medieval existence, almost animal-like.

    For all intents and purposes, India is a banana republic, a wretched place of poverty and disease. The only difference between India and other well-recognized banana republics is that India has so far avoided overly negative headlines in the international media;  Indian lobbies in the US and the UK work very hard to make India look good. As noted above, this mainly serves to prop up the self-esteem of NRIs.

    It has become fashionable to compare India to China. This comparison seems extremely far-fetched. Chinese GDP per capita is more than five times higher, and is growing more than four-times faster than India’s in absolute terms. If India keeps growing at the recent high rate of 7.5% and China at a mere 6.3%,  it will take India more than 135 years to catch up with China’s economic output in absolute terms.

    People who have been concerned about the demonetization policy have repeatedly asked me if India is the next Venezuela. My response was “I wish it were.” On per capita basis, Venezuela’s GDP is more than seven times that of India. Venezuelans fight when they go hungry. Indians are too weak to even leave their homes. Indians should be fighting, particularly the poor, who have always got a very bad deal.

    When India becomes the next Venezuela, which hopefully won’t take longer than three decades, one would actually have cause to celebrate.

     

    Almost half of Indians have no choice but to defecate in the open. What looks like a simple problem has proved impossible for India’s government to solve. The government nevertheless wants to send probes to Mars and make India the first cashless economy. In due course, Modi will get swept away by India’s realities. The problem is that whoever succeeds him, will very likely be worse. A military general perhaps?

    Photo credit: Keystone / AP

     

    Millennia of human progress in terms of economic transactions have been wiped out  overnight. People have been forced to go back to barter.

     

    Demonetization Continues

    More than 90% of the banned banknotes have reportedly already been deposited in banks. This is widely hailed as a victory of the government. As Mumbai-based economist Mithun B. Dutta explained in a note, the reality is the exact opposite. He argues that demonetization would only have made sense if a large part of the banned currency had never made it into bank deposits.

    Up until recently,  the banned currency was selling for a 20% discount to its face value. Not only has this discount disappeared in recent days, but the remaining banned bills are now trading at premiums of up to 10%.

    The poorest people lack the connections to deposit their cash and get it back out. The queues outside bank branch offices have continued and the mood is increasingly desperate. Businesses are closing, with many too damaged financially to be able to ever restart again. Poor people are losing their jobs.

    Food prices are down by 25% to 50%, leaving farmers without the funds needed to support the next crop planting cycle. Shops remain empty, as discretionary spending is put on hold. Many businesses have suffered sharp declines in sales. Wheat sowing is said to be down sharply as well.

    Who cares when one has problems of one’s own? This half-dead old woman serves as an example for more than 75% of India’s population. She cannot even write her own name, but is expected to learn to use plastic cards. For Modi she does not count if she isn’t paying taxes and isn’t part of the formal economy; but it is Modi who will eventually be thrown out.

     

    Desperate poor people, whose pain is not reflected in any news or statistics.

    Photo credit: Praveen Kumar/HT

     

    Members of the salaried middle class, Modi’s biggest supporters, are slowly starting to face the pinch as well. When they went to their banks on  December 1, 2016 to collect part of their salaries, they had to rub shoulders with the poorest of the country, for whom they have deep-rooted disgust. And then they had to go back home empty-handed or with only part of the cash they had wanted to withdraw.

    They are still hoping that their bank accounts will be unfrozen after the demonetization deadline on December 31 passes. They will soon realize that  their accounts will stay frozen, as simple math shows there is no other possibility. Modi will have to make a new announcement on December 31 to keep his social engineering project on track with yet another patch-up job, and to keep people’s hopes up.

     

    There has been a significant surge in spontaneous outbreaks of violence across the country. Indian police are not sufficiently trained and lack the competence to keep a material increase in social unrest under control.

     

    Conclusion

    No one has explained yet how the currency demonetization policy will lead to less corruption. Most of the outstanding cash has already made it into bank accounts, but despite that, the queues at bank branch offices seem to be never-ending. It is the unbanked, the poorest people, who are most likely to have failed to deposit their currency and get their cash back out.

    The government clearly has the intention of keeping bank accounts frozen after the official deadline of 31st December 2016. The economy will remain stalled at an enormous human cost. Modi is losing his control over his own party. He has isolated himself in a cocoon, surrounded by yes-men; but the middle class, which has so far considered itself to occupy the moral high ground, is starting to experience cash-related problems as well now.

    At the same time, the political opposition is fragmented and weak. Modi probably cannot even imagine losing power, believing himself to be indispensable. If he sees his support dwindling, India could easily end up being pushed toward outright autocratic rule.

    To properly understand all the undercurrents, it is best to consider first principles. India is an extraordinarily irrational, tribal and superstitious place. Despite the country’s long association with Britain, which by now has lasted over 300 years, it has failed to adopt the concept of reason. India and its institutions as they exist today were constructed by the British. It was inevitable that they would crumble, as India lacks the will and human capabilities needed to maintain them.

    A society lacking in rationality cannot be expected to be able to differentiate between right and wrong. It cannot have respect for the individual, or develop moral instincts. Its people will be lacking in empathy and compassion, as demonstrated by the indifference of members of the middle class to the suffering of their desperately poor fellow citizens.

    When such people are given western education, it merely sits in their minds as yet another belief system. Evidently, they don’t even understand that an ethical society cannot possibly be compatible with a government reneging on the contract that is printed on its currency.

    Even poor people suffer in silence, or even worse, are fighting among themselves. They too lack the necessary understanding of moral principles to feel revulsion when they are mistreated. Instead of directing their anger at those responsible for their plight, they take out their frustrations on the nearest persons weaker than themselves.

    With the passage of time, Indian institutions are necessarily mutating to accommodate India’s irrational culture. Culture cannot be changed through education alone, and changing it takes a very long time. India is likely to disintegrate at some point, fragmenting into tribal units or several smaller countries. Institutional decay has been underway for the past 70 years, but with Modi as a catalyst, its pace is picking up. The story of many countries in South Asia, the Middle East, Africa and large parts of South America is quite similar.

    What should investors do? Ultimately India is likely to turn out to be a terrible investment destination. Indian savers should consider moving their wealth abroad. Indians are still permitted to transfer $250,000 per year, but eventually capital controls are bound to be instituted. Keeping in mind that Indian savers are already paying premiums of 30% or more to purchase US dollars or British pounds, there seems hardly a good reason for foreigners to send money to India.

     

  • Krugman: "To Join Trump Administration You Have To Be A White Nationalist, Conspiracy Theorist"

    Paul Krugman wants you to know that, in his view, the markets are misinterpreting "Trumponomics" and because he is far smarter than you, the markets, and pretty much anyone else, it's important to pay attention.

    Of course, this shouldn't be terribly surprising as Trump could literally announce that he found a cure for cancer and Krugman would immediately take to the New York Times to pen an op-ed defending malignancies, and how its eradication would mark the end of "hope" for mankind.

    In any event, Krugman posted a short article to his twitter account this afternoon warning that the markets' interpretation of "Trumponomics" is all wrong.  While the confused Keynsian would ordinarily praise aggressive infrastructure plans, like the one proposed by Trump, in this case he's willing to make an exception and notes that the plan looks more like a "privatization scheme" than an "actual plan to boost public investment."  And while Krugman has never before seen a budget deficit that he didn't criticize for being too small, Trump's "privatization scheme" combined with "tax cuts for the rich" suddenly has him extremely worried about federal debt balances. 

    Financial markets seem to have decided that the Siberian candidate will pursue strongly expansionary macroeconomic policy. Long-term interest rates have risen sharply; expected inflation is also up, although not as much.

     

    But are the markets getting this right? I suspect not: fiscal policy probably won’t be expansionary as expected (or maybe at all), and Trump’s economic team is looking like a gathering of goldbugs, who will if anything push for deflation.

     

    On the fiscal side, I’m still seeing people talking about a huge infrastructure push. But there’s no indication that Republicans in Congress are at all eager to get moving on this push; their priorities seem to be repealing Obamacare and tax cuts for the rich, perhaps especially the estate tax. And in any case what we know about that supposed infrastructure push is that it looks much more like a privatization scheme than an actual plan to boost public investment.

     

    So what we’re really looking at is a combination of tax cuts and spending cuts. Overall, this will surely increase budget deficits. But the tax cuts will go to the wealthy, who won’t spend much of their windfall, while the spending cuts will fall on the poor and struggling workers, who will be forced into sharp cutbacks in spending. The overall effect on demand is therefore likely to be negative, not positive.

    For proof of his view on "Trumponomics," Krugman provided the following tweet storm, for your reading pleasure, highlighting the "gathering of gold bugs" known as Trump's cabinet.  Apparently Mnuchin "hangs out" with John Paulson so he's guilty by association.  Meanwhile, Mulvaney had the audacity to imply that the Fed's 0% interest rate policy might result in a weak USD.  And Larry Kudlow, well everyone knows that he is under the perpetual illusion that we're still living in the 1970's.

     

    While Krugman blasts the Trump tax plan as a blatant gift to rich people he ignores that people of all tax brackets would get breaks under Trump's plan.  Trump Tax Plan:

    Trump Taxes

    Current 2016 Tax Brackets:

    2016 Taxes

    He also ignores the reduction in corporate taxes that will impact 1000's of small businesses around the country and the expectation that the new administration will slash regulations which is nothing more than a massive, conservative form of fiscal stimulus. But lets not allow facts to get in the way of a good narrative.

    Finally, Neeraj Agrawal wins the award for "most outstanding response" to Krugman's latest rant:

    And finally, not satisfied with his almost-insane allegations, Krugman played the race-card

  • Uber's Massive Cash Burn Problem: 2016 Loss Set To Hit A Record $3 Billion

    With a valuation of $68 billion as of December 2016 – more than GM and Twitter combined – Uber is, according to the WSJ’s Unicorn Database, the most valuable private company in the world.

    And yet, despite its eye-popping valuation courtesy of a growth curve which until recently was truly unprecedented (at least until the company’s sudden withdrawals from China), Uber has a big problem: an unprecedented cash burn, which if not getting worse with every passing quarter, is certainly not getting better.

    Back in August, Bloomberg reported that Uber’s first half loss was roughly $1.4 billion ($580MM in Q1 and well over $800MM in Q2) on just over $2 billion in revenue ($960MM in Q1 and $1.1BN in Q2): it was burning approximately $1.6 dollars in costs and overhead (mostly in the form of an ongoing attempt to price the competition out of business by subsidizing drivers using VC cash).

    This follows a loss of $2 billion in 2015, and had, as of Q2, lost at least $4 billion in the history of the company. Of this, however, Uber reportedly lost at least $2 billion in China as a result of a failed attempt to penetrate the local market which it abandoned later in the summer, which while sapping growth potential in China, also supposedly stem losses associated with the Chinese market.

    Furthermore, the H1 loss came at a time when its fortunes in the US were said to be changing, and the company vowed it was turning a profit in Q1, only to revert back to its money losing ways in Q2 and onward.

    As Bloomberg said at the time, “It’s hard to find much of a precedent for Uber’s losses. Webvan and Kozmo.com—two now-defunct phantoms of the original dot-com boom—lost just over $1 billion combined in their short lifetimes. Amazon.com Inc. is famous for losing money while increasing its market value, but its biggest loss ever totaled $1.4 billion in 2000. Uber exceeded that number in 2015 and is on pace to do it again this year.”

    Fast forward three months, when overnight Bloomberg reported that Uber’s cash burn problems continued, and in the third quarter, Uber lost another $800 million, bringing its total loss for the first nine months of the year to “significantly more” than $2.2 billion. The good (and bad) news is that even as its cash burn grew, so did Uber’s revenue which rose even leaving the world’s most populous country, and is said to have generated about $3.76 billion in net revenue in the first nine months of 2016, or about $1.7 billion in Q3 revenue and, according to Bloomberg, is on track to exceed $5.5 billion this year. The problem – if only from a cash burn basis – is that when 2016 closes in ten days, Uber is also expected to have burned a record $3 billion.

    Another problem, one which comes as less of a surprise, is that growth in Uber’s bookings – the total combined value of the fares that riders pay – is slowing down: these came in at $5.4 billion in the third quarter, an increase from $5 billion in the second quarter and $3.8 billion in the first. The slowdown in Uber’s bookings growth can at least partially be explained by the company’s decision to leave China. Uber said on Aug. 1 that it came to an agreement with Didi Chuxing to exit China in exchange for 17.5 percent of the Chinese company. As part of the deal, Didi invested $1 billion in Uber. Uber’s third-quarter financials don’t include the business in China, which were part of the previous quarterly results.

    But the biggest problem is that despite the growth in revenues, Uber’s losses continue to gross in a proportional manner, suggesting that the company has little if any control over its bottom line: as noted above, in Q1 the loss was about $580 million and by Q2 it significantly exceeded $800 million, including China. That number is likely far higher.

    Even in the U.S., Uber’s home market, the company continues to lose money. After turning a slight profit in the in the first quarter of this year, Uber lost $100 million in the U.S. in the second quarter. The loss increased in the third quarter, the person said. Lyft, Uber’s largest U.S. competitor, has promised investors that it will keep its losses below $150 million a quarter.

    What does all of the above mean? During Uber’s Q2 presentation with investors, the company’s head of finance, Gautam Gupta said that subsidies for Uber’s drivers are responsible for the majority of the company’s losses globally. Which means that Uber continues to cut prices in an aggressive attempt to gain market share. While for now this plan has worked, and Uber has become a dominant player in most venues in which it operates (except, perhaps, the most important one of all China), this strategy only works as long as Uber has has to, literally, burn to capture market share (something which in the end backfired dramatically on Saudi Arabia in a similar experiment over the past two years), and as long as its investors are willing to keep writing equity checks to the company at ever higher valuations – a down round for Uber would be the beginning of the end.

    For now, however, the company’s main competition – established taxi and transportation companies – are proving resilient, and despite the aggressive cost pressures from Uber, few have been bankrupted, and while the price of a Yellow Cab medallion has plunged from $1.3 million in 2014 to just $250,000 recently, New York City is still not only dominated by taxis, Uber still has a long way to go before it can get even close to catching up to its competition in terms of volume.

    Meanwhile, Uber’s success will go on only as long as the company has blow billions in hopes it puts its competitors in bankruptcy before its cash runs out. Alas, a few more years like 2015, in which the company burned a whopping $3 billion despite a rising top-line, and Uber’s prospects are suddenly starting to look rather shaky. Meanwhile, the winner in this massive “deflationary” battle to the bottom is the consumer, for whom transportation prices have rarely been lower. So dear Venture Capitalists, please continue to fund Uber and subsidize deflation for consumers in at least this part of the economy: it’s clear that between the Fed and Trumpflation, there aren’t many such deflationary hiding spots left.

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Today’s News 20th December 2016

  • Paul Craig Roberts Warns "Only A Counter-Coup Can Save American Democracy"

    Authored by Paul Craig Roberts,

    The CIA has long engineered coups in other countries. Now we are approaching at breakneck speed a CIA coup in the USA.

    When the presstitute media first published unverifired, unsourced leaks attributed to unnamed CIA officials, both the FBI and the Director of Homeland Security said that they did not embrace the accusation that Trump’s election was a result of Russian interference in the US presidential election.

    Now suddenly we have a report from the Washington Post, a rag whose integrity is in doubt and a mainstay of anti-Trump propaganda suspected of being a CIA asset, that the FBI and Homeland Security are in agreement with the anonymous leaks to the presstitutes:

    “FBI Director James B. Comey and Director of National Intelligence James R. Clapper Jr. are in agreement with a CIA assessment that Russia intervened in the 2016 election in part to help Donald Trump win the White House, officials disclosed Friday, as President Obama issued a public warning to Moscow that it could face retaliation.
    New revelations about Comey’s position could put to rest suggestions by some lawmakers that the CIA and the FBI weren’t on the same page on Russian President Vladi­mir Putin’s intentions.”

     

    “The positions of Comey and Clapper were revealed in a message that CIA Director John Brennan sent to the agency’s workforce Friday. ‘Earlier this week, I met separately with FBI [Director] James Comey and DNI Jim Clapper, and there is strong consensus among us on the scope, nature, and intent of Russian interference in our presidential election,’ Brennan said, according to U.S. officials who have seen the message.”

    Note, that this claim comes from the CIA. It has not been verified at this time of writing by the FBI and Homeland Security. Indeed, please note that the Washington Post, which is hyping this story of intelligence agency consensus, reports:

    “The CIA and the FBI declined to comment on Brennan’s message or on the classified intelligence assessment that CIA officials shared with members of the Senate Intelligence Committee earlier this month, setting off a political firestorm.” In other words, the CIA might be putting words in the mouths of the other intelligence officials.

    Note also that Hillary says that Putin interfered against her because he has a grudge against her for her interference in his reelection by fomenting protests against him with the Western-financed Russian NGOs. If what Hillary claims is correct, then any Russian interference, for which proof remains absent, was directed against Hillary in order to settle a score and has nothing to do with any Russian influence over Trump or 200 Internet sites as falsely and maliciously reported by the Washington Post.

    All the CIA officials making claims of Russian interference, according to the Washington Post, continue to speak “on the condition of anonymity.”

    So we have a coup against the president-elect based solely on unverified, unsourced, anonymous assertions made by the public knows not who.

    Rep. Davin Nunes, the chairman of the House Intelligence Committee, which has oversight over the CIA, has said that neither he nor the committee have seen any evidence from the CIA in support of the claims he reads in the media. He has asked the agency to brief the Intelligence Committee on the alleged evidence but has had no response.

    According to the Washington Post, “Nunes said: ‘We have not received any information from Intelligence Community (IC) agencies indicating that they have developed new assessments on this issue. I am alarmed that supposedly new information continues to leak to the media but has not been provided to Congress.’”

    Rep. Nunes statement makes it completely clear that the CIA is using the presstitute media to launch a coup against president-elect Trump.

    CIA director John Brennan’s audacity suggests that he expects the coup to succeed. Otherwise, he is dead meat along with Bezos, The Washington Post and the rest of the presstitute media.

    Trump’s critics on the left and right and among the liberals and progressives have stupidly played into the CIA’s hands. I tried to warn them not to judge Trump by the past associations of his appointees as no change was possible without strong knowledgeable appointees. Those who romanticize Bernie Sanders are out to lunch. A person as weak as Sanders proved to be, completely collapsing in the face of his stolen presidential nomination by Hillary, could not possibly have prevailed over the powerful oligarchic groups that rule America. When we finally get a president-elect strong enough to bring change from the top down, the leftwing-liberal-progressive elements join the CIA in denouncing him!

    If the generals Trump has announced as his appointees have been too marginalized within the military by the neoconservatives to be able to provide US military protection against the CIA’s coup against the president-elect, do not expect Donald Trump to be inaugurated as President of the United States on January 20.

    We are at the point that only a countercoup against the CIA and the Hillary forces can save American democracy.

    High treason is alive and well in the United States, and it is operating against American democracy and president-elect Trump.

  • Where People Trust The News Most (And Least)

    With Facebook rolling out new Soros-sponsored features designed to tackle the spread of ‘fake news’ across America, we thought it worth looking at just how trusted (or not) the media are around the rest of the world

    Infographic: Where People Trust The News Most And Least | Statista
    You will find more statistics at Statista

    The Reuters Institute For The Study Of Journalism recently released a report showing that trust levels in news vary hugely by country. As Statista’s Niall McCarthy notes, trust is highest in affluent Western European nations, primarily due to the presence of well-funded public service broadcasters.

    65 percent of people in Finland agreed that “you can trust most news most of the time”.

    In the United States, the epicenter of the fake news storm, trust was far lower at just 33 percent.

  • The Most Hated Asset On The Planet

    Submitted by Kevin Muir via TheMacroTourist.com,

    http://themacrotourist.com/images/RollDec1916.png

    Last year at this time markets were grappling with the Fed’s first rate hike in almost a decade. Although many optimists were confident the economy was plenty strong enough to handle the increase in rates, within days it was obvious they were sorely mistaken.

    Fast forward to today. With the election of Trump, there is even more optimism filling the air.

    Don’t get me wrong, I understand all the reasons to be bullish.

    But doesn’t the fact that everyone else understand all those reasons too not worry you just a little bit?

    There is no wall of worry to climb. Instead we are faced with complete and overwhelming confidence the Fed hike will not derail the good times.

    Now maybe I worry too much. Maybe the Fed hike will not slow down the markets even in the slightest.

    Yet a little part of me wonders if the problems with the shortage of US liquidity will come rushing back to the forefront with the Fed hike.

    And just in case it does, I think it is instructive to review what happened last year when the Fed hiked.

    Let’s start with the S&P 500:

    http://themacrotourist.com/images/SPXDec1916.png

    After last year’s Fed hike the S&P 500 managed to stay bid for a week before collapsing in the worst start to a new year in the history of finance.

    How about the US dollar?

    http://themacrotourist.com/images/DXYDec1916.png

    Although the US dollar went up for a few weeks after, it eventually rolled over and had a terrible first quarter of 2016.

    So far all the reactions to the Fed hike seem to have some delay. Yet have a look at gold. The “pet rock” bottomed on the day after last year’s Fed hike and never looked back.

    I don’t want to goocher it, but so far, the pattern is playing out exactly the same. Gold has once again bottomed on the day following this year’s Fed hike, and knock on wood, has not yet violated that low.

    http://themacrotourist.com/images/GoldDec1916.png

     

    This all coincides with the gold/S&P 500 ratio once again bumping along the support at the previous low.

    http://themacrotourist.com/images/GLDSPXDec1916.png

     

    Putting it all together, will the gold/S&P 500 ratio repeat last year’s performance?

    http://themacrotourist.com/images/RepeatDec1916.png

    I know any suggestion of gold rising and stocks declining seems absurd. After all, gold is probably the most hated asset class on the planet with stocks being the most loved.

    Yet somehow that doesn’t bring me much comfort as I am pretty sure last year the bulls were extremely confident the Fed hike wouldn’t derail the budding recovery. The fact they are even more confident today doesn’t bring me any solace…

  • Turkish Gunman Arrested After Firing Shots, Trying To Enter US Embassy In Ankara

    Hours after the Russian ambassador was shot dead in Ankara, a man was arrested early on Tuesday morning after firing a gun and trying trying to enter the US Embassy in Ankara. According to the Daily Sabah newspaper, the Embassy was placed on lockdown after the man, who has not yet been named, approached the embassy with a gun.  He also fired at least one shot in the air, newspaper to the Turkish media.

    The attack came hours after the US state department issued a security message warning all US citizens to avoid the area near Embassy compound until further notice.

    It was not immediately clear if anyone was hurt by the suspect.

    A video, and photographs, show him being led away, apparently uninjured. He appears to be in his 40s or 50s. In the video footage of his arrest, he can be heard shouting ‘Don’t play with us’ as he pushes against the group of police officers guiding him to a van.

    The US Embassy was also placed on lockdown after that shooting.

    The event followed the shocking murder earlier today of Russian ambassador Andrei Karlov, 62, who was shot dead in an Ankara art gallery. Karlov was killed by Melvut Mert Altintas, 22, an off-duty member of the Ankara special forces police department. Footage of the scene shows the man saying in Arabic: ‘We are the descendants of those who supported the Prophet Muhammad for jihad.’ According to local media, his words are similar to the unofficial anthem of Al Nusra, the Syrian branch of Al Qaeda.

    In Turkish, Altintas adds: ‘Don’t forget about Aleppo. Don’t forget about Syria. As long as our lands are not safe, you will not taste safety … Only death will take me out of here. Anyone who has a role in this oppression, they will all die one by one.’ Altintas was shot dead after a standoff with police.

    It is unclear if there is any link between the two men.

  • Commuter-In-Chief: Obama Sets New Single-Day Clemency Record; More Than Previous 11 Presidents Combined

    Earlier today President Obama commuted the sentences of another 153 federal prisoners bringing his total to 1,176, more than the previous 11 presidents combined.  The president also pardoned another 78 individuals, bringing his total pardons over the course of his eight years in office to 148.  Combined, these 231 acts of clemency sets a record for the most ever granted by a president in a single day in history. 

    This latest move is just further evidence of his stated intention to ramp up commutations throughout the remainder of his presidency.  And, while the President often claims publicly that his commutations are only for “low-level” and “non-violent” criminals, 395 of the 1,176 commutations were offered to people serving life sentences…which typically aren’t given to “low-level” criminals caught with a couple ounces of drugs on them.

    Of course, in typical fashion, the President took to Twitter to brag about his latest “accomplishment.”

     

    And here is the full statement from the President’s White House blog released earlier today.  As usual, the post ends with a vow to grant even more pardons over the coming weeks as Obama approaches the end of his time in the White House.

    Today, President Obama granted clemency to 231 deserving individuals — the most individual acts of clemency granted in a single day by any president in this nation’s history. With today’s 153 commutations, the President has now commuted the sentences of 1,176 individuals, including 395 life sentences. The President also granted pardons to 78 individuals, bringing his total number of pardons to 148. Today’s acts of clemency — and the mercy the President has shown his 1,324 clemency recipients — exemplify his belief that America is a nation of second chances.

     

    The 231 individuals granted clemency today have all demonstrated that they are ready to make use — or have already made use — of a second chance. While each clemency recipient’s story is unique, the common thread of rehabilitation underlies all of them. For the pardon recipient, it is the story of an individual who has led a productive and law-abiding post-conviction life, including by contributing to the community in a meaningful way. For the commutation recipient, it is the story of an individual who has made the most of his or her time in prison, by participating in educational courses, vocational training, and drug treatment. These are the stories that demonstrate the successes that can be achieved — by both individuals and society — in a nation of second chances.

     

    Today’s grants signify the President’s continued commitment to exercising his clemency authority through the remainder of his time in office. In 2016 alone, the President has granted clemency to more than 1,000 deserving individuals. The President continues to review clemency applications on an individualized basis to determine whether a particular applicant has demonstrated a readiness to make use of his or her second chance, and I expect that the President will issue more grants of both commutations and pardons before he leaves office. The mercy that the President has shown his 1,324 clemency recipients is remarkable, but we must remember that clemency is a tool of last resort and that only Congress can achieve the broader reforms needed to ensure over the long run that our criminal justice system operates more fairly and effectively in the service of public safety.

    Generally a full list of the drug dealers that will be released back on to the streets in the near future can be viewed on the Department of Justice website.  That said, Obama seems to be  releasing criminals faster than the DOJ can update their site, so you’ll have to check back later for the official list. 

    1,324 extra democrat voters and counting…

  • Bank Of Japan Leaves Policy Unchanged, Upgrades Economic Outlook

    With a vote of 7 to 2, The Bank of Japan decide to change nothing about its monetary policy. While expected, some had suggested Kuroda might shift the 10Y target away from 0bps, but no – no change to asset purchases, no change to 10Y target level, and no change to policy rate. However, in what some say is a tilt towards future tightening, The BoJ upgraded its view of the Japanese economy.

    • BOJ keeps monetary policy unchanged, as predicted by all 39 economists surveyed by Bloomberg.
    • BOJ: Japan’s Economy Has Continued Moderate Recovery Trend
    • Bank of Japan Keeps 10-Year JGB Yield Target at About 0%
    • BOJ Maintains Policy Balance Rate at -0.100%
    • BOJ statement lists all the usual risks – China, Brexit, uncertainty in the U.S. And, interestingly, it flags worries about euro zone debt and European banks, the crisis that everyone seems to have forgotten (except the BOJ it seems).

    There is a small (negative) reaction in yen…

    Unusuallym there are no wild-cards in this statement, but as Bloomberg’s Brian Fowler notes, the one key takeaway is that BOJ upgrades view of Economy. One more piece of evidence suggesting next move will be toward tightening rather than loosening.

  • Make America "Greater Fools" Again?

    Submitted by Lance Roberts via RealInvestmentAdvice.com,

    The post-election euphoria has been quite amazing as the markets have surged more than 8% since then. Of course, the election of Donald Trump was supposed to be a disaster, but that rhetoric quickly changed, at least for now.

    Not surprisingly, the media has reported each notch of “new highs” with joyful glee culminating with last week’s Barron’s cover “Get Ready For Dow 20,000”.  It was not just Barron’s getting “giddy” over the millennial milestone, but the majority of the financial media and press has been salivating with anticipation of being able to don ball caps commemorating the occasion.

    Unfortunately, for most investors, the headline is probably right. As I stated in the most recent newsletter:

    “I still suspect there is enough bullish exuberance currently to push the Dow to 20,000 and the S&P to 2,300 by the end of the year. However, I am more concerned about what happens next.”

    The reason I say it is “unfortunate” for most investors, is because investors have a tendency to do exactly the opposite of what they should do when it comes to investing – “Buy High and Sell Low.”  The reality is that the emotions of greed and fear do more to cause investors to lose money in the market than being robbed at the point of a gun.

    Take a look at the composite bullish sentiment chart below which is a compilation of individual and professional investors. (AAII, INVI, MarketVane, and NAAIM)

    Typically, when sentiment has been this “bullish” markets have been near short to intermediate-term peaks, or worse. We can also examine investor behavior by looking at fund flows of individuals over time. Not surprisingly, investors tend to buy the most near market peaks and sell the most near market bottoms.

    Since investors are mostly individuals that have a “day job,” the majority of their “research” comes from a daily dose of media headlines. Therefore, since the media tends to “focus” their attention on “market moving headlines,” either bullish or bearish, investors tend to “react” accordingly.

    During market declines, investors tend to panic and sell out of stocks with the majority of the selling occurring near the lows. Conversely, as the markets begin to rally from deeply oversold conditions, investors continue to sell as they disbelieve the rally and are just happy to be getting some of their money back. However, as the rally continues to advance, investors are “lured” back in as the “greed factor” overtakes their logic. Unfortunately, this buying always tends to occur at, or near, market peaks.

    I have used the analogy many times in the past the market is like a rubber band. During bullish trends, the market can get stretched to extremes from the moving average for a short period of time before it snaps back.

    The “Greater Fool” Theory.

    As investors, our job now is to be selling off our investments to those “greater fools” that are willing to overpay for an asset. Heading into the election, it was believed that if Donald Trump was elected it would be “a crisis” for the markets. Heading into election night, the market sold-off and was trading at 3-standard deviations below the moving average. Regardless of who won, the negativity of the market had set it up for a rally. Currently, at 3 standard deviations above the 60-day moving average, the “Donald Trump Is Great” rally is likely complete as opposite extremes have now been reached. 

    This is not something seen just recently, but at the peak and trough of every correction over time. The market is pushing extremes rarely seen at the beginning of a next “leg higher” in the markets.

    So, while the media is busy putting on party hats and penning articles that the “Market Is Back”just remember that we have been here before – both on the way up and the way down. More importantly, as I stated this past weekend:

    “First, “record levels” of anything are records for a reason. It is where the point where previous limits were reached. Therefore, when a “record level” is reached it is NOT THE BEGINNING, but rather an indication of the MATURITY of a cycle. While the media has focused on employment, record stock market levels, etc. as a sign of an ongoing economic recovery, history suggests caution.  The 4-panel chart below suggests that current levels should be a sign of caution rather than exuberance.”

    4-panel-recession-watch

    The point here for individuals trying to save for their retirement is that “getting back to even is not an investment strategy.”  While the media continues to tout every advance to a previous level as the coming of the next great bull market – keep in mind that this has nothing to do with your money or investing. Bonds and cash have outperformed the stock market over the last two decades – yet individuals, chided along by the media and Wall Street, still chase the worst performing asset class over that time frame.

    Let me turn this around.

    As markets advance in price, the risk of investing money, or rather the potential for loss, grows. It is when markets decline that we should be getting excited about investing. Yet, it is exactly the opposite of how individuals react. The media should be hitting the airwaves on down market days with “The market got CHEAPER today as the S&P 500 declined…”  

    The reality is, however, that declining markets don’t sell products of mutual funds companies or Wall Street brokerage firms. Declining markets are not as fun as advancing markets, and investors just want to make money.

    Unfortunately, it just isn’t that easy.

    It is interesting that people spend years in school to become Doctors, Lawyers and Engineers but spend virtually no time studying and learning the most complicated game in the world – investing.  Yet this is the game that they commit their hard-earned dollars to playing every day.

    If you ask an individual if they would take their entire 401k plan and go to Vegas to gamble with it – they will look at you as if your crazy. That same individual, however, speculates with their retirement funds in a “virtual casino” every day with the hopes that somehow it will turn out to be a greater sum down the road. 

    Why? Because the media tells them that is what they must do.

    However, there is ample evidence they absolutely “suck” at doing so, which is also confirmed by the average retirement plan savings balance.

    Since most investors lose money in the markets over time due to fees, emotional biases, trading mistakes, etc. – the odds in Vegas might just be better.

    To be a successful investor you have to be part historian, statistician, economist, financial analyst, and a fortune teller all rolled into one. Even with the requisite skills, education, and experience, investing for the long-term successfully is still a challenge in an environment where markets are inefficient, and to many degrees, affected by Central Bank influences.

    Here is my point. With markets trading at extremes, bullish exuberance at peaks and monetary policy tightening – this might be a good time to locate one of those “greater fools” to sell to. 

    Of course, this is just the opposite of what the media is telling you to do currently.

     

  • The Best Election Map Yet

    Behold, the Clinton archipelago…

     

    h/t @JohnCardillo

  • Wall Street’s Shills Are Starting to Feel Trump’s Chinese Cold War Chills

    Jim Cramer looked a little worried this evening, during his Maddening Money programme. All throughout the elections, the establishment elite, globalist shills, underestimated Trump’s desires to make America great again. With today’s electoral college win and Trump’s persistent lack of subservience to China, the shills on Wall Street are starting to wonder if it’s really happening.

    It really is this time, happening that is.

    In the brief clip below, Cramer summarizes what he believes to be Trump’s position on China, which plainly states we’re already in a trade war with China and Trump isn’t gonna take it anymore, God damn it. According to Goldman Sachs, these companies have the most exposure to China. china

     

    Content originally generated at iBankCoin.com

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Today’s News 19th December 2016

  • Trump Can't Stop It: "The People Who Have Been Orchestrating The Collapse Have Not Halted Their Agendas"

    Submitted by Jeremiah Johnson (nom de plume of a retired Green Beret of the United States Army Special Forces (Airborne)) via SHTFPlan.com,

    There are some very somber, pragmatic articles circulating as of late that present a true snapshot of the difficulties the U.S. faces after eight years of Obama.  One of these articles is a well-written, thought-provoking piece by Susan Duclos of All News Pipeline, entitled We are Facing the Most Important Battle of All at the Most Dangerous Moment in History The piece shows what we’re up against and cautions all of us not to rely on the “magic fix” of Trump’s victory to side rail our preparations and vigilance.  Here is an excerpt from that excellent article:

    We at ANP are noting a lot of optimism from investors with stocks soaring,  to economic confidence reaching new highs, to small business owners, to household spending and even prepping has hit a “multi-year low,” all the articles I am reading are crediting the election of Donald Trump as reason for all this optimism, but as much as I hate to rain on everyone’s parade… now is the most dangerous time in history, not a time to assume just because one man was elected, all the wrongs will be made right, the failing economy will automatically just magically fix itself.”

    Susan deserves special thanks, as well as Stefan Stanford; their coverage of developments has been spot-on and unwavering in their attempts to present objective and factual reporting, while warning readers akin to modern Paul Reveres that the battle is not over by any means.  In reality, it is not even close to being over.  I recommend reading the article’s section toward the beginning under “THE ECONOMY IS COLLAPSING” paragraph introduction for statistics on where we stand economically at this moment in time.

    There was a piece released by Michael Snyder of the Economic Collapse Blog on December 8th entitled It is Like a Nuclear Bomb Went Off in the Prepping Community, another timely piece that warns of the complacency settling in now that most conservatives believe that Trump will be the vaccine for the country’s illnesses.  Here is an excerpt from that article:

    Not since the election of Ronald Reagan has the mood on the right shifted in such a positive direction so suddenly.  But now that everyone is feeling so good about things, very few people still seem interested in prepping for hard times ahead.  In fact, it is like a nuclear bomb went off in the prepping community.

     

    As the publisher of The Economic Collapse Blog, I am in contact with a lot of people that serve the prepping community.  And I can tell you that sales of emergency food and supplies have been crashing since Donald Trump’s surprise election victory.  Firms that help people relocate outside of the United States have seen business really dry up, and I know of one high profile individual that has actually decided to move back to the country after Trump’s victory. 

     

    It is almost as if the apocalypse has been canceled and the future history of the U.S. has been rewritten with a much happier ending.  Personally, I am quite alarmed that so many people are suddenly letting their guard down, but it is difficult to convince people to be vigilant when things seem to be going so well. 

    Mike’s sentiments are completely accurate and I agree with them wholeheartedly.  The people who have been orchestrating the collapses of national governments (Ukraine, Libya, and Egypt, for example) and have been funding the “fundamental transformations” of other areas, (such as Syria and Yemen) have not halted their agendas.  And, why would they?  There are hundreds of billions of dollars at stake that have already been invested in the planned collapse of all the nations of the world and the absorption into one global governance split (as written in earlier articles) into three areas to promote “homogeneity” and management along lines of ethnic, cultural, and genotypical similarities.

    It appears as if the U.S. may take a little bit longer than expected, now.  “May” is still the deciding word.  Remember: the 9-11 attack was what enabled Bush Jr. to propel the U.S. toward a police state.  The John Warner Defense Act was signed in 2006, and the Patriot Act did not originate under Obama, but under Bush.  You can see the “Overton Window” principle and the resultant paradigm shifts as you observe each successive election and term of office…the “back and forth” from (supposedly) Conservative to Liberal administrations.  Reagan (8 years) and Bush Sr. (4 years, when the decline began), followed by Clinton (8 years) and then Bush Jr. (8 years) and then Obama (8 years) …and here’s Trump for at least 4 years.

    The Republican administrations gave a few “small pushes” toward globalism, while the Democrats gave “huge pushes” that moved the line of what the public could tolerate further along the path… alternatingly scaling back with the Republican administration that followed.

    The globalists need the illusion of the two-party system to enable a “reprieve” in the minds of the people with the rise of a Bush or a Trump…but the reprieve is merely an illusion.

    If these Marxist traitors forced their agenda on the people all at once, there would have been a revolution in its inception.  They alternate: destroy the society and the culture to the max under a Democrat administration, and then “scale back” a bit under a Republican administration while still nipping away at the edges with an “Act” here, or a “piece of legislation” there.

    The proof to this pudding is that Trump will not completely clean house and redo the existing political, economic, and social order when he takes office.  Already he has reneged on campaign pledges to repeal Obamacare and build a complete physical barrier between Mexico and the U.S.  He is not going to deport the illegal aliens.  He is going to emplace several people in his cabinet who are known to be either in the pockets of the corporations (such as Mnuchin), or have stances that diametrically oppose his own campaign pledges (such as his selection for White House Chief of Staff who supports amnesty for illegal aliens).

    It may take them a little longer, but Trump will not be able to undo the current course toward the collapse of the United States and the relinquishing of national sovereignty in favor of global governance.  He may be (wittingly or unwittingly) helping it along.  I believe the former will be the case.  Remember Bush Jr.’s departure from the White House?  He gave Obama a manila file folder, marked “From 43 to 44,” in reference to their sequential order as presidents.  Wonder what was in it, don’t you?

    Wonder what Obama will be handing “Number 45” before (and if) he departs?  There should be no doubt in anyone’s mind that there is an agenda that Trump will follow that is larger than his own.  The global manipulators behind the scenes have handed the American people their “champion” and a slight reprieve to avoid a revolution that would have been far from bloodless.  We’re still in a mess overall, and Trump will either knuckle under to their demands in the manner of the aforementioned pattern of their choosing, or they’ll remove him from office.  Meanwhile it is important not to lose focus, to stay aware, and continue to prepare for the eventual collapse, regardless of what the majority does or doesn’t do in denial of the true situation.

  • AG Lynch Admits She "Regrets" Tarmac Meeting With Bill Clinton

    As yet another member of President Obama's administration desperately attempts to define their own legacy (with words other than "failed", "rigged", or "favoritism"), Attorney General Loretta Lynch put on her gentlest, quietest voice for an 'exit' interview with CNN's Jake Tapper, admitting she "regretted sitting down" with Bill Clinton because "it gave people concern" and wants to be remembered for ensuring justice to "all Americans."

    As The Hill reports, Lynch said Sunday that the fallout from her tarmac meeting with former President Bill Clinton was "painful" for her.

     

    "I do regret sitting down and having a conversation with him, because it did give people concern. And as I said, my greatest concern has always been making sure that people understand that the Department of Justice works in a way that is independent and looks at everybody equally," Lynch said on CNN's "State of the Union."

     

    "And when you do something that gives people a reason to think differently, that's a problem. It was a problem for me. It was painful for me, and so I felt it was important to clarify it as quickly and as clearly and as cleanly as possible."

    The Clinton campaign has cited Comey's decision to send a letter to Congress just days before the election about newly discovered emails as one of the reasons she lost.

    "But certainly if Bill Clinton hadn't gotten on the tarmac that time and gone to you, things might have been different," said host Jake Tapper. "You would have had more say. You would have been able to control Comey more … It might have changed the letter that he gave at the end there."

     

    Lynch replied: "I don't think it would have changed his view of what he had to say or not say to Congress."

    So to be clear, Lynch regrets the meeting only because she was caught and it caused controversy… not because it was clearly a bad judgment call!

    But, as Lynch went on to explains, she wants her legacy at DOJ to be one of inclusion

    Once again, defining the narrative is key – "inclusion" – which appears to defined by her and the DoJ as easing and deciminalizing any law-breaking activity that appears to bias against poor or minorities (whether or not they actually broke the law or not). As a reminder, The New York Post noted earlier this year that even a senior Justice Department official predicts the decriminalization-cum-deincarceration movement will backfire in higher crime nationwide. “In five years the crime rate is going to be crazy again,” he said.

    The official, who oversees probation of felons paroled from federal prisons and who requested anonymity, worries the new department policy will be abused.

     

    “I don’t see liberal judges even attempting to make people pay or spending the time making an accurate determination of a person being ‘indigent,’ ” he said. “It’s another way of not holding people accountable for their actions.”

     

    The Justice guidance defines “indigent” as anybody who might be “eligible for public benefits,” but not actually receiving them. “Jurisdictions may benefit from creating statutory presumptions of indigency for certain classes of defendants,” the source said.

     

    The administration claims cops and courts conspire to exploit poor blacks to generate city revenue in some kind of shakedown. But data show blacks fail to pay their fines at far greater rates than whites, so why not target whites if cash extortion is the objective?

     

    Many of the cities with the highest fines, such as Philadelphia, are run by Democrats; and the Justice Department is no piker when it comes to levying fines.

     

    “US attorneys always want fines and restitution amounts in the millions from people who have little chance of ever paying it back,” the department official said.

     

    Liberals are actually to blame for the trend they’re trying to reform. Court fines and fees help pay for all the new costs liberals have added to the system, such as drug counseling and home electronic monitoring. They’ve also pushed judges to assess more fines in lieu of incarceration, especially for drug offenders.

     

    Yet now they claim the whole court fine and bail system is racist.

     

    Former federal civil rights attorney Hans Bader, now with the Competitive Enterprise Institute, describes the latest reforms as a “massive assault on the criminal justice system.”

    It’s a slippery slope to clemency for criminals, large and small.

  • Damaging The Deep State: Trump, Russia, And China

    Submitted by Alasdair Macleod via GoldMoney.com,

    Even before he takes office, President-elect Trump is turning the world upside down.

    It has become clear his attitude towards Russia and China is very different from that of his predecessors. Amazingly, he is already wresting power from the deep state, causing it great resentment, which under Obama, Clinton and the Bushes, ran geopolitical policy. From January, barring accidents the world will not be the same, the establishment up-ended.

    This short article builds on information available to date and speculates how America’s relations with Russia and China are likely to evolve, and the implications for NATO and Europe. It attempts to cut through the disinformation and noise (from all sides) to assess how Trump will change super-power relations.

    Russia

    President-elect Trump has signalled his respect for President Putin as a leader, and Putin, who has been careful to not comment on the US presidential election, has indicated his respect for Trump. Furthermore, Trump, who admittedly said lots of contradictory statements to get elected, clearly wishes to reduce America’s funding commitment to NATO and to reduce American involvement in the Middle East. These objectives will obviously find favour with Putin, and could form the basis of a relationship reset between Russia and the West.

    The American deep state was responsible for moving missiles within range of Moscow, under cover of targeting Tehran, in this year’s escalation of a new cold war. It follows the covert destabilisation by the US of Ukraine over the last decade and American backing for various terrorist groups in Syria, following Syria’s refusal to permit pipelines from the Gulf to cross her territory five years ago. Since the fall of the USSR, NATO has moved its eastern border to within 300 miles of Moscow. Elements in the CIA, working to their own agenda, are still trying to demonise Russia without any evidence, as the Washington Post story about Russian intervention in the election demonstrates.

    The Trump team dismissed this attempt to blacken the Russians as disinformation, from the same sources that came up with the fiction of Saddam Hussain’s weapons of mass destruction. The timing of accusations over Russian involvement probably has much to do with influencing the electoral college’s votes, a last stand against Trump’s election, in which case the intervention is politically outrageous. But this is a side-show, and doubtless Trump will deal appropriately with those involved when he is in office.

    Rather like super-tankers that need seven miles to stop, regional powers are also finding it hard to adjust to these new realities, but adjust they surely will. European governments and NATO members will have had background briefings, but the normal channels for this, the CIA, the US Military advisers and American diplomats are not on Trump’s page, so confusion still reigns. But one thing is becoming clear: Trump will not be diverted from a general policy of détente and de-escalation of military presence in both Europe and the Middle East.

    The process of détente is reasonably predictable. A summit with Russia to agree strategic arms limitations (called SALT3 perhaps?) is a proven path to follow. It should be a step-by-step process scheduled over five or ten years, with pre-agreed conditions designed to satisfy concerns in the Baltic States and Poland that Russia might attempt border-creep. For their part the Russians must agree Ukraine’s independence (excepting the Crimea, Donetsk and Luhansk, which should be formally ceded to Russia). Ukraine and Belorussia will be independent buffer states between Russia and the European Union. Under a SALT3 both NATO and Russia will agree to a phased withdraw of all military hardware other than limited ground troops and their associated equipment.

    In the Middle East, America will concede that Syria remains in the Russian sphere of influence, and will withdraw all support for rebel organisations. This is no more than reality. China, doubtless, will help in the physical reconstruction of Syria in due course. Agreement will be sought as to the means of destroying Daesh. Beyond that, a reduced American presence in the region will continue to ensure security for Israel and the Gulf states. Already, the British have announced they will step up their presence in the region, which should also contribute to regional stability.

    Iran should be persuaded by Russia to take a more constructive approach to peace with Sunni states, such as Saudi Arabia, and towards Israel. This could be difficult, but should be possible, given Iran has become considerably more moderate since the days of Ahmadinejad, particularly if the right tone from America is forthcoming. Iran’s days of hiding from western sanctions behind Russia will be over, and should be replaced with an emphasis on trade. And Saudi Arabia can no longer afford to wage wars, such as that in the Yemen, contributing to a less belligerent outcome.

    All this is practical, possible and predictable. Behind the change in geopolitical reality for the Middle East is the fact that Peak Oil is being pushed further into the future. Not only are large new oil fields still being discovered (such as the Kashagan Field in the north of the Caspian Sea), but modern technology is bringing other forms of ecologically-friendly energy supplies on stream and higher prices will unlock shale oil supplies. The strategic importance of the Middle East has therefore declined, particularly since insignificant quantities of oil from the region go to America. And with that decline goes less need for geostrategic intervention by the US.

    For the first time since the Six Day War in 1967 there is a realistic possibility of stability in the area, assuming the super-powers take a constructive approach to détente, and are willing to jointly police the region.

    Regional implications of détente with Russia

    The benefits of regional peace to the Middle East will, hopefully, materialise. Turkey is important, and will need to be considered as well. The coup attempt earlier this year, which was likely supported if not actually instigated by the US, has resulted in Erdogan tightening his grip on all opposition to his rule. However, Erdogan may have become Russia’s puppet, because the Russians appear to have tipped him off ahead of the coup and ensured its failure. If this is indeed the case, not only does he owe his power to Russia, but Russia can take it away. Under Russian influence, we can expect Turkey to continue to lean away from her impractical and unrealistic hopes of joining the EU, and instead pursue her more recent ambitions for membership of the Shanghai Cooperation Organisation. That would offer Turkey the best long-term future.

    With Turkey’s future direction appearing to be decided, far more important is the effect of a reset with Russia on Europe and the European Union. As NATO members, European nations have gone along with Russian sanctions, which have been detrimental particularly to Germany’s economy. Their removal will give Germany a new long-term trade market of considerable potential, reducing her dependence on trade with other EU states, particularly France, Spain and Italy. The possibility of a new Hanseatic League, about which I wrote last March, is now on the cardsi. I was very surprised that it hadn’t been considered by the British Government and discussed with the Germans as a Plan B in the event of a vote for Brexit. However, the prospect of détente with Russia leads to a new Hanseatic League now becoming a realistic possibility.

    Briefly, the trade route to Russia, both by sea through the Baltic and overland by rail and road, offers enormous trading potential for Germany, Britain, Holland, and Scandinavia. To this we can add Poland, Czech Republic, Slovakia, Austria, Hungary, and to a lesser extent, Romania, Bulgaria and Serbia. Furthermore, a northern trade route will link into China’s One Belt One Road project, further enhancing its importance. In short, the long-term future of France, Spain, Italy and Greece will be challenged by the rehabilitation of Russian trade, and potentially become one of relative isolation. An overriding reason why Russia will become so important is because of her partnership with China in the Shanghai Cooperation Organisation. Russia is, with sub-Saharan Africa, the source of natural resources for China’s planned industrialisation of all Asia. And as a resource-rich country, Russia will benefit from the continuing rise in raw material and energy prices. Détente with America and NATO will improve her economic outlook considerably, but she needs European commercial technologies and manufacturing techniques to help rebuild her own middle class’s wealth.

    The underlying reasons a SALT3 will work for Russia are all there, and Trump is likely to take the view that Western Europe should not be his responsibility. There is little US trade with Russia, so trade negotiations for America are not in this mix, simplifying matters considerably. The trade bun-fight will be mainly confined to negotiations with China.

    We can be sure that there will be a summit between President Xi and President Trump early next year, because Henry Kissinger, who is trusted by the Chinese, and despite his great age has been sent by Trump to arrange it. Reports in the press that Kissinger’s visit last week was just to calm things down after Trump’s telephone call with the Taiwanese leader are wide of the mark. Trump is simply establishing his negotiating position from the outset.

    Trump is of the opinion that businessmen, not diplomats, should control trade negotiations. While diplomats might view this approach as naïve, the fact is Trump will be setting the agenda. Consequently, he is likely to be dismissive of past agreements, and impatient with the snail’s pace common in diplomatic trade negotiations. He will most likely wish to handle trade negotiations with China himself.

    In order that trade negotiations progress without misunderstandings he has nominated Iowa Governor Terry Branstad for the post of Ambassador to China. Branstad has known President Xi through previous visits, and should be an effective communications channel. That’s the soft part of the deal. The hard part is Trump’s rhetoric, and his willingness to talk to Taiwan, which has established his opening gambit. His objective will be to get China to stop manufacturing copies of American goods, hacking into commercial websites to steal trade and technological secrets, and abusing intellectual property. It is likely China will agree to tighten up on this behaviour, in which case a new trade agreement can be reached.

    While diplomats might find Trump’s style damaging to their careful construction of trade relations over time, there is little doubt his approach has merit. Success with China, even if it is limited in scope, is likely to be the outcome. It could alter not only the way trade agreements with China are set in the future, but could override the whole WTO process for other international trade relationships as well. And here again, we see the EU with its antiquated and obstructive approach to trade being most challenged.

    At the end of the day, Trump’s language is one the Chinese will understand, and in return for backing off over Taiwan, they are likely to concede America’s beef over intellectual property abuses, hacking and commercial espionage. China’s focus is moving away from that sort of business anyway, towards higher-level services and improved infrastructure for its rapidly-growing middle classes, and she plans to spread the benefits of her industrialisation throughout Asia.

    Furthermore, there are likely to be echoes from Trump’s big-bang on trade. Removing diplomats from the act of setting the trade agenda, disconnects trade from geopolitical considerations generally, allowing Japan, for instance, to join the Asian Infrastructure Investment Bank. It is even conceivable that the US itself might apply to join it at a future date, in which case, you heard it here first.

    Trump’s trade negotiations with China, if successful, could have far-reaching effects. They could, of course, go badly wrong, but the Chinese are realists and will almost certainly adapt to the new reality. It is in their interests to strike a deal with Trump, swiftly giving him concessions that established diplomatic practice would be unlikely to yield.

    Political and economic consequences for America

    In the first half of 2017, Trump is likely to achieve both détente with Russia and a new, better trade deal with China. If so, his pre-election stance, that the American establishment was failing the people, will have been amply proven. Trump will likely be riding high in the opinion polls.

    However, you cannot demolish the status quo without consequences. While much good will be achieved if Trump’s approach to Russia and China succeeds, the EU will be undermined both politically and financially. The European Union is already threatening to break up following Brexit, and Trump’s détente with Russia could give Germany a realistic opportunity to cast off from the European Project. The financial cost of a European break-up will be a difficult pill for Germany to swallow, and renewed trade links with Britain and Russia is her best shot at recovery. The future for the euro, whatever happens, is being challenged, more so if Germany decides to replace it with a new Deutschemark. If Germany replaces the euro, the Eurozone’s banking system and currency will be increasingly vulnerable to collapse. And if the Eurozone has a banking crisis, it will inevitably infect the global banking system, undermining America’s banks as well.

    If we make the optimistic assumption that somehow the Eurozone and its currency manage to stagger on, there is a further problem for America. Industrial raw material prices have been rising strongly throughout 2016, measured in dollars, despite the dollar’s strength against other currencies. Trump’s stated ambition, to cause US infrastructure investment to rise significantly, coincides with China’s thirteenth five-year plan for building new Silk Roads and associated projects. Consequently, both America and China will be aggressively bidding against each other for raw materials in 2017.

    Price rises in raw materials and energy will become a major factor driving the rate of price inflation sharply higher on America’s Main Street. Yet the ability of the Fed to raise interest rates in their traditional attempts to limit price inflation will be checked by the height of the nominal rate that will trigger widespread debt liquidation. Debt, as the cliché goes, is the gorilla in the room.

    Trump’s basic problem is that he understands business, but not necessarily economics. He obviously thinks that trade deficits arise from unfair trade practices. It’s a common mistake, but they don’t. They arise from unfunded government spending and the expansion of bank credit. His fundamental belief, that fair terms of trade will make America great again is therefore badly flawed.

    It is also difficult to see where he stands on monetary policy, if at all. In business, he has personally benefited from the expansion of bank credit, but does he understand the eventual price consequences of unlimited expansion of bank credit? Very few businessmen do, in which case we can only hope he will be well advised.

    Past US presidents, from Herbert Hoover onwards, have been generally poorly advised on basic economic theory, thinking the state is well equipped to fix things that go wrong. The evidence for this error is found in the unremitting accumulation of public sector debt since the Wall Street Crash in 1929, confirmed when Roosevelt devalued the dollar against gold in 1934, and reconfirmed when Nixon temporarily abandoned all gold convertibility in 1971. That Trump might be better advised must remain a pipe-dream, unless contradicted by events.

    Therefore, my broad expectations for 2017, the first year of the Trump presidency, is success in foreign and trade policy will be offset by rising price inflation and falling asset prices as interest rates rise (see my article dated 1st December, Credit cycles and gold), terminating in a credit-crunch from higher nominal interest rates. Good on the geopolitics, bad on the economy.

     

  • China To Hand Over Seized US Drone "Under These Conditions"

    On Saturday morning, the Pentagon was eager to announce that China would return a U.S. Navy underwater drone after its military scooped up the submersible in the South China Sea late this week and sparked a row that drew in President-elect Donald Trump. As previously reported, Pentagon spokesman Peter Cook said that “through direct engagement with Chinese authorities, we have secured an understanding that the Chinese will return the UUV to the United States.”

    In retrospect, the Pentagon may have declared victory too soon. According to the South China Morning Post, China’s handover of the drone will come “with conditions“, adding that “Beijing is expected to demand the United States scale down its ­surveillance in the South China Sea when it hands back a seized US underwater drone.” Beijing would also “seek an expansion in the code for unplanned military encounters in the disputed waters to cover drones like the one seized by a Chinese warship off the Philippine coast near Subic Bay on Thursday.”

    Zhang Zhexin, a professor from the Shanghai Institutes for International Studies, said he ­expected it would take about 10 days for the drone to be returned. The demand for US concessions stems from the fact that “China is worried that there will be more action from the US during its power transition period,” Zhexin said. “Beijing will possibly talk to the US about expanding the code for unplanned encounters at sea to include unmanned underwater vehicles.”

    Currently the code includes a set of standard operational procedures ­designed to minimize the risks of unintended maritime encounters, but it does not have a procedure to deal with underwater drones.

    China is concerned that despite the US insistence that the drone was used for purely peaceful purposes. its deployment had ulterior motives. Zhang Huang, a professor from the PLA National Defence University, said the unmanned underwater vehicle could be used to gather data on Chinese naval actions, and the navigation details of Chinese submarines, People’s Daily reported.

    Zhang Baohui, a China security specialist at Hong Kong’s ­Lingnan University, said the drone could be used to collect data on factors such as currents and salinity, as well as special ­sonar signals from Chinese nuclear submarines. “Both uses have military applications. The first could be used to track possible routes by Chinese submarines,” he said.

    “The second could be used to detect and trace Chinese nuclear submarines.

    “The drone is part of the US’ anti-submarine ­warfare.”

    Meanwhile, Bloomberg reports that after Trump lashed out at China over the weekend, saying it stole an underwater drone from the U.S. Navy in an “unprecedented act”, Beijing’s official response was muted, although there was far more “passion” in the local nationalist tabloid press, such as the Global Times which mocked Trump’s demeanor as “lagging far behind the White House spokespersons.”

    “China has so far practiced restraint at Trump’s provocations as he’s yet to enter the White House,” the Global Times said. “But this attitude won’t last too long after he officially becomes the U.S. president, were he still to treat China in the manner he tweeted today.”

    And yet despite the occasional press outburst, Beijing is holding its fire at least until after he takes office next month. Until then, it looks set to continue the stance of “strategic composure” articulated after Trump questioned the U.S.’s policy of diplomatically recognizing Beijing instead of Taiwan.

    However, just like Obama is contemplating his options on how to retaliate to “Russian hacking” if at all, China is likewise planning its next move:

    Beijing will “strike back firmly” if Trump as president openly challenges China’s core interests like Taiwan, Tibet, the South China Sea and the East China Sea, said Shi Yinhong, director of the Center on American Studies at Renmin University in Beijing and an adviser to China’s State Council, the cabinet. Options include recalling the ambassador, stopping international cooperation, fighting a trade war — even severing diplomatic ties.

     

    “So far, China has adopted a cautious, measured approach of wait and see,” Shi said. “The government is still closely observing what Trump is up to and in the process of forming a clear view on his possible policy. This approach will likely continue into his presidency for the first couple of months.”

     While some policy makers in Beijing initially hoped that Trump would bring a more pragmatic approach, that view is quickly fading. Indeed, if anything, with every incremental tweet, Trump promises that it is only a matter of time before a far more serious diplomatic scandal erupts.

    Trump’s reaction to the drone incident raises questions about whether that’s the case. He deleted his first tweet after writing “unpresidented” rather than “unprecedented.” Later, after tensions appeared to have been diffused, Trump sent another tweet: “We should tell China that we don’t want the drone they stole back.- let them keep it!”

    Others, like Malcolm Davis, a senior analyst at the Australian Strategic Policy Institute in Canberra, disagreed and said that “such a response would deprive the U.S. of the ability to assess what information China sought to obtain while analyzing the drone after it was seized”

    He added that “It just shows that Trump hasn’t thought out his policy before he tweets it,” Davis said. “The risk is that he is going to confront China to the point where it is destabilizing.” 

    Indeed, if anything, the drone incident has shown how quickly tensions between the nations could escalate, particularly as China challenges U.S. naval supremacy in Asia, and what makes the situation especially volatile is that suddenly both the actions of China and the US are likewise unpredictable:

    “Under Trump, China-U.S. conflicts in the South China Sea are likely to ratchet up or even deepen, with unpredictable incidents like the Bowditch episode to occur from time to time,” Li Jie, a senior researcher at the Chinese Naval Research Institute in Beijing. One could say the same about China, whose drone confiscation was seen as a substantial escalation in the festering diplomatic conflict between the two nations.

    The overseas edition of The People’s Daily, the Communist Party’s flagship newspaper, said on its social media WeChat account Saturday night that China’s capture of the drone was legal because it was conducting “military operations in sensitive waters” and rules about drone activities are ambiguous.  “This is a gray area,” the article said. “If the U.S. military can send the drone over, China can certainly seize it.”

    Actually, as shown previously, the drone was snatched in a zone in the South China Sea that was in close proximity to the Philippines and not even inside the confines of the nine-dash line.

     

    As Bloomberg concludes, “while the motive for the seizure remains unclear, it’s a concern no matter whether it was ordered from Beijing or the act of a rogue captain, according to Michael Mazza, research fellow in foreign and defense policy studies at the American Enterprise Institute. “To me all of these various explanations are troubling,” he said. “If we do learn it was one ship acting on its own that’s not cause for a sigh of relief.”

    One thing, however, is certain: should China indeed issue conditions which have to be met prior to the return of the US underwater drone, there will be many more, and far angrier tweets from Trump, the response to which from China will be critical, and may finally force the euphoric market to pay attention.  Keep a close eye on what Beijing says in the coming days, and certainly keep a very close eye on Trump’s twitter feed. That’s where the action in the final trading week of the year will be.

  • The Hacking Evidence Against Russia Is Extremely Weak

    Last week, German security officials said that Russia hacked secret German communications and provided them to Wikileaks (English translation).

    But now, German officials say that the communications were likely leaked from an insider within the German parliament, the Bundestag (English translation).

    Similarly, when a treasure trove of secret NSA tools were revealed, Russian hackers were initially blamed.

    But it turns out that it was probably a leak by an NSA insider.

    So claims that Russia is behind any specific hacking incident need to be taken with a grain of salt …

    A group of high-level former American intelligence officials – including the man who designed the NSA’s global surveillance system (Bill Binney), a 27-year CIA officials who personally delivered the daily briefing to both Democratic and Republican presidents (Ray McGovern) , and others – say that the Democratic Party emails were not hacked, but were actually leaked by insiders.

    A former British intelligence analyst and British Ambassador to Uzbekistan (Craig Murray) alleges that he personally met the leaker, and that it was an American working for the NSA.

    But whether or not these American and British intelligence officials are right that the Democratic emails were leaked by insiders as opposed to hacked by Ruskies, the fact remains that the evidence for Russian hacking is very weak.

    Initially, the main allegation for Russia hacking Democratic emails to throw the election for trump is that Wikileaks released Democratic – but not Republican – emails.

    However, the RNC says that their cybersecurity stopped attempts to hack into their computers. If true, then it may be that the Dems were simply more careless than the GOP. Indeed, John Podesta fell for a basic phishing scam.

    Moreover, it’s famously difficult to attribute the source of hacks.

    A leading IT think tank – the Institute for Critical Infrastructure Technology – points out:

    Malicious actors can easily position their breach to be attributed to Russia.  It’s common knowledge among even script kiddies that all one needs to do is compromise a system geolocated in Russia (ideally in a government office) and use it as a beachhead for attack so that indicators of compromise lead back to Russia. For additional operational security, use publically available whitepapers and reports to determine the tool, techniques, and procedures of a well-known nation-state sponsored advanced persistent threat (APT), access Deep Web forums such as Alphabay to acquire a malware variant or exploit kit utilized in prolific attacks, and then employ the malware in new campaigns that will inevitably be attributed to foreign intelligence operations. Want to add another layer? Compromise a Chinese system, leap-frog onto a hacked Russian machine, and then run the attack from China to Russia to any country on the globe. Want to increase geopolitical tensions, distract the global news cycle, or cause a subtle, but exploitable shift in national positions? Hack a machine in North Korea and use it to hack the aforementioned machine in China, before compromising the Russian system and launching global attacks. This process is so common and simple that’s its virtually “Script Kiddie 101” among malicious cyber upstarts.

     

    ***

     

    Incident Response techniques and processes are not comprehensive or holistic enough to definitively attribute an incident to a specific threat actor from the multitude of script kiddies, hacktivists, lone-wolf threat actors, cyber-criminals, cyber-jihadists, hail-mary threats, and nation-state sponsored advanced persistent threats (APTs), who all possess the means, motive, and opportunity, to attack minimally secured, high profile targets.

     

    ***

     

    Attribution might be reliable if the target is well-protected, if the target operates in a niche field, or if the malware involved in the incident is unique because one or more of those characteristics can be deterministic of the sophistication and resources of the threat actor. Attribution is less exact in the case of the DNC breach because the mail servers compromised were not well-secured; the organization of a few hundred personnel did not practice proper cyber-hygiene; the DNC has a global reputation and is a valuable target to script kiddies, hacktivists, lone-wolf cyber-threat actors, cyber-criminals, cyber-jihadists, hail-mary threats, and nation-state sponsored advanced persistent threats (APTs); and because the malware discovered on DNC systems were well-known, publicly disclosed, and variants could be purchased on Deep Web markets and forums.

     

    ***

     

    Both APT28 and APT29 are well-known sophisticated threat actors that have been extensively profiled by cybersecurity firms such as FireEye. As a result, their profiles, operational behavior, tools, and malware could all be easily emulated by even an unsophisticated adversary in a campaign against an insecure target such as the DNC, that did not prioritize cybersecurity, cyber-hygiene, or system cyber resiliency. For instance, the cyber-criminal group Patchwork Elephant, known for adopting malware from other campaigns, could easily have also conducted the DNC/ RNC attacks by emulating APT28 and APT29.

    James Carden – a former Advisor to the US-Russia Presidential Commission at the US State Department – writes:

    Evidence of a connection between the Russian government and the hackers that are believed to have stolen the DNC/John Podesta e-mails remains illusory. Cyber-security expert Jeffrey Carr has observed that “there is ZERO technical evidence to connect those Russian-speaking hackers to the GRU, FSB, SVR, or any other Russian government department.” The very real possibility that non-state actors carried out the hack of the DNC has been conspicuously absent from the mainstream narrative of “Russian interference.”

    Craig Murray notes:

    Despite himself being a former extremely competent KGB chief, Vladimir Putin [is alleged to have] put Inspector Clouseau in charge of Russian security and left him to get on with it. The Russian Bear has been the symbol of the country since the 16th century. So we have to believe that the Russian security services set up top secret hacking groups identifying themselves as “Cozy Bear” and “Fancy Bear”. Whereas no doubt the NSA fronts its hacking operations by a group brilliantly disguised as “The Flaming Bald Eagles”, GCHQ doubtless hides behind “Three Lions on a Keyboard” and the French use “Marianne Snoops”.

     

    What is more, the Russian disguised hackers work Moscow hours and are directly traceable to Moscow IP addresses. This is plain and obvious nonsense. If crowdstrike [the consulting firm hired by the Democratic National Committee] were tracing me just now they would think I am in Denmark. Yesterday it was the Netherlands. I use Tunnel Bear, one of scores of easily available VPN’s and believe me, the Russian FSB have much better resources. We are also supposed to believe that Russia’s hidden hacking operation uses the name of the famous founder of the Communist Cheka, Felix Dzerzhinsky, as a marker and an identify of “Guccifer2” (get the references – Russian oligarchs and their Gucci bling and Lucifer) – to post pointless and vainglorious boasts about its hacking operations, and in doing so accidentally leave bits of Russian language script to be found.

     

    The Keystone Cops portrayal of one of the world’s most clinically efficient intelligence services is of a piece with the anti-Russian racism which has permeated the Democratic Party rhetoric for quite some time. Frankly nobody in what is vaguely their right mind would believe this narrative.

    It is not that “Cozy Bear”, “Fancy Bear” and “Guccifer2” do not exist. It is that they are not agents of the Russian government and not the source of the DNC documents. Guccifer2 is understood in London to be the fairly well known amusing bearded Serbian who turns up at parties around Camden under the (assumed) name of Gavrilo Princip.

     

    Of course there were hacking and phishing attacks on the DNC. Such attacks happen every day to pretty well all of us. There were over 1,050 attacks on my own server two days ago, and many of them often appear to originate in Russia – though more appear to originate in the USA. I attach a cloudfare threat map. It happens to be from a while ago as I don’t have a more up to date one to hand from my technical people. Of course in many cases the computers attacking have been activated as proxies by computers in another country entirely. Crowdstrike apparently expect us to believe that Putin’s security services have not heard of this or of the idea of disguising which time zone you operate from.

     


     

    One Day’s Attempts to Hack My Own Server – Happens Every Single Day

     

    Pretty well all of us get phishing emails pretty routinely. Last year my bank phoned me up to check if I was really trying to buy a car with my credit card in St Petersburg. I don’t know what the DNC paid “Crowdstrike” for their narrative but they got a very poor return for their effort indeed. That the New York Times promotes it as any kind of evidence is a truly damning indictment of the mainstream media.

    Andrew Cockburn asks some hard-hitting questions:

    1/ The DNC hackers inserted the name of the founder of Russian intelligence, in Russian, in the metadata of the hacked documents.  Why would the G.R.U., Russian military intelligence do that?

     

    2/ If the hackers were indeed part of Russian intelligence, why did they use a free Russian email account, or, in the hack of the state election systems, a Russian-owned server?  Does Russian intelligence normally display such poor tradecraft?

     

    3/ Why would Russian intelligence, for the purposes of hacking the election systems of Arizona and Illinois, book space on a Russian-owned server and then use only English, as documents furnished by Vladimir Fomenko, proprietor of Kings Servers, the company that owned the server in question, clearly indicate?

     

    4/ Numerous reports ascribe the hacks to hacking groups known as APT 28 or “Fancy Bear” and APT 29 or “Cozy Bear.” But these groups had already been accused of  nefarious actions on behalf of Russian intelligence prior to the hacks under discussion.  Why would the Kremlin and its intelligence agencies select well-known groups to conduct a regime-change operation on the most powerful country on earth?

     

    5/ It has been reported in the New York Times, without attribution, that U.S. intelligence has identified specific G.R.U. officials who directed the hacking. Is this true, and if so, please provide details (Witness should be sworn)

     

    6/ The joint statement issued by the DNI and DHS on October 7 2016 confirmed that US intelligence had no evidence of official Russian involvement in the leak of hacked documents to Wikileaks, etc, saying only that the leaks were “consistent with the methods and motivations of Russian-directed efforts.”  Has the US acquired any evidence whatsoever since that time regarding Russian involvement in the leaks?

    So while Russia may have hacked the Democratic emails and then delivered them to Wikileaks, the evidence is extremely weak.

  • Canada Sees 5x Surge In American Refugee Applications… To 28

    Leading up to the 2016 Presidential election, dozens of overconfident celebrities and political figures promised to flee to Canada if Trump emerged victorious (we noted them all here: “These Are The Celebrities Who Vowed To Leave America If Trump Wins“).  Unfortunately, none of them have announced plans to follow through on those promises despite news from Canada’s immigration officials that applications for political refugee status from Americans was up 5x YoY in November.

    That said, this may be one of those times when a YoY% change does not really do the absolute number justice, because that 5-fold increase in refugee applicants translates into… 28 people filing asylum applications in November 2016. 

    Moreover, as HeatStreet points out, none of them are likely to actually be granted asylum with only 2 requests being approved for Americans since 2010.  Apparently the Canadian government doesn’t recognize the various “triggers” that have set off these disaffected Hillary supporters as valid reasons for refugee status.

    Of the 28 who applied, it’s possible none will be approved to relocate to America’s northern neighbor. The CBC found only two successful claims for asylum out of hundreds of cases filed from the U.S. since 2010. There was no successful claim out of the 170 filed in 2015.

     

    If you aren’t fleeing an unjust war, or fleeing actual threat of death, Canada is likely to decline your request. If you’re not applying as a refugee, the Canadian legal immigration process can take about a decade to navigate.

    Triggered

    While most celebrities who threatened to leave the U.S. have since said they were “just joking,” CBC News couldn’t officially confirm whether any of the 28 applications filed in November came from disaffected Hollywood snowflakes.  When asked about the applications, Nicholas Dorion, a spokesman for the Canada Border Services Agency, simply said that “refugee claims are protected under the Privacy Act” which prohibits the disclosure of any details of applicants.

    Meanwhile,  applicants have a sympathizer in Jamie Liew, a University of Ottawa professor and immigration lawyer, who told CBC News that it’s not surprising that so many disaffected Hillary snowflakes were triggered by the election given the “concerning language, including hate; exclusion; deportation” that surfaced during the campaigning cycle. 

    “I don’t think it’s surprising at all,” she said.

     

    “The rhetoric coming from the (U.S. political) discussion… was filled with a lot of concerning language, including hate; exclusion; deportation… I could see why people would be concerned for their own safety, their own lives, and evaluate whether they could live (there).

     

    Liew has been involved in a handful of American refugee claims over the years. Such cases can involve victims of domestic violence, or soldiers escaping wars like in Iraq and Afghanistan. She recalled one case related to death threats against a same-sex couple.

     

    “It really doesn’t matter what country a refugee comes from. That is not the central issue in determining if someone is a refugee,” Liew said.

     

    “A country could be democratic. A country could be espousing … human rights. What really matters is how people are being treated on the ground, and protected by the state that they’re in.”

     

    That said, Americans don’t have much success when claiming refugee status in Canada: “Obviously if you’re coming from a war-torn state that is obviously an easier case to be made. But that does not make it impossible for someone from the United States to make a claim for refugee protection.”

     

    Only a minuscule share of American refugee claimants get approved in Canada.

    While we wish these 28 applicants the best of luck in their process, we remain immensely disappointed that Lena Dunham has decided to stay in the U.S. and would like to remind her one last time that travel arrangements are still set to the extent she wants to follow through on her pledge to move to Vancouver.

  • Coup Or No Coup: What To Watch For As The Electoral College Votes On Monday

    With even Harvard’s Larry Lessig admitting that his efforts to flip the Electoral College against Trump have failed miserably (see “Harvard Professor Admits His Efforts To Turn Electoral College Against Trump Have Failed Miserably“), it’s a near certainty that Trump will, in fact, be elected President when the Electoral College casts their votes tomorrow. 

    That said, there could always be surprises and, as such, The Hill has published a list of five things you should keep an eye on as electors get set to cast their ballots.  First, here is how the 538 electors should cast their ballots if they all strictly follow the will of the voters in their respective states. 

    EC 1

     

    That said, we know that at least one Texas elector, Chris Suprun,  has vowed to go rogue tomorrow and anxious eyes will be waiting to see if anyone decides to join him.  As The Hill points out, there hasn’t been an election since 1836 in which more than 1 elector changed his vote, so even 2 defectors would make history.

    There’s no evidence of a widespread number of Republican defections—just one Republican elector from Texas has gone public with plans to break from Trump.

     

    But there hasn’t been an election in which more than one elector jumped ship for reasons other than the death of a candidate since 1836, according to the nonprofit FairVote. So a defection by even one more Republican elector would make history.

    The next thing to watch is whether any Democrat electors will cast protest votes.  A small group of Democratic electors had vowed to join Larry Lessig’s coup attempt by throwing their support behind an alternative Republican candidate.  While this now seems like a remote possibility, it is something to watch for.

    Democratic electors are the ones beating the drums for the revolt, yet they’re largely powerless to change the outcome.

     

    A handful of electors are already planning on uniting around a Republican alternative as a protest, but it’s still unclear how many are willing to join the protest.

     

    In theory, a unified front of the 232 Democrats could join with 38 Republicans to elect an alternative president. But in practice, the anti-Trump electors will be lucky if more than a dozen Democrats break.

    Electoral College Map

     

    With 29 states and the District of Columbia binding their electors by law, it will also be interesting to see if anyone in those states choose to defect, and if so, what penalties will be levied upon them.

    The country’s presidential electors are chosen through different methods across the country—some are elected directly while others are picked by the candidates themselves or by the state party.

     

    Bucking their jurisdiction’s votes could also have consequences for faithless electors. 29 states and the District of Columbia bind their electors by law, mostly with small fines as retribution for going rogue. No faithless electors have ever been punished, so political junkies will be watching to see if that changes.

    Finally, when all the voting is said and done, all eyes will be watching how the candidates and their respective parties react.  Will Trump launch a massive tweet storm blasting “faithless electors” and/or will Democrats finally tone down the “Russian hacking” rhetoric and calls to scrap the Electoral College system?  Somehow we suspect that finally admitting they ran a failed candidate that was doomed to lose from the start is not a viable alternative for the talking heads of the leftist media…so we’re somewhat less than hopeful.

  • Palladium, Platinum, Gold, Silver, Copper, Bonds and the Dollar Market Correlations (Video)

    By EconMatters


    We go over some viewer questions in this video regarding trading theory, and then go over a question regarding market correlations of assets in the metals market. Blame the programmers for overly simplistic market correlations, they are just being lazy! But know the nuances of each specific market because you are giving away too much edge to just lump everything into general trade baskets.

    © EconMatters All Rights Reserved | Facebook | Twitter | YouTube | Email Digest | Kindle   

  • Ukraine Nationalizes Its Largest Bank, Which Holds 36% Of All Domestic Deposits

    It was just a few short days ago, on Wednesday of last week, that Ukraine’s largest lender, PrivatBank, said that reports it will be nationalized were “attempts to create panic and destabilize the political situation in the country.

    Local media, quoted by Reuters, speculated that Privatbank, which is part-owned by one of Ukraine’s richest men, billionaire Ihor Kolomoisky, could be privatized if it does not meet a year-end deadline for Ukraine banks to reach a capital ratio requirement agreed under an International Monetary Fund bailout program. However, what made Privatbank unique, is that with some $6 billion in private deposits – or 36.5% of Ukrainian banks’ total – it puts America’s own TBTF banks to shame: the bank is an absolute giant which controls nearly half of the local banking sector.

    On Wednesady, the bank’s deputy chairman reaffirmed that there was nothing to worry about and said its customers had received phone calls and messages telling them the bank would be taken under state control due to a failure to meet the required capitalization level. “Exploiting the ignorance of citizens about nationalization, they stir up panic,” Oleg Gorokhovsky said, without saying who was behind the reports.

    Separately, the bank stated that “the information attack on Ukraine’s largest bank, Privatbank linked to the ‘pseudo-nationalisation’ of the bank is primarily directed at clients of the bank and is an attempt to destabilize the political situation in the country.” It added that the reports of its imminent nationalization were politically motivated.

    * * *

    Fast forward four days, when late on Sunday night, the “attempts to create panic and destabilize the political situation” in Ukraine turned out to be true after all, and whether politically motivated or otherwise, the Ukrainian government announced hours ago that it would nationalize the suddenly very ironically named PrivatBank, unleashing one of the biggest shake-ups of the banking system since the country plunged into political and economic turmoil two years ago.

    In a statement late on Sunday, the government made no mention of the size of the potential burden to the state budget, but said it would ensure a stable transition and the smooth functioning of the bank.

    According to Reuters, The Finance Ministry would take over PrivatBank, with Finance Minister Oleksandr Danylyuk adding that depositors’ money was safe and secured by the state, and that the bank was functioning normally. It was not immediately clear if Ukraine had $6 billion in liquid funds to distribute to PrivatBank depositors should there be a run on the bank tomorrow, as some expect.

    “The private shareholders of PrivatBank proposed to the government that it become the bank’s owner in the interests of its clients,” the government said in a statement.

    “The transition period begins on 19 December. The state will ensure a smooth transition and the stable functioning of the bank.”

    The unprecedented bailout could fuel instability in Ukraine, where opposition parties have repeatedly called for snap elections to unseat the pro-Western leadership that took power after the 2014 Maidan protests. As Reuters notes, the opposition has harnessed the anger of depositors from banks that were previously shut down in a sweeping cleanup of the financial system, mobilizing rallies and demanding the central bank chief’s resignation.

    The nationalization announcement came just days before parliament was to vote on next year’s budget, which must stick to a shortfall of 3 percent of economic output, as agreed with Ukraine’s international backers.

    There was no official statement from PrivatBank. Oleg Gorokhovsky, PrivatBank’s deputy chairman, wrote on Facebook that the bank had seen increased withdrawals in recent days of 2 billion hryvnia ($76 million) daily against previous peaks of around 1.5 billion hryvnia ($57 million). “Of course, the bank needed a capital increase and to improve the collateral for loans,” he said.

    The plan was to do this over a period to 2018. However, Gorokhovsky said after the outbreak of violence in the east and against the backdrop of a sinking economy, the bank experienced what he described as a series of “information attacks” that led to an outflow of funds from individuals and corporate clients.

    “The decision on a voluntary and peaceful transfer of the bank to state ownership was made at a time when we realized that we could not survive the (latest) information attack,” he wrote.

    In other words, while the real reason for the nationalization, it appears the owners were eager to dump what remains of the bank into the lap of Ukraine’s taxpayers, most of whom also happen to be the bank’s depositors.

    Incidentally, recapitalizing PrivatBank and other large lenders and reducing their lending to shareholders was one of the tasks mandated by a $17.5 billion IMF aid-for-reforms program.

    Meanwhile, the political future of former PrivatBank owner, Kolomoisky, remains unclear: his control of strategic industries, including energy and media holdings, has put him at the center of ongoing power battles among the political elite since street protests ousted Moscow-backed Viktor Yanukovich and the pro-Russian rebellion erupted in the east.

    PrivatBank’s nationalization is the culmination of the banking sector cleanup, which has closed dozens of lenders that were seen as little more than personal piggy banks for their owners. Should there be a major run on the bank in the coming days, Ukraine may once again emerge as a centra of financial and economic instability in the region, despite the IMF’s implicit backing

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Today’s News 18th December 2016

  • Paul Craig Roberts Warns "A CIA-led Coup Against American Democracy Is Unfolding Before Our Eyes"

    Authored by Paul Craig Roberts,

    This article by Moon of Alabama is not conspiracy theory: Read it carefully. Check out the links.

    The below theses are thus far only a general outlay…

    • There is an "elite" coup attempt underway against the U.S. President-elect Trump.
    • The coup is orchestrated by the camp of Hillary Clinton in association with the CIA and neoconservative powers in Congress.
    • The plan is to use the CIA's "Russia made Trump the winner" nonsense to swing the electoral college against him. The case would then be bumped up to Congress. Major neocon and warmonger parts of the Republicans could then move the presidency to Clinton or, if that fails, put Trump's vice president-elect Mike Pence onto the throne. The regular bipartisan war business, which a Trump presidency threatens to interrupt, could continue.
    • Should the coup succeed violent insurrections in the United States are likely to ensue with unpredictable consequences.

     

    No general plan has been published. The scheme though is pretty obvious by now. However, the following contains some speculation.

     

    The priority aim is to deny Trump the presidency. He is too independent and a danger for several power centers within the ruling U.S. power circles. The selection of Tillerson as new Secretary of State only reinforces this (Prediction: Bolton will not get the Deputy position.)  Tillerson is for profitable stability, not for regime change adventures.

     

    The institutional Trump enemies are:

    • The CIA which has become the Central Assassination Agency under the Bush and Obama administrations. Huge parts of its budgets depend on a continuation of the war on Syria and the drone assassination campaigns in Afghanistan, Pakistan and elsewhere. Trump's more isolationist policies would likely end these campaigns and the related budget troughs.
    • The weapons industry which could lose its enormous sales to its major customers in the Persian Gulf should a President Trump reduce U.S. interference in the Middle East and elsewhere.
    • The neoconservatives and Likudniks who want the U.S. as Israel's weapon to strong arm the Middle East to the Zionists' benefit.
    • The general war hawks, military and "humanitarian interventionists" to whom any reduction of the U.S. role as primary power in the world is anathema to their believes.

    Read more here…

    The article is a documented and accurate description of a coup that is underway. The extraordinary lies that are being perpetrated by the media and by members of the US government have as their obvious purpose the prevention of a Donald Trump presidency. There is no other reason for the extraordinary blatant lies for which there is not a shred of evidence. Indeed, there is massive real evidence to the contrary. Yet the coup proceeds and gathers steam.

    President Eisenhower warned us more than a half century ago of the danger that the military/security complex presents to US democracy.

    In the decades since Eisenhower’s warning, the military/security complex has become more powerful than the American people and is demonstrating its power by overturning a presidential election.

    Will the coup succeed?

    In my opinion, former and present members of the US government and the media would not dare to so obviously and openly participate in a coup against democracy and an elected president unless they expect the coup to succeed.

    It is an easy matter for the ruling interests to bribe electors to vote differently than their states. The cost of the bribes is miniscule compared to the wealth and income streams that a trillion dollar annual budget provides to the military/security complex. The fake news of a Putin/Trump election-stealing plot generated by unsupported allegations of present and former members of US intelligence, the lame-duck President Obama, and the presstitute media provide the cover for electors to break with precedent “in order to save America from a Russian stooge.”

    The CIA-controlled European media, the politicians in Washington’s European vassal states, NATO officials, and the brainwashed European peoples will support the coup against Trump.

    The only ones speaking against the coup are the voters who elected Trump—all of whom are alleged to have been deceived by Russian fake news— the Russian government, and the 200 websites falsely described by the Washington Post and the secret organization PropOrNot as Russian agents.

    In other words, those objecting to the coup are the ones described by the coup leaders as those who made the coup necessary.

    I do not know that the coup will succeed, but looking at the commitment so many high level people have made to the coup, I conclude that those bringing the coup expect it to succeed.

    Therefore, we should take very seriously the expectation of success that those who control levers of power are demonstrating.?

  • How Trump's Tax Changes Will Impact You?

    “Reduce taxes across-the-board, especially for working and middle-income Americans” – that was Trump’s campaign pledge. And now he is about to move into the White House and is backed by Republican majorities in both House and Senate, he has a real shot at fulfilling that pledge to the letter. So, what are the specifics of his plan, and how would it affect you?

    As HowMuch.net details, first and foremost, Trump’s income tax reform is a simplification: he wants to cut down the number of tax bands from seven to three. But simplifying is not necessarily the same as reducing taxes. As this graph demonstrates, some taxpayers would definitely benefit from Trump’s tax reform – especially those at the higher end of the income scale. There are others, however, who would see their tax rates go up. Especially those on lower incomes.

    The current income tax bands range from 10% and 15% at the lower end of the scale over 25%, 28%, 33% and 35% in the middle to the top band of 40%. Under the Trump plan, only three tax bands would remain: 12%, 25% and 33%.

    This would be good news for everyone currently in the top two brackets (35% and 40%). These taxpayers would see their effective rate drop down to 33%, by 2 and 7 percentage points respectively. Conversely, the simplification would bad news for the taxpayers in the lowest bracket (10%). These would see their effective tax rate go up by 2 percentage points, to 12%.

    But even in the middle, where many would stay in the same bands as before (25% and 33%), there would be losers as well as winners. Most people in the 15% bracket would drop down to a 12% rate. But a tiny sliver of top earners in this bracket (earning between $37,500 and $37,650) would have the misfortune of seeing their effective tax rate go up by 10 percentage points, to 25%.

    A similar thing would happen to the old 28% bracket: taxpayers with incomes between $91,150 and $112,500 would drop three percentage points to 25%, while those between $112,500 and $190,150 would see their tax rate go up 5 percentage points to 33%.

    All income amounts quoted here apply to single filers (left side of the graph); but the graph also shows the changes for joint filers (on the right). The calculation is pretty easy – double the amounts for the single filers.

    The graph does not take into account other aspects of the Trump tax plan not directly related to the changes to income tax bands, such as the increase of standard deductions and a cap on itemized deductions, although of course these would also have an impact on net incomes.

  • Trump Responds To Michelle Obama's Claim That He Is The "End Of Hope" For America

    Michelle Obama appeared on Oprah yesterday and continued to ignore the unspoken, but widely acknowledged and obeyed, tradition of not bashing incoming administrations.  When asked whether Obama was successful at bringing “hope” to America, rather answer the question, the first lady decided to attack Trump by saying that “now we’re feeling what not having hope feels like.”

    Is this Michelle’s idea of “going high” when other “go low?”  Notice she didn’t bother to offer any supporting evidence of how exactly Obama brought “hope” to Americans….could that be because there isn’t any?

    Oprah:  “Your husband’s administration, everything, the election was all about hope.  Do you think that this administration acheived that?

     

    Michelle:  “Yes.  I do.  Because we feel the difference now.  See, now we’re feeling what not having hope feels like.

     

    Perhaps these 9 charts we posted back in September accurately depict the “hope” that Michelle spoke of (see “Harvard Crushes The “Obama Recovery” Farce With 9 Simple Charts“):

    Harvard

     

    Or maybe these charts that we posted back in June better reflect Obama’s “Hope & Change” mantra…unfortunately, while the data scores big on the “Change” factor, it’s somewhat lacking on the “Hope” component (see “These Are The 9 Zero Hedge Charts Showing “Obama’s Recovery” That Angered The Washington Post“):

     

    Or perhaps this 16% decline in Black homeownership rates since 2004, which we discussed just yesterday, is more what Michelle had in mind (see “Obama “Housing Recovery” Crushes “Blacks, Young Adults” As Homeownership Rates Crash“):

    Homeownership

     

    Of course, never one to back down when attacked, Trump told a group of supporters at a rally in Mobile, Alabama that he assumed Michelle was “talking about the past, not the future.”

    “Michelle Obama said yesterday that there’s no hope.  But I assume she was talking about the past, not the future because I”m telling you we have tremendous hope and we have tremendous promise and we have tremendous potential.”

  • Bitter In Aleppo Defeat, US And EU Seek To Further Demonize Russia

    Submitted by Finian Cunningham via Stratgic-Culture.org,

    As Russian forces help liberate the Syrian city of Aleppo this week from a four-year terrorist siege, Washington and Europe step up threats of cyber war and economic aggression with sanctions. That’s no coincidence. It is the response of accomplices bitter in defeat.

    Perverse isn’t it? Instead of celebrating with the people of Syria over the liberation of Aleppo from terrorists; instead of sending massive humanitarian aid to the tens of thousands of civilians freed after being held under siege for four years by terrorist gangs; instead of commending Russia for its decisive role in restoring peace to Syria’s second biggest city, the US and European Union turn reality on its head and further demonize Moscow.

    The perverse behavior by Washington and its European satraps is simply a case of sour grapes. Very sour grapes.

    They have been proven spectacularly wrong about Syria. The liberation of Aleppo this week exposes the Western governments and media in their unrelenting falsehoods and systematic complicity in the Syrian war. This was never a pro-democracy uprising. It was a Western-backed criminal regime-change operation that was unleashed in March 2011, and which is now staring at ignominious defeat.

    The blood of up to half a million people and many more maimed is on the hands of American and European governments.

    It is no coincidence that Barack Obama this week invoked his putative presidential authority to double down on US intelligence claims that Russia hacked into the American elections to get Donald Trump into the White House. The stakes were raised to new unwieldy heights with White House claims that Russian President Vladimir Putin personally sanctioned the alleged hacking of Hillary Clinton’s emails. And Obama is now recklessly warning that his country will respond with cyber-warfare «at a place and time of our choosing».

    Meanwhile, European Union leaders this week decreed that economic and diplomatic sanctions on Russia would be extended for another six months. The official reason for the measures was the ongoing conflict in Ukraine, but it is obvious that the dramatic developments in Syria were the real motivating factor behind the EU’s decision to further penalize Russia.

    Addressing the EU summit, German Chancellor Angela Merkel deplored atrocities allegedly committed in the northern city of Aleppo by Syrian state forces and their Russian and Iranian allies. European Council President Donald Tusk lamented that the EU was not «indifferent to the suffering of civilians in Aleppo».

    But where is the evidence either from Obama on alleged Russian cyberattacks to subvert the American presidential election or from the EU on alleged Russian (and Syrian) atrocities in Aleppo. There is, glaringly, no evidence. Yet on the back of breathless assertions, Washington is threatening to «retaliate», and European leaders are slapping more damaging sanctions on Russia. This is an insane policy of unjustified aggression.

    It is especially insane considering that present and former members of US intelligence agencies do not support the White House’s assertions about Russian cyberattacks. Indeed respected former US intelligence experts have cogently argued that Washington’s claims of Russian hacking are completely spurious. Moreover, two polls reported by the Washington Times and Washington Post this week also show that the majority of American people do not believe that Russia interfered in the US election.

    As for the American and European claims about «massacres» in Aleppo, amplified by the dutiful mainstream media all week, there is neither evidence nor testimonies from the tens of thousands of civilians pouring out of the former terror enclaves. The reckless claims are merely propaganda rumors put out by terrorist apologists and recycled by Western media. Perversely unreported in the Western media are the real stories of civilians having lived under horror imposed by the Western-backed so-called «rebels». Largely unreported by the Western media is the dominant mood of celebration and relief among civilians for having been liberated by the combined efforts of the Syrian army and its Russian, Iranian and Lebanese allies.

    Where are the «moderate rebels» now that the veil of secrecy has finally been lifted from eastern Aleppo? Where are the so-called neutral rescuers belonging to the White Helmets, who only a few weeks ago Western media were championing for a Nobel peace prize? They are all piling on to the same buses with the jihadi terrorists to be evacuated to nearby Idlib city as part of a surrender deal. In other words, the West has been all along backing terrorists, and now their terrorist proxies are seen by the whole world as being routed from Aleppo after four years of holding the eastern side of the city hostage.

    Liberated civilians tell of a reign of terror, how their family members were threatened by the Western-backed jihadis with execution if any of them dared to escape from the captive terror enclaves. Buildings recovered by the Syrian army have shown humanitarian aid, medicines and food stockpiled by the terrorists which they used to extort the civilian population. None of this is broadcast by the Western news media of course. Instead, they indulged in gory fantasies about the Syrian army committing summary executions and other atrocities against women and children. Stories, it should be noted, which have since petered out because there is no evidence to back them up.

    CNN’s self-important journalist Christiane Amanpour this week gave a platform to an alleged doctor, Hamza al-Khatib, who made unsubstantiated claims that children were being massacred in a basement by Syrian forces. Amanpour expressed horror as if the allegation was fact. The same «fact» was then reiterated by US ambassador to the UN Samantha Power. Turns out that Hamza al-Khatib is not even a doctor, according the Aleppo University records, where he once studied.

    CNN's alleged doctor Hamza Al Khatib with head-chopping jihadi friends

    In the past, he has been photographed in the company of the jihadi terrorists who were were responsible for the beheading of a 12-year-old Palestinian refugee boy Abdullah Issa near Aleppo. Reliable sources dispute that Hamza al-Khatib is even residing in east Aleppo where he claims to be. It is believed he is hiding out in neighboring Turkey, from where he gives interviews to gullible hacks like Amanpour. (Notice his smirk in the linked interview video when Amanpour naively asks how he remains safe in Aleppo.)

    Western lies and fake narratives about Syria were torn asunder this week. Sanctimonious Washington and European lackeys are exposed in their responsibility for fueling the war in Syria by giving cover to terrorist gangs as supposed «moderate rebels».

    Western governments, UN diplomats and media organizations are shown to be complicit in a state-sponsored terrorist conspiracy against the Syrian nation.

    Russia has played a vital and truly heroic role in saving Syria from a Western-imposed charnel house.

    And so, with the bitter taste of defeat over the historic battle for Aleppo, Washington and Europe are lashing out irrationally to further demonize Russia. Cyber war threats and economic aggression through sanctions are the Western response to bitter defeat

  • Russia is a 3rd World Country – 13 SECRET FACTS EXPOSED

    Since publishing exclusively on Zero Hedge our expose on Russia in order to ‘counterbalance’ the propaganda out there from the deep state, we’ve learned that there is a deep FACT VOID about this mysterious culture and place called RUSSIA and requires a series of articles.  This is a topic not being covered elsewhere!  And as we explain in our best-selling FX book – the world isn’t 

    Anyone who has ever been to Russia, that is – outside of a 5 star hotel in Moscow which isn’t any different than a 5 star hotel anywhere else – you don’t need to read an article like this to agree, that Russia is a 3rd world country, or debate about how big their missiles are.  Being a 3rd world country isn’t a bad thing.  And of all the third world, Russia is the fastest growing.  Remember, Russia was born in 1990, and is a capitalist market economy.  Russia has grown by huge leaps and bounds in the past 25 years.  But they lack the cultural background to make the switch to a fully market economy.  What does that mean – in other words?  There is a mentality that was programmed into their brains, during the Soviet Union, that still lives in Russia and with that mentality, having anything but the Soviet system is difficult or impossible.  The new generation of iphones and consumerism, albeit vulgar, will have better chances at adapting to a global market economy which is what Russia hopes to be.  The communist hardliners are dead and dying, and not being replaced.  In a system where everyone saved and money sometimes didn’t exist (such as during Perestroika, where workers were paid with tickets, not money – which could be bartered with neighbors for example if one family didn’t drink alcohol, vodka tickets could be traded for more meat, making Russians develop a natural talent for trading in dark pools).

    For those who will argue about ‘what is a third world country’ let’s use this article as a base guideline, Russia certainly meets the definitions here.

    If everything in and of the state is basically and profoundly corrupt (which naturally prompts the question if there is any political state in the world that is not corrupt and thus Third World?).

    If nothing really works but there is always ‘a way’.

    If you have to pay the authorities when entering or leaving the country. If you have to do both you’re actually in a Fourth World country!

    If the price of taxis are either totally negotiable or strictly determined by government regulations — amounting to the same.

    If there’s always a taxi and a willing driver to be found.

    If there are no ways of proving whether you’ve been drinking and/or speeding behind the wheel.

    If the government doesn’t care whether you’ve been drinking and/or speeding.

    If road patrols routinely consist of heavily armed military.

    If the paint on the bathroom walls have been allowed to stain the shower tiles as well. In this particular respect, Italy, Spain and France would easily qualify as ‘Third World countries’. The Greeks and the peoples of the Balkan countries, on the other hand, don’t do this. I guess they admire the Germans and have to some degree been influenced by them.

    If painting the doors also on the inside is considered an unnecessary expense.

    Before claiming yourself a self-professed “Russian Expert” you should either be 1) from Russia or 2) speak Russian language fluently, and have lived there for a number of years or 3) have extensively studied all things Russian.  If you are none of these, and want to have a quick education on the subject, here’s a few places to start:

    A History of Russia: New, Revised Edition – This is a MUST READ for any Russophile, student of Russia, or someone who wants to do business in Russia.  Probably, the reason this is one book written objectively that offers fresh perspectives is for the simple reason that it was written by a Russian intelligentsia in the United States, while at Yale University:

    Vernadsky took a novel approach to Russian history, presenting it as a continuous succession of empires, starting from the Scythian, Sarmatian, Hunnic, and Gothic; Vernadsky attempted to determine the laws of their expansion and collapse. His views emphasized the importance of Eurasian nomadic cultures for the cultural and economic progress of Russia, thus anticipating some of the ideas advanced by Lev Gumilev.

    Vernadsky became the leading American exponent of depicting Russia as much Asian and European, if not more so. He pointed out many strong cultural differences between Russia and Europe, and praised the success of Russian development along an independent path that revealed his own unique character. Vernadsky was a geographical determinist like his Yale colleague Ellsworth Huntington. They assumed that the characteristics of a land defined the character of the people and indeed of their government as well. For that reason Vernadsky was able to identify the roots of Russian culture in an ancient period long before the Slavic groups arrived. He thereby undercut the standard claim that modern Russia emerged from Kievan Rus. He emphasized the importance of the Mongol period (1238-1471), as the horde united the vast Eurasian plain under a single ruler. This gave tsarist Russia a strong centralized government as well as the deep distrust of Europe. Vernadsky was annoyed that Peter the Great tried to Westernize Russia, thereby distorting its natural character. He said Peter only succeeded in polarizing Russia into a Western oriented elite that stood in profound conflict with the Eurasian peasants. Indeed, Vernadsky argued that this polarization was one of the main weaknesses of the tsarist regime, making it incapable of dealing with the revolutionary movements of the early twentieth century. He celebrated the collapse of the European style parliamentary regime in the October Revolution of 1917 that brought the Bolsheviks to power. Vernadsky was not a liberal, nor was he a Communist sympathizer, but he did admire the Bolsheviks for rebuilding a strong Russia on non-European lines.[1]

    Unnatural Deaths in the U.S.S.R.: 1928-1954 – This is a historical chronicle about the ‘real’ deaths during this time period:

    Who was worse, Hitler or Stalin?  In the second half of the twentieth century, Americans were taught to see both Nazi Germany and the Soviet Union as the greatest of evils. Hitler was worse, because his regime propagated the unprecedented horror of the Holocaust, the attempt to eradicate an entire people on racial grounds. Yet Stalin was also worse, because his regime killed far, far more people, tens of millions it was often claimed, in the endless wastes of the Gulag. For decades, and even today, this confidence about the difference between the two regimes—quality versus quantity—has set the ground rules for the politics of memory. Even historians of the Holocaust generally take for granted that Stalin killed more people than Hitler, thus placing themselves under greater pressure to stress the special character of the Holocaust, since this is what made the Nazi regime worse than the Stalinist one.

    This is just a good start.  If you really want to know any culture – the only way is to go there, live there, do business there.  But for those with a short attention span, that enjoy throwing objects at their TV when the reporters tell them something they don’t like, here we go:

    SECRET FACTS – RUSSIA IS A 3RD WORLD COUNTRY

    1. 80% or more of the Russian economy is unknown.  This is because it all happens ‘under the table’ to avoid taxes.  This will change probably, but as of now, workers are paid ‘white’ and ‘black’ salaries.  You can read about this here.  Auditors and government workers are bribed, wined and dined, when they inspect the books.  It’s a system everyone likes, that just ‘works’ – but it is impractical to make economic forecasts for such a system.  This system is also on the highest levels, as oligarchs wealth is often owned by dead people.  Of course, this practice isn’t heavily documented, because the whole idea of this under the table system is to not leave any paper trail!  Businesses even keep a full set of ‘white books’ and ‘real books’ like the mob used to do.  Yes – this is business in Russia!  

    2. Bankruptcy doesn’t exist.  There is no concept of bankruptcy.  There are even banks that offer really high interest loans (there are no usury laws) that will hire strong men to ‘scare’ you into paying, which might include breaking a leg, burning down your shed or in extreme cases, maybe holding a relative in their ‘office’ – yes this goes on and it’s not done by the MAFIA it’s done by the BANKS!  

    3. Russian healthcare system is ‘not to Western standards’ although it is ‘developing.’  25% of males die before they are 55 years old, mostly due to alcohol.

    4.  The primary currency used is physical rubles, that means PAPER.  When local people believe the Ruble will depreciate in value, they will exchange their paper Rubles for physical US Dollars or Euros and literally – keep them under the mattress.

    5. You have never seen roads in such poor conditions.  Around the Kremlin, and in rich areas of Moscow, roads are OK.  Outside of this area, harsh Russian winter wreacks havoc on roads that were never built to European or US standards, as they would be in Chicago or Boston.  See this road in Volgograd:

    This is why invading Russia has historically been impossible.  Of course, not all roads are like this – but many are.  

    6. Only in Russia meme – Just google “Only in Russia” or checkout this article.

    (Letters say “We watch you! – You must be 18+ to use this game)

    7. Russia is not a pleasant country to live in.  The weather in winter is worse than in Canada, Wisconsin, Maine, or your average US northern city.  Only Alaska is comparable to Russian climate.  

    8. Putin is not a dictator – he is just VERY popular.  But anyway, 3rd world countries usually have a “Putin” or “Castro” which is almost more than a President – a cultural leader.  Putin meets this criteria.  People keep photos of Putin on their walls.  They sell them, along with small busts of his head at every Metro station.  Russian people are simply crazy for Putin.  To understand this better here’s a WAPO article on the topic.

    9. In Russia there is not such a thing as ‘consumer rights’.  Grocery stores sell spoiled food.  There’s no ‘return policy.’  

    10. Corruption is just considered part of government life (see example here).  Finding a government official that was not corrupt, would be unusual.  For example, in a small town the government decides to ‘renovate’ streets and parks, so they assess a special tax to residents (normally, there is no real estate tax in Russia).  But 90% of the collected money goes into the pocket of the officials, and little is left to clean up the streets.

    11. The average pension in Russia is $148 USD.  The average Russian pension is paid IN CASH by Government official on a monthly basis, at the property of the pensioner.

    12.  24% of the entire population HAS A BANK ACCOUNT.  In the USA about 95% of eligible persons (excluding children, illegal immigrants) have bank accounts.

    13. If using the income disparity guage of what is third world, experts say in this report from CNBC that RUSSIA IS THE MOST UNEQUAL country in the WORLD – even MORE than the Arabs.  What happened after the collapse of USSR, the Russian Elite allowed the seizure or ‘privatization’ of state assets by individuals who became ‘Oligarchs’ which are the US equivalent of “Robber Barons” that literally inherited state owned assets because they were really, really, really, really, really, really lucky.  But the practical fact is that an Oligarch class is needed for any Capitalist society to flourish.

    Russia has grown by huge amounts.  They have produced some of the world’s leading thinkers, scientists, artists, writers, composers, and other talent.  Now, the global Russian oligarch class challenges mainstream Western business.  But keep it all in perspective, Russia has a long way to go.  In the meantime, don’t worry about Russian hackers breaking into your home office.  They have problems of their own to solve.

    Don’t believe us – read some of these books and articles:

    Wall Street and the Bolshevik Revolution.  

    Armand Hammer: The Untold Story

    A People’s History of the United States

    Clinton Cash: The Untold Story of How and Why Foreign Governments and Businesses Helped Make Bill and Hillary Rich

    To learn how the global financial system works, checkout Fortress Capital Trading Academy – or checkout SPLITTING PENNIES FOR ONLY $6.11

  • Harvard Professor Admits His Efforts To Turn Electoral College Against Trump Have Failed Miserably

    A few days ago we wrote about the Harvard Professor, Larry Lessig, who was offering free legal services to any Republican elector willing to consider switching their vote from Trump to any other candidate when the electoral college meets on December 19th (see “Harvard Professor Says He’s Rallied Nearly Enough GOP Electors To Block Trump“).    At the time, Lessig said he was in active discussions with 20 electors, all of whom he claimed had vowed to switch their votes.

    That said, in an interview to be aired tomorrow on “Aaron Klein Investigative Radio,” the disaffected, leftist, sore loser admits that his efforts to disrupt the 2016 presidential election have been a colossal failure and will likely result in only a handful of electors switching their votes.  Per Breitbart:

    “But I think that we are not going to see more than a handful who actually vote against Donald Trump unless that number climbs above 40. Because I think there are many people who think it is just not worth it given especially the pretty explicit threats that have been made against the electors who exercise their constitutional prerogative.”

    Lessig

     

    Of course, with Trump earning 306 electoral college votes on November 8th, Lessig needed to pool a group of at least 37 electors to push the election to Congress.  But with Congress controlled by Republicans, Klein asked the “triggered” Lessig whether his efforts were an exercise in futility as Trump would almost certainly be elected anyway.  Apparently anything that would keep hope alive for just a little longer was worth the effort to Lessig who said “in the House there are a lot of things that could happen.”

    “You know, in the House there are a lot of things that could happen. You know, people could judge the fact that he was the first president to be denied the nomination of the Electoral College for reasons like this. There was a vice president in 1836 who was denied. But he would be the first president as a kind of fatal blow. And in that House, the Republicans might consider, ‘Well, is there another candidate?’ It would have to be among the top three vote-getters of the Electoral College. But is there another candidate who we should nominate instead? And that’s why people have been talking about alternatives like [Republican Ohio Gov. John] Kasich. Or it could be anybody who gets the votes of the Electoral College that are in the top three. And such a move might actually for the nation be incredibly important to get beyond the horrendous political partisan divide that we now find ourselves in.  That might be a good reason for them to act like that.”

    For once, Hillary actually said it best: “some people are sore losers…”

  • Former Fed Advisor: State Pensions Time Bomb Spells Disaster For The US

    Underfunded government pensions to the tune of $1.3 trillion, with a gap that just can’t be filled, is the ticking time bomb facing the US economy which faces dramatic cuts in public services – and potentially riots reminiscent of Athens six years ago – according to former Federal Reserve advisor, and President of Money Strong, Danielle DiMartino Booth.

    As she picks apart the danger signs with the US on the precipice of recession, it’s the impending pensions crisis that keeps her awake at night, sharing the gloomy sentiment laid out in an extensive March 2016 Citi report titled “The coming pensions crisis.”

    With few people taking part in what little recovery the US has had, and given how stretched pensions are, checks are going to have to be written from Washington sooner than you think, DiMartino Booth told Real Vision TV in an interview. “The Baby Boomers are no longer an actuarial theory,” she said. “They’re a reality. The checks are being written.”


    A Bulldozer Couldn’t Fill the State Pensions Gap

    The $1.3 trillion pensions deficit just takes into account state and municipal obligations, and with promised returns of 8% and funds compounding at 3% for decades it will take nothing short of an economic miracle to recover.  “The average state pension in the last fiscal year returned something south of 1%. You cannot fill that gap with a bulldozer, impossible,” DiMartino Booth said. “Anyone who knows their compounding tables knows you don’t make that up. You don’t get that back unless you get some miracle.”

    The last time we saw significant market weakness, the baby boomers pretty much accepted that they would be retiring at 70 instead of 65, she added. “Well, guess what? They’re turning 71. And the physiological decision to stay in the workforce won’t work for much longer. And that means that these pensions are going to come under tremendous amounts of pressure.

    “And the idea that we can escape what’s to come, given demographically what we’re staring at is naive at best. And it’s reckless at worst,” DiMartino Booth said. “And when you throw private equity and all of the dry powder that they have — that they’re sitting on — still waiting to deploy on pensions’ behalf, at really egregious valuations, yeah, it’s hard to sleep at night.”

    Pension Fund Underfunding is Ground Zero

    The interview with Real Vision was held in Dallas, which DiMartino Booth said is Ground Zero for the pensions crisis, where returns for the $2.27 billion Police and Fire Pension System have suffered due to risky investments in real estate made over a decade ago. Huge withdrawals are now taking place, amid concerns over the future viability of the pension scheme, which commentators say could be flat broke in a little over ten years.

    “We’re seeing this surge of people trying to retire early and take the money. Because they see it’s not going to be there. And if that dynamic and that belief spreads– forget all the other problems,” DiMartino Booth said. “The pension fund — underfunding is Ground Zero.”

    The gravity of the situation with the lack of returns is magnified by the fact that the underperformance has been going on for between ten and 15 years. Calpers, the California Public Employees’ Retirement System is a case in point, amid reports that it returned just 0.6% last year compared with its long term target of 7.5%. With the legal language tightly written on pensions like this across the country, such that states and municipalities won’t be able to break free of their obligations, DiMartino Booth thinks the endgame will evoke memories of the Winter of Discontent in London in 1979 and more recently the riots in Athens as key public services are cut.

    Angry Country, Angry World – The Wealth Effect is Dead

    “This is where the smile comes off my face. We are an angry country. We’re an angry world. The wealth effect is dead. The inequality divide is unlike anything we’ve seen since the years that preceded the Great Depression,” she told Real Vision TV. “Where’s the money going to come from? And the answer is, for now, they cut services. I’ve just written about the Winter of Discontent and the rubbish piled up in central London streets in 1979, as Thatcher was coming in. I worry about the ambulance not getting there in time. I worry about firefighters being cut to the bone and policemen.”

    The seriousness of the issue might not have hit home yet in Denver, where the state budget for tulips had to be cut recently to top up the pension fund, she said, but what happens when you are not talking about flowers anymore and when you are talking about a very populous state like Illinois?

    “If the actuaries are going to force the checks to be written and reduce the rate of returned assumptions to anything remotely related to reality, then we won’t be laughing anymore looking in the rear view mirror at the riots in the streets of Athens a few years back,” DiMartino Booth warned.

    Visit Real Vision TV to watch this exclusive full interview, free to all. Real Vision TV is a video-on-demand channel for finance, offering over 500 videos from 200 of the world’s sharpest investment minds. Think of it as what CNBC could have been if it actually focused on quality of content.

  • Toward A New World Order, Part III

    Submitted by Eugen von Bohm-Bawerk via Bawerk.net,

    A new world order is coming of age and the transition is painful to accept for a Western middle class with a deep-seated sense of entitlement.

    We showed how the West feels threatened globally in Toward a New World Order and followed up explaining how this translate into domestic politics in Toward a New World Order Part II. We will now continue this series by showing how gross economic mismanagement have created the new political class that we described in part two.

    As we stated back then, a large and increasing part of the electorate, swayed by neither the political correct socialist/feminist/cultural relativist dogma presented by the left, nor the lip service paid to free markets by a corrupted right, have taken hold in western democracies. They form a directionless blob of potential voters which until recently have drifted aimlessly along the political spectrum. Now they have made up their mind and it is proving pundits clueless as to what is going on. The “worker” making millions on Wall Street or by helping Google refine their search engine is not the same “worker” we find in flyover America. The young billionaire making apps to entertain confused millennials and snowflakes is not the same capitalist as the shale oil investor we might encounter in North Dakota. Political classes traditionally defined are useless as a tool to understand the world today. What is important to note though is that a growing minority of people with little to lose from the status quo is about to, or in many places have already become a small majority.

    When people have nothing to lose and foresee a future of continued hardship they become desperate and are willing to change for the sake of change itself. When the current leadership provide nothing but more of the same hopelessness, they will move politically toward to candidates with views counter to that held by the establishment.

    Before we move on, let us examine the upcoming election in France to show what we mean. In the traditional way of viewing national politics in France, it will be impossible for Le Pen and her Front National to win. Why? Because the left will hold their nose and vote for right-wing Republican Fillon in the second round to strategically avoid Le Pen. While some undoubtedly will follow the traditional recipe of left-right politics, it is far from certain that enough will do so to avoid a Le Pen victory. On the contrary, as we showed in part II, this line of thinking is outdated and a better representation is shown in the chart below.

    true-political-axis-2

    Using our methodology, we come up with a far more likely scenario on how the French voters will vote come May. With the center right representing everything the middle class loath, they will not migrate from the center-left to help Fillon to victory. Le Pen’s vote base is not disillusioned UMP voters, but blue-collar workers that used to support the socialists and militant French unions. We do not draw this conclusion from some unique insight into French politics, but from observing a tendency across the whole of western society as a larger and larger share of the population have lost hope for the future. One of the most primal driving forces in humans is the belief in a brighter future. Dirt poor in Africa or pampered by the European welfare state, it does not matter. What matters for the positive development of the human spirit is an expectation that next year will be better than the current one. If that belief is taken from them, they will most certainly force real change on the system as they feel there is little to lose. 

    how-le-pen-will-win

    So what went wrong? There are many answers to this question and we have tried to address several on them on these pages earlier, such as excessive debt levels, monetary policy gone awry and demographics. We would also add to the list that we have seen a general tendency toward destructive policies as a result from people losing purpose in life; in this regard, it is no coincidence that environmentalism appeared as a new form of religion on the “godless” continent.

    In That 70s Show (part I, II, III and IV) we spelled out how things changed after Nixon took the US dollar off gold and gave the Americans the ability to exchange nothing for something. Obviously, this created an irresistible incentive to consume more than the Americans could produce, which in turn artificially changed relative prices. A new productive structure emerged because of the new set of prices, but unless the dollar issuance continued, and even accelerateed, it would not be possible to sustain the ensuing capital allocation.

    In other words, this road have taken us all down a very unpleasant path as every time the central bank, and/or the commercial banking system (including global dollar claims dubbed Eurodollars) is forced to retrench a recession must necessarily set in as the nothing-for-something-transaction have to be undone. However, as long as the global community accept dollar claims as money good the banking system can always gear up in time of crisis to avert the worst of inbuilt consequences stemming from past folly.

    What made 2008/09 so special is the fact that the global dollar community had in fact reached peak debt. In other words, further dollar claims were no longer considered money good and the global banking system could no longer reflate the balance sheet, as this would have been unacceptable to their counterparties. A different way of looking at this is through the capital structure. At peak debt the current structure can no longer be funded as the pool of real savings is gradually depleted by the incessant something-for-nothing-transactions. We, as participants in a global economy, have essentially been consuming our seed corn.

    In the 1970s the US economy employed about 50 per cent of its workforce in private sector service occupations. However, as the nothing-for-something system got under way the share of service sector employment rose almost constantly to reach more than 70 per cent today. This transformation can be characterized as a move away from tradable sector toward non-tradable, and was inevitable since the US manufacturing sector essentially had to compete against foreign products that cost the American system nothing to procure.

    Service sector jobs have, or at least used to have, less scope for productivity improvements and hence real wage increases. Furthermore, goods producing sectors were clearly affected as they could no longer compete successfully against foreign producers. As a consequence, investments fell, thus dragging down productivity even more. Wages in tradable sectors naturally stagnated as a result. Amazingly, the real wage level in the 1970s for middle class workers is the same as today (using the BLS headline CPI index as deflator). Service sector wages must follow that of the goods producing sector and stagnated too.

    service-sector-employment-vs-wages

    Why did this not create a political movement toward National Socialism decades ago? Simply because artificial dollar claims were still considered money good worldwide. An increasingly creative financial system, in no doubt cheered on by corrupt politicians, thus took the best and brightest and told them to create ever more dollar liabilities to satisfy world demand. The masses could thus leverage their balance sheet with ease as banks needed collateral to sell abroad. Until 2008 that is. From that point on it all came crashing down as dollar claims were suddenly deemed unsafe. Banks could no longer expand their balance sheet at will and therefore the households and business couldn’t either.

    The real pain from a four-decade long boom was suddenly felt as the system moved away from its exponentially rising growth trend toward one allowed by a broken Eurodollar system. (Some of the charts below came to be with great inspiration by the excellent work of Alhambra Investment Partner economists Jeffery Snider).

    ip-eurdollar-break

    corp-cash-flow-ed-break

    real-final-sales-ed-break

    missing-workers-ed-break

    retail-sales-ed-break

    We could go on, but you get the picture. The recession of 2008 triggered a structural change in the global economy, and we are confident that the mechanism behind it is the breakdown of the Eurodollar system that came about at peak debt.

    Before we end, we would like to highlight one more thing. As the American worker had to compete with zero cost foreign competitors, manufacturing businesses in the US were forced to either move abroad, shut down or invest in automation. This pressured workers even more and help explain why industrial output continued to rise even though the number of employees in the sector fell in successive waves. It is also noteworthy that this positive trend ended with the collapse of the Eurodollar.

    ip-automation-not-trade

    Bottom line, the new world order that made itself felt in 2016 will be even more pronounced in 2017 with elections in the Netherlands (Geert Wilders could end up kingmaker or even prime minister), France (we predict a Le Pen victory) and Germany (where AfD will surprise everyone).

    Next time we will look at the investment implications from all this.

  • Paul Krugman Loses It: Hints At Trump 9/11-Style Attack False Flag

    Some establishment types took the election of Donald Trump – and the implicit rejection of their omnipotence – a lot harder than others. Perhaps the arch-Keynesian himself, New York Times' Paul Krugman, is the best example, lashing out this morning at the ignorance of Trump voters once again (well they must be ignorant, right?) along with his co-conspirators Noah Smith and Brad DeLong, exclaiming:

    "A fact-constrained candidate wouldn’t have been able to promise such people what they want; Trump, of course, had no problem."

    And falling back to playing the race card also…

    "California is an affluent state, a heavy net contributor to the federal budget; it went 2-1 Clinton. West Virginia is poor and a huge net recipient of federal aid; it went 2 1/2-1 Trump.

     

    I don’t think any kind of economic analysis can explain this. It has to be about culture and, as always, race."

    But, it was a tweet that the great "debt doesn't matter" guru blurted out this morning that has many questioning his sanity (or paranoia)…

    We are shocked that Twitter followers have not demanded Krugman be banned, blocked, and shamed for such conspiracy theory hate-speak.

    Reading between the lines of the so-called economist's comment, he appears to be suggesting that president-elect Donald Trump has an "incentive" to stage a 9/11-style terrorist attack in order to legitimize his presidency ("like Bush did"?)

    Hell, we nearly had a seizure upon reading this, though not of course as bad a Kurt Eichenwald's…

    *  *  *

    Now, does Krugman's tweet seem like real news worthy of the great New York Times' columnist or "fake news"? Is this the kind of suggestive propaganda that The CIA is hoping maintains a groundswell of "well, if he is not hitler… he must be worse" thoughts among those so easily led? Still, coming from a man who has prognosticated alien invasions as a global economic growth engine, we are not sure if he is mental situation is improving or deteriorating.

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Today’s News 17th December 2016

  • BuzzFeed And The NYDN: Click-Bait Headlines, False Stories, And Virtually Nonexistent Retractions

    Submitted by Duane via Free Market Shooter blog,

    On Thursday, December 1st,  Yasmin Seweid was allegedly assaulted by Trump supporters in NYC.  According to BuzzFeed and the NY Daily News, the attack took place at the uptown 6 train stop at 23rd Street in midtown Manhattan.  The assaliants allegedly called Seweid a terrorist, broke her bag strap, followed her when she tried to get away from them, and tried but were unable to pull her hijab off of her head.

    Both Tamerra Griffin and Ben Kochman, the authors for BuzzFeed and the NYDN stories, did not include any additional sources for their story, other than Seweid’s personal account and a statement from police that the “investigation was ongoing” with no further comment.  It seems both read her Facebook post recounting her story (which has since been removed), and after speaking with her, they took it and her account of the incident as fact, without verifying her story anywhere else.  Even though Seweid was their sole source for the story, they didn’t even bother to include the word “allegedly” as I did in italics above.  The NY Daily News said Seweid stated the following:

    They kept screaming Trump’s name at her, and then said, “Oh look, a (expletive) terrorist,” she said.“ Get the hell out of the country!” they yelled during the train ride. “You don’t belong here!”

     

    When Seweid ignored them, they pulled on her bag to get her attention and the strap broke.“That’s when I turned around and said ‘can you please leave me alone,’ and they started laughing,” she said. She walked to the other end of the train, and they followed her and tried to pull off her hijab, a head covering worn by Muslim women.“ Take that thing off!” they hollered.

     

    “I put my hand on top of my head to hold it,” Seweid said. “Then I turned around and screamed ‘what the (expletive).’ ” Seweid got off the train at Grand Central Terminal on E. 42nd St. and reported the terrifying incident to police.

     

    Her father, Sayeed Seweid, 55, of New Hyde Park, L.I., said he was also angry that no one else stepped in to defend his daughter.“ Nobody even offered to help an 18-year-old girl,” he said. “That means something. Her phone was dying. You offer help — it doesn’t matter the race, religion, or the country.”

    Yes, in overwhelmingly “accepting” and liberal NYC, which voted 87% for Hillary Clinton and 10% for Donald Trump, a Muslim woman was attacked by Trump supporters on a subway platform directly under the Credit Suisse building in a very safe part of Manhattan.  Not only that, no one stepped in to help, and even more surprisingly, no one recorded the incident and splashed it all over social media.  And no police officer was able to readily verify her account to reporters with confirmation from the vast network of surveillance cameras that are omnipresent in NYC.

    The only time I would ever expect to hear this story is if it were prefaced with the words, “I’ll take stuff that never happened for $400, Alex.” 

    In fact, the story would have been much more believable if it was a Trump supporter who was being harassed and attacked.  Back in August, some guy who was wearing a “Make America Great Again” hat tried to walk through the public park surrounding City Hall.  Unfortunately for him, he just so happened to be walking through a police protest, but the protesters turned on him, shouting and shoving him out of the park to the chants of “racist out” and “fascist out”, while police stood by without intervening.  Of course, video of the whole incident was captured and posted on social media:

    As the NY Post reported, protesters took to the streets in force after Trump won the election, chanting “not my president” and “Trump Is Hitler” all over Manhattan, even using a noose to hang a Trump effigy in Columbus Circle.

     

    If you heard a story about a Trump supporter and an attack on an NYC subway, and just after this election, wouldn’t you expect it to be a Trump supporter getting attacked by a group of anti-Trump assailants, and not a group of Trump supporters doing the attacking?  And no matter what happened, wouldn’t you expect to see a video of the incident?

    You certainly should.  As an example, in the days after the election, GotNews founder Charles C. Johnson was on an NYC subway wearing a “Make America Great Again” hat, minding his own business, when he was repeatedly harassed by someone who was angry with Trump’s election.  Once again, the whole incident was captured on video and splashed all over the internet, like so many other confrontations, altercations and assaults that take place on public transit that have been made quite popular on websites like World Star Hip Hop and LiveLeak.

    And yet, BuzzFeed and the NYDN ran the Seweid story on her word alone, without any video, police or witness commentary to support her claim.  Notably, they presented her story as fact, never once stating that it could be fiction.  Given the attack’s alleged location and assaliants, if you were a journalist, wouldn’t you expect fiction to be the case, and not even bother running the story?

    My sentiments exactly.  Though the NYDN was careful to post a follow-up story detailing discrepancies and doubts in her story, it wasn’t until almost two weeks later when she was arrested and formally charged by police for filing a false report that the NYDN acknowledged that their original story was totally bogus.  According to police, Seweid finally told them, “she didn’t want to get in trouble for breaking her curfew after being out late drinking with friends”, even though “she had numerous opportunities to admit nothing happened and she kept sticking by her story.”  And somehow, the original story remains up on the NYDN website, unedited and readily accessible to NYDN readers, and no retraction was ever published.  

    As I have pointed out in the past, were any of the “fake news” websites listed by the MSM to do this, they would not only be called out by the MSM, they would instantly lose all of their viewers.  But somehow, people keep going back to the true purveyors of “fake news”, when they time and again demonstrate that they are not willing to hold themselves accountable for their mistakes.  Which is something that is readily apparent in the case of BuzzFeed, who has left their original story and click-bait headline up, and only posted the following addition below the title:

    UPDATE: The woman was arrested on Dec. 14 for filing a false police report and obstructing government administration, police said.

    TRUNEWS, who did an excellent job of covering a real, videotaped assault of a Trump supporter in Chicago, also did a superb job of summarizing the entire saga of the Seweid story.  I spoke with Edward Szall, the TRUNEWS correspondent who covered both stories, and he explained to me the specifics about how the Seweid story was run without question by the local news and the aforementioned outlets, noting the initial reaction to the story and the ensuing vilification of Trump supporters.  I’ve provided screenshots to the BuzzFeed comments section, which also remains up, so you have an idea of how exactly people reacted.

    Note that you can see the doubt in the minds of some of the commenters.  Shocking, but hardly surprising; even BuzzFeed’s own comment section sees holes in the story that author Tamerra Griffin didn’t even bother to acknowledge at all.

    And somehow, Seweid’s sister Sara is blaming the police for investigating the incident.  Yes, she really expects police to not be skeptical of a dubious allegation and not investigate her story.  WND reported what she stated in a Facebook post below:

    …she said she was concerned about the “mental state of young Muslim women who feel that they have to lie so intensively to survive.”

     

    She also wrote, “The NYPD should have never been involved in the first place even if the incident did happen. It became super clear to me these past two week [sic] that the police’s first instinct is to doubt your story and try to disprove it.”

     

    Sara Seweid also blasted the police: “The NYPD doesn’t care about us or our safety. Never did.”

     

    Then she went on to attack the media: “Things snowballed out of our control because of the media because by the next morning the news had started publishing stories. Reporters made things so much worse for my family.”

    As ridiculous as she sounds, Sara Seweid makes a good point – we never would have heard about this story if it wasn’t for irresponsible reporting from outlets like BuzzFeed and the NYDN.  But in her post, she of course omitted the obvious fact that Seweid retold her lie to the media on her own. 

    If journalists and publications plan to stay in business and retain readers, they will need to do a better job of providing tangible content that isn’t later proven to be completely fabricated.  If they don’t, they’ll soon find their names in the constantly growing list of defunct newspapers and websites.  BuzzFeed and the NYDN will need to learn that not only do they need to publish truthful stories that are credible and honest, they need to do a better job of owning up to their mistakes and retracting them.  It wouldn’t have taken more than a couple seconds to verify that Seweid’s story was dubious – they shouldn’t have posted it almost as much as Seweid shouldn’t have told it.

    Look, we’ve all been teenagers and made teenage mistakes.  I’ve certainly made much bigger mistakes than coming home “after curfew” and dating someone my parents didn’t approve of, and you probably have too.  But, I’ve always faced up to the consequences of my decisions.  With Seweid’s indiscretions now being front page news, its fair to say that she is certainly facing up to the multitude of mistakes she made, and it almost feels unnecessary to write this article as a result.

    But, Seweid needs to be held accountable for what she did.  Not only did she foolishly get the police and media involved in her ridiculous attempt to cover her tracks, she made a false accusation.  If someone ended up being accused of a crime against her, it could have been even more damaging personally and professionally as whatever Seweid is facing, from either the authorities or her parents.  What if it was you on that subway platform who was accused of assaulting her, and you got dragged before the police and falsely charged with a crime? 

    What should her punishment be?  You’ll have to trust the courts to sort that one out properly.  Should her parents have punished her over this incident and being “upset she was dating a Christian” by shaving her head and eyebrows prior to her arrest, and having her display it by not wearing her hijab?  You’ll have to decide that one for yourself.

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  • Did Satellites Expose A Secret American Drone Hangar In A Saudi Desert?

    Buried deep in the heart of one of the most barren deserts in Saudi Arabia, and the entire planet for that matter, a commercial satellite happened upon what appears to be a very modern airport that suddenly appeared out of thin air from one year to the next.  What makes the airport even more mysterious is the fact that there are no planes on site and no government claims ownership of the facility.  So, is this airport a mere “Border Guard” facility, as Google Maps would suggest, or did this satellite just happen to reveal the location of a secret U.S. military airport used to conduct drone operations in Yemen?

     

    Certainly, the proximity to the Yemen border would make this an ideal location for drone operations.

    Saudi Airport

     

    And it does seem somewhat odd that such a massive airport, with 3 large hangars, would be required to conduct “border operations.”  Moreover, while we understand that the Saudi border police are probably using some pretty sophisticated prop planes to conduct their operations, it does seem a bit odd that not a single plane would be visible at the airport. 

    Saudi

     

    While we may never know the true owner/function of this mysterious facility, we’re almost certain that Russia hackers are behind the leak of it’s location.

  • 2016 Facts And Figures Quiz

    As Nick Colas writes, one thing is certain: 2016 was a truly historic year. 

    From Donald Trump’s unorthodox but successful campaign for President to the Brexit vote, popular votes shifted the course of global politics in ways very few could have imagined a year ago. Here is a brief quiz that highlights the year’s politics, developments in technology, and changes in the U.S. labor market/economic policy. 

    The idea here, Colas writes, is to (hopefully) shed a little light and (more importantly) humor on the events of 2016 and what they might mean for 2017. Which stock has most contributed to the Dow’s move this year to 20,000? How’s the FANG thing working these days?  And how has a “Real” (60/40 stock/bond) investor done since Election Day (not great actually…).  Read on for the answers and a few other questions about the year. 

    From Convergex’ Nick Colas

    I am a big fan of the weekly National Public Radio show “Wait, Wait, Don’t Tell Me.”  It is, by NPR standards, a nonpartisan news quiz show that uses humor to inform.  If you don’t know the show, check it out.  If you do, you’ll recognize the spirit of the questions below.

    The idea here is to highlight the most notable events of 2016 and place them into a greater context.  In conversations with scores of clients and friends in the last few weeks one theme comes up repeatedly: 2016 has been a truly momentous year.  Sometimes the years go by quickly because nothing much new happens.  This one is the opposite – 2016 feels like “You are there” history in the making.

    Today we will cover Trump/Brexit, and bit of technology and economics.  We’ll finish off tomorrow with a few other subjects.

    Topic #1: Donald Trump

    Question 1: President Elect Trump uses social media to deliver his message directly to his supporters.  How many tweets/retweets has he sent since setting up his @realDonaldTrump Twitter account in March 2009?

    1. 7,881
    2. 22,001
    3. 29,909
    4. 34,121

    AnswerD. As of this Monday, Trump had sent a total of 34,121 tweets/retweets.  That is an average of 12 messages per day, every day.  And if you put this in historical context, not all that surprising.  FDR had his fireside chats using the then-relatively new medium of radio.  JFK’s good looks played well with television audiences.  Politicians understand that “The medium is the message”.

    Question 2: While Mr. Trump has over 17 million Twitter followers, he himself only follows 40 accounts. Which one of these people is on that select list?

    1. Geraldo Rivera
    2. Piers Morgan
    3. YouTube personalities “Diamond and Silk”, two sisters from North Carolina
    4. Ann Coulter

    Answer: All of the above.  Having the President-Elect follow you on Twitter is essentially the most exclusive club in the world.  By comparison, Augusta National Golf Club has more members, at about 300 currently.

    Question #3: Which one of these is listed as a “Signature cocktail” at the bar at Trump Tower NYC? (check all that apply).

    1. “You’re Fired”, the bar’s take on a classic Bloody Mary
    2. “Make America Great Again”, an Old Fashioned with either rye or bourbon
    3. “A Big Beautiful Wall”, a frozen margarita made with American-sourced tequila
    4. “The Billionaire Martini”, with Premium Chopin vodka

    Answer: A & D.  Worth noting: Mr. Trump himself does not drink alcohol. And if you want to try any of these cocktails, be ready for a wait.  Trump Tower is locked down tight at the moment, as anyone who has been to 56th and 5th can tell you.

    * * *

    Topic #2: Technology

    Question #4: On July 22, 2016, a Japanese company made the very last unit of a product that profoundly changed the way the world consumed entertainment and information.  What was it?

    1. A black and white television
    2. A stereo cassette deck
    3. A VCR machine
    4. A cathode ray tube (CRT) television

    Answer: C (VCR machine).  Phillips made the first mass market video cassette recorder available in 1972.  The product started to gain broad appeal in the late 1970s as popular movies became available for purchase or rental, allowing consumers to view content at home.  From there it is a straight line to Netflix streaming, Hulu and Apple TV.  And the global long term success of the VCR – 40-plus years in constant production – is a record that will likely never be broken.  For reference, consider that the iPhone is 9 years old.  Only 31 years to go….

    * * *

    Topic #3: Brexit

    Question #5: What do Boston (England, not MA) and Gibraltar have in common when it comes to the Brexit vote?

    1. They had the lowest turnout of any region/country for the referendum
    2. They represent the two most extreme votes for Remain/Leave of any region/country in the U.K.
    3. They were the only two regions/country perfectly indifferent (exactly 50/50 votes) to the outcome
    4. None of the above.

    Answer: B (the two extremes).  The town of Boston voted 76% to “Leave”, while Gibraltar polled 96% to remain, representing the extremes of the Brexit vote.  Also among the areas with a predominant “Remain” vote; many of the well-known cities in the U.K., including the City of London (75% Remain), Oxford (70%), Cambridge (74%), and Edinburgh (745).  “Remain”, however, only managed to win in three areas: Scotland (62%), London (60%) and Northern Ireland (56%).

    In what is, I think, the deepest commonality with the U.S. Presidential election, Secretary Clinton also handily won most of the large American urban centers.  These include Manhattan (90%), Boston (85%), Cook County Chicago (78%), San Francisco (90%) and Los Angeles (75%).  The populist schism that has punched its hallmark into 2016 is most easily understood as a divide between urban/non-urban dweller, which makes it difficult to see how this social rift begins to mend itself.

    * * *

    Topic #4: Economics

    Question #6: Who mused in a recent public speech about the merits of a “High pressure economy” where everything runs a little hotter than usual (wages, employment, inflation) to overcome the last vestiges of the Great Recession, and even cited their spouse to defend the merits of “Running hot”?

    1. Donald Trump
    2. Janet Yellen
    3. Mario Draghi
    4. Bill Dudley

    Answer: B (Janet Yellen, in a speech titled Macroeconomic Research After the Crisis).  The key question of 2017 will, of course, be just how much “High pressure” the Fed Chair is willing to accommodate.  The U.S. central bank may finally get the fiscal stimulus it has requested for years, thanks to Mr. Trump’s plans to cut taxes, reduce regulation and spur infrastructure spending.  Will Chair Yellen and the Fed allow the U.S. economy to run hotter than normal in 2017/2018, or will they work to tamp down the animal spirits that President Trump and Congress want to encourage?

    Question #7: By some measures, the U.S. labor market is back to essentially full employment.  But by others, it still shows troubling signs.  Which one of these issues still plagues the domestic labor market?

    1. Participation rates are still declining, with November’s reading below 60%.
    2. Teenage unemployment is higher than a year ago, at +16%
    3. Average weeks spent unemployed are still 30% higher than the prior worst-ever levels (back in 1984).
    4. Unemployment for those people with less than a high school degree is still over 10%.

    Answer: C (Average time spent unemployed is 26 weeks as of November 2016, still far worse than any post-World War II recession).  If you have a friend who has been unemployed for more than a few months, you know this is true.  Perhaps their skills don’t meet what employers need.  Or perhaps there is a negative bias to the long term unemployed.  Whatever the reason, there are still 1.9 million people in the U.S. who have been unemployed longer than 6 months and still want a job.  In every prior recovery, it has taken them less time to get back to work.

    * * *

    Topic #5: Markets

    Question #1: You probably know that Energy (up 29%) and Health Care (down 3%) are the best and worst performing large cap sectors in the S&P 500.  But what are the second best and worst sectors in terms of price performance?

    Answer: Industrials take silver with a 20% price return YTD, and Consumer Staples (up 4%) get the steak knives for second worst.

    Question #2: The Dow Jones Industrial Average is knocking at the door of 20,000.  What stock has contributed the most this year to getting the Dow to this level?

    Answer: Goldman Sachs (GS) represents 440 points of the Dow’s 2,480 point move this year, or 18% of the total.  Other major contributors: UnitedHealth (340 points), Caterpillar (230 points) and IBM (220 points).  Goldman now has an 8.2% weighting in the Dow, the largest of any of the 30 components, so watch that name in the final sprint to 20,000.  And in case you were wondering, Apple’s move this year (up 9%) only adds about 60 points to the Dow.


    Question #3: Over the last few years, everyone was talking about the FANG stocks (Facebook, Amazon, Netflix and Google).  How did this group do in 2016, assuming an even weighted portfolio?

    Answer: The average return for the FANG portfolio is 11.2% YTD, spot on the price return for the S&P 500) of 11.1%. 

    Question #4: The S&P 500 is up 6.2% from Election Day, but how much is the classic 60/40 stock/bond portfolio up over the same period?

    Answer: It depends on which bond proxy you use in the calculation, but a reasonable answer is a 2.6% return.  That is based on a broad bond market index, which is down 3% on a price basis since Election Day.  If you were only in long dated Treasuries over this period (down 9.2% since Election Day), you are actually flat.


    Question #5: If I asked you which ETF drew the most new money thus far in 2016, you’d probably guess SPY (SPDR S&P 500 ETF).  And you’d be right, with $20.3 billion of inflows YTD.  But which U.S. listed ETFs have seen the largest redemptions this year?

    Answer: The ETF with the largest outflows is the Wisdom Tree Europe Hedged Equity Fund ($8.1 billion out).  Other ETFs with more than $5 billion of outflows this year to date: Deutsche X-trackers MSCI Currency Hedged Equity Fund ($5.6 billion), PowerShares QQQ ($5.6 billion), WisdomTree Japan Hedged Equity ($5.8 billion) and iShares MSCI EMU ETF ($6.7 billion).  Don’t take that as any measure of investment merit, of course – this is a data point about investment themes. 

    Question #6: The long run average of the CBOE VIX is 20.  How many days in 2016 has the VIX closed higher than that?

    Answer: If you guessed less than 20, you are wrong (41 days is the answer).  But the error is understandable, because during the second half of the year the VIX has only closed above 20 on 2 days (November 3 and 4).


    Question #7: U.S. equity small caps have dramatically outperformed large caps this year, but the two most closely watched indices for this asset class have very different YTD returns.  The Russell 2000 is up 22%, where the S&P Small Cap 600 is up 27%.  Why?

    Answer: Sector weightings go a long way to explaining the disparity.  For example, the S&P Small Cap Index has a 19% weighting to Industrials, where the Russell is only 15% exposed to that strongly performing sector. 


    Question #8: President-Elect Donald Trump famously used Twitter as a cornerstone of his communication strategy during the campaign.  How much of a “Trump bump” did Twitter’s stock get this year from this high-profile use case for its technology?

    Answer: Hard to say.  The stock is down 16.3% year to date, so draw your own conclusions.


    Question #9: Simple question – which has done better in 2016: gold or silver?

    Answer: It’s not even close.  Silver is up 22% and gold is only up 9%.  Earlier in the year (August) silver was up close to 50% and gold was 28% higher. 


    Question #10: Who told Bob Woodward of the Washington Post back in April that “It’s a terrible time right now” to invest in U.S. stocks?

    Answer: An easy one to close things out, because I am pretty sure everyone knows it was President-Elect Donald Trump.  Total return for the S&P 500 since that story ran: 11.3%, with more than half of that return coming since Election Day.  Now, I suspect everyone (including Mr. Trump) hopes he is wrong.  Or at least that his future policies will “Make US stocks Great Again”.

     


  • Stunning Visualization Of The Flow Of International Trade

    The interactive visualization you see in this post was created by data visualization expert Max Galka from the Metrocosm blog. (Also check out his new project, Blueshift, which allows users to upload data and visualize it on maps with no coding required.)

    Trade is an essential part of economic prosperity, but, as Visual Capitalist’s Jeff Desjardins asks, how much do you know about global trade?

    The stunning visualization below helps to map international trade on a 3D globe, plotting the exchange of goods between countries. It enables the abstract concept of trade to become more tactile, and at the same time the visuals make it easier to absorb information.

    Click here for full interactive chart, enabling users to select a country to see its share of trade alone, or spin/navigate the globe by using your mouse.

    EXPLORING THE MAP

    The great thing about interactive maps is that they allow you to take control.

    Here are a few things we found particularly interesting, as we scanned through the map:

    • When looking at the globe as a whole, trade is concentrated into obvious hubs. The United States, Europe, and China/Japan are the most evident ones, and they are all lit up with color.
    • There are also obvious have-nots. Take a look at most of the countries in Africa, or click on an individual country like North Korea to see a lack of international trade.
    • In fact, North Korea is completely vacuous, except for one lonely dot floating to China every so often. After taking a quick look at the data, it seems China takes in over 60% of North Korea’s exports, which are mostly raw materials such as coal, iron ore, or pig iron.
    • Now click on South Korea, and the situation is completely different. By the way, South Korea exports $583 billion of goods per year, while the hermit nation does just $3.1 billion per year.
    • This map also shows how dependent some countries are on others for trade. Look at Canada, a country that sends close to 75% of its exports to the United States. Mexico has a similar situation, where it does most of its business with the U.S. as well.
    • This is a stark contrast to Cuba, which doesn’t trade enough with any one partner to have it visualized on this scale at all. Cuba has exports of only $1.7 billion, and its largest trading partner is China, which only takes in $311 million of goods per year.

    Want to see more on international trade? Check out this set of maps that shows China’s rising dominance in trade, or the flow of oil around the world.

  • How Come No One Involved in the Russian Hacking Conspiracy Talked?

    Authored by Paul Craig Roberts,

    The claims that the Russian government hacked US voting machines are absurd.

    Voting machines are not connected to the Internet. To hack a voting machine you have to be physically in proximity to the machine and use a hand held device.

     

    The machines can be programmed to throw the vote count to one candidate or the other, and there are other ways to interfere with elections.

     

    Possibly if a foreign power had server presence in the US, some precinct reports of results could be intercepted and altered, although a voice check over the telephone is an easy way to verify the electronic transmission. What is clear is that Russia cannot hack the voting machines.

    What about the claims that Russia hacked Hillary’s emails and used a network of 200 Internet websites to convince the American people to vote for Trump?

    Wikileaks, which released the emails, said they were a leak, not a hack, and that they did not come from Russians. The FBI and the Director of National Intelligence do not support the CIA’s claims. Or should we say claims attributed to the CIA as apparently the source of the claims, like the source of PropOrNot, is unknown.

    And look at the size of the alleged conspiracy—the Kremlin and 200 websites. Surely someone would have talked!

    John McCain says he is sure Russia did something and we need a congressional investigation to find out what.

    Why not start with an investigation of PropOrNot and what they are up to?

    We also need an investigation why Americans living in big cities on the NE and West coasts were immune to Russian fake news, whereas the geographical bulk of the country succumbed to the Russian fake news instead of to the presstitute fake news that conquered the NE and West coasts.

    The FBI says that the claims attributed to the CIA would not stand up in court.

    So what are the claims all about? Who is behind them?

     

    Are there elements within the CIA committing treason by working against president-elect Trump?

     

    Are there elements in the US Congress committing treason by trying to sway electors with fake news resting on unattributed claims that the Russians, not the American people, elected Trump?

     

    Why these claims in the absence of proof?

    What we are experiencing in the delegitimization of Donald Trump is an extraordinary rejection of democracy by elements in the government and by the presstitutes.

  • Gartman's 2016 Year in Review

    From Slope of Hope: I realize that the year isn’t quite over, but it’s late enough in 2016 to put together a retrospective of ZeroHedge’s favorite “commodity king”, Mr. Dennis Gartman. This is the man, of course, frequently featured on CNBC, even though his daughter Courtney left the network earlier this year.

    Although Gartman mostly makes market commentary, he also declared quite plainly in late August that Trump had “no chance” of winning the presidential race.

    I did a couple of posts about the man, such as The Gartman Grid, which offers insight into how to interpret the often curious ponderings of DG, as well as a fanciful take at a new Broadway production Gartman The Musical.  

    A more serious (and time-consuming) undertaking was to go through all of the Gartman-specific posts on ZH that called out concrete buy or sell recommendations from Gartman. Now “concrete” is a little tough with a man who peppers his speech with words like “gently” and “slightly” and “very very lightly”, but I’ve tried my best. I can understand his reticence to make the bold declarations that he used to (e.g. “I have never been so bullish of oil”) given the tomato-throwing that often ensues when he’s wrong.

    Nevertheless, I have broken down all his equity buy/sell and crude oil buy/sell ideas. According to my analysis, he’s been right about 30% of the time overall, with equities (22.73% correct) being weaker than oil (45.45% correct). Well, they do call him the commodity king, right?

     

    1216-gartman

    You can access this analysis by clicking the image above or click here to see the Google Doc itself. I look forward to keeping up with the man’s declarations in 2017 and perhaps doing another analysis next December.

  • "When Gold Goes Above 1430 We Whack It"

    Submitted by Allan Flynn via ComexWeHaveAProblem blog, 

    As it goes in silver, so it goes in gold. In London at least. 

    In a bid to have UBS reinstated as a defendant in a London Gold Fix antitrust lawsuit, plaintiffs documents submitted to a New York Court last week include explosive chat room transcripts of UBS and traders from different banks encouraging each other to “push,” “smack,” and “whack” gold prices.

    The transcripts are equally as startling as those described of banks of the London Silver Fix and UBS given to the court the previous day and described last week in this article.

    On December 6th attorneys for plaintiffs in a consolidated class action against banks of the London Gold Fix and UBS, asked the court for leave to amend with a Third Amended Complaint. The TAC includes additional facts based on a “limited set of cooperation materials” produced by former defendant Deutsche Bank, as part of a settlement agreement and further statistical analysis.

    Supporting documents say the amended complaint addresses the Court’s October finding that the previous complaint failed to plausibly plead firstly that UBS was part of the antitrust conspiracy, and secondly that the conspiracy existed prior to 2006.

    Also, for the first time a gold producer has been added to the class action of those claiming losses in gold trading due to the manipulation. Compania Minera Dayton, SCM the Chilean subsidiary of Australian resources company Lachlan Star is said to have “sold gold on many of the specific days on which Plaintiffs demonstrated manipulation of gold investments” totaling $287.4 million over the period 2004 to 2013.

    In support of allegations that UBS shared customer order information and executed coordinated trades to manipulate gold markets, samples of “dozens” of chat room messages between UBS and Deutsche Bank are contained in the revised document indicating "many efforts to artificially suppress gold prices, and to manipulate gold prices at the time of the Fixing.”

    Filings include the following script reminiscent of an 1980’s arcade game scene. Rather than competing for business in the marketplace, supposed competitors UBS and Deutsche Bank however are seen coordinating tactics as they anticipate the most illiquid of days to jointly execute their sell orders for greatest negative impact on the market.

    Deutsche Bank: bro japan holiday today

     

    Deutsche Bank: think it’ll be quiet

     

    Deutsche Bank: well, illiquid, not quiet haha

     

    Deutsche Bank: illiquid means wild wild west

     

    UBS:okay when gold pops 1430

     

    UBS: we whack it

     

    UBS: u sell your 50k

     

    UBS: i sell my 20k

     

    UBS: then we double that up and produce our on liquidity too

     

    UBS: that should be enough to cap it on a holiday

     

    Deutsche Bank: haha yeah

     

    Deutsche Bank: lol

    One chat see's a Deutsche Bank trader confirming with a UBS trader his trading had indeed influenced the Gold Fix: “u just said u sold on fix.”  The UBS traded replied “yeah,” “we smashed it good.”

    The secret associations between traders appear to be close knit, with the members willing to assist their opposite numbers at every chance: UBS “im feeling helpful to ubs today.”  The UBS trader then said “need to push this back wer,” to which the Deutsche Bank trader replied “ok,” and “lets do it.”

    Counter-intuitively, the banks special penchant to suppress the price of gold is repeated throughout the examples. As the gold ticker rose on this occasion the indignant traders teamed up to push it back down, commending themselves sarcastically meanwhile.

    Deutsche Bank: someone still trying to push our gold up

     

    UBS: so u should pay the mkt right away

     

    Deutsche Bank: nope

     

    UBS: cause chances are someone else got hit and u f*ck them up

     

    Deutsche Bank: no touchy

     

    Deutsche Bank: im short 15k

     

    Deutsche Bank: xau

     

    Deutsche Bank: too much fire

     

    UBS: im gonna sell more silver and gold

     

    Deutsche Bank: k

     

    Deutsche Bank: i really think we are on the right side today, being short

    Not only are they pushing the market down but also there appears to be intent to harm client interests as the November 2014 FINMA investigation loosely reported.

    Here a UBS trader gives information to a Deutsche Bank trader about a client’s order query on Nov 16th 2010, and strategizes to punish them by whacking the price lower if purchased from another party.

    UBS: boc sniffing around in gold

     

    Deutsche Bank: likewise

     

    Deutsche Bank: passed my bid

     

    Deutsche Bank: dude

     

    Deutsche Bank: so their round

     

    Deutsche Bank: is from u

     

    Deutsche Bank: to me

     

    Deutsche Bank: haha

     

    UBS: not always

     

    UBS: anyway good to give each other heads up

     

    UBS: if we find out side, whack it

     

    Deutsche Bank: yeah

    Bank of China, one of the largest state-owned commercial banks in China, and which offers customers “a wide range of gold investments in gold bars and gold bullion coins” have yet to respond to this author’s query if the bank could be the buyer referred to as “BOC” in the above conversation.

    A central tenant of this lawsuit is that the banks have chosen one particular part of the trading day to act secretly. The strategy of banks that "colluded around the PM Fixing to ensure prices moved the direction they wanted, when they wanted," was enabled in this case by the same Deutsche Bank trader who appears in multiple chats over a period of years with various others sharing their presumably winning strategies around the afternoon benchmark.

    2007

    During a trading day which had been less successful the Deutsche Bank trader assured his opposite trader from Bank of Nova Scotia that “at least the fix will be fun . . . make it all back there!!!!!! : ?”
     

     

    Another day the Deutsche Bank trader remarked to a different trader at Bank of Nova Scotia “hahahahaha, we were all short going into that fix.”

    2008

    The Deutsche Bank trader was informed by a HSBC trader: “i kick some out and take it back after the fix,” describing a tactic to sell gold high before the fix and buy it back after the fix at a lower price. Plaintiffs say the traders knew it would nearly always be cheaper after the fix. The Deutsche Bank trader replied ironically: “ yeah no one else is thinking that : – ?.”

    2011

    The Deutsche Bank trader this time to another HSBC trader: “everyone shrt into the fix i swear it’s the only time ppl trade,” to which the opposite party at HSBC replied “hahahhahahahahahahahha shocking absolutely shocking.”

    2012

    The Deutsche Bank trader said to his opposite number at Barclays, “im glad u are now interbank.” Barclays trader: "Why?" Deutsche Bank trader: “it’s a good alliance.”

    That day the Deutsche Bank trader informed another trader at Barclays, “im a tiny buyer at the mom.”  Barclays trader: “think im buyer too,” Deutsche Bank trader: “means we fix lower.”

    An example of further statistical analysis from plaintiff's Third Amended Complaint, TAC is a chart showing UBS spot gold price quotes over the period 2004-2012. The complaint says the bank "used its transactions and substantial presence in the gold market to drive prices downward, thus playing a key role in the conspiracy."

    Deutsche Bank's proposed settlement of the London Gold Fix class action amounting to $60 million including the provision of cooperation materials was given the Court's preliminary approval on December 9th subject to a Fairness Hearing. This follows the non-UBS defendant banks of the London Gold Fix; Bank of Nova Scotia, Barclays, HSBC, and Société Générale being ordered in October to face charges in the lawsuit along with London Gold Market Fixing Limited, LGMF a private company owned by the five banks. Deutsche Bank's settlement offer of $38 million including cooperation materials in a similar antitrust lawsuit involving the banks of the London Silver Fix was given the court's preliminary approval earlier.

    Opinion

    The new chat evidence in silver and gold described in this and other articles provides the missing narrative to the volumes of statistical analysis incorporated in the original and amended complaints closely scrutinized by court and counsel at the April hearings. It lifts the curtain for once and all on the dirty role of bank suppression in gold and silver markets, and its not just the London Fix. The Court has already acknowledged plaintiffs evidence of symbiosis between the London Fixes and the pricing of other silver and gold products. The Court's preliminary approval of the Deutsche Bank settlements may provide for class claims in bullion, coins, options, futures, spot and other markets including exchange traded funds, ETF's within the US.

    The collective evidence also neatly deals with the court's October supposition that further amending the complaint would be "futile."

    Given the damming nature of material against UBS particularly, it remains all the more mystifying why the 2014 Swiss Supervisory Market Authority FINMA report into foreign exchange and precious metals trading at UBS said so little comparatively about UBS' precious metals trading misconduct, and specifically nothing about gold trading misconduct. As discussed in an earlier article, the word “gold” is conspicuously absent from the 2014 report.

    Were it not for the early moral act of Deutsche Bank in providing the cooperation materials, which presumably gave them a settlement advantage, UBS directors might be sleeping much easier this week. If the remaining non-UBS defendants agree to settle, which is an increasing likelihood, there will be no need for the court discovery scheduled for 2017 and civil trial beyond. In the meantime we wait to see how long UBS hangs in there.

    The appearance of a precious metals producer among the class of plaintiffs will also see shareholders and directors reaching for the calculator. SCM is but one of thousands of producers who have sold precious metal in the US throughout the period and like any other plaintiff if the case is successful could be entitled to treble damages with interest if granted standing.

    Plaintiffs analysis indicates that manipulation of the London Gold Fix led to average losses of up to four basis points or four hundredths of a percentage point in the gold price on the days affected. Therefore, a small gold producer similiar to SCM with say $500 million of gold sales over 8 years could tally treble claims of $600,000 plus interest.

    Supposing as statute 28 U.S.C. 1961 directs, the present Treasury constant maturities nominal- 1-year interest rate currently at 0.83% is applied to this figure over an average sale date midway through the class period of say December 2008, and an optimistic successful conclusion of the lawsuit comes a year from now. Interest then of $54,793.64 could bring a theoretical claim of $654,793.64 for just one class member like this. In this context Deutsche Bank's $60 million, plus the cooperation materials supplied, appear to be money well spent.

  • Obama "Housing Recovery" Crushes "Blacks, Young Adults" As Homeownership Rates Crash

    The Obama administration has a tendency to conflate the strong performance of Fed-induced "assets bubbles" with "strong economic growth."  Unfortunately, as is often the case these days, the "hard data" paints a slightly different picture than the "narrative" being pushed by Obama and his staff.

    Per a new report from the Pew Research Center, and as our readers are undoubtedly aware, home prices have indeed recovered to pre-recession levels with a little help from Janet Yellen and crew.

    Nationally, home prices have almost recovered from the bust

     

    That said, the Obama narrative breaks down from there as further research readily reveals that home prices have recovered despite a massive drop in overall homeownership rates. 

    Fall in homeownership continues amid

     

    Moreover, the folks that seem to have been hit the hardest are the ones that were the biggest supporters of Obama's "Hope & Change" agenda.  Per the table below, homeownership rates among "Young Adults" and "Blacks" are down 18% and 16%, respectively, since the peak in 2004.  And while that's definitely a big "Change," its somewhat lacking on the "Hope."

    Homeownership

     

    But if "mainstreet" Americans didn't drive Obama's housing recovery then who did?  Perhaps the following Bloomberg headline can help answer that question:

    Blackstone

     

    Yes, the benefits of Obama's "housing recovery" accrued to none other than his "archenemy," Wall Street, which poured $100's of millions into single-family houses on a weekly basis and $10's of billions over the past couple of years.

    Adding insult to injury, this massive pace of investment has re-inflated the housing price bubble, making it, once again, nearly impossible for "Young Adults" and "Blacks" to afford homes.  And, unlike in 2007 when subprime lending basically erased the need for down payments, homebuyers today are forced to "have some skin in the game" before banks will blindly give them $100,000's of dollars. 

    But, with the average American having about $3,000 in "financial assets," we're not sure that's feasible.

    The typical total financial assets of most renters has declined

     

    But, as we always say, who needs facts when narratives are so much more fun.

  • Princeton & NYU Professor Warns Of Dangers From Liberal Media's "False Narratives Of A New Cold War"

    Submitted by Mike Krieger via Liberty Blitzkrieg blog,

    We’re shut out now. There hasn’t been an op-ed in The New York Times or Washington Post editorial pages arguing that the United States is at least equally to blame for this new Cold War crisis. They simply will not accept those articles…So this is the problem. In a democracy we fight through discourse. If you can’t get to the mainstream media  and make the argument, then there’s no way of slowing the drift toward catastrophe.

     

    – Stephen F. Cohen, Professor Emeritus of Russian studies at Princeton University and New York University

    Stephen Cohen just recorded an incredibly trenchant interview regarding the extreme dangers of the recent explosion in Russia hysteria with Brian Lehrer on WNYC.

    This is what the sage-like Cohen said three years ago

    The degradation of mainstream American press coverage of Russia, a country still vital to US national security, has been under way for many years. If the recent tsunami of shamefully unprofessional and politically inflammatory articles in leading newspapers and magazines—particularly about the Sochi Olympics, Ukraine and, unfailingly, President Vladimir Putin—is an indication, this media malpractice is now pervasive and the new norm.

     

    Even in the venerable New York Times and Washington Post, news reports, editorials and commentaries no longer adhere rigorously to traditional journalistic standards, often failing to provide essential facts and context; to make a clear distinction between reporting and analysis; to require at least two different political or “expert” views on major developments; or to publish opposing opinions on their op-ed pages. As a result, American media on Russia today are less objective, less balanced, more conformist and scarcely less ideological than when they covered Soviet Russia during the Cold War.

    And sure enough, what has come to pass.

    As the following paragraphs published in Politico earlier today show… While the article itself was embarrassingly biased toward standard U.S. government talking points, some valuable history can be found amongst all the noise. Such as the following:

    Related was Hillary Clinton’s enthusiasm for NATO’s further expansion into Eastern Europe. That process was based on the well-founded idea that Eastern Europe needed—indeed, was asking for—protection from Russia aggression. But Russia’s military establishment treated it as a slow-rolling invasion of their sphere of influence.

     

    This reaction, too, had its roots under Bill Clinton. An expanded NATO would help ensure democracy, prosperity and stability across Europe, he believed. Moscow took a sharply different view. After one 1994 summit at which Yeltsin gave Bill Clinton his blessing to the addition of new NATO members—including Poland and Hungary, both former Soviet satellites—a communist newspaper fumed about “the capitulation of Russian policy before NATO and the U.S.” One of Yeltsin’s main political opponents said he had allowed “his friend Bill [to] kick him in the rear.” He compared the agreement to the treatment of Germany at Versailles after World War I—a recurring theme among Russian officials since the Cold War’s end.

     

    Some of Bill Clinton’s top advisers correctly predicted that NATO expansion would produce a backlash in Moscow, and would create a handy narrative for would-be nationalists to posture against the West. Clinton’s secretary of defense, William Perry, told POLITICO this summer that he considered resigning over the issue out of concern for its effect on U.S.-Russia relations. But Clinton pressed ahead, kicking off a process that added a dozen new members over the next 20 years, from the Baltic countries of Latvia, Lithuania and Estonia through Eastern Europe (the Czech Republic and Romania) and into the former Yugoslavia—all places where Russia had once enjoyed uncontested influence.

     

    As Obama kept the NATO train rolling, his secretary of state was fully on board. “There can be no question that NATO will continue to keep its doors open to new members,” Clinton said in February 2010.

    Now without further ado, here’s perhaps the most important interview you’ll hear all month. Listen and share with everyone you know.

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Today’s News 16th December 2016

  • Obama Vows to Exact Revenge Against Russia for Unsubstantiated Russian Hacking Claims

    Those who deny the assertions put forth by the Washington Post, citing unnamed and nefarious CIA sources, regarding Russian intervention in the US elections, are being labeled as traitors. Conservatives view all of the Russian hysteria business as the final stage of grief being played out in public, by a completely broken and mentally addled globalist movement left in shambles. The media is attempting to up the rhetoric by moving past the discovery phase of the investigation, without ever having to actually prove that Russia meddled with the elections, in order to attempt to implicate the GOP and of course Donald Trump. Nevermind the fact that Julian Assange plainly stated today that Wikileaks did not receive the data from any state source, and certainly not Russia.

    Democrats are only capable of believing what they want to believe, which is that Russia helped Trump win. How else could they grasp the reality that America turned on them and their degradative policies that seek to annihilate the middle class?

    In an NPR interview today, President Obama promised revenge against Putin for his meddling. Note that this is extremely uncouth and unseemly — especially since he is a lame duck President. To start a conflagration before the next President takes office is nothing less than a slap in the face to Trump.

    source: CNN

    “I think there is no doubt that when any foreign government tries to impact the integrity of our elections that we need to take action and we will at a time and place of our own choosing,” Obama told National Public Radio.

    Describing potential countermeasures by the US, the President said “some of it may be explicit and publicized; some of it may not be.”

     
    He said he directly confronted Russian President Vladimir Putin about a potential US response, and said his counterpart acknowledged his stance.
    “Mr. Putin is well aware of my feelings about this, because I spoke to him directly about it,” Obama said.

    Obama and Putin conferred on the sidelines of the G20 meeting in China in September.

    Afterwards, Obama told reporters he raised cybersecurity with the Russian leader.

    Intelligence agencies in October pinned blame on Russia for election-related hacking. At the time, the White House vowed a “proportional response” to the cyberactivity, though declined to preview what that response might entail.

    Officials have said US actions against Russia may not be revealed publicly.

    Speaking Thursday at the White House, Press Secretary Josh Earnest declined to say whether the US had already begun its response to Moscow’s actions.

    “The President determined once the intelligence community had reached this assessment that a proportional response was appropriate,” Earnest said. “At this point, I don’t have anything to say about whether or not that response has been carried out.”

    Enter Keith Olbermann, the liberal elite left personified. They have no interest in democracy.

    The Russian Embassy in the UK’s response.

     

    Content originally generated at iBankCoin.com

  • Silver Smoking Gun to Stop Dishonest Dealing

    By Bron Suchecki

    Last week ZeroHedge reported on the amended London Silver Fixing Antitrust Litigation which included damaging chat logs provided by Deutsche Bank that reveal collusion between bullion bank traders to “shade”, “blade”, “muscle”, “job”, “spoof” and “snipe” the silver market.

    While the amended complaint only provides selected examples from the 350,000 pages of documents and 75 audio tapes that the plaintiffs received as part of the settlement with Deutsche Bank, what has been provided shows cliques of traders who worked together against the interests of their clients.

    Below is a network map of these cliques, which shows every trader mentioned in the complaint with the lines indicating who chatted with whom (view the map online here).

     Network map of fix manipulation traders

    The key ringleader is DB Trader-Submitter A (submitter refers to their role submitting orders into the London Fix) and this sort of hub and spoke model is common in social networks. The two persons with a slash and two banks in their name indicate that they moved banks during the period of the complaint. This is not uncommon in bullion banking since it is a small industry and would increase the risk of collusion between former workmates, something the management of the banks should have been alert to.

    The lack of connection between these groups is likely due to them being in different timezones. The group of four in the top left corner are most likely in Singapore, given the use of Singlish terms like “lah” in the chats. The larger group is based mostly in London with one in New York, based on references in the complaint. The group of three at the bottom may be in Dubai, although that is speculation.

    The chats have a jovial feel with traders calling each other “bro”, “dude” and “mates” and show no care for clients on the other end of their schemes: for example, Deutsche Bank Trader B talks about “wanna ramp it up like really just buy at mmkt and fk everyone so bad”. No doubt these chats will now be a lot more stilted as traders realise that collusive behaviour brings with it personal consequences like jail terms, as it did with LIBOR.

    Nick Laird at goldchartsrus.com has collated all the chats in chronological order here with a chart of the silver price underneath to help put the chats in context of market price action at the time. In general, the chat logs show collusion to tactically/short-term manipulate the London Silver Fix and spot market (curiously, there is no mention of Comex futures, but the plaintiffs are only giving us a sample in this complaint).

    With the Deutsche Bank chat logs showing a collusive network across banks, it would seem unlikely that the defendants will be able to refute the antitrust claim by the plaintiffs. The next question is that of damages. As it stands, the tactical nature of the manipulations means that the defendants are likely to argue that the members of the class action can only claim damages if they traded at the same time as the chat evidence shows market manipulation.

    To cover the entire class and increase the damages, the plaintiffs need to show that the traders’ actions resulted in ongoing suppression of the silver price.

    In the chats the traders do not explicitly indicate any plans to suppress the price on an ongoing, multi-day/month/year basis or reference having to manage a large naked futures short position (which many have said is necessary for ongoing price suppression to exist). Monetary Metals have written on the naked short theory in the past, noting that it is not supported by observation of prices as contracts approach first notice day. To implement such an ongoing suppression using futures, the bullion banks would need to roll their oversized short position by purchasing the expiring contract and shorting the next contract. Such massive buying of an expiring contract would cause the basis to rise, yet the opposite occurs – see here for more details.

    Absent such explicit proof of suppression, the complaint masses a number of different econometric analyses to show that the London Silver Fix impacts other silver prices in the wider market.

    The analysis does not start off well where, on page 40, the plaintiffs fall for the “correlation proves causation” fallacy claiming that “the prices of COMEX silver futures contracts are directly impacted by changes in the Fix price, which determines the value of the physical silver underlying each COMEX silver futures contract” on the basis of a regression analysis between futures closing prices and the Silver Fix of 99.85%. The defendants will be able to rebut such claims by referring to papers like London or New York: where and when does the gold price originate? which show that neither London (spot) nor New York (futures) are dominant in terms of price and that the dominant market switches from time to time.

    We feel the plaintiffs are on stronger footing when comparing spot and futures price movements around the fix (see page 71 onwards, figures 24 to 28). The plaintiffs’ show a few charts demonstrating a spot to futures linkage but we would suggest that to win the case the analysis would benefit from looking the spread between spot and futures markets, or the basis, which we report on each week. For an example of the application of basis to forensic price analysis, see our November 13 report where we show that the drop of $30 in the gold price around the London Fix on November 11 was driven by selling of futures as the gold basis began to fall before the price did (see below).

    Gold Intraday Nov 11

    The final challenge for the plaintiffs is to prove that the impact of the banks’ manipulative actions persisted “well beyond the end of the Fixing Member’s daily conference call” (see pages 81-83). While the plaintiffs claim that this is proven because the mean of the cumulative unadjusted returns “on Down Days does not recover fully from the price drop that occurs at the start of the Silver Fix”, the very wide confidence interval implies that on a number of days it did recover. It will be interesting to see how the defendants response to this crucial claim.

    The Deutsche Bank chat logs have enabled the plaintiffs to get over the first huge hurdle of showing antitrust behaviour. The focus of media reports to-date on the colorful chats gives the impression this is a closed case but the lack of explicit chats discussing management of a large naked futures short position and/or plans to supress the price over months is unusual. One would expect that managing such a large ongoing supression would be the main focus of discussions between traders. It is possible that the plaintiffs may have withheld this evidence for strategic purposes but if not, this case may end up turning into a battle of the bookworms with academics arguing econometrics and questioning what does the “mean of the cumulative unadjusted returns” really mean.

    Whichever way the case develops, bullion banks now have increased costs of supervising and managing the risks that precious metals trading desk “bros” might be looking to “fk” their clients. Combined with the potential that the “cost of doing business will jump – perhaps by 300% on one estimate” due to Basel 3 rules, some may decide to do a Deutsche Bank and pull out of the market. The result may be further consolidation in bullion banking and give regulators more justification to push those that remain out of “dark” OTC trading and on to “lit” exchanges.

  • What Is The Real Purpose Behind "Fake News" Propaganda?

    Submitted by Brandon Smith via Alt-Market.com,

    Here is the first problem with modern political discourse – too many people want to “win” arguments instead of getting to the greater truth of the matter. Discussions become brinkmanship. Opponents launch into immediate attacks instead of simply asking valid questions. They assert immediately that their position is the only valid position without verification. When confronted with rational responses and ample evidence, they dismiss everything instead of pondering what you have handed them. After this line is crossed, there is no point in continuing the debate. It will go on forever.

    This is one of the great tragedies of the Saul Alinsky method of political confrontation; it has bred entire generations of people who now believe that there is no objective truth. They think everything is relative. Because of this belief, they assume that there is no wrong or right side, no wrong or right goal. Instead, there are only goals that are MORE right than the goals of others. Everything boils down to a “lesser of two evils” mentality, and the ends therefore justify the means. Using dishonest measures to win the fight becomes acceptable.

    In the end, ideological combat actually prevents people from learning rather than helping them get to the root of the issue. We live in a world where truth is superfluous to the overall narrative. The only thing that is important is destroying your rivals.

    A classic strategy of dishonest debate and disinformation is to use every method possible to avoid confronting your ideological opponents legitimate arguments and to attack him personally. If you can’t beat him on fair ground using reason and evidence, then why not undermine his character so that the public will be influenced to avoid listening to him at all.  This is sometimes called “inoculation.”

    At first glance, this is what the entire “fake news” meme supported by the mainstream media seems to be about.

    The MSM has proven itself utterly ineffective against the rise of the alternative media. And as I have explained in recent articles, there is a very good and obvious reason for this. The alternative media is the closest thing to a “free market” of ideas that the world has had in a very long time.  Before web media, the public was strictly limited to a handful of corporate outlets that dictated information flow with an iron fist.  If you wanted to learn anything beyond the mainstream narrative, you had to data mine at the library in an infinitely slower fashion, or try to personally seek out people who represented sources and witnesses.

    Today, data mining happens at light speed. Facts and evidence are uncovered in real time. Video interviews and transcripts can be achieved as quickly as a phone call. They can be examined and witnesses can be cited without traveling across the country. The prevalence of visual media also makes it difficult for witnesses to lie about their original claims later down the road.

    Beyond this, the alternative media offers something the masses have rarely ever had — choice. People can now look at all sides of an issue and all available evidence and decide for themselves what conclusions make the most sense. The mainstream media has only ever offered one side, with highly regulated information and cherry-picked evidence.

    The mainstream media’s purpose has never been to convey the unfettered “news.”  Rather, their purpose has always been to manipulate public opinion, and we saw this revealed undeniably during the 2016 election as Wikileaks exposed journalist after journalist using their position of public trust as a weapon to influence the election outcome.

    Instead of admitting wrongdoing after this embarrassment, the MSM has decided to double down and escalate the accusation that the alternative media is “fake news.” Meaning, the MSM wants people to believe that we are liars and amateurs, that they are the “professionals,” and that the public should ignore everything the alternative media has to say from now on.  I have to point out, though, that the narrative of mainstream news versus “fake news” seems a little thin to me.

    Meaning, I believe there is more going on here than the MSM simply trying to save itself.

    Call me a “conspiracy theorist,” but the elitist controlled mainstream media does little to help itself through this strategy. Think about it; the MSM is already clearly dying if one looks at the ever shrinking size of their audience and the loss of younger viewers and readers. They have been deteriorating for years, while the alternative media has been exploding in influence. The promotion of the fake news meme requires these mainstream media outlets to actually LIST which sources they believe represent fake news.  This is what the Washington Post did with their promotion of liberal professor Melissa Zimdar’s list.

    So, forgive me if I am making too much of a leap here, but it seems that this tactic will only bring MORE web traffic to the sites listed, because the list does not really include any specific examples of “fake news” trespasses.  People who are curious will be compelled to then visit the alternative sites to see what all the fuss is about. Perhaps many of them will find something they like, rather than something they hate. To me, the entire set-up of the fake news meme hurts the mainstream news more than it helps them.

    The next major story linked to fake news has been the assertion by some in government (including the CIA) that the alternative media is actually a front for Russian hacking and propaganda. I predicted this development two years ago in my article 'When War Erupts Patriots Will Be Accused Of  Aiding “The Enemy.”'

    In that article, I argued that a war is being engineered between Eastern and Western powers (Russia and China vs. the U.S. and parts of Europe), and that this war will likely be an economic war.  I also pointed out that such a conflict might be used by the elites in the West to rout out the alternative media as agents of Russian propaganda.  Here’s a quote:

    “Another aspect of this plan, I believe, involves the hijacking of the image of the liberty movement. The liberty movement is essentially the most dangerous unknown element on the elite’s global chessboard. In fact, because we understand that international financiers and central bankers are the real enemy, we have the ability to leave the chessboard entirely and play by our own rules. Widespread economic or military conflict provides an opportunity to neutralize liberty activists who might turn revolutionary.

     

    Recently, I came across an article from The Atlantic titled Russia And The Menace Of Unreality. Now, some alternative analysts would read this article and immediately shrug it off as yet another attempt by the Western media machine to propagandize against Russia. Though their motivations are genuine, these analysts would be cementing the delusion that Russia is the “good guy” and the U.S. is the ever present “bad guy.” The Atlantic piece is a far more intricate manipulation than they would be giving credit for…”

     

    “…This was not as pressing an issue two years ago, when conflict with Russia was a ridiculous notion for many people. But today, conflict with Russia, at the very least on an economic scale, is an inevitability. If you read in full the linked Atlantic article, the narrative that is being constructed is clear — the establishment hopes to rewrite the history and image of the liberty movement by painting us as dupes radicalized by Russian propaganda, rather than being the originators of our own grassroots movement with our own philosophy and methodology. Through this, they take away our ownership of our own cause.”

    It would appear that everything I warned about two years ago is now happening.  That said, I would amend my original viewpoint to include a new dynamic. 

    The coming economic war will be based on a false paradigm — the false East/West paradigm.  Over the years I have outlined in great detail the evidence that Eastern nations are just as controlled by central banking elites and globalist interests as Western nations, including evidence that Vladimir Putin is an avid supporter of the International Monetary Fund’s push for a single global currency system using the Special Drawing Rights basket as a bridge. He is also now suddenly a supporter of the UN’s climate change and carbon taxation agenda.

    I consistently warned analysts within the liberty movement to be careful about cheerleading too much for Russia and Putin, not only because he is controlled opposition, but because eventually we would be caught up in a media war that would label us as enemy conspirators.  Remaining (rightly) critical of Putin was the best way to avoid being labeled as a member of the “fake news,” or a purveyor of Russian propaganda.

    It was my original belief that the elitist media would use the alternative media’s love affair with Putin as a means to undermine our credibility. However, today I would say that in a strange kind of way, the opposite is taking place.

    Confusing? Yes. Look at it this way; with the predominantly leftist mainstream media dying in an irreversible way, no amount of whining about “fake news” is going to save them. The rise of the “populists” is at hand, and as I have warned for the past year, this is by design.  Just as conservative anti-establishment movements are rising in geopolitical influence, so to is the anti-establishment media. We are sort of a package deal.

    My belief is that conservative movements and the alternative media are being allowed into a position of cultural authority. The globalists are stepping out of the way (for now) as we grow in power. They are doing this in preparation for the final stage of an economic collapse they have been gestating since at least 2008. They are doing this because their goal is to set us up as scapegoats for a global disaster that will be remembered for centuries to come. I was able to predict the success of the Brexit Referendum,  Donald Trump’s election win and the latest Federal Reserve rate hike based on this theory and I believe it will continue to prove itself.

    The globalists know that at this stage the fake news meme will only HELP US, rather than hurt us. That is to say, the elites are throwing the leftist media to the wolves and the Russian propaganda claims will only make the MSM look more ridiculous.  The globalists see the writing on the wall — in fact, with the level of web analytics at their disposal, they can read and predict shifts in social consciousness before almost anyone else is aware of them.

    Instead of trying to obstruct us or fight us directly, I believe the elites plan to co-opt us or co-opt our image. That is to say, they will let us grow in apparent influence, trigger a crisis, and either use certain alternative outlets as the new mainstream, or simply paint all of us as complicit in the failures of conservative governments and nationalism.

    The end game here is to destroy the underlying principles of liberty movements; to make future generations reel in horror at the very mention of conservatives and national sovereignty.  The elites are playing a very complex strategy of fourth-generation warfare. Nothing you see is exactly what it seems. The fake news label is not meant to disrupt the alternative media. In fact it will help us rise to a position in which we can be blamed for negative global influence.

    Some people will say I am reading too much into the situation, or that I am giving the elites “too much credit,” or attributing too much “omnipotence” to their position. They will probably reference the recent passage of the 'Countering Disinformation And Propaganda Act' and claim that this is clearly meant to take down the alternative media.

    I would ask these people to consider a question, though — who will really have control over this legislation in the near future?  If I am right, and Trump enters the White House in January with a Republican majority in Congress and the Senate, will it not be Trump that most benefits from the legal framework? How then will it serve to undermine the alternative and conservative media?

    I predict, in fact, that conservatives are being given enough rope to hang themselves with. I predict that Trump will utilize this legislation to go after the mainstream media, not the alternative media, and that many conservatives will support him even though questions of constitutionality will increase. I believe the fake news meme will backfire and that the MSM will die off as a result.

    I believe that this is all part of a carefully crafted narrative in which the right wing gains unprecedented political sway, only to be met with economic and social disaster. I believe that the game is far from over in the fight between globalists and sovereignty activists. I believe they cannot defeat us directly, so they now hope to defeat us indirectly, or, trick us into defeating ourselves. In reality, the game is just beginning.

  • Wall Street is Overly Optimistic on Trump Presidency (Video)

    By EconMatters


    We discuss some of the challenges Donald Trump has had in his past with just making good solid decisions, let alone being the savior that is currently priced into financial markets for the US Economy. The Stock Market is setup for a big letdown in 2017 if past performance of Donald Trump regarding his competency at doing anything right is analyzed in depth.

    I would really like to know how we are going to cut the corporate tax rate, and at the same time fund a large infrastructure project in a rising rate environment with a strong US Dollar and 20 Trillion Dollars in National Debt and climbing. Wall Street does understand that this is impossible and actually incompatible economic policy goals right?

     

    © EconMatters All Rights Reserved | Facebook | Twitter | YouTube | Email Digest | Kindle    

  • Entire Police Department Quits After "Illegal, Unethical, And Immoral" Requests By Town Council

    The Town Council of the small town of Bunker Hill, Indiana, home to 888 residents, is likely wishing they had  “do-over” this morning after constant budget cuts and alleged “illegal, unethical, and immoral” requests from council members resulted in the entire police force quitting.  Per the Fox 59 affiliate in Indianapolis, the Bunker Hill town Marshall and his 4 deputies all walked off the job earlier this week and have no intention of returning. 

    An entire Indiana town has no police officers after every single one walked off the job. The officers blame the Bunker Hill Town Council for the situation.

     

    Thomison served as town marshal for four years until Monday night when he and four other officers handed over resignation letters to the council, telling them they have had enough.

     

    “They would not communicate with us or the officers and they kept scaling back,” said Thomison.

     

    In their resignation letters, the officers accuse council members of asking them to “do illegal, unethical, and immoral things.” They cited examples like asking police to run background checks on other town councilors to find their criminal history. The officers also claim they were threatened when they said no.

     

    Another issue they brought up in the letter was their safety. The officers say they were all forced to share one set of body armor, putting their lives on the line while they were out making arrests and serving warrants.

     

    I did not want to send someone out there with bad body armor so I would take mine off and provide it to the other officers. I told them we have to provide this, there is an IC code that explains that and says that the town has to provide that body armor,” said Thomison.

     

    Meanwhile the Bunker Hill Town Council offered the following statement to residents saying that disagreements with the police force were “caused by the lack of funding available to the town” but that council members had never asked officers to “be involved in any illegal, unethical or immoral actions.”  Well, clearly it seems like someone is stretching the truth slightly.  

    Like most small towns, there have been from time to time, disagreements in the policy making process between the town council and other town departments. The current town council as well as prior councils have, on occasion, had disagreements with Mr. Thomison over a number of things. These disagreements have primarily been caused by the lack of funding available to the town to invest in the police department. However, the council denies that it has failed to provide body armor for the marshal or reserve deputies. The council is well aware of Indiana law on the topic and has complied with it fully. Further, the council absolutely denies that it has ever asked Mr. Thomison or any of the reserve deputies to be involved in any illegal, unethical or immoral actions.

     

    The council admits that it had made a number of cuts to the police department over the last few years. This was a decision the town made due to a lack of funding. Bunker Hill is diligently working to solve this problem for the coming year. The cuts made to the police department were not made with the intention of jeopardizing the safety of any of the town’s police officers. Over the last few years, the Council has made attempts to find additional money for the department. Mr. Thomison was instrumental in obtaining a large sum of money on behalf of the town. However, he fails to state that the police department received the benefit of a large portion of that funding.

     

    As Mr. Thomison has stated, there is currently a lawsuit pending against the town relating to Indiana’s Open Door Law. The council denies that it has violated Indiana’s Open Door Law in any manner. However, the council will not comment further on this topic as the litigation is still pending.

     

    The resignation of the entire police force has come as a shock to the council. It has never been the goal to dismantle or otherwise endanger the town police department or officers. The council thanks these officers for their service to the town. Bunker Hill is in the process of obtaining a new marshal and reserve deputies. The council asks for patience from the town residents in this process.

    If ever there was a time and a place for some drag racing on public streets…this is it for Bunker Hill residents…enjoy!

  • Obama Vows Retaliation Against "Russia Hacking", To Hold Press Conference On Friday

    With last night’s top nationwide story, the NBC report that according to unnamed CIA sources, Vladimir Putin himself supervised the hacking of the US presidential election (it is still unclear precisely how Putin “hacked the election”, or for that matter, what if any proof exists ), making the rounds and as of this moment having been placed front and center on the front page of Reuters.com

    … it was obvious that this story was not going away just four days before the Dec. 19, Electoral College vote.

    And sure enough, on Thursday evening CNN reported that President Barack Obama vowed retaliatory action against Russia for its meddling in the US presidential election, in effect telling Russia he is about to declare cyberwar on it.

    “I think there is no doubt that when any foreign government tries to impact the integrity of our elections that we need to take action and we will at a time and place of our own choosing,” Obama told National Public Radio. He is certainly right: the only doubt is that a foreign government did in fact try to “impact the integrity of our elections.”

    Describing potential countermeasures by the US, the President, confirming he had learned something from Donald Trump, said “some of it may be explicit and publicized; some of it may not be.

    Obama also said he directly confronted Russian President Vladimir Putin about a potential US response, and said his counterpart acknowledged his stance. “Mr. Putin is well aware of my feelings about this, because I spoke to him directly about it,” Obama said.

    As CNN adds, Obama and Putin conferred on the sidelines of the G20 meeting in China in September. Afterwards, Obama told reporters he raised cybersecurity with the Russian leader. It was not clear if Obama had told Putin he was prepared to launch World Cyber War I against the Russian, just because Hillary won an election every “expert” in the country said Trump would lose.

    Intelligence agencies in October pinned blame on Russia for election-related hacking. At the time, the White House vowed a “proportional response” to the cyberactivity, though declined to preview what that response might entail.

    Russia has, of course, laughed off this escalating stupidity. Russian Foreign Minister Sergei Lavrov told state TV channel Rossiya-24 that he was “dumbstruck” by the NBC report of Putin’s alleged involvement.
    “I think this is just silly, and the futility of the attempt to convince somebody of this is absolutely obvious,” he said.

    Early on Thursday, Putin spokesman Dmitry Peskov told the AP the report was “laughable nonsense“, while Russian foreign ministry spox Maria Zakharova accused “Western media” of being a “shill” and a “mouthpiece of various power groups”, and added that “it’s not the general public who’s being manipulated,” Zakharova said. “the general public nowadays can distinguish the truth. It’s the mass media that is manipulating themselves.

    That may be true, but Obama is set to give it one last try.

    As CNN further adds, officials have said US actions against Russia may not be revealed publicly.

    Speaking Thursday at the White House, Press Secretary Josh Earnest declined to say whether the US had already begun its response to Moscow’s actions. “The President determined once the intelligence community had reached this assessment that a proportional response was appropriate,” Earnest said. “At this point, I don’t have anything to say about whether or not that response has been carried out.”

    Meanwhile, at Hillary Clinton’s “thank you” party for billionaire donors, the topic of both Donald Trump and Russian hacking came up, and Hillary told her supporters not to “lose heart.”

     

    Then there were other, unsubstantiated if more concerning reports:

    * * *

    So what does it all mean? We’ll know the answer tomorrow early afternoon.

    According to Reuters, President Barack Obama will hold an impromptu press conference at the White House on Friday at 2:15 p.m. ET before leaving for his annual family vacation in Hawaii, the White House said on Thursday. It would be fitting if Obama announced he would start a cyberwar with Russia, then jetted off to the safety of a far off, golf-friendly island.

  • Doug Casey: "Sell All Your Bonds"

    Via Casey Daily Despatch,

    [The following essay originally appeared in this month’s issue of The Casey Report.]

    So, Trump has won the election. Of course anything can happen between now and his presumed inauguration on January 20. Maybe the Swamp Creatures will succeed in causing a recount in so-called Purple States that could change the number of electors in Hillary’s favor. Maybe they’ll somehow influence Trump electors to vote for Hillary. None of this would have been an issue if Baby Bush II, Jeb, had been the Republican nominee, as was supposed to have happened. It all just shows what a transparent (a word these people love to use) fraud “democracy” has become.

    Let the hoi polloi cast a meaningless vote, so they have the illusion of being in control. Instead of seeing themselves as subjects, they’ll think they’re “we the people,” who actually have some say in what happens. That way they’ll pay their taxes willingly, enthusiastically sign on to aggressive wars on the other side of the world against people they know nothing about, and generally do as they’re told. Because it’s supposed to be patriotic. “Democracy” is a much more effective scam for controlling the plebs than kingship or dictatorship.

    That said, the Establishment, the Deep State, was genuinely shocked and appalled by Trump’s victory. As Baby Bush the First would have said, they misunderestimated how angry the average voter was. That’s because the Coastal Democratic Elite are totally out of touch with the common man. But they needn’t fret too much. They’ll be re-installed, with a vengeance, in four years.

    That will likely be true for two reasons:

    1. Simple demographics. The groups that vote Democrat (e.g., blacks, Hispanics, urban dwellers, immigrants, Millennials) are growing in numbers faster than those who vote Republican. Republicans are older people, and the Boomers (born 1946–1966) and the Silent Generation (1926–1946) are dying off. More people are moving to the cities, and that influences them to vote Democratic. More people (still, idiotically) are pursuing higher education, and that also influences them to vote Democrat.

    2. The Greater Depression. One definition of a depression is a period of time when distortions and misallocations of capital are liquidated. A time when bubbles caused by monetary expansion are popped. A time when unsound businesses fail. I re-emphasize this because the party on whose watch it happens is automatically kicked out. So, the Democrats actually got quite lucky not to be in office when the time bomb goes off. Trump could easily go down as Herbert Hoover II.

    What could change things? A serious war, much bigger than the sport wars the US is currently engaged in, is the biggest danger. That’s much less likely with Trump than Hillary, but these things have a life of their own. My guess for the next president is either a left-wing general (because Americans love and trust their military), or a left-wing populist, like Elizabeth Warren.

    But that’s crystal balling at this point. Let’s proceed on the assumption Trump is actually going to be the president for at least the next four years. Although problematical, he’s a vast improvement over Hillary. What will it mean for the US and the world? More importantly, what will it mean for your personal finances and freedom? Let’s look at the possibilities.

    Bonds—With bonds, we’re at the peak of the biggest financial bubble in world history. This is a very big deal.

     

    Interest rates move in very long cycles. They went up from the mid-1940s to the early ’80s, when long-term government bonds peaked at close to 16%, and T-Bills at over 16%. I thought they hit bottom years ago, but the cycle overshot.

     

    My guess is that they’re headed up in earnest now. And Trump, as someone who understands business (even though he doesn’t understand economics), will likely (I think…) do what he can to send them higher. Why? He understands the country needs to save, to rebuild capital. And higher rates will encourage saving and discourage debt.

     

    The risk is that, with all the debt that’s been put on in the last decade, debtors will be hard-pressed to service it. That includes the USG with $20 trillion of on-balance-sheet debt, and a lot more in the way of off-balance-sheet debt, guarantees, and contingent liabilities. Much of it will be activated if higher rates cause a lot of defaults.

     

    What should you do? Sell all your bonds.

     

    Real Estate—Property, at least in the English-speaking world, floats on a sea of debt. Interest rates go up, real estate prices go down. The economy goes down, so do property prices. Add to that the aging US population, which isn’t good for property; as people age, they downsize. Add to that the fact we’re in another real estate bubble, similar to what we saw in the mid-oughts. After bonds, property is likely the worst place to be. In fact, I’ll go so far as to say the great post–World War II property boom is at an end—but that’s a subject for another time. There’s not much that Trump can do to fix this.

     

    What should you do? Lighten up on property. Make sure any mortgages you keep are at fixed rates.

     

    Stocks—If Trump only follows through with his promise to cut taxes, and eliminate two old regulations for every new one, it would be wonderful for the economy. But the economy and the stock market are two different things; they only correlate over the long run. I suppose he’ll follow through with his promise to build lots of new infrastructure. Government deficits will soar, and only the Fed will be on hand to buy all that new debt.

     

    Infrastructure companies will get a fat slug of the newly printed money. But I find it hard to get enthusiastic for the stock market. In terms of dividends, P/E ratios, or book value, it’s already at one of the highest levels ever. Bear in mind that well-selected stocks can still go up, even if the market as a whole goes down.

     

    That said, I feel more comfortable with shorts than longs at this point.

     

    Gold and Commodities—Frankly, where do you put your money when almost everything is overpriced? Commodities are coming out of a five-year-long bear market. They’re about the only thing that’s cheap. That’s true relative to their cost of production (farmers, ranchers, and miners are breaking even, at best, all over the world). And it’s true relative to their history (they’re down 50% from the peak of 2011).

     

    In other words, commodities are a much safer place for your capital than stocks, bonds, or real estate (excepting agricultural property) for the foreseeable future. The problem is that it’s hard to hold a carload of wheat or ten tonnes of sugar.

     

    Remember that gold and other commodities aren’t “investments.” An investment is something that acts to create new wealth. They’re simply assets. Sometimes they can be excellent speculations. Gold, however, is money, and will remain so long after the US destroys its currency.

     

    I recommend, therefore, that you accumulate gold and silver instead of plunging into conventional investments. Check with the dealers we list in The Gold Book to see who you prefer to work with. [Editor's note: The Gold Book is exclusive to readers of The Casey Report, which you can sign up for at the end of today's essay.] But if you don’t have a significant position in the metals already, please get going.

    A final thought. It’s usually a mistake to count on any head of state to make things in a country better. It can certainly happen—as with Erhard in Germany after WW2, Pinochet in Chile, Thatcher in Britain, or even Reagan in the US. Maybe it will be true of Trump. He’s got a much stronger personality than Reagan, for openers. But the bigger and older a State gets, the harder it is to change. It’s comparable to trying to stop a fully loaded supertanker.

  • Goldman Warns Bond Yields Are Now "A Threat To Risky Assets"

    At the end of November, when the 10Y yield had just cracked 2.3%, Goldman, together with SocGen, JPM, RBC and various other banks, gave its answer to what may be one of the most important questions for the market right now: how high can 10Y bond yields go before they start to hurt equities? Goldman answered that “the equity market is still at a level that can cope with moderately rising bond yields. We estimate that a rise in US bond yields above 2.75% or probably between 0.75-1% in Germany would create a more serious problem for equity markets: at that point we would expect the correlation between bonds and equities to be more positive – i.e., any further rises in yields from there would be a negative for stock returns.”

    2.75% is also the level above which JPM’s Marko Kolanovic said last week the 10 Year would begin to cause problems for stocks:

    Going into US elections, macro systematic investors (such as trend followers and various Var-based strategies) were long bonds. While the performance of these strategies suffered, the “risk on” nature of the market reaction (bonds down, equities up) prevented a more rapid deleveraging. Yet this risk is not entirely eliminated, and should bond yields continue increasing (e.g. 10Y beyond 2.75%) this will risk an equity sell-off that usually triggers a broader deleveraging of var-based strategies.

    Incidentally, according to other banks such as SocGen, the market is already in purgatory: at the end of November we showed an analysis by SocGen according to which at bond yields above 2.60%, stocks are rich relative to bonds.

    In any case, fast forward to today when Goldman has refreshed its cross-asset modelling, and reports that “US 10-year rates have now overshot our 3-month forecast of 2.30%, and are now close to our Bond Sudoku macro measure of ‘fair value’, which is currently around 2.60%. 

    US Treasuries Have Reached our Sudoku Fair Value of 2.6%

    This is the first time since 2013 Goldman reports the “valuation gap” is completely closed.

    The bank then notes that based on its bond impulse analysis – designed to identify which bond market is leading the others – the sell-off in global rates is solely led by the US.

    But the Goldman punchline is that with US Treasuries now at the bank’s measure of fair value, they are now “starting to become a problem for the risk complex.” To wit:

    As a result of the strengthening of the Dollar and the increase in long-term rates, US Financial Conditions are tightening on our preferred measure. The change in financial conditions since September is roughly equivalent to 70bp of cumulative Fed hikes. As we argued in a recent note, should US 10-year rates move above ‘fair value’, this would represent a threat to risky assets unless incoming data continue to sustain the optimism they now discount.

    The problem is that incoming data, if anything, indicate that the Fed is now not only behind its own curve, but that of Donald Trump, whose hundreds of billions in fiscal stimulus will only push the envelope further, and force the Fed to tighten even more aggressively as Yellen hinted during the FOMC press conference.

    For now, however, Goldman has issued its warning, although it is unclear if the hypnotized, euphoric market will even bother to listen.

  • China Devalues Yuan To Weakest Fix Since May 2008

    Following last night’s bond bloodbath, The Fed fallout continues in China as The PBOC has devalued the official Yuan fix the most since Brexit to its weakest level since May 2008, breaking above 6.95/USD. Since the “one-off” devaluation in Aug 2015, the Chinese currency has now weakened almost 14% against the dollar.

    While the broad Renminbi basket has been “stable” against China’s global trading partners for 3 months…

     

    It appears the devaluation pressure has been focused back against the US Dollar…

     

    And bear in mind that the “stability” we described above came at the grand cost of a stunning quarter of a trillion in reserves ‘defending’ the outflow pressure in 2016

     

     

    For now the China bond market has stabilized a little (by which we mean it is not collapsing).

     

    At some point this butterfly’s wings of turmoil will ripple across the world’s liquidity markets and punch all those with a plan in US banking stocks in the face… the question is, when?

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Today’s News 15th December 2016

  • Fed Fallout Escalates: China Bond Market Crashes Most On Record, Yuan Plunges

    After a bubblicious surge higher over the last few months (as China's hot money swishes from one trending-higher market to another), China's bond market is collapsing. As Chinese money-markets tighten into new year, yuan weakens, and capital outflows accelerate, so it appears the final bastion of safety has cracked. Chinese bond futures crashed overnight by the most on record, erasing in a week the gains of the last 18 months.

    The rally began in 2014, buoyed by slowing economic growth and a monetary-easing cycle that kicked off in November that year. Now that is over…

     

    As Chinese liquidity pressures ripple up from the short-term repo markets…

     

    Offshore Yuan has tumbled 5 handles since The Fed raised rates…

     

    And Japanese stocks cannot hold a bid despite the weaker yen.

    It appears Janet's message about Trump's fiscal plan is starting to sink in.

  • Celebrities Unite to Ask Electors to Vote Against Trump on December 19th

    The fuckery is indeed very real.

    The fervor and energetic effort into preventing Trump from taking the Presidency, has taken on new levels of lunacy by the left — who are absurdly panicked and beguiled by paranoia to the point of making themselves into carnivale clown jackasses — all but assuring the reelection of Trump in 2020 and the Silver Fox in 2024.

    Springboarding off the hysterical media and their Russian fairytales of election tampering and raging Putin vendettas, a new organization has appeared — seemingly out of nowhere. They call themselves United For America and they are cucks.

    Here is their mission statement.

    statement

    According to their Whois data, the website was launched shortly after Thanksgiving, suggestive that plans to deny Trump the Presidency has been in motion for at least three weeks.

    united

    Here is their sparsely followed Twitter account — again indicative of their irrelevancy and newness to the 2016 elections.

    twitter

    And here is their video, a plea for help from the electors — practically begging them to ignore the will of the people and to vote against Trump on 12/19, saying they’d make history doing so and would be considered heroes for ‘voting their conscience’, somehow suggesting that the electors don’t really want to vote for Trump — but only do so because he won the god damned elections.

    This video shall forever immortalize the emotional collapse of the left — bedraggled snowflakes, crestfallen, deep in a stupor of their own making.

    Acceptance is the final stage of grief, something the illiberal left will soon be forced to endure — whether they want to or not.

     

    Content originally generated at iBankCoin.com

  • Jill Stein Spends $1mm Of Recount Donations On "Staff, Admin and Consultants"

    After promising to spend “every dollar” of the donations she raised from disaffected Hillary supporters on recount efforts, Jill Stein has just released the following budget which reveals that over $1mm (or nearly 15% of the total $7.3mm raised) was used to fund her “staff payroll,” “consultants,” “administrative expenses,” and “compliance costs.”  This looks eerily similar to some Clinton Foundation budgets we recently reviewed which claimed to have spent “every dollar” of their donations on “charity work.”

    Stein Budget

     

    Of course, to add insult to injury, Stein’s efforts in Wisconsin actually widened Trump’s margin of victory while recount efforts in Michigan and Pennsylvania were shut down by courts based on merit.  Therefore, given that Wisconsin’s net votes changed by a grand total of 131, Stein effectively paid $56,759 for each changed vote.  

    And while that may sound like a complete failure to most of us, Stein, in a press release posted to her website, was a bit more upbeat describing the recounts as a “resounding success.”

    “Thanks to over 161,000 donors and support from more than 10,000 volunteers, this historic recount pushed forward in three states, defying every political blocking tactic and clearing every bureaucratic and financial hurdle,” said Dr. Jill Stein, 2016 Green Party candidate for president. “It was an amazing affirmation of the power of the American people to have a voice in their voting system and demand elections with integrity. By revealing serious problems about our voting systems, out of date laws and recount procedures in three states, these recounts were a resounding success. Our efforts have shined a light on the urgent need for reforms to our electoral system, to election laws and to recount procedures. We look forward to continuing our work to make those reforms a reality. The fight for civil and constitutional rights of all Americans goes on today – stronger than ever before.”

    So congrats on the “resounding success” young Hillary voters!  You spent $7.3mm to widen Trump’s margin of victory and didn’t even “get a lousy hat.”

    JS

  • Former UK Ambassador Says Source Of Clinton Emails Was "Disgusted" Democratic Whistleblower

    Just as the CIA/Democrat/Mainstream Media narrative of Russia's involvement in the election jumps the shark with fact-less accusations of Putin's personal involvement, The Daily Mail blows the entire 'hack' meme out of the water. As an evoy for Wikileaks, former UK ambassador Craig Murray claims he flew to Washington for a clandestine handoff with one source, who "had legal access to the information. The documents came from inside leaks, not hacks… Neither of [the leaks] came from the Russians."

    Murray, who blasted The CIA's "blatant lies" in a recent op-ed, has now come forward with more details on how he knows they are lying… (as The Daily Mail reports)

    Craig Murray, former British ambassador to Uzbekistan and a close associate of Wikileaks founder Julian Assange, told Dailymail.com that he flew to Washington, D.C. for a clandestine hand-off with one of the email sources in September.

     

    'Neither of [the leaks] came from the Russians,' said Murray in an interview with Dailymail.com on Tuesday. 'The source had legal access to the information. The documents came from inside leaks, not hacks.'

    While Murray is a controversial figure who was removed from his post as a British ambassador amid allegations of misconduct. He was cleared of those but left the diplomatic service in acrimony. His links to Wikileaks are well known.

    His account contradicts directly the version of how thousands of Democratic emails were published before the election being advanced by U.S. intelligence.

    Murray insisted that the DNC and Podesta emails published by Wikileaks did not come from the Russians, and were given to the whistleblowing group by Americans who had authorized access to the information.

     

    'Neither of [the leaks] came from the Russians,'  Murray said. 'The source had legal access to the information. The documents came from inside leaks, not hacks.'

     

    He said the leakers were motivated by 'disgust at the corruption of the Clinton Foundation and the tilting of the primary election playing field against Bernie Sanders.'

     

    Murray said he retrieved the package from a source during a clandestine meeting in a wooded area near American University, in northwest D.C. He said the individual he met with was not the original person who obtained the information, but an intermediary.

     

    His account cannot be independently verified but is in line with previous statements by Wikileaks – which was the organization that published the Podesta and DNC emails.

    Murray declined to say where the sources worked and how they had access to the information, to shield their identities.

     

    He suggested that Podesta's emails might be 'of legitimate interest to the security services' in the U.S., due to his communications with Saudi Arabia lobbyists and foreign officials.

     

    Murray said he was speaking out due to claims from intelligence officials that Wikileaks was given the documents by Russian hackers as part of an effort to help Donald Trump win the U.S. presidential election.

     

    'I don't understand why the CIA would say the information came from Russian hackers when they must know that isn't true,' he said. 'Regardless of whether the Russians hacked into the DNC, the documents Wikileaks published did not come from that.'

    Assange has similarly disputed that charges that Wikileaks received the leaked emails from Russian sources.

    'The Clinton camp has been able to project a neo-McCarthyist hysteria that Russia is responsible for everything,' Assange told John Pilger during an interview in November.

     

    'Hillary Clinton has stated multiple times, falsely, that 17 US intelligence agencies had assessed that Russia was the source of our publications. That's false – we can say that the Russian government is not the source.'

    As Murray concluded in his recent op-ed, the continued ability of the mainstream media to claim the leaks lost Clinton the election because of “Russia”, while still never acknowledging the truths the leaks reveal, is Kafkaesque.

    It is terrible that the prime conduit for this paranoid nonsense is a once great newspaper, the Washington Post, which far from investigating executive power, now is a sounding board for totally evidence free anonymous source briefing of utter bullshit from the executive.

    The worst thing about all this is that it is aimed at promoting further conflict with Russia. This puts everyone in danger for the sake of more profits for the arms and security industries – including of course bigger budgets for the CIA. As thankfully the four year agony of Aleppo comes swiftly to a close today, the Saudi and US armed and trained ISIS forces counter by moving to retake Palmyra. This game kills people, on a massive scale, and goes on and on.

  • Report: House Intelligence Committee Abruptly Cancels Briefing After CIA Declined to Attend

    The current hysteria over Russian interference doesn’t infer that they hacked the voting itself, but instead made available true information about the Hillary Clinton campaign, by way of Wikileaks, which then swayed public opinion to vote in favor of Trump. In other words, Podesta, Clinton and their media shills are still corrupt bastards, beholden to Saudi Arabia and China — but had the American people never learned about it via the Wikileaks, well then, they might’ve voted for her instead of Trump.

    In a nut shell, that’s the democrat argument for fomenting war against Russia and to overturn the will of the people. Again, no one is questioning the validity of the votes, but the souls of men and how they felt after reading the Wikileaks.

    Fox News is reporting the House Committee has abruptly canceled a briefing scheduled for tomorrow — due to the CIA not making anyone available to attend. As of now, the CIA is refusing to comment on the matter, until their full assessment of the situation is made available to President Obama before 1/20/17.

    Source: Fox

    The House Intelligence Committee abruptly canceled a briefing set for Thursday on alleged Russian interference in the U.S. election, after the CIA declined to provide a briefer for the session, Fox News is told.

    Amid concerns about reports that conflict with details previously provided to the committee, Chairman Devin Nunes, R-Calif., had requested a closed, classified briefing Thursday for committee Republican and Democratic members from the FBI, CIA, Office of the Director of National Intelligence and National Security Agency.

    But Fox News is told the CIA declined citing its focus on the full review requested by President Obama, and the other agencies did not respond to the committee’s request, which is unusual given the panel is the most-senior committee with jurisdiction.

    “It is unacceptable that the Intelligence Community directors would not fulfill the House Intelligence Committee’s request to be briefed tomorrow on the cyber-attacks that occurred during the presidential campaign,” Nunes said in a statement. “The Committee is deeply concerned that intransigence in sharing intelligence with Congress can enable the manipulation of intelligence for political purposes.”

    “Last week, the President ordered a full Intelligence Community review of foreign efforts to influence recent Presidential elections – from 2008 to present,” the statement added. “Once the review is complete in the coming weeks, the Intelligence Community stands ready to brief Congress—and will make those findings available to the public consistent with protecting intelligence sources and methods. We will not offer any comment until the review is complete.”

    Separately, Fox News has learned additional details about the “full review” President Obama ordered from his intelligence agencies regarding Russian interference.

    The review is being led by the Office of the Director of National Intelligence, and is a multi-agency effort. Investigators plan to take existing intelligence and reconstruct what happened.

    Fox News is told one focus is on whether there is new intelligence that substantiates analysis the interference was designed to ensure a Trump victory, or whether a review of the existing intelligence with “fresh eyes” leads to new conclusions.

    Some lawmakers, on both sides of the aisle, have backed calls for a separate congressional investigation, voicing concern that Obama’s intelligence agencies might not be able to conduct a thorough review before he leaves office.

    Given statements from the White House, Fox News is told there is considerable pressure on the intelligence community to declassify as much of the findings as possible before Jan. 20, when Trump is set to take the oath of office.

    As of yesterday, 55 electors are asking for information regarding the Russian scare and if Trump knew anything about it. What the fuck?

    The Electors require to know from the intelligence community whether there are ongoing investigations into ties between Donald Trump, his campaign or associates, and Russian government interference in the election, the scope of those investigations, how far those investigations may have reached, and who was involved in those investigations. We further require a briefing on all investigative findings, as these matters directly impact the core factors in our deliberations of whether Mr. Trump is fit to serve as President of the United States.

    Judging by libtards comments like the one featured below, there are many on the left who believe the election result isn’t conclusive.

    Thoughts? butthurt The electoral college is scheduled to vote on December 19th.

     

    Content originally generated at iBankCoin.com

  • The Conspiracy To Shut Down Truth, Donald Trump, & The American People

    Authored by Paul Craig Roberts,

    There is circumstantial evidence that the Washington Post, the New York Times, and the rest of the presstitute media are part of a conspiracy with the oligarchs, the military/security complex, the Hillary Democrats, and neoconized Republicans to shut down the dissident Internet alternative media and to deny Donald Trump the presidency.

    Consider the brand new website PropOrNot and its fake news list of 200 Internet Russian agents. PropOrNot is a website hidden behind multiple screens as would be an offshore tax avoidance scheme. In other words, no known, responsible entity is behind the site, which has libeled 200 other websites, or if it is, it is too ashamed of what it is doing to be associated with it publicly.

    Consider the expertise and money required to shield the identity of an organization, whether tax avoidance or website. This is not something that just anyone can do. This type of Klingon cloaking requires real money or the CIA.

    As long as it pretends to be a newspaper, the Washington Post is subject to journalistic ethics. But the PropOrNot story by Craig Timberg violated journalistic ethics. Unsupported accusations were leveled against 200 websites, a McCarthyism record.

    How did a story, which would have been instantly quashed by editors in my day as a Wall Street Journal editor get past Timberg’s editor?

    That is the question.

    Here we have the Post committing libel against 200 websites, all of whom can sue for damages. There go Bezos’ billions.

    Would a Washington Post editor of any intelligence have published such a libel-inviting story unless the owner, Bezos, gave the OK or the order?

    How can the Washington Post feel secure in an act of libel?

    Is it because Bezos is protected by his reported membership on a US government committee, along with the Google CEO, that is believed to conspire against the privacy of the American people?

    PropOrNot would have amounted to nothing except for the Washington Post. Craig Timberg’s story was written as if PropOrNot was the real goods. Yet, Timberg does not reveal who is behind PropOrNot.

    Add to this picture the hyping by the Washington Post, New York Times, and TV presstitutes of the unattributed CIA charge that Russia hacked the Hillary emails and used them to elect Trump with the help of Russian agent websites. This fake news charge is challenged by Wikileaks and by a number of experts who asked why unattributed allegations are accepted in the place of evidence, and the charge is not supported by the FBI. How do we know that the alleged unattributed CIA charges are actually made by the CIA or whether there is consensus within the agency?

    How can the presstitutes, such as the NYT and Washington Post give us all these claims without a shred of evidence or any attribution to the CIA officials allegedly reporting the story? What kind of journalism is this?

    The conspiracy against truth and against president-elect Trump is real. The oligarchs and their presstitutes, rogue elements of the CIA and the neocon establishment hope to drag alternative media before McCarthyite congressional hearings run by the American hegemonists who want power over the world.

    Whatever you think of Trump, clearly the oligarchs who rule us fear him. The oligarchs are trying to keep Trump out of the presidency, and they are trying to associate truthful reporting with foreign influence.

    Who wins this war determines the fate of America.

  • Will Today's Selloff Continue: According To RBC, Here Is One Way To Find Out

    Having hit it out of the park recently with several fantastic cross-asset pieces, including “RBC Warns January Is Setting Up As A “Massive Mean-Reversion” Month” and “RBC Answers “THE” Question Every Investor Is Asking: “What Could Derail This Rally?””, today in the aftermath of the FOMC’s press conference, RBC’s cross-asset head Charlie McElligott is out with another must read report, explaining why we find outselves at a “dangerous fork in the road.”

    But before we present it to readers, a more topical point touched on by McElligott is how to determine what happens to markets tomorrow, specifically: whether today’s selloff will continue.  His answer:

    It’s likely that the very potent mix of higher $/Y and hits being taken in UST portfolios should induce further UST pressure from that specific audience. Sidenote:If they sell the Nikkei tonight despite the enormous weakening in yen today…I’ll start turning rather nervous for risk assets.

    If Charlie is right, tomorrow is not shaping up to be a pretty day for risk assets, because in the early Japanese session, the Nikkei was indeed being sold…

    • JAPAN’S NIKKEI 225 FALLS 0.1% TO 19,225.24 AT MORNING CLOSE

    … even as the Yen retraced just a modest part of its massive intraday move today.

    * * *

    Here is the rest of RBC’s note:

    **SPECIAL REPORT**: A DANGEROUS FORK IN THE ROAD

    #HOTTAKE: Geez. 

    The initial post-Fed takeaway was the collective “uh oh” from the buyside which was forced to suddenly shift to a worldview that the Fed is now “behind the curve,” with three hikes seemingly to come in ’17 (up from 2 in Sept projection), and then three more in each of the following two years.  Off the back of this reassessment, the more troubling observation came in the form of the exponential move in “real rates”:

    A violent move to this extent in real rates and USD (BBDXY seeing a +2.6SD move on day) is pure “FINANCIAL TIGHTENING,” which of course “mucks-up” the plumbing of a global economy funded in Dollars.  This is not supportive of the “reflation trade.”  We need some +++ inflation data, stat. 

    Rates blew through 2.50 on their way to 2.57, and now markets are fixating on 2.75 as the next stop.  These new levels brought out convexity sellers / swaps payers from the mortgage universe, but there is also seemingly a willingness from the leveraged-crowd to let their shorts ride / further pay in swaps, as it continues to generate so much positive PNL.  Into year-end with ever-diminishing liquidity / bank balance sheet, it would support the case for this to run.  Feedback too from the overseas ‘real money’ crowd also indicates that this rates-move can continue to run, as they won’t be buyers with yields closing at new highs (and especially above the ‘round #’ 2.50 level).  It’s likely that the very potent mix of higher $/Y and hits being taken in UST portfolios should induce further UST pressure from that specific audience (sidenote: if they sell the Nikkei tonight despite the enormous weakening in yen today…I’ll start turning rather nervous for risk assets).

    The potentially good news is that generally-speaking, the risk-parity community has gone through a massive deleveraging of their bond / duration length over the recent move, so there might not be the same scale of ‘unemotional selling’ as we’ve gotten accustomed-to during prior episodes of rate volatility….while too the only modest move in VIX (just +3.7% because out of the money call vols were down roughly equivalent to the marginal move higher in OTM put vols, mitigating one another—H/T Jon Simon) won’t bring out the ‘risk-control’ / ‘vol target’ universe in forced / mechanical risk-based deleveraging either.  Incredibly, 15-, 30- and 50-day historic SPX vols all sit below 10 still.

    Stocks acted largely as one would expect on an asymmetrical rates move higher: bond proxies / ‘low vol’ / defensives were absolutely crushed on account of the escalation of the duration unwind:

    The REAL issue for us ‘secular reflationists’ is that the recent positioning-pivot ‘winners’—small caps, high beta cyclicals, ‘value’ factor—were also beaten-up along-side the rates sensitives.  And in nearly perfect fit with the “January Effect” quant factor reversal strategy scenario (where quants go long Q4 ‘losers’ against short Q4 ‘leaders’), the two key factor inputs (being 1- December outperformance of “momentum market neutral” and 2- “anti-beta market neutral”) that we are watching as indicators were both ‘signaling’ again, with the two strategies as the two best-performing components in my thematic monitor today (green box):

    Optimally I think if markets come in to rates ripping to new highs tomorrow morning in sloppy-fashion, risk markets could be in for something.  But if we are able to expose some UST buyers and keep a lid on the rates move, it would allow financials / banks to work tomorrow, and stocks could very well likely “stop the bleeding.”  Per the script I’ve been outlining, I think then we have to set-up for the January ‘mean reversion’ potential where bonds rally against stocks, which in theory would allow re-setting of bond shorts and equities longs into a still picking-up backdrop of inflation and global PMIs. 

    Now instead, we must downshift that assessment and wait to take in new information in the coming-days with regards to this now very disruptive introduction of “financial tightening” and the implications for risky-assets. 
     

  • Trumponomics: Going for a Ride on the Trump Train

    The following article by David Haggith was published first on The Great Recession Blog:

    The Trumponomics Train may not be too smart. By a_marga from madrid, Spain (Be stupid) [CC BY-SA 2.0 (http://creativecommons.org/licenses/by-sa/2.0)], via Wikimedia CommonsI’m afraid the Trump train is headed for a sharp economic curve that takes us further away from free-market capitalism. The US already pulled out of the free-market station a long time ago, but Trumponomics moves deeply into a “mixed economy,” an economy in which government funding and private funding are married. The bankster-baron confederation in the Trump cabinet is how business and government consumate their marriage.

    My pervious article about Trump’s cabinet lineup demonstrated a major economic shift forming in the presidential cabinet. This article explains what that shift means.

     

    How Trumponomics may radically change the US economy

     

    In Trumponomics, this is worked out by placing corporate giants in direct control over all the reins of government in order to make sure that government is compliant to corporate interests as an effective way of boosting the economy. Trump has stated that most of his infrastructure spending will come from private enterprise, and this confederation assures government funding and business funding align.

    While this union empowers rapid economic growth, the downside to Trumponomics is that a mixed economy easily sidetracks from its stimulus intentions to becoming the ultimate form of crony capitalism because government and industry become such intimate partners in development that you cannot tell where one begins and the other really ends. That entices a flow of money from public to private interests. The state risks becoming the weaker partner in this arrangement — a mere servant of corporate needs and wants — because those running the state have their former institutions, lifelong friends and their pocket books at heart.

    Purportedly, Trumponomics is for the economic betterment of the entire nation, which is accelerated by combining the strength of state and business as a team in a unified direction. (It worked well for Germany after World War I.) I believe the Donald intends it for the best; but another downside is that Government — instead of having purely regulatory roles (congress and the executive branch) and the judicial role — effectively subsidizes certain businesses in creating the projects that government wants to accomplish.

    Trump is proposing that government may, for example, pay half the cost of building a bridge while a private contractor pays the other half in exchange for owning the right to collect a toll at the bridge forever. A bridge can support a toll that will be profitable up to a certain cost of construction. Above that cost, no one will pay the toll. So, the government kicks in the full cost above what industry sees as leaving room for an acceptable margin of profit. Government also helps clear the hurdles for construction. That gets a lot more things done quickly, but at what risks?

    Trumponomics is a plan for petal-to-the-metal growth; but it leaves no one regulating businesses when business executives are placed in charge of all the regulatory agencies. Another pitfall is that government, instead of simply assuring a level playing field for all businesses, can slip into favoritism toward businesses that are highly regarded by the corporate executives who assume the government reins of power.

    Granted, the US hasn’t had a truly free market for decades. The Fed, which is corporately owned, already rigs the economy constantly by enticing banks to soak up government debt at practically no interest with its promises of buying the debt back from its member banks and by creating money that it gives freely to banks to invest in stocks.

    Trump, however, is moving the country further in the direction of a mixed economy. Instead of state ownership of the economy (communism), it is corporate ownership of the state by corporate control of state offices, potentially directing them to the opposite end from what those offices were originally created for as regulatory bodies.

    I’m not saying corporate leaders should never hold cabinet positions, but when the cabinet is stacked almost entirely in the direction of Trump placing his corporate cronies in power, it looks very problematic, whether they are truly cronies (as in friends) or just a clutch of high-power corporate colleagues.

     

    The early surprise effects of Trumponomics

     

    Trump is already boosting the economy, and he hasn’t even assumed office. His Wall-Street cabinet lineup and his enormous corporate tax gifts (See “Trump: Titan of Corporate Tax Cuts” and “Trump Tax Plan Turns the Donald into Trickle-Down King.”) coupled to his promise that the government will take out huge sums of debt to buy projects from corporate tycoons have all certainly goosed stock-market expectations. Investors now run long with hopes that Trump’s plans will further inflate the stock market bubble to all-time weather-balloon heights.

    Given how Trump railed against Wall Street in his campaign, it is ironic that Trumponomics has proven most outstanding for Wall Street where bank stocks have risen more than any other sector. Leading the leaders of the pack, Goldman Sachs has absolutely skyrocketed, up a massive 33% since Trump won the election earlier this month:

     

    goldmanstocks

     

    The financial sector has taken off since the election, on the assumption that a Republican administration will foster a much more lenient regulatory environment than has been in place since the financial crisis…. In particular, Goldman Sachs — a previous employer of several key Trump advisers — has been on a tear…. Indeed, according to legendary trader Art Cashin, about one-third of the postelection increase in the Dow Jones Industrial Average came directly from Goldman Sachs’ performance. (Business Insider)

     

    Three of Trump’s key team members are former Goldman Sachs executives. Several others come from or own other major banks. To be sure, the Trump cabinet looks like a cabal of the world’s biggest bankers. It looks like a group you might find in Davos.

    This all builds a massive amount of steam to power economic growth (and, for that reason, it may be hard for Democrats to totally resist when confirmation time arrives, though they have manifold other reasons to object); but where does the Trump train end up?

    To what extent will the corporate interests that now saturate the Trump cabinet come to own government and use its potent economic fuel to power their own engines? Such massive economic changes certainly have the power to change my predicted 2016 schedule for the Epocalypse, made before anyone knew Trump would be the engineer of the nation’s new economic train — vastly different from Obama’s sputtering economy.

    That would be good, except I think the Trumponomics train arrives at the same station only with much more momentum as we power headlong into much greater government debt, crewed by a cabinet rife with conflicts of interest and enticements toward self-serving corporate corruption. We are either counting on the sterling reputation of the nation’s biggest bankers and oil barons to resist temptation or on Trump’s mighty ability to keep this rambunctious train on the rails and out of the swamps of corruption while running the locomotive at a head pressure greater than the engine’s normal operating capacity.

    Will we say at the end, “How the mighty have fallen?”

     

     

    Trumponomics ends in a train wreck? (Photo credited to the firm Levy & fils by this site. (It is credited to a photographer "Kuhn" by another publisher [1].) (the source was not disclosed by its uploader.) [Public domain], via Wikimedia Commons)

    Trumponomics ends in a train wreck if it doesn’t end before it even begins.

  • Is Janet Yellen Concerned About "A Bubble In Stock Prices"? This Is Her Answer

    Three months ago, Janet Yellen was asked during the last FOMC press conference if she was “worried about bubbles in the economy because of our prolonged low interest rates?” Her 169-word response was the following:

    Yes. Of course we are worried that bubbles will form in the economy and we routinely monitor asset valuations, while nobody can know for sure what type of valuation represents a bubble, that’s only something one can tell in hindsight, we are monitoring these measures of valuation and commercial real estate valuations are high. Rents have moved up over time, but still valuations are high, relative to rents. And so it is something we’ve discussed. We called this out in our monetary report and in other presentations and we are, in our supervision with banks, and I indicated, we have issued supervisory guidance to make sure underwriting is strong on these loans and this is something that we’ve looked at in stress tests, the larger banks to see what would happen to their capital positions and to make sure that they hold sufficient capital. And of course, I think the soundness and state of the banking system has improved substantially, but of course we are focused on such things.

    Fast forward to today, when Yellen was served a variation of the same question – one which included mentions of both “bubble” and “irrational exuberance” – by a Fox Business reporter, who asked: “the Dow is about to hit 20,000. It’s up substantially since the election apparently on investor optimism about the potential impact of President-elect Trump’s policies on the economy and an approving economy. I wonder if you share that optimism, number one. And if not, are we seeing a bout of perhaps irrational exuberance right now or are you concerned at all about a bubble in equity prices that could create some financial instability in the economy?

    Her response:

    I don’t want to comment on the level of stock prices. They may have been boosted by expectations about tax policy, possible cuts in corporate tax rates that have been much discussed, or by expectations about growth, possible reductions in down side risk to the economy. But these are things that market participants are trying to view along with the likely paths of interest rates, and I think all of that factors in to movements in stock valuations. But I don’t want to offer a view as to whether they are appropriate.

    The reporter did not, however, give up and continued his questioning:

    On equity prices you talked about whether or not evaluations are still within historical ranges and norms. Is Dow 20,000 kind of within the historical norms, are you comfortable with that?

    To which, a frustrated Yellen responded:

    Rates of return in the stock market relative to – remember that the level of interest rates is low – and taking that into account. I believe it’s fair to say that they remain within normal ranges.

    So i) Yellen did not wwant to comment on whether stock prices are appropriate and ii) when pressed, she confirmed that yes, they are.

    Which is surprising, because over a year and a half ago, in May 2015, Yellen’s view was quite different. As Bloomberg reported at the time, Yellen – speaking at a Washington forum  – said that “I would highlight that equity-market valuations at this point generally are quite high,” She then added “they’re not so high when you compare the returns on equities to the returns on safe assets like bonds, which are also very low, but there are potential dangers there.”

    How does the market valuation in  May 2015 compare to December 2016 from a forward PE multiple basis? Here is the answer:

     

    So since Janet appears confused, here is a quick primer from Bank of America laying out all the ways that stocks are currently overvalued. According to the 20 most popular metrics, the stock market is  currently overvalued based on 17 of them by as much as 76%.

     

    Don’t believe Bank of America? Here’s Goldman showing that as of November 28, the S&P is expensive based on most metrics. It is even more expensive as of today.

    So what is a trader to do: ignore the fundamentals and trust Yellen when she says that “it’s fair to say that valuations remain within normal ranges”, or open one’s eyes and watch as the world’s most overvalued “market” keeps grinding higher? We will know the answer as soon as the next BTFD opportunity presents itself.

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