• US National Insecurity: The Art Of Blaming Russia (For Everything)

  Submitted by Daniel Spaulding via 21stCenturyWine.com,

  In American politics the nation of Russia, especially as personified in its leader Vladimir Putin, becomes all things to all men.

  To American leftists, Russia is a neo-fascist, violently nationalist country that ruthlessly suppressed minority groups, especially homosexuals. To the American Right, Putin is the second coming of Stalin who is working to subvert good old-fashioned American values around the world.

  In line with the latter narrative, a certain Christian Gomez recently published an article on The New American website, the flagship of the John Birch Society, supposedly revealing that the Russian government is the real power behind the ISIS terrorist group, as well as being behind the recent terrorist attacks in Paris. The source of this “revelation” is a single, alleged and unidentified ‘defector’ from the FSB, Russia’s security service, who spilled these supposed secrets on Ukrainian television, a mouthpiece for the Washington-backed Kiev coup-junta that never misses an opportunity to slander all things Russian.

  Such charges are absurd on their face; there is absolutely no evidence to hint, much less demonstrate, that Russian intelligence had any involvement in the formation of ISIS. Why Russia would want to support a terrorist entity that seeks to destabilize and overthrow its close and reliable ally, Bashar Assad of Syria, is never explained or analyzed by either the faux defector or his American champions at the John Birch Society.

  Indeed, even mainstream Western media sources no longer make serious attempts to hide the fact that America’s regional allies, and not Russia, are to be identified as the sources of ISIS development and support. Countries like Saudi Arabia, Turkey, and even Israel have all played a significant role in funding, arming, and enabling ISIS, Jahbat al-Nusra, and other similar jihadist factions in Iraq and Syria.

  
  Turkey has an awfully peculiar way of “fighting” ISIS (Image: RT)

  America itself is certainly in a far better position to be plastered with the charge of supporting ISIS. According to Washington’s own Defense Intelligence Agency, the American government knew from the beginning of its support for the “Arab Spring” in Syria that the violent insurgency against Bashar Assad was composed primarily of unsavory, vicious Islamist factions, including the Muslim Brotherhood and Al-Qaeda sympathizers, and even predicted these factions, if empowered, would seek to create a Salafist “principality.”

  Meanwhile, Russian president Vladimir Putin has been stalwart in his support for Bashar Assad, recently going as far to providing air cover to the Syrian military as it seeks to reclaim the country from ISIS and other terrorist brigades. An undertaking that has earned Putin even more irrational hatred from the Western media and political establishment, which cheers on jihadists as they pillage and plunder their way through Syria.

  So where did this preposterous charge against Russia originate? The faux defector that would smear Russia with responsibility for ISIS is obviously a pawn of Langley’s Ukrainian satraps, but his absurd conspiracy theory still finds fans in the West, especially among so-called American conservatives and ‘patriots’, since it fits in with a much older narrative, one stretching back to the Cold War.

  During the height of the Cold War, figures like W. Cleon Skousen, a former FBI agent and an associate of the John Birch Society, and the opportunistic Soviet KGB defector Anatoly Golitsyn propagated the narrative that the Soviet Union was not merely a geopolitical rival of the United States, but was fantastically successful in its quest to undermine American democracy and replace it with a communist society. Golitsyn and Cleon Skousen’s nephew, Joel Skousen, have gone as far as to claim the collapse of the Soviet Union was a clever ruse designed to lull America and the West into a false sense of security so that the “communist agenda” might continue, with no one the wiser.

  Coincidentally, this non-falsifiable conspiracy theory plays well to more fringe elements of the American “patriot” movement and many Christian dispensationalists, who see Russia as the Biblical ‘Gog and Magog’ set to devour their idol, the State of Israel. It also provides a convenient scapegoat for American conservatives who are unable or unwilling to see the real culprits behind the social chaos in their country – and that their country is the prime source of both geopolitical and cultural subversion abroad.

  Communist influence on American society and culture during the era of the Cold War shouldn’t be wholly discounted. In fact, the neo-Marxist Frankfurt School certainly left its mark, though often exaggerated, on the deconstruction of traditional institutions in the West. But often overlooked by anti-communist conspiracy theorists is the reality that cultural Bolsheviks like Herbert Marcuse and Theodor Adorno didn’t receive their marching orders from Moscow, a power which they disdained, but rather were assets of Western elites and their intelligence apparatus, particularly the U.S. Office of Strategic Services (OSS), the forerunner of the CIA. Nor did Bolshevism in the first part of the 20th century spawn indigenously from Russian soil, like Athena from the head of Zeus. Rather, the dictatorship of the proletariat was helped along in its ascendancy by oligarchs in New York and London.

  
  PROPAGANDA’S ROLE REVERSAL: “It’s only feigned reverence, obviously Neo-Soviet propaganda.”

  Furthermore, its impossible to find any evidence that Russia exerts any significant social, economic, or political influence on America, or is working toward turning America into the “socialist workers’ paradise”. On the contrary, whatever minor outreach that Russians have extended to America has actually been toward Christian conservatives wishing to preserve the traditional family and other social values.

  While neoconservatives and their useful idiots among the American “patriots” cynically dismiss President Putin as a Soviet retrograde and Tom Clancy villain, the Kremlin implements communist policies neither at home, nor abroad. On the other hand, Russian Orthodoxy has returned slowly but surely as a central part of Russian life, and Russian patriotism has no need for Marxist rhetoric about workers’ revolutions or the dictatorship of the proletariat.

  Instead of tired, CIA-fueled Cold War narratives and covers for liberal imperialism, perhaps sincere conservatives and ‘patriots’ in America should look to the Soviet dissident, Russian patriot, and devout Christian, Alexander Solzhenitsyn, a man far wiser than any ‘FSB defector’. Solzhenitsyn saw a positive, stabilizing role in Putin’s leadership as Russian culture and identity revived, and it was Solzhenitsyn who also saw that the “Euro-Atlantic alliance” was the engine of the “decline of Christian civilization.” Meanwhile, the West sinks further into its simulacrum Babylon, and its spiritually blind “defenders” will blame anyone but themselves.

  

  

  

  

  

• Exclusive: "And It's Gone… It's All Gone" – The One Gold Scandal That Goes To The Very Top

  Long before Turkey was flagrantly arming and funding the CIA-created “terrorist organization” known as ISIS, there was another, far more elaborate way in which Turkey was flaunting international sanctions against an ostracized state – in this case Iran – which involved an epic gold smuggling triangle of Hollywood-thriller proportions, all made possible thanks to the United Arab Emirate city of Dubai.

  Best known known for its luxury shopping, ultramodern architecture including the world’s tallest building, a lively nightlife scene, and a facade of openness and decorum, what Dubai is less known for is its unprecedented seedy underbelly of corruption and untouched criminality among the handful of billionaire oligarchs, princes, sheiks and sultans, who quietly dominate the local (and global) power and financial structure.

  But first, a little history.

  It may seem like a distant memory now, but just a few short years ago, instead of a close ally of Barack Obama, Iran was a pariah state subject to international financial sanctions due to its nuclear program development, one which Israel had repeatedly (and famously) threatened would attack preemptively to prevent Iran from obtaining a nuclear weapon.

  Iran, of course, had no choice but to find ways to keep its economy going, and in order to circumvent these sanctions, it resorted to the oldest form of trade known to man: gold.

  This, in itself, is not surprising. What is surprising is how and with whom Iran collaborated to breach the international embargo in order to obtain this valuable and much needed gold, which it could then barter with other countries – notably those along the Pacific Rim – in exchange for any and all needed products and services.

  A Reuters article from October 23, 2012 explained, in broad terms, just how Iran’s intricate smuggling operation worked.

  To see one of Iran’s financial lifelines at work, pay a visit to Istanbul’s Ataturk International Airport and find a gate for a flight to Dubai. Couriers carrying millions of dollars worth of gold bullion in their luggage have been flying from Istanbul to Dubai, where the gold is shipped on to Iran, according to industry sources with knowledge of the business.

   

  The sums involved are enormous. Official Turkish trade data suggests nearly $2 billion worth of gold was sent to Dubai on behalf of Iranian buyers in August. The shipments help Tehran manage its finances in the face of Western financial sanctions.

   

  The sanctions, imposed over Iran’s disputed nuclear program, have largely frozen it out of the global banking system, making it hard for it to conduct international money transfers. By using physical gold, Iran can continue to move its wealth across borders.

   

  “Every currency in the world has an identity, but gold means value without identity. The value is absolute wherever you go,” said a trader in Dubai with knowledge of the gold trade between Turkey and Iran.

   

  The identity of the ultimate destination of the gold in Iran is not known. But the scale of the operation through Dubai and its sudden growth suggest the Iranian government plays a role.

   

  The Dubai trader and other sources familiar with the business spoke to Reuters on condition of anonymity, because of the political and commercial sensitivity of the matter.

   

  Iran sells oil and gas to Turkey, with payments made to state Iranian institutions. U.S. and European banking sanctions ban payments in U.S. dollars or euros so Iran gets paid in Turkish lira. Lira are of limited value for buying goods on international markets but ideal for a gold buying spree in Turkey.

  So three years ago, Turkey was purchasing Iran oil and paying in gold. Now it is purchasing ISIS oil and paying in dollars, for the simple reason that there is no banking embargo against the Islamic State like there was against Iran in 2012. One almost wonders why the international community was far stricter with Iran than it is with ISIS now.

  Anyway, continuing on, we present: the Dubai connection.

  In March [of 2012] as the banking sanctions began to bite, Tehran sharply increased its purchases of gold bullion from Turkey, according to the Turkish government’s trade data. Direct gold exports to Iran from Turkey, long a major consumer and stockpiler of gold, hit $1.8 billion in July – equivalent to over a fifth of Turkey’s entire trade deficit in that month.

   

  In August, however, a sudden plunge in Turkey’s direct gold exports to Iran coincided with a leap in its sales of the precious metal to the UAE.

   

  Turkey exported a total $2.3 billion worth of gold in August, of which $2.1 billion was gold bullion. Just over $1.9 billion, about 36 metric tons, was sent to the UAE, latest available data from Turkey’s Statistics Office shows. In July Turkey exported only $7 million of gold to the UAE. At the same time Turkey’s direct gold exports to Iran, which had been fluctuating between $1.2 billion and about $1.8 billion each month since April, slumped to just $180 million in August.

   

  The Dubai-based trader said that from August, direct shipments to Iran were largely replaced by indirect ones through Dubai, apparently because Tehran wanted to avoid publicity.

   

  “The trade from Turkey directly to Iran has stopped because there was just too much publicity around it,” said the trader.

  However, instead of suddenly having a craving for Turkish gold, Dubai was merely a middleman which would then resell Turkey’s gold to Iran, in exchange for a very generous commission.

  Dealers, jewelers and analysts in Dubai said they had not noticed any large, sudden increase of supply in the local gold market during August. They said that suggested the increased shipments to the UAE were sent straight on to Iran.

   

  It is not clear how the gold is moved from Dubai to Iran, but there is substantial trade between the two economies, much of it conducted by wooden dhows and other ships crossing the Gulf, a distance of only about 150 kilometers (100 miles) at its narrowest point.

  And as everyone knows, what better way to “lose” gold at a moment’s notice than to be involved in an “unfortunate shipping accident”…

  A trader in Turkey said Tehran had shifted to indirect imports because the direct shipments were widely reported in Turkish and international media earlier this year. “Now on paper it looks like the gold is going to Dubai, not to Iran,” he said.

   

  Iranian gold buyers may want to conceal their Turkish gold deliveries for fear of attracting attention from the United States, which is pressing countries around the world to shrink their economic ties with Iran.

   

  The buyers may also want to make their purchases less vulnerable to any possible interference by Turkey’s government. Turkey’s close relationship with Iran has begun to sour as the two states find themselves on opposite sides of the civil war in Syria, with Turkey advocating the departure of President Bashar al-Assad and Iran remaining Assad’s staunchest regional ally.

  Fear not: if the Erdogan family was guaranteed, say 5% of the total transaction price, it would gladly close its eyes, even if it meant the Ayatollah singing lullabies and war chants to Assad in his bedroom.

  But why gold?

  Simple: while Iran’s banks had been locked out of SWIFT international money transfer system (until mid-2015 when Obama’s historic nuclear deal with Iran was announced and let Iran back into the global financial community), and commerce was virtually impossible in fiat currency terms, the UN sanctions did not prohibit most forms of trade. As a result there was no suggestion that the gold trade involving Dubai was violating international sanctions. In fact, the west tacitly encouraged, and Turkey latched on to this great source of trade arbitrage, and unbridled corruption with both hands. Reuters continued:

  Turkish trade data confirms the gold is being transported to Dubai by air. According to the data, $1.45 billion of Turkey’s total gold exports in August [2012] were shipped through the customs office at Ataturk airport’s passenger lounge. Almost all of the rest, $800 million, were shipped from Istanbul’s smaller Sabiha Gokcen airport.  Turkey’s total exports of all goods to the UAE totaled $2.2 billion in August. Of that amount, $1.19 billion were registered at the Ataturk passenger lounge, while $776 million were registered at Sabiha Gokcen.

  It was a golden free for all: “a customs broker who does business at Ataturk said couriers were boarding Turkish Airlines and Emirates flights to Dubai at the airport, carrying the metal in their hand luggage to avoid the risk of it getting lost or stolen.”

  The maximum amount of gold bullion which a passenger is allowed to take is 50 kilograms (110 pounds), he said. This suggests that during the month of August, as many as several hundred courier trips may have taken gold to Dubai on Iran’s behalf.

   

  “It is all legal, they declare it, they give their tax number and it is all registered so there is nothing illegal about this,” the broker said.

  The Reuters article cut off at the most important part: who were the people organizing the trade? “The trade data shows almost $1.4 billion worth of Turkey’s August exports to the UAE came from a company or companies with a tax number registered in the coastal city of Izmir, Turkey’s third biggest. Customs officials at Ataturk declined a Reuters request to provide documents identifying the exporters, saying the information was confidential. The identity of the companies handling the business could not be confirmed. Traders said that because of the risk of attracting unwelcome attention from U.S. authorities, only a few companies were likely to be willing to get involved.”

  Almost a year later, we found out just why the local authorities were so very cautious about identifying the people on the Turkish side behind this “perfectly legal trade”- it involved everyone from an Iranian billionaire, Riza Sarraf, to Turkey’s then economy minister, Zafer Caglayan, all the way to the very top, you guessed it, current president and then prime minister, Recep Tayyip Erdogan. A Bloomberg follow up piece from the summer of 2013 laid out all the key actors on the Turkish side:

  As the minister in charge of Turkey’s $800 billion economy in 2013, Zafer Caglayan was facing a series of numbers that didn’t bode well for coming elections. Inflation was up, growth was slowing and the lira was weakening.

   

  One key measure of financial health was particularly worrisome: the country was importing far more goods, services and capital than it was sending abroad. By October, when he was interviewed by a local CNBC affiliate, Caglayan described the gap as unsustainable and said the government would take steps to improve it.

   

  What he didn’t mention was a clandestine export-boosting operation started up more than a year before that was helping to solve the trade imbalance.

   

  At the time of the television appearance, it was still underway. Three weeks before, Caglayan had been secretly taped by national-police investigators telling his collaborators to find a way to increase exports by at least $1 billion a month. His orders came from the top in a two-hour meeting with Prime Minister Recep Tayyip Erdogan, he told an associate.

   

  The operation featured an Iranian-born businessman who liked fast horses, faster cars and the fastest planes. His unique skill: Getting gold into sanctions-encircled Iran. Enough gold that for a time he became the government’s key instrument in improving Turkey’s irksome economic imbalance.

   

  How a team that included Turkey’s economy minister sought to manage the current account deficit, as the gap is called, by juicing exports to Iran is laid out in a 300-page document prepared by Turkish investigators in 2013. Caglayan and his collaborators also came away with tens of millions of dollars in bribes, according to the document, which has been cited in parliament by opposition lawmakers.

  Caglayan resigned on Dec. 25 as economy minister after the investigation became public, is immune from prosecution as a member of parliament. Erdogan, whose bribes from this operations were in the hundreds of millions of dollars, did everything in his power as then-prime minister to kill the probe and decried the inquiry as an “attempted coup”, a card he has pulled every single time some political probe gets too close to his unprecedented financial crimes, which have a recurring pattern: sell goods and services to an organization isolated by the international community, and pocket tens or hundreds of millions in “commissions” and bribes in the process.

  Since then Erdogan has made Turkey his personal despotic fiefdom, and after serving as prime minister from 2003 to 2014, he was “elected” president in which role he serves to this day. There is not a soul in Turkey who poses any political threat to Erdogan, whose vast plundered financial fortune assures that the army would be on his side even in a military coup scenario.

  In any case, the spice, or rather gold, flowed. As Bloomberg confirmed in 2013, “the covert efforts that Caglayan and his associates undertook eventually swelled to a multi-billion dollar enterprise that reached from Ghana to China, according to the investigation. Tons of gold flowed from Turkey to Iran, much of it via Dubai. That freed up Iranian money trapped in Turkish banks, in turn boosting Turkish exports.

  When the gold trade was foiled by tightening American sanctions starting in July 2013, Sarraf and his collaborators kept exporting. They sent thousands of tons of overpriced — and sometimes fictitious — food onto ships steaming between Dubai and Iran, according to the document.”

  It was not just Erdogan and Caglayan who made a killing: “Smoothing out the complications of this shadowy and complex trade were bribes to Turkish government ministers: multimillion-dollar diamonds, and millions of dollars stuffed into suit bags, chocolate boxes and even shoe boxes, the investigation document says.”

  Meanwhile, the amounts of gold shipped from Turkey to Iran via Dubai were simply staggering:

  In an interview with television channel A Haber, Sarraf estimated he had facilitated the transfer of about $12 billion in gold — about 200 tons — to Iran. That represented “about 15 percent-15.5 percent of the current account deficit that I closed by myself,” he said. He didn’t say what period he was referencing.

   

  “There’s a serious benefit to the Turkish economy with profit that’s gone into state coffers,” he told the interviewer.

  Ultimately, this unprecedented in its vast scale and scope gold smuggling operation, which stretched as far as China, Moscow and Azerbaijan, faded: in July 2013 the U.S. added precious metals to the list of items that couldn’t be sold to Iran as part of an effort to curtail that country’s nuclear enrichment program.

  At that moment that Iran gold smuggling party for Turkey was over, and it was time to find a new foreign “trade” partner. A year later one emerged in the form of ISIS as has been documented here previously…

  * * *

  All of this has been publicly known so far. What follows is being reported for the first time.

  While in 2012 and 2013 the world’s attention was focused on Iran and Turkey, with both Reuters and Bloomberg scrambling to find the involved parties, nobody paid any attention to the key middle-man responsible for billions in smuggled gold, Dubai. And while the main Turkish actors and beneficiaries of this gold smuggling have been extensively documented, nothing at all has been written about any of the Dubai intermediaries who also made hundreds of millions, if not more, simply for facilitating the move of gold from point A to point B.

  Which is strange, because for anyone doing even a little cursory digging, the answer was there in broad daylight all along.

  Presenting Mohammed Abu-Alhaj: the key Dubai “connection” in the Turkey-Iran gold smuggling triangle.

  

   

  Who is Abu-Alhaj? A brief biography from his public profile:

  Mohammad has many years of vast experience in the finance and financial technology industry. He began his career establishing an e-commerce business in the United States followed by another e-commerce of a different trade. He then moved on to Dubai in the early 2000s to establish a brokerage firm. Following its success he was a major shareholder in its subsidiaries across the MENA region.

   

  Meanwhile he has set-up, directed and operated many entities in the online trading of financial products, and now gold and precious metals. Mohammad is very resourceful and possesses many highly qualified skills; he has developed innovative platforms for online trading, effective management and leading skills and he is thorough in analyzing problems and finding creative solutions.

   

  Mohammad’s latest accomplishment is the set-up of the Gold AE DMCC and its subsidiaries across the region, Switzerland and Africa, one of the first online trading entities for deliverable gold and silver, and Islamic dinars and dirhams in the United Arab Emirates.

   

  Presently, Mohammad is the Founder, Chairman and Managing Director of Gold AE. He is also the deputy Chairman and a board member of Abu Alhaj Holdings, registered in the Dubai International Financial Centre.

  What made Abu-Alhaj unique was his early fascination and interest in Turkey and its role in “physical deliverable gold” trading. A fascination which paid off in droves. Follow excerpts from article from Turkish newspaper Dunya…

  

  … ironically written on October 23, 2012, the same day as Reuters first exposed Turkey’s role in this epic gold smuggling triangle.

  Dubai businessmen connects Gulf investors with Turkey

   

  Mohammed Abu-Alhaj, vice chairman and chief executive officer of his Dubai-based family-owned Abu-Alhaj Holding, first visited Turkey as a tourist in 2004, and explored the economic possibilities of the country.

   

  “I saw stability had started to take hold in the nation. Turkey was a highly productive country. I was certain it would become among the top emerging markets for years to come,” the 40-year old businessmen reminisced in an interview in Istanbul on Saturday.

   

  Soon he acquired a Turkish brokerage house, Ikrisat Yatirim, through the Savings Deposits Insurance Fund (TMSF), a state banking receivership fund, for S15 million, and became one of the first Arab Investors in Turkey.

   

  In 2009, he sold the brokerage house to Dubai Holding. He then established in Istanbul’s Atasehir financial district the company Altin 24.com, an on-line gold trading company. Altin 24 serves as the Istanbul office of his regional gold commerce company Gold.AE. He also founded a store in Istanbul’s Covered Bazaar, the main gold and jewelry market of Turkey. Altin 24 provides full services in gold bullion and certificates trading for Turkish clients.

   

  Although he employs only nine persons in Turkey, his Altin 24 has already carried out $700 million in gold trading in the country.

   

  Istanbul and Dubai are the world’s two biggest centers for gold trade.

   

  Acting as bridge

   

  “I started to believe I could be a bridge between the Arab world, especially the six nation Gulf Cooperation Countries (GCC), and the Turkish market,” he said. “I resolved to help remove the obstacles preventing GCC oompanies from investing in the country.”

   

  He has been successful so far.

   

  Although once shy of secular Turkey, Arab investment has been pouring into Turkey since Prime Minister Recep Tayyip Erdogan’s moderately Islamist Justice and Development Party came to power a decade ago.

   

  * * *

   

  Mr. Abu-Alhaj’s father found Abu-Alhaj holding as a logistics company and then went into industry. The group, which he still runs with his five sons, now has investments in technical textiles, pharmaceuticals, agribusiness, real estate development, investment banking and tourism in seven nations: Dubai, Jordan, Kuwait, Saudi Arabia, Switzerland, Yemen and Turkey.

   

  A graduate of computer science and information technologies from Concordia University in Montreal, Quebec, Canada, he worked on Wall Street during the dot.com bubble that led to the collapse of hundreds of technology upstarts. He returned to his homeland to run the family business.

   

  Mr. Abu-Allhaj believes that the decision of Turkey’s Central Bank to allow depositors and banks to hold gold accounts has helped the country distance itself from the economic crises gripping the world.

   

  “Gold accounts will save the country from the crisis in international markets that will happen for sure” he asserted.

  He may be right about that, but it is everything else that has raised a red flag. Incidentally, those curious can read much more about Abu-Alhaj’s push into Turkey’s gold market in the Press section of his Gold.AE website.

  But just who is Gold Arab Emirate, or Gold AE, based out of Dubai? We ask because we – like most of our readers – had never heard of this company before. Perhaps the company’s biggest claim to fame was the first gold ATM it introduced in the Emirates back in 2010, to much media fanfare.

  

   

  Ok, so they make gold ATMs. What else? For the answer we go straight to the company’s website.

  Gold AE, Like Your Gold Bank

   

  Gold Arab Emirate, Gold AE is the first corporate entity in Middle East incorporated in Dubai – UAE, for E-Commerce of Gold & Silver bullion being its core commercial activity. Gold AE is conducting its operations under the commercial license # DMCC 30821, issued by Dubai Multi Commodities Centre (DMCC). DMCC is a Dubai Government’s initiative to monitor and facilitate the trading in precious metals.

   

  In addition to its presence in Dubai, it has branches in Abu Dhabi (UAE), Jordan, Turkey, Switzerland and affiliations in Qatar, Saudi Arabia and Egypt.

   

  Gold AE is led by an experienced team of seasoned bullion professionals which gives it a competitive advantage over contemporary firms in the market and gaining a remarkable reputation as an emerging market participant in the gold markets of the gulf. We are proud to provide investor friendly schemes in bullion investments through our highly valuable trading platform apart from providing international brands in bullion products on our E-shop at comparatively low cost.

   

  Gold AE is a subsidiary of M/s Gold Holding Ltd, a Dubai International Financial Centre (DIFC) based company. M/s Gold Holding Ltd. owns various trading entities involved in online bullion trading of physical gold and silver, gold mining and refining industries as well as entities serving the financial institutions for gold logistics. The Holding company professionally supports its subsidiaries with financing, operational business management and controlling activities. This includes market sectors such as gold industry, information technology, as well as financial investments.

  Notable is the website’s description of its executive management, which presents Abu-Alhaj as Chairman and Managing Director. Keep that in mind because it will be important shortly.

  

   

  But even more important, is the company’s description of itself as a subsidiary of Gold Holding Ltd. Who is Gold Holdings? Again, we go to the source:

  Gold Holding Limited is an investment holding company headquartered in Dubai and registered under the laws and regulations of the Dubai International Financial Centre. Gold Holding is a thriving group that is constantly seeking new companies to join its growing portfolio of precious metal and mining companies. It does however have stringent ethical values that mean its procurement methods are always of the highest moral standards and it is highly selective in where it chooses to operate.

  Basically, if Gold AE is the Turkey-focused trading front, Gold Holding is the mothership which deals with all major activities behind the scenes. This becomes immediately obvious when looking at the main shareholders and management team of the Holding company.

  Main Shareholders:

   

  – SBK Business Holding www.sbkholding.com
  – Sheik Sultan BIn Khalifa bin sultan Al-nahyan (Chairman)
  – Sheik Malek Hmood Alsabah (Vice Chairman)
  – Abu-alhaj Holding
  – Aruntani Sac

  Management:

   

  – Chairman: Sheik Sultan bin khalifah Al nahyan
  – Vice Chairman: Sheik Malek Hmood Alsabah
  – Managing Director: Mo Nico Consari
  – CEO: Andre Gauthier
  – CFO: Fahad Ayoob

  Please bear with us a few more minutes as we close all these semingly unconnected loops of ownership, because while most other names presented so far are largely meaningless, one name above stands out, that of Sheikh Sultan Bin Khalifa Bin Zayed Al Nahyan.

  Sultan is the advisor to the President of UAE, the eldest son of Khalifa Bin, President of the United Arab Emirates, Supreme Commander of the UAE Armed Forces, and Ruler of Abu Dhabi.

  Sultan was promoted to the rank of lieutenant colonel staff pilot in 1999 and then to the rank of colonel staff in February, 2000. He is the advisor to the president of the UAE, Khalifa bin Zayed, and the board chairman of the SBK Holding. He is among the board members of the Executive Council of Abu Dhabi. He was appointed the board member of the Abu Dhabi Investment Authority for three years in April 2013.
  

  
  

  Basically, Sultan is the second in command in the United Arab Emirates.
  

  As for SBK Holding, it is the Holding Company of Sultan Bin Khalifa. “With its headquarters in the United Arab Emirates, SBK Holding has a range of companies that serve a broad cross-section of industries not only in the Gulf region but also globally.”

  A quick glance at the company’s website shows that it is involved in virtually everything, and among the things it is involved in, is a vast gold trading empire courtesy of the Gold Holding company.

  * * *

  To recap the story so far:

  • Mohammed Abu-Alhaj is the owner of Gold.AE, a gold trading operation, whose primary role has been facilitating gold trade in Turkey (and ostensibly, since it is the primary Dubai gold company involved in Turkey, was the dominant player in Turkey’s smuggling of gold to Iran).
  • Gold.AE is a subsidiary of Gold Holdings Ltd, a company which is owned by SBK Business Holdings and Abu Dhabi’s second in command, the son and avisor to the ruler of Abu Dhabi, Sheik Sultan bin khalifah Al nahyan

  All of this brings us to today, and the following letter which the suddenly very unfortunate clients of Gold.AE aka “Your Gold Bank“, just received.

  Dear Client

   

  A group of minority shareholders of GOLD HOLDING suspected that there were questionable financial transactions being undertaken in Gold AE DMCC (“the Company”). Acting on these suspicions they initiated internal investigations. During the course of the investigations the entire then management team abruptly resigned with no notice. Since the majority shareholders also seemed to be unavailable, the minority shareholders did not accept this resignation. However, these persons went to DMCC, submitted their resignations and managed to get their visas cancelled.

   

  Following this, in august 2015, Mr. Andre Gauthier has been appointed as the manager of the Company so that investigations continued and once completed necessary action can be taken to secure the interests of the clients and shareholders of the company. His appointment took effect from August 9 ,2015 . When he took over, new management realized that he now had access to more information concerning the activities of the previous management and, he realized that there had been substantial withdrawals from the company’s account to the personal accounts of some of the management and the majority shareholders.

   

  Management has also uncovered information with respect to the existence of a bank account with Arab Bank (Switzerland) Ltd in Switzerland in the name of the Company. An attempt has been made to approach this bank but, since none of the current management or minority shareholders are signatories to the account and, due to the stringent Swiss banking laws and regulations regarding confidentiality, no additional information or access has been provided by the bank.

   

  In order to try and secure/recover monies that had been taken out of the accounts of the company, Mr. Gauthier in his capacity as manager has filed various cases as against the recipients of the funds from the Company (Dubai Police ( Bur Dubai Police Station), Case No: 24378). The minority shareholders are doing everything within their powers to support him in his efforts to recover these monies that were withdrawn from Gold AE in questionable circumstances.

   

  DMCC has alleged that some of these activities undertaken by the previous management are in breach of DMCC’s rules and as such they have taken the decision to terminate the license of the Company. We are working closely with DMCC to find a solution and in the meanwhile, we request that you bear with us. In the meanwhile, as a statutory consequence of the license being terminated, the trading platform of the Company has to shut down as of the date of termination of the license which is 24th November 2015.

   

  We trust the forgoing is of assistance.

   

  Sincerely,

   

  On behalf of GOLD AE MANAGEMENT

  To loosely paraphrase South Park “aaaannd it’s gone. The gold is all gone.“

  For all those who just received the letter, and had funds at Gold.AE, our condolences, because if there is any confusion, what it says is that after a cursory inquiry into the operations of the “former” management team, the one led by Abu-Alhaj, not only did the “management team” vaporize with all the funds held in the trading group, but they “seemed to be unavailable”, meaning the management team itself vaporized. It also means that any funds you may have had there are gone for ever.

  Furthermore, since the letter explicitly highlights the “minority shareholders”, one wonders: was Sheik Sultan bin khalifah Al nahyan, the second most important person in Abu Dhabi, and a majority shareholder, involved in this unprecedented raiding of a company that was instrumental in the Turkey-to-Iran gold smuggling campaign?

  And if he wasn’t directly involved, just how much about this company’s gold-smuggling operations did he know?

  But perhaps the money is not completely vaporized. Perhaps it is simply sitting in the following Swiss bank as per the letter:

  

   

  Then again, we doubt that any money parked by the fraudulent management team of Gold AE will ever be uncovered, if only in the public realm: after all, the tentacles of this particular scandal stretch very far, so far that anyone who dares to talk will not live to say much more.

  How far?

  Let’s summarize once again: a gold-smuggling scandal that took place under the nose of the US and the international community for years, one which allowed Iran to skirt international sanctions using gold as a barter tool to keep its economy going and involved China and Russia among many other nations, and one which saw the participation of not only the economic and prime ministers of Turkey (and current president) but also countless corrupt Turkish politicians and the richest person in Iran, but also the second most powerful person in Dubai, the largest holding company in the Arab Emirates and the largest gold holding company in the Gulf state.

  A scandal which resulted in untold riches for everyone involved, and has also resulted in the Dubai management team disappearing with what may well be billions in stolen funds.

  And, naturally, there is a token “anonymous” Swiss bank to boot, which is likely the resting place of said stolen billions.

  All of this it is real, it happened, and is not the screenplay of the next James Bond movie.

  And – the punchline – it all revolves around one of the simplest products known to man: gold.

  

  

  

  

  

• The Fed Has Created A "Monster" And Just Made A "Dangerous Mistake," Stephen Roach Warns

  Stephen Roach is worried that the Fed has set the world up for another financial market meltdown. 

  Lower for longer rates and the proliferation of unconventional monetary policy have created “a breeding ground for asset bubbles, credit bubbles, and all-too frequent crises, so the Fed is really a part of the problem of financial instability rather than trying to provide a sense of calm in an otherwise unstable world,” Roach told Bloomberg TV in an interview conducted a little over a week ago. 

  To be sure, Roach’s sentiments have become par for the proverbial course. That is, it may have taken everyone a while (as in five years or so) to come to the conclusion we reached long ago, namely that central banks are setting the world up for a crisis that will make 2008 look like a walk in the park, but most of the “very serious” people are now getting concerned. Take BofAML for instance, who, in a note we outlined on Wednesday, demonstrated the prevailing dynamic with the following useful graphic:

  

  Perhaps Jeremy Grantham put it best: “..in the Greenspan/ Bernanke/Yellen Era, the Fed historically did not stop its asset price pushing until fully- fledged bubbles had occurred, as they did in U.S. growth stocks in 2000 and in U.S. housing in 2006.”

  Indeed. It’s with that in mind that we bring you the following excerpts from a new piece by Roach in which the former Morgan Stanley chief economist and Yale fellow recounts the evolution of the Fed and how the FOMC ultimately became “beholden to the monster it had created”.

  *  *  *

  From “The Perils of Fed Gradualism” as posted at Project Syndicate

  By now, it’s an all-too-familiar drill. After an extended period of extraordinary monetary accommodation, the US Federal Reserve has begun the long march back to normalization.

  A majority of financial market participants applaud this strategy. In fact, it is a dangerous mistake. The Fed is borrowing a page from the script of its last normalization campaign – the incremental rate hikes of 2004-2006 that followed the extraordinary accommodation of 2001-2003. Just as that earlier gradualism set the stage for a devastating financial crisis and a horrific recession in 2008-2009, there is mounting risk of yet another accident on what promises to be an even longer road to normalization.

  The problem arises because the Fed, like other major central banks, has now become a creature of financial markets rather than a steward of the real economy. This transformation has been under way since the late 1980s, when monetary discipline broke the back of inflation and the Fed was faced with new challenges.

  The challenges of the post-inflation era came to a head during Alan Greenspan’s 18-and-a-half-year tenure as Fed Chair. The stock-market crash of October 19, 1987 – occurring only 69 days after Greenspan had been sworn in – provided a hint of what was to come. In response to a one-day 23% plunge in US equity prices, the Fed moved aggressively to support the brokerage system and purchase government securities.

  In retrospect, this was the template for what became known as the “Greenspan put” – massive Fed liquidity injections aimed at stemming financial-market disruptions in the aftermath of a crisis. As the markets were battered repeatedly in the years to follow – from the savings-and-loan crisis (late 1980s) and the Gulf War (1990-1991) to the Asian Financial Crisis (1997-1998) and terrorist attacks (September 11, 2001) – the Greenspan put became an essential element of the Fed’s market-driven tactics.

  The Fed had, in effect, become beholden to the monster it had created. The corollary was that it had also become steadfast in protecting the financial-market-based underpinnings of the US economy.

  Largely for that reason, and fearful of “Japan Syndrome” in the aftermath of the collapse of the US equity bubble, the Fed remained overly accommodative during the 2003-2006 period. The federal funds rate was held at a 46-year low of 1% through June 2004, before being raised 17 times in small increments of 25 basis points per move over the two-year period from mid-2004 to mid-2006. Yet it was precisely during this period of gradual normalization and prolonged accommodation that unbridled risk-taking sowed the seeds of the Great Crisis that was soon to come.

  Today’s Fed inherits the deeply entrenched moral hazard of the Asset Economy. The longer the Fed remains trapped in this mindset, the tougher its dilemma becomes – and the greater the systemic risks in financial markets and the asset-dependent US economy.

  Full post here

  *  *  *

  Roach goes on to say that we’re already seeing the beginnings of what may very well turn out to be a dramatic unwind as high yield rolls over and the emerging world struggles to cope with a soaring dollar (remember, even though EM has largely avoided “original sin” i.e. borrowing in dollars, at the sovereign level, corporates are another story). 

  As an aside, those interested in a comprehensive account of what Roach covers in the article cited above are encouraged to reach David Stockman’s “The Great Deformation.”

  

  

  

  

  

• Why 'The Regime' Hates Gold

  Submitted by Doug Casey via InternationalMan.com,

  A meme is now circulating that gold is the investment equivalent of a pet rock, and that the smart investor should sell gold, and buy stocks. That’s a ridiculous notion. In fact, if you believe in buying low and selling high, this is the time to buy gold, and sell stocks.

  It pays to remain as objective as you can be when analyzing any investment. People have a tendency to fall in love with an asset class, usually because it’s treated them so well. We saw that happen most recently with Internet stocks in the late ’90s and with houses up to 2007. Investment bubbles are driven primarily by emotion, although there’s always some rationale for the emotion to latch on to. Perversely, when it comes to investing, reason is recruited mainly to provide cover for passion and preconception.

  In the same way, people tend to hate certain investments unreasonably, usually at the bottom of a bear market, after they’ve lost a lot of money; even thinking about the asset means reliving the pain and loss. Love-and-hate cycles occur for all investment classes.

  But there’s only one investment I can think of that many people either love or hate reflexively, almost without regard to market performance: gold. And, to a lesser degree, silver. It’s strange that these two metals provoke such powerful psychological reactions – especially among people who dislike them. Nobody has an instinctive hatred of iron, copper, aluminum, or cobalt. The reason, of course, is that the main use of gold has always been as money. And people have strong feelings about money. Let’s spend a moment looking at how gold’s fundamentals fit in with the psychology of the current market.

  What Gold Is – and Why It’s Hated

  Let me first disclose that I’ve always been favorably inclined toward gold, simply because I think money is a good thing. Not everyone feels that way, however. Some, with a Platonic view, think that money and commercial activity in general are degrading and beneath the “better” sort of people – although they’re a little hazy about how mankind rose above the level of living hand-to-mouth, grubbing for roots and berries. Some think it’s “the root of all evil,” a view that reflects a certain attitude toward the material world in general. Some better-informed people (who have actually read Paul of Tarsus) think it’s just the love of money that’s the root of all evil. Some others see the utility of money, but think it should be controlled somehow – as if only the proper authorities know how to manage the dangerous substance.

  From an economic viewpoint, however, money is just a medium of exchange and a store of value. Efforts to turn it into a political football invariably are signs of a hidden agenda, or perhaps a psychological aberration.

  But, that said, money does have a moral as well as an economic significance. And it’s important to get that out in the open and have it understood. My view is that money is a high moral good. It represents all the good things you hope to have, do, and provide in the future. In a manner of speaking, it’s distilled life. That’s why it’s important to have a sound money, one that isn’t subject to political manipulation.

  Over the centuries, many things have been used as money, prominently including cows, salt, and seashells. Aristotle thought about this in the 4th century BCE and arrived at the five characteristics of a good money:

  • It should be durable (which is why, say, wheat isn’t a good money – it rots).

  • It should be divisible (which is why artwork isn’t a good money – you can’t cut up the Mona Lisa for change).

  • It should be convenient (which is why lead isn’t a good money – it just takes too much to be of value).

  • It should be consistent (which is one reason why land can’t be money – each piece is different).

  • And it should have value in itself (which is why paper money leads to trouble).

  Of the 92 naturally occurring elements, gold has proved the best money (silver is second). It’s not magic or superstition any more than it is for iron to be best for building bridges and aluminum for building airplanes.

  Of course, we do use paper as money today, but only because it recently served as a receipt for actual money. Paper money (currency) historically has a half-life that depends on a number of factors. But it rarely lasts longer than the government that issues it. Gold is the best money because it doesn’t need to be “faith based” or rely on a government.

  There’s much more that can be said on this topic, and it’s important to grasp the essentials in order to understand the controversy about whether now is a good time to buy. But this isn’t the place for an extended explanation.

  Keep these things in mind, though, as you listen to the current blather from talking heads about where gold is going. Most of them are just journalists, reporters that are parroting what they heard someone else say. And the “someone else” is usually a political apologist who works for a government. Or a hack economist who works for a bank, the IMF, or a similar institution with an interest in the status quo of the last few generations. You should treat almost everything you hear about finance or economics in the popular media as no more than entertainment.

  So, let’s take some recent statements, assertions, and opinions that have been promulgated in the media and analyze them. Many impress me as completely uninformed, even stupid. But since they’re floating around in the infosphere, I suppose they need to be addressed.

  Misinformation and Disinformation

  Let’s examine some memes floating around.

  “Gold is expensive.”

  This objection is worth considering – for any asset. In fact, it’s critical. We can determine the price of almost anything; that’s easy. The hard part is figuring out its value. From the founding of the U.S. until 1933, the dollar was defined as 1/20th of an ounce of gold. From 1933 to 1971, it was redefined as 1/35th of an ounce. After the 1971 dollar devaluation, the official price of the metal was raised to $42.22 – but that official number is meaningless, since nobody buys or sells the metal at that price. More importantly, people have gotten into the habit of giving the price of gold in dollars, rather than the value of the dollar in gold. But that’s another subject.

  Here’s the crux of the argument. Before the creation of the Federal Reserve in 1913, a $20 bill was just a receipt for the deposit of one ounce of gold with the Treasury. The U.S. official money supply equated more or less with the amount of gold. Now, however, dollars are being created by the trillion, and nobody really knows how many more of them are going to be shazammed into existence.

  It’s hard to determine the value of anything when the inch marks on your yardstick keep drifting closer and closer together.

  “The smart money is long gone from gold.”

  This is an interesting assertion that I find is based on nothing at all. Who really is the “smart money”? How do you really know that? And how do you know exactly what they own (except for, usually, many months after the fact) or what they plan on buying or selling? The fact is that very few billionaires (John Paulson perhaps being the best known of them) have declared a major position in the metal. Gold is only a tiny proportion of the financial world’s assets, both absolutely or relative to where it has been in the past:

  

  “Gold is risky.”

  Risk is largely a function of price. And, as a general rule, the higher the price, the higher the risk, simply because supply is likely to go up and demand down – leading to a lower price. So, yes, gold is riskier at $1,100 than it was at $700 or at $200. But even when it was at $35, there was a well-known financial commentator named Eliot Janeway (I always thought he was a fool and a blowhard) who was crowing that if the U.S. government didn’t support it at $35, it would fall to $8.

  In any event, risk is relative. Stocks are very risky today. Bonds are ultrarisky. Real estate, at least in many major cities, is in a near mania. And the dollar, although it’s cyclically popular, is on its way to reaching its intrinsic value. In fact, stock, bonds, property, and the dollar are all in bubble territory.

  Yes, gold is risky now. But it is actually much less risky than most alternatives.

  “Gold pays no interest.”

  This is kind of true. But only in the sense that a $100 bill pays no interest. You can get interest from anything that functions as money if it is lent out. Interest is the time premium of money. You will not get interest from either your $100 or your gold unless you lend them to someone. But both the dollars and the gold will earn interest if you lend them out. The problem is that once you make a loan (even to a bank, in the form of a savings account), you may not even get your principal back, much less the interest. And, of course, many banks around the world now pay negative interest for loaning them money – an absurd inversion of reality.

  “Gold pays no dividends.”

  Of course it doesn’t. It also doesn’t yield chocolate syrup. It’s a ridiculous objection, because only corporations pay dividends. It’s like expecting your Toyota in the driveway to pay a dividend, when only the corporation in Japan can do so. But if you want dividends related to gold, you can buy a successful gold mining stock.

  “Gold costs you insurance and storage.”

  This is arguably true. But it’s really a sophistic misdirection to which many people uncritically nod in agreement. You may very well want to insure and professionally store your gold. Just as you might your jewelry, your artwork, and most valuable things you own. It’s even true of the share certificates for stocks you may own. It’s true of the assets in your mutual fund (where you pay for custody, plus a management fee).

  You can avoid the cost of insurance and storage by burying gold in a safe place – something that’s not a practical option with most other valuable assets. But maybe you really don’t want to store and insure your gold, because the government may prove a greater threat than any common thief. And if you pay storage and insurance, they’ll definitely know how much you have and where it is.

  “Gold has no real use.”

  This assertion stems from a lack of knowledge of basic chemistry as well as economics. Yes, of course people have always liked gold for jewelry, and that’s a genuine use. It’s also good for dentistry and micro-circuitry. Owners of paper money, however, have found the stuff to be absolutely worthless hundreds of times in scores of countries.

  In point of fact, gold is useful because it is the most malleable, the most ductile, and the most corrosion resistant of all metals. That means we’re finding new uses for it literally every day. It’s also the second-most conductive of heat and electricity, and the second-most reflective (after silver). Gold is a hi-tech metal for these reasons. It can do things no other substance can and is part of the reason your computer works so well.

  But all these reasons are strictly secondary, because gold’s main use has always been (and I’ll wager will be again) as money. Money is its highest and best use, and it’s an extremely important one.

  “The U.S. can, or will, sell its gold to pay its debt, depressing the market.”

  I find this assertion completely unrealistic. The U.S. government reports that it owns 265 million ounces of gold. Let’s say that’s worth about $300 billion right now. I’m afraid that’s chicken feed in today’s world. It’s only half of this year’s federal deficit alone. It’s only half of one year’s trade deficit. It represents perhaps only 2% of the dollars outside the U.S. The U.S. government may be the largest holder of gold in the world, but it owns less than 5% of the approximately 6 billion ounces above ground.

  From the ’60s until about 2000, most Western governments were selling gold from their treasuries, working on the belief it was a “barbarous relic.” Since then, governments in the advancing world – China, India, Russia, and many other ex-socialist states – have been buying massive quantities.

  Why? Because their main monetary asset is U.S. dollars, and they have come to realize those dollars are the unbacked liability of a bankrupt government. They’re becoming hot potatoes, Old Maid cards. But the dollars can be replaced with what? Sovereign wealth funds are using them to buy resources and industries, but those things aren’t money. And in the hands of bureaucrats, they’re guaranteed to be mismanaged. I expect a great deal of gold buying from governments around the world over the next few years. And it will be at much higher dollar prices.

  “High gold prices will bring on huge new production, which will depress its price.”

  This assertion shows a complete misunderstanding of the nature of the gold market. Gold production is now about 90 million ounces per year and is trending down. That’s partly because, at high prices, miners tend to mine lower-grade ore. And partly because the world has been extensively explored, and most large, high-grade, easily exploited resources have already been put into production. And partly because most production is now unprofitable. Miners aren’t putting any new mines into production.

  But new production is trivial relative to the 6 billion ounces now above ground, which only increases by about 1.3% annually. Gold isn’t consumed like wheat or even copper; its supply keeps slowly rising, like wealth in general. What really controls gold’s price is the desire of people to hold it, or hold other things – new production is a trivial influence.

  That’s not to say things can’t change. The asteroids have lots of heavy metals, including gold; space exploration will make them available. Gigantic amounts of gold are dissolved in seawater and will perhaps someday be economically recoverable with biotech. It’s now possible to transmute metals, fulfilling the alchemists’ dream; perhaps someday this will be economic for gold. And nanotech may soon allow ultralow-grade deposits of gold (and every other element) to be recovered profitably. But these things need not concern us as practical matters for years to come.

  “You should have only a small amount of gold, for insurance.”

  This argument is made by those who think gold is only going to be useful if civilization breaks down, when it could be an asset of last resort. In the meantime, they say, do something productive with your money…

  This is poor speculative theory. The intelligent investor allocates his funds where it’s likely they’ll provide the best return, consistent with the risk, liquidity, and volatility profile he wants to maintain. There are times when you should be greatly overweight in a single asset class – sometimes stocks, sometimes bonds, sometimes real estate, sometimes what-have-you. From 1971 to 1980 and 2001 to 2011, it was wise to be hugely overweight gold. From 1981 to 2000 and 2011 to the present, it was wise to only keep an insurance position. Right now, you again want an overweight position. The idea of keeping a constant, but insignificant, percentage in gold impresses me as poorly thought out.

  “Interest rates are near zero; gold will fall as they rise.”

  In principle, as interest rates rise, people tend to prefer holding currency deposits. So they tend to sell other assets, including gold, to own interest-earning cash. But there are other factors at work. What if the nominal interest rate is 20%, but the rate of currency depreciation is 40%? Then the real interest rate is minus 20%. This is more or less what happened in the late ’70s, when both nominal rates and gold went up together. Right now governments all over the world are suppressing rates even while they’re greatly increasing the amount of money outstanding; this will eventually (read: soon) result in both much higher rates and a much higher general price level. At some point, high real rates will be a factor in ending the gold bull market, but that time is many months or years in the future.

  “Gold sentiment is dead.”

  That’s quite true. Gold sentiment is not just quite subdued among the public; most of them barely know the metal even exists.

  You’ll know sentiment is at a high when major brokerage firms are hyping newly minted gold products, and Slime Magazine (if it still exists) has a cover showing a golden bull tearing apart the New York Stock Exchange. We’re a long way from that point. When it arrives, I hope to sell my gold and buy the NYSE.

  “Mining stocks are risky.”

  This is absolutely true. In general, mining is a horrible business. It requires gigantic fixed capital expense to build a mine, but only after numerous, expensive, and unpredictable permitting issues are handled. Then, the operation is immovable and subject to every political risk imaginable, not infrequently including nationalization. Add in continual and formidable technical issues of every description, compounded by unpredictable fluctuations in the price of the end product. Mining is a horrible business, and you’ll never find Graham-Dodd investors buying mining stocks.

  All these problems (and many more that aren’t germane to this brief article), however, make mining stocks excellent speculative vehicles from time to time. Like right now.

  “Mineral exploration stocks are very, very risky.”

  This is very, very true. There are thousands of little public companies, and some are just a couple steps up from a prospector wandering around with a mule. Others are fairly sophisticated, hi-tech operations. Exploration companies are often classed with mining companies, but they are actually very different animals. They aren’t so much running a business as engaging in a very expensive and long-odds treasure hunt.

  That’s the bad news. The good news is that they are not only risky but extraordinarily volatile. The most you can lose is 100%, but the market cyclically goes up 10 to 1, with some stocks moving 1,000 to 1. That kind of volatility can be your best friend. Speculating in these issues, however, requires both expertise and a good sense of market timing. But they’re likely to be at the epicenter of the gold bubble when it arrives – even though few actually have any gold, except in their names.

  “Warren Buffett is a huge gold bear.”

  This is true, but irrelevant – entirely apart from suffering from the logical fallacy called “argument from authority.” Nonetheless, when the world’s most successful investor speaks, it’s worth listening. Here’s what Buffett said about gold in an interview with Ben Stein, another goldphobe:

  You could take all the gold that’s ever been mined, and it would fill a cube 67 feet in each direction. For what that’s worth at current gold prices, you could buy all – not some, all – of the farmland in the United States. Plus, you could buy 10 ExxonMobils, plus have $1 trillion of walking-around money. Or you could have a big cube of metal. Which would you take? Which is going to produce more value?

  I’ve long considered Buffett an idiot savant – a genius at buying stocks but at nothing else. His statement is accurate, but completely meaningless. The same could be said of the U.S. dollar money supply – or even of the world inventory of steel and copper. These things represent potential, but are not businesses or productive assets in themselves. Buffett is certainly not stupid, but he’s a shameless and intellectually dishonest sophist, despite his disarming and avuncular demeanor. And although a great investor, he’s neither an economist nor someone who believes in free markets.

  “Gold is a religious statement.”

  Actually, since most religions have an otherworldly orientation, they’re at least subtly (and often stridently) anti-gold. But it is true that some promoters of gold seem to have an Elmer Gantry-like style. That, however, can be said of True Believers in anything, whether or not the belief itself has merit. In point of fact, I think it’s more true to say goldphobes suffer from a kind of religious hysteria, fervently believing in collectivism in general and the state in particular, with no regard to counterarguments. Someone who understands why gold is money and why it is currently a good speculative vehicle is hardly making a religious statement. More likely, he’s taking a scientific approach to economics and thinking for himself.

  So Where Are We?

  So, these are some of the more egregious arguments against gold that are being brought forward today. Most of them are propounded by knaves, fools, or the uninformed.

  My own view should be clear from the responses I’ve given above. But let me clarify it a bit further. Historically – actually just up until the decades after World War I, when world governments started issuing paper currency with no relation to gold – the metal was cash, and it was used as money everywhere, on a daily basis. I believe that will again be the case in the fairly near future.

  The question is: At what price will that occur, relative to other things? It’s not just a question of picking a dollar price, because the relative value of many things – houses, food, commodities, labor – has been distorted by a very long period of currency inflation, increased taxation, and very burdensome regulation that started at the beginning of the last depression. Especially with the fantastic leaps in technology now being made and breathtaking advances that will soon occur, it’s hard to be sure exactly how values will realign after the Greater Depression ends. And we can’t know the exact manner in which it will end. Especially when you factor in the rise of China and India.

  A guess? I’ll say the equivalent of about $5,000 an ounce of today’s dollars. And I feel pretty good about that number, considering how shaky the world financial situation is, and that we are – I believe – about to enter another gold bull market. Classic bull markets have three stages. We’re still in the “Stealth” stage – when few people even remember gold exists, and those who do mock the idea of owning it. Next, we’ll enter the “Wall of Worry” stage, when people notice it and the bulls and bears battle back and forth. At some point, we’ll enter the “Mania” stage – when everybody, including governments, is buying gold, out of greed and fear. But also out of prudence.

  The policies of Bernanke, Yellen, and Obama – and also of almost every other central bank and government in the world – are not just wrong. These people are, perversely, doing just the opposite of what should be done to cure the problems that have built up over decades. One consequence of their actions will be to ignite numerous other bubbles in various markets and countries. I expect the biggest bubble will be in gold, and the wildest one in mining and exploration stocks.

  When will I sell out of gold and gold stocks? Of course, they don’t ring a bell at either the top or the bottom of the market. But I expect to be a seller when there really is a bubble, a mania, in all things gold related. There’s a good chance that will coincide to some degree with a real bottom in conventional stocks. I don’t know what level that might be on the DJIA, but I think its average dividend yield might then be in the 6% to 8% area.

  The bottom line is that gold and its friends are again cheap, and they have a long way – in both time and price – to run. Until they’re done, I suggest you be right and sit tight.

  

  

  

  

  

• Manhattan Luxury-Home Prices Drop For 8th Straight Month Amid "Glut In Overpriced Apartments"

  The poor are getting poorer but the rich, it appears, are no longer getting richer. With apartment vacancies at 9-month highs, Bloomberg reports that Manhattan's luxury-home market is rapidly losing its luster. Prices have been dropping every month since February, when they reached their highest point on record, and, as one analyst notes, "the downward trend in that decline hasn’t abated, and we haven’t seen it wavering in any way."

  As we detailed previously,

  The vacancy rate in November was 2.87 percent, up from 2.31 percent a year earlier and the highest since August 2006, according to a report Thursday by appraiser Miller Samuel Inc. and brokerage Douglas Elliman Real Estate. Landlords eager to fill empty units lured tenants with the most concessions since 2011.

   

  

   

  The rise in vacancies suggests tenants are reaching the upper limits of what they’re able to pay after more than four years of almost continuous rent growth, according to Jonathan Miller, president of Miller Samuel. In November, the median monthly apartment rent climbed 3.9 percent from a year earlier to $3,361. Leasing costs have jumped more than 18 percent since the end of the recession in June 2009.

   

  “We’re reaching the point where things can’t go up as much,” Miller said in an interview. “The economics don’t make much sense anymore.”

   

  …

   

  “The conditions that are driving rents higher haven’t changed,” Miller said. “What’s changed is the acceptance of it, the affordability of it.”

   

  The luxury-apartment market, the top 10 percent of all rentals by price, was the only category with a decline in prices. The median rent in November fell 1.4 percent to $8,537.

   

  “Complaining about high rents in Manhattan is nothing new, but now it’s becoming more visceral to tenants,” said Miller, who’s been tracking the apartment market since 1991.

   

  “We’re hitting the point where affordability is really becoming a much bigger issue than it has been in the past.”

  And now luxury home prices are falling…

  

  As Bloomberg details,

  Prices for luxury homes are moving in the opposite direction from the broader Manhattan market, where values are still rising and discounts are few. New York’s high-end inventory has ballooned in recent years as developers focused on building large and lavish units in an appeal to wealthy investors, who now appear to be more hesitant to buy. Listings for more moderately priced homes, meanwhile, haven’t been replenished because the high cost of land makes building in that range unprofitable, and owners are reluctant to sell because they can’t afford to trade up.

   

  The result is a pool of listings that’s light on the properties that more people want to buy, Lightfeldt said. In the third quarter, the supply of homes for sale in the top fifth of the the market rose more than in any other segment, jumping 8.9 percent to 4,055 units, according to StreetEasy. For the other four levels combined, listings declined more than 3 percent.

   

  The Federal Reserve, in its December Beige Book of regional economic conditions, noted the same bifurcation in the New York market, citing a “supply glut” of high-end homes and slackening buyer demand for them. The top price tier was also the only one in which sellers as a group didn’t get their full asking price in the third quarter, StreetEasy data show.

   

  “Every asset has a threshold in pricing and once you push past it, you’re going to see the buyers resist,” said Donna Olshan, president of Olshan Realty Inc. and author of a weekly newsletter on the New York luxury market.

   

  Olshan, who defines luxury as units listed for at least $4 million, described having had four good sales weeks out of the past four months, with prospective buyers choosing to pause rather than submit to ever higher prices.

   

  “We have a lot of overpriced apartments on the market and that’s the reason for a slowdown,” said Olshan, who said she believes the market has plateaued rather than peaked.

   

  “Tremendous overpricing means that marketing periods are longer, and the people who are overpriced are going to have to correct.”

  The luxury market “has been over-served and the demand seems to be fully satiated,” said Lightfeldt of StreetEasy.

  The firm’s price index is based on a representative sampling of resales in a given month, which are compared to their previous sales prices.

   

  Demand for the most-expensive homes has also been dimmed by the weakening of the euro against the U.S. dollar, gyrations in the Chinese stock market and a losing year for hedge funds, Olshan said.

   

  “You take all of those factors and you sprinkle them onto a real estate market that was overpriced to begin with, and you’re going to feel it,” she said.

  *  *  *

  So what market's property bubble explodes next?

  

  

  

  

  

  

  

• Ukraine's Looming "19 Fukushimas" Scenario

  Submitted by Dmitry Orlov via ClubOrlov.com, (author of The Five Stages Of Collapse)

  With all the action in Syria, the Ukraine is no longer a subject for discussion in the West. In Russia, where the Ukraine is still a major problem looming on the horizon, and where some 1.5 million Ukrainian refugees are settling in, with no intentions of going back to what's left of the Ukraine, it is still actively discussed. But for the US, and for the EU, it is now yet another major foreign policy embarrassment, and the less said about it the better.

  In the meantime, the Ukraine is in full-blown collapse – all five glorious stages of it – setting the stage for a Ukrainian Nightmare Before Christmas, or shortly after.

  Phase 1. Financially, the Ukrainian government is in sovereign default as of a couple of days ago. The IMF was forced to break its own rules in order to keep it on life support even though it is clearly a deadbeat. In the process, the IMF stiffed Russia, which happens to be one of its major shareholders; what gives?

   

  Phase 2. Industry and commerce are approaching a standstill and the country is rapidly deindustrializing. Formerly, most of the trade was with Russia; this is now over. The Ukraine does not make anything that the EU might want, except maybe prostitutes. Recently, the Ukraine has been selling off its dirt. This is illegal, but, given what's been happening there, the term “illegal” has become the stuff of comedy.

   

  Phase 3. Politically, the Ukrainian government is a total farce. Much of it has been turned over to fly-by-night foreigners, such as the former Georgian president Saakashvili, who is a wanted criminal in his own country, which has recently stripped him of his citizenship. The parliament is stocked with criminals who bought their seat to gain immunity from prosecution, and who spend their time brawling with each other. Prime Minister Yatsenyuk was recently hauled off the podium by his crotch; how dignified is that? He seemed unfazed. Where are his testicles? Perhaps Victoria Nuland over at the US State Dept. is keeping them in a jar. This sort of action may be fun to watch on Youtube, but the reality is quite sad: those who “run” the Ukraine (if the term still applies) are only interested in one thing: stealing whatever is left.

   

  Phase 4. Ukrainian society (if the term still applies) has been split into a number of warring factions. This was, to some extent, inevitable. What happens if you take bits of Poland, Hungary, Romania and Russia, and stick them together willy-nilly? Well, results may vary; but if you also spend $5 billion US (as the Americans did) turning the Ukrainians against Russia (and, since they are mostly Russian, against themselves), then you get a complete disaster.

   

  Phase 5. Cultural collapse is quite advanced. The Ukraine once had the same world-class educational system as Russia, but since independence they switched to teaching in Ukrainian (a made-up language) using nonexistent textbooks. The kids have been taught a bogus history hallucinated by rabid Ukrainian nationalists. They've been told that Russia is backward and keeping them back, and that they deserve to be happy in the EU. (Just like the Greeks? Yeah…) But now the population has been reduced to levels of poverty not commonly seen outside of Africa, and young people are fleeing, or turning to gangsterism and prostitution, to merely survive. This doesn't make for a happy cultural narrative. What does it mean to be “a Ukrainian” now? Expletives deleted. Sorry I asked.

  Now, here's what it all really means. With so much going wrong, the Ukraine has been unable to secure enough natural gas or coal supplies to provide a supply cushion in case of a cold snap this winter. A few weeks of frosty weather will deplete the supply, and then pipes will freeze, rendering much of the urban areas unlivable from then on (because, recall, there is no longer any money, or any industry to speak of, to repair the damage). That seems bad enough, but we aren't quite there yet.

  You see, the Ukraine produces over half of its electricity using nuclear power plants. 19 nuclear reactors are in operation, with 2 more supposedly under construction. And this is in a country whose economy is in free-fall and is set to approach that of Mali or Burundi! The nuclear fuel for these reactors was being supplied by Russia. An effort to replace the Russian supplier with Westinghouse failed because of quality issues leading to an accident. What is a bankrupt Ukraine, which just stiffed Russia on billions of sovereign debt, going to do when the time comes to refuel those 19 reactors? Good question!

  But an even better question is, Will they even make it that far? You see, it has become known that these nuclear installations have been skimping on preventive maintenance, due to lack of funds. Now, you are probably already aware of this, but let me spell it out just in case: a nuclear reactor is not one of those things that you run until it breaks, and then call a mechanic once it does. It's not a “if it ain't broke, I can't fix it” sort of scenario. It's more of a “you missed a tune-up so I ain't going near it” scenario. And the way to keep it from breaking is to replace all the bits that are listed on the replacement schedule no later than the dates indicated on that schedule. It's either that or the thing goes “Ka-boom!” and everyone's hair falls out.

  How close is Ukraine to a major nuclear accident? Well, it turns out, very close: just recently one was narrowly avoided when some Ukro-Nazis blew up electric transmission lines supplying Crimea, triggering a blackout that lasted many days. The Russians scrambled and ran a transmission line from the Russian mainland, so now Crimea is lit up again. But while that was happening, the Southern Ukrainian, with its 4 energy blocks, lost its connection to the grid, and it was only the very swift, expert actions taken by the staff there that averted a nuclear accident.

  I hope that you know this already, but, just in case, let me spell it out again. One of the worst things that can happen to a nuclear reactor is loss of electricity supply. Yes, nuclear power stations make electricity—some of the time—but they must be supplied with electricity all the time to avoid a meltdown. This is what happened at Fukushima Daiichi, which dusted the ground with radionuclides as far as Tokyo and is still leaking radioactive juice into the Pacific.

  And so the nightmare scenario for the Ukraine is a simple one. Temperature drops below freezing and stays there for a couple of weeks. Coal and natural gas supplies run down; thermal power plants shut down; the electric grid fails; circulator pumps at the 19 nuclear reactors (which, by the way, probably haven't been overhauled as recently as they should have been) stop pumping; meltdown!

  And so, if you want to say a prayer for the Ukraine this holiday season, don't bother because it's well and truly fucked. But do say a prayer for global warming. If this winter stays very, very warm, then the “19 Fukushimas” scenario just may be averted. This is not impossible: we've been seeing one freakishly warm winter after another, and each passing month is setting new records. The future is looking hot—as in very warm. Let us pray that it doesn't also turn out to be hot—as in radioactive.

  

  

  

  

  

• Two-Thirds Of Young Democrats Eager To Accept Refugees From Fictional City In Aladdin Movie

  Earlier in the week, many scoffed at the stereotype-confirming 30% of Republicans than supported the bombing of Agrabah – the fictional city from the Disney movie Aladdin. Now, according to WPAResearch, a new poll shows a stunning 66% of young Democrats are especially eager to take in the imaginary refugees.

  As WPAResearch reports,

  Public Policy Polling, which is known for adding questions in surveys to exploit Republicans who are less informed, recently found that 30% of Republican voters would support bombing Agrabah, a fictional country in the Disney film Aladdin.

   

  On December 20, 2015, WPA Research fielded a national survey of 1,132 registered voters that found 44% of Democrats would support taking refugees from that same Agrabah.

   

  Would you support or oppose allowing refugees from Agrabah to be re-settled in the United States?

   

  

   

  PPP may have proven that some Republicans will support bombing a fictional country, but fully 44% of Democrats will allow refugees from anywhere into the country, whether they are potential ISIS supporters from Syria or potential cartoon characters on a magic carpet ride.

   

  Additionally, 'Young' Democrats aged 18-34, a key constituency of President Obama, are especially eager to take in imaginary refugees.

   

  

   

  So, nearly two-thirds of these voters support accepting refugees from Agrabah. This seems particularly suprising given this generation grew up watching Disney films such as Aladdin.

  *  *  *

  As Mike Krieger concluded recently,

  And you wonder why things are the way they are. These are the people who will choose the Presidential nominees for each corrupt political party.

  

  

  

  

  

• 58 Facts About The U.S. Economy From 2015 That Are Almost Too Crazy To Believe

  Submitted by Michael Snyder via The Economic Collapse blog,

  The world didn’t completely fall apart in 2015, but it is undeniable that an immense amount of damage was done to the U.S. economy.

  This year the middle class continued to deteriorate, more Americans than ever found themselves living in poverty, and the debt bubble that we are living in expanded to absolutely ridiculous proportions.  Toward the end of the year, a new global financial crisis erupted, and it threatens to completely spiral out of control as we enter 2016. 

  Over the past six months, I have been repeatedly stressing to my readers that so many of the exact same patterns that immediately preceded the financial crisis of 2008 are happening once again, and trillions of dollars of stock market wealth has already been wiped out globally.  Some of the largest economies on the entire planet such as Brazil and Canada have already plunged into deep recessions, and just about every leading indicator that you can think of is screaming that the U.S. is heading into one.

  So don’t be fooled by all the happy talk coming from Barack Obama and the mainstream media.  When you look at the cold, hard numbers, they tell a completely different story.  The following are 58 facts about the U.S. economy from 2015 that are almost too crazy to believe…

  #1 These days, most Americans are living paycheck to paycheck.  At this point 62 percent of all Americans have less than 1,000 dollars in their savings accounts, and 21 percent of all Americans do not have a savings account at all.

  #2 The lack of saving is especially dramatic when you look at Americans under the age of 55.  Incredibly, fewer than 10 percent of all Millennials and only about 16 percent of those that belong to Generation X have 10,000 dollars or more saved up.

  #3 It has been estimated that 43 percent of all American households spend more money than they make each month.

  #4 For the first time ever, middle class Americans now make up a minority of the population. But back in 1971, 61 percent of all Americans lived in middle class households.

  #5 According to the Pew Research Center, the median income of middle class households declined by 4 percent from 2000 to 2014.

  #6 The Pew Research Center has also found that median wealth for middle class households dropped by an astounding 28 percent between 2001 and 2013.

  #7 In 1970, the middle class took home approximately 62 percent of all income. Today, that number has plummeted to just 43 percent.

  #8 There are still 900,000 fewer middle class jobs in America than there were when the last recession began, but our population has gotten significantly larger since that time.

  #9 According to the Social Security Administration, 51 percent of all American workers make less than $30,000 a year.

  #10 For the poorest 20 percent of all Americans, median household wealth declined from negative 905 dollars in 2000 to negative 6,029 dollars in 2011.

  #11 A recent nationwide survey discovered that 48 percent of all U.S. adults under the age of 30 believe that “the American Dream is dead”.

  #12 Since hitting a peak of 69.2 percent in 2004, the rate of homeownership in the United States has been steadily declining every single year.

  #13 At this point, the U.S. only ranks 19th in the world when it comes to median wealth per adult.

  #14 Traditionally, entrepreneurship has been one of the primary engines that has fueled the growth of the middle class in the United States, but today the level of entrepreneurship in this country is sitting at an all-time low.

  #15 For each of the past six years, more businesses have closed in the United States than have opened.  Prior to 2008, this had never happened before in all of U.S. history.

  #16 If you can believe it, the 20 wealthiest people in this country now have more money than the poorest 152 million Americans combined.

  #17 The top 0.1 percent of all American families have about as much wealth as the bottom 90 percent of all American families combined.

  #18 If you have no debt and you also have ten dollars in your pocket, that gives you a greater net worth than about 25 percent of all Americans.

  #19 The number of Americans that are living in concentrated areas of high poverty has doubled since the year 2000.

  #20 An astounding 48.8 percent of all 25-year-old Americans still live at home with their parents.

  #21 According to the U.S. Census Bureau, 49 percent of all Americans now live in a home that receives money from the government each month, and nearly 47 million Americans are living in poverty right now.

  #22 In 2007, about one out of every eight children in America was on food stamps. Today, that number is one out of every five.

  #23 According to Kathryn J. Edin and H. Luke Shaefer, the authors of a new book entitled “$2.00 a Day: Living on Almost Nothing in America“, there are 1.5 million “ultrapoor” households in the United States that live on less than two dollars a day. That number has doubled since 1996.

  #24 46 million Americans use food banks each year, and lines start forming at some U.S. food banks as early as 6:30 in the morning because people want to get something before the food supplies run out.

  #25 The number of homeless children in the U.S. has increased by 60 percent over the past six years.

  #26 According to Poverty USA, 1.6 million American children slept in a homeless shelter or some other form of emergency housing last year.

  #27 Police in New York City have identified 80 separate homeless encampments in the city, and the homeless crisis there has gotten so bad that it is being described as an “epidemic”.

  #28 If you can believe it, more than half of all students in our public schools are poor enough to qualify for school lunch subsidies.

  #29 According to a Census Bureau report that was released a while back, 65 percent of all children in the U.S. are living in a home that receives some form of aid from the federal government.

  #30 According to a report that was published by UNICEF, almost one-third of all children in this country “live in households with an income below 60 percent of the national median income”.

  #31 When it comes to child poverty, the United States ranks 36th out of the 41 “wealthy nations” that UNICEF looked at.

  #32 An astounding 45 percent of all African-American children in the United States live in areas of “concentrated poverty”.

  #33 40.9 percent of all children in the United States that are being raised by a single parent are living in poverty.

  #34 There are 7.9 million working age Americans that are “officially unemployed” right now and another 94.4 million working age Americans that are considered to be “not in the labor force”.  When you add those two numbers together, you get a grand total of 102.3 million working age Americans that do not have a job right now.

  #35 According to a recent Pew survey, approximately 70 percent of all Americans believe that “debt is a necessity in their lives”.

  #36 53 percent of all Americans do not even have a minimum three-day supply of nonperishable food and water at home.

  #37 According to John Williams of shadowstats.com, if the U.S. government was actually using honest numbers the unemployment rate in this nation would be 22.9 percent.

  #38 Back in 1950, more than 80 percent of all men in the United States had jobs.  Today, only about 65 percent of all men in the United States have jobs.

  #39 The labor force participation rate for men has plunged to the lowest level ever recorded.

  #40 Wholesale sales in the U.S. have fallen to the lowest level since the last recession.

  #41 The inventory to sales ratio has risen to the highest level since the last recession.  This means that there is a whole lot of unsold inventory that is just sitting around out there and not selling.

  #42 The ISM manufacturing index has fallen for five months in a row.

  #43 Orders for “core” durable goods have fallen for ten months in a row.

  #44 Since March, the amount of stuff being shipped by truck, rail and air inside the United States has been falling every single month on a year over year basis.

  #45 Wal-Mart is projecting that its earnings may fall by as much as 12 percent during the next fiscal year.

  #46 The Business Roundtable’s forecast for business investment in 2016 has dropped to the lowest level that we have seen since the last recession.

  #47 Corporate debt defaults have risen to the highest level that we have seen since the last recession.  This is a huge problem because corporate debt in the U.S. has approximately doubled since just before the last financial crisis.

  #48 Holiday sales have gone negative for the first time since the last recession.

  #49 The velocity of money in the United States has dropped to the lowest level ever recorded.  Not even during the depths of the last recession was it ever this low.

  #50 Barack Obama promised that his program would result in a decline in health insurance premiums by as much as $2,500 per family, but in reality average family premiums have increased by a total of $4,865 since 2008.

  #51 Today, the average U.S. household that has at least one credit card has approximately $15,950 in credit card debt.

  #52 The number of auto loans that exceed 72 months has hit at an all-time high of 29.5 percent.

  #53 According to Dr. Housing Bubble, there have been “nearly 8 million homes lost to foreclosure since the homeownership rate peaked in 2004″.

  #54 One very disturbing study found that approximately 41 percent of all working age Americans either currently have medical bill problems or are paying off medical debt.  And collection agencies seek to collect unpaid medical bills from about 30 million of us each and every year.

  #55 The total amount of student loan debt in the United States has risen to a whopping 1.2 trillion dollars.  If you can believe it, that total has more than doubled over the past decade.

  #56 Right now, there are approximately 40 million Americans that are paying off student loan debt.  For many of them, they will keep making payments on this debt until they are senior citizens.

  #57 When you do the math, the federal government is stealing more than 100 million dollars from future generations of Americans every single hour of every single day.

  #58 An astounding 8.16 trillion dollars has already been added to the U.S. national debt while Barack Obama has been in the White House.  That means that it is already guaranteed that we will add an average of more than a trillion dollars a year to the debt during his presidency, and we still have more than a year left to go.

  What we have seen so far is just the very small tip of a very large iceberg.  About six months ago, I stated that “our problems will only be just beginning as we enter 2016″, and I stand by that prediction.

  We are in the midst of a long-term economic collapse that is beginning to accelerate once again.  Our economic infrastructure has been gutted, our middle class is being destroyed, Wall Street has been transformed into the biggest casino in the history of the planet, and our reckless politicians have piled up the biggest mountain of debt the world has ever seen.

  Anyone that believes that everything is “perfectly fine” and that we are going to come out of this “stronger than ever” is just being delusional.  This generation was handed the keys to the finest economic machine of all time, and we wrecked it.  Decades of incredibly foolish decisions have culminated in a crisis that is now reaching a crescendo, and this nation is in for a shaking unlike anything that it has ever seen before.

  So enjoy the rest of 2015 while you still can.

  2016 is almost here, and it is going to be quite a year…

  

  

  

  

  

• Declassified Top Secret Documents Show US Planned To Nuke Moscow, Berlin, Beijing

  Back in September, we noted that the US was set to send 20 new nuclear bombs to Germany each of which has four times the destructive power of the explosive dropped on Hiroshima.

  “[These] new attack options against Russia” constitute “a conscious provocation of [Germany’s] Russian neighbors,” one member of Angela Merkel’s Christian Democrats warned. Sergei Lavrov’s de facto number-two, Maria Zakharova said the move represented an “infringement of Articles 1 and 2 of the Treaty on Non-Proliferation of Nuclear Weapons.” 

  Just days after the news crossed the wires, Interfax reported that in response, Moscow was set to deploy Iskander ballistic missiles to its enclave of Kaliningrad if the US indeed moved to upgrade its nuclear weapons in Germany.

  

  The tension underscores the fact that even before Russia officially entered the fray in Syria, relations between NATO and Moscow had deteriorated markedly to post-Cold War lows on the back of mutual distrust tied to Crimea and Ukraine. 

  Against that rather ominous backdrop, we bring you the Strategic Air Command’s Atomic Weapons Requirements Study for 1959, produced in June 1956 and published Tuesday for the first time by the National Security Archive. 

  As Dr. William Burr, the senior analyst who directs the Archive’s nuclear history documentation project writes, the document “provides the most comprehensive and detailed list of nuclear targets and target systems that has ever been declassified.”

  He continues: “The SAC study includes chilling details. According to its authors,  their target priorities and nuclear bombing tactics would expose nearby civilians and ‘friendly forces and people’ to high levels of deadly radioactive fallout. Moreover, the authors developed a plan for the ‘systematic destruction’ of Soviet bloc urban-industrial targets that specifically and explicitly targeted “population” in all cities, including Beijing, Moscow, Leningrad, East Berlin, and Warsaw.”  

  The National Security Archive, which is based at The George Washington University, says it obtained the 800-page study, through the Mandatory Declassification Review process. 

  Below, find excerpts from Burr’s summary.

  *  *  *

  SAC Nuclear Planning for 1959

  SAC’s top priority for destruction was Soviet “air power” because of the apparent immediate threat that Soviet bombers posed to the continental United States and to U.S. forces in Europe and East Asia.  The report’s detailed introduction explained that the priority given to Air Power (BRAVO) targets dictated the surface bursting of high-yield thermonuclear weapons to destroy priority targets, including airbases in Eastern Europe.  That tactic would produce large amounts of radioactive fallout compared to bursting weapons in the air.  According to the study, “the requirement to win the Air Battle is paramount to all other considerations.”

  The “greatly compressed time factor”—the danger of a speedy Soviet attack and counterattack– encouraged targeters to require the surface bursting of high-yield nuclear weapons. According to SAC, bursting the weapon in the air would “result in decrease of blast effect.” Detonating the weapon on or close to the ground would maximize blast effects, destroy the target, and disperse irradiated particles which would be picked up by winds and descend far and near.

  SAC’s top priority for destruction, the Soviet bloc’s air power, was a complex target system.  Before the Soviet Union  acquired the atomic bomb and significant capability to deliver nuclear weapons at long distances,  SAC’s priority had been the destruction of the Soviet urban-industrial complex, but during the mid-1950s the “greatly compressed time factor” produced a reversal.[3]   In the SAC Atomic Weapons Requirements Study for 1959, SAC broadly defined the “Air Power” target: air and missile bases for strategic  and tactical forces, defensive and offensive, but also government and military control centers that would direct the air battle and nuclear weapons storage sites, air industry, atomic industry, and petroleum-oil-lubricants (POL) storage areas.

  Given the expansive definition of Air Power, this suggested that targets in major cities such as Moscow and Leningrad could be subjected to H-bomb attack because both were rich in air power targets. 

  If fighting continued once the air power battle was over, the second phase of the war was to be the “systematic destruction” of Soviet bloc war-making potential. The “final blows” in the bombing campaign would strike “basic industries”—those industries and economic activities which most contributed to war-making capability.

  Moscow, the number one urban target, had around 180 installations slated for destruction; some were in the air power category, but many involved a variety of industrial activities, including factories producing machine tools, cutting tools, oil extraction equipment, and a most vital medicine: penicillin.  Other targets involved significant infrastructural functions: locks and dams, electric power grids, railroad yards, and repair plants for railroad equipment.

  What is particularly striking in the SAC study is the role of population targeting.  Moscow and its suburbs, like the Leningrad area, included distinct “population” targets (category 275), not further specified.  So did all the other cities recorded in the two sets of target lists. In other words, people as such, not specific industrial activities, were to be destroyed.

  East Germany was the site of major Soviet airbases and East Berlin itself was a target for “systematic destruction.”  A sampling of the SAC airfields list finds more than a few Soviet-operated installations among the top 200, with some not very far from Berlin. Among them were Briesen (number 140), Gross Dolln (Templin) (number 70), Oranienberg (number 95), Welzow (number 96), Werneuchen (Verneuchen) (number 82). 

  East Berlin had a priority ranking of 61 in the list of urban-industrial slated for “systematic destruction.”  The SAC study identified 91 DGZs in East Berlin and its suburbs: a wide range of industries and infrastructural activities including electric power, railroad yards, liquid fuel storage, machine tools, and radio and television stations.

  Whether China was fighting on the Soviet side or not in a war, SAC treated it as part of the Soviet bloc and listed Chinese airfields and cities in the target lists, including Beijing. Of the list of targets scheduled for “systematic destruction,” Beijing [Peiping in Wade-Giles transliteration] was in the top 20 (number 13) with 23 DGZs.

  *  *  *

  So while Berlin may now be set to receive 20 nuclear bombs from Washington, the city was also set to be on the “receiving” end of several nukes five decades ago. Needless to say, the “fallout” for West Berlin would have been disastrous, a fact which was greeted with “shock and awe” (pun fully intended) in Germany this week. Here are some representative tweets:

  Und als Kollateralschaden wäre Westberlin mal eben verglüht: Hunderte Ziele von US-Atombomben in der DDR https://t.co/QXXShVtwmW via @welt

  — Oliver Michalsky (@omichalsky) December 23, 2015

  USA wollten im Ernstfall 91 Ziele in Ost-Berlin treffen Damals glaubten wir noch an Freundschaft?
  https://t.co/s8BE7Q0dg2 via @SPIEGELONLINE

  — Franz W.Winterberg (@franzwi3) December 23, 2015

  Here’s Spiegel (translated):

  Disastrous consequences for West Berlin

   

  The documents show that the end of the fifties the quick elimination of the Soviet Air Force was the most important war aims of the United States. The 1100 Air Force bases in the Eastern bloc should be turned off before the Soviet bombers could take off at all.

   

  Among the main destinations of the 200 US nuclear bombers were numerous military installations in East Germany:

  • The front bomber base the Soviet Air Force in Briesen, south of Berlin
  • The largest Soviet military airfield in the GDR in Great Dölln, north of Berlin
  • The Soviet military airfield in Welzow, south of Berlin
  • The base of the 16th Soviet Air Army in Werneuchen, east of Berlin
  • The Soviet military airfield in Oranienburg, on the outskirts of Berlin

  In case of war, these military installations had been bombed with thermonuclear weapons. Large areas in the environment would have been exposed to radioactive radiation.

   

  Remains unclear whether the US Army had calculated the consequences of the nuclear attacks on West Berlin. William Burr doubts: “The atomic bombing of East Berlin and its suburbs have caused among other nuclear-generated firestorms. This would have had disastrous consequences for West Berlin..”

  What the documents seem to show, in a nutshell, is that the US was willing to wipe Moscow, Berlin, and Beijing off the face of the earth despite the fact that West Berlin was an ally and regardless of whether Beijing was actually involved in the fight.

  Mass civilian casualties were part and parcel of the plan, as was the complete destruction of German and Russian industrial capacity. If this is any indication of what a nuclear standoff between the US and Russia would resemble today, we hope, for humanity’s sake, that cooler heads will prevail in what is likely to be a yearslong period of heightened tensions.

  *  *  *

  SAC Docs

  

  

  

  

  

• Bernie Sanders: We Need A "Full And Independent Audit" Of The Federal Reserve

  Submitted by Barry Donegan via TruthInMedia.com,

  2016 Democratic presidential candidate and U.S. Senator from Vermont Bernie Sanders wrote an op-ed for The New York Times on Wednesday calling for the Federal Reserve to be audited independently by the Government Accountability Office on an annual basis.

  Meanwhile, Senate Majority Leader Mitch McConnell (R-Ky.) has scheduled a historic Jan. 12 vote on a bill, colloquially referred to as “Audit the Fed,” which was introduced by Sen. Rand Paul (R-Ky.). The bill would authorize the GAO to perform full audits of the Federal Reserve System.

  “To rein in Wall Street, we should begin by reforming the Federal Reserve, which oversees financial institutions and which uses monetary policy to maintain price stability and full employment. Unfortunately, an institution that was created to serve all Americans has been hijacked by the very bankers it regulates,” wrote Sen. Sanders.

  He added, “What went wrong at the Fed? The chief executives of some of the largest banks in America are allowed to serve on its boards. During the Wall Street crisis of 2007, Jamie Dimon, the chief executive and chairman of JPMorgan Chase, served on the New York Fed’s board of directors while his bank received more than $390 billion in financial assistance from the Fed. Next year, four of the 12 presidents at the regional Federal Reserve Banks will be former executives from one firm: Goldman Sachs.”

  Sanders called for the Glass-Steagall Act to be reinstated, a Depression-era banking regulation that created a wall of separation between consumer and investment banks prior to its repeal by former President Bill Clinton. He also suggested that the Fed should be prevented from providing incentives to encourage banks to sit on cash reserves.

  “As a condition of receiving financial assistance from the Fed,” said Sanders, “large banks must commit to increasing lending to creditworthy small businesses and consumers, reducing credit card interest rates and fees, and providing help to underwater and struggling homeowners.”

  Sanders argued that the Federal Reserve suffers from a lack of transparency. “In 2010, I inserted an amendment in Dodd-Frank to audit the emergency lending by the Fed during the financial crisis. We need to go further and require the Government Accountability Office to conduct a full and independent audit of the Fed each and every year,” he said.

  Audit the Fed legislation first became a hot political topic as a result of the sudden, meteoric 2008 rise to popularity of libertarian icon and former Congressman Ron Paul (R-Texas), who made the push for Fed transparency a central focus of his entire political career.

  The Dodd-Frank amendment that Sen. Sanders is referring to that provided for a limited audit of the Federal Reserve drew strong criticism from Congressman Paul back in 2010, as Paul felt that Sanders had hijacked his momentum for a full audit and replaced it with a more limited, watered-down version. Congressman Paul’s full Audit the Fed legislation had already passed the House prior to Sanders’ push for a tamer audit in the Senate.

   

  In the above-embedded video from 2010, an irate Ron Paul can be seen saying,

  “I had expected Bernie Sanders to offer S. 604 which is the same as H.R. 1207, which is Audit the Fed bill, and at the last minute he switched it and watered it down and, really, it adds nothing. It’s a possibility that it even makes the current conditions worse… We need to get as many messages as possible to any senator you can think of — especially to Bernie Sanders’ office — that we don’t want this version. We want a true audit of the Fed. We need to know what the Open Market Committee does and we need to know what they’re doing overseas with the agreements with central banks and financial institutions and other governments.”

  

  

  

  

  

• Switzerland To Vote On Ending Fractional Reserve Banking

  One year ago (and just two months before the shocking announcement the Swiss Franc’s peg to the Euro would end, dramatically revaluing the currency, and leading to massive FX losses around the globe and for the Swiss National Bank) the Swiss held a referendum whether to demand that their central bank should convert 20% of its reserves into gold, up from 7% currently. After the early polls showed the Yes vote taking a surprising lead, the Diebold machines kicked in and the result was a sweeping victory for the No vote, without a single canton voting for sound money.

  

   

  Ironically, this unexpected nonchallance about the Swiss central bank’s balance sheet by one of Europe’s more responsible nations took place just before the same bank announced CHF30 billions in losses on its long EUR positions following the revaluation of the CHF. It also took place when not just Germany, but the Netherlands and Austria announced they would repatriate a major portion of their gold in a move which, all spin aside, signals rising concerns about the existing monetary system.

  We wonder if the Swiss have changed their mind about just how prudent it is to have their central bank operate as one of the world’s largest – and worst – after its CHF 30 billion loss in Q1 FX traders, and hedge funds with $94 billion in stock holdings, since then.

  We may soon have the answer, because in what is shaping up to be another historic referendum on the treatment of money, earlier today the Swiss Federal Government confirmed that it had received enough signatures and would hold a referendum as part of the so-called “Vollgeld”, or Full Money Initiative, also known as the Campaign for Monetary Reform, which seeks to ban commercial banks from creating money, and which calls for the central bank to be given sole power to create the money in the financial system.

  In other words, an initiative to ban fractional reserve banking, and revert to a 100% reserve.

  As Finanzen.ch reports, after 111,763 signatures urging a referendum were submitted, of which 110,955 valid, the Federal Chancellery announced on Thursday that the popular vote would take place. Under Switzerland’s direct democracy, a referendum can be held if a motion gains 100,000 signatures within 18 months of launching.

  “Banks won’t be able to create money for themselves any more, they’ll only be able to lend money that they have from savers or other banks,” said the campaign group.

  Ever since the SNB was established in 1891, it has had exclusive power to mint coins and issue Swiss banknotes. However, as with every other fractional reserve banking system, over 90% of the money in circulation in Switzerland, as in every other country, now exists in the form “electronic” cash created by private banks, rather than the central bank.

  It is this threat of uncontrolled money creation and the risks to systemic stability that the Vollgeld campaign is seeking to stem.

  “Due to the emergence of electronic payment transactions, banks have regained the opportunity to create their own money,” said the Swiss Sovereign Money campaign. “The decision taken by the people in 1891 has fallen into oblivion.”

  So with the referendum now docketed, will this vote too be mysteriously “lost” in the final minutes of voting? According to the Telegraph, unlike the gold vote – which was seen as a precursor to re-introducing the Gold Standard in Switzerland – economists have been more supportive of the idea of “sovereign money” as a way to stabilize the economy and prevent excess credit growth.

  A date for the Swiss referendum has not been set.

  If the vote passes, and if Swiss banks are barred from creating deposits (by way of loans), it would shake to the core the entire modern financial system, which these days is exclusively reliant on runaway fractionalization of sound money, as more and more layers are added to the top of the Exter’s Pyramid, as the only possible “growth” left in a world that has never seen so much debt, is to find new and creative ways to borrow from the future, with banks getting all the benefits and stuffing taxpayers when the inevitable collapse happens.

  

   

  Below is a pdf provided by the Vollgeld Initiative, responding to popular criticisms against its “100% reserve” crusade.

  

  

  

  

  

• During the Next Crisis, Central Banking Itself Will Fail

  For six years, the world has operated under a complete delusion that Central Banks somehow fixed the 2008 Crisis.

   

  All of the arguments claiming this defied common sense. A 5^th grader would tell you that you cannot solve a debt problem by issuing more debt. If the below chart was a problem BEFORE 2008… there is no way that things are better now. After all, we’ve just added another $10 trillion in debt to the US system.

   

  Similarly, anyone with a functioning brain could tell you that a bunch of academics with no real-world experience, none of whom have ever started a business or created a single job can’t “save” the economy.

   

  However, there is an AWFUL lot of money at stake in believing these lies. So the media and the banks and the politicians were happy to promote them. Indeed, one could very easily argue that nearly all of the wealth and power held by those at the top of the economy stem from this fiction.

   

  So it’s little surprise that no one would admit the facts: that the Fed and other Central Banks not only don’t have a clue how to fix the problem, but that they actually have almost no incentive to do so.

   

  So here are the facts:

   

  1)   The REAL problem for the financial system is the bond bubble. In 2008 when the crisis hit it was $80 trillion. It has since grown to over $100 trillion.

   

  2)The derivatives market that uses this bond bubble as collateral is over $555 trillion in size.

   

  3)Many of the large multinational corporations, sovereign governments, and even municipalities have used derivatives to fake earnings and hide debt. NO ONE knows to what degree this has been the case, but given that 20% of corporate CFOs have admitted to faking earnings in the past, it’s likely a significant amount.

   

  4)   Corporations today are more leveraged than they were in 2007. As Stanley Druckenmiller noted recently, in 2007 corporate bonds were $3.5 trillion… today they are $7 trillion: an amount equal to nearly 50% of US GDP.

   

  5)   The Central Banks are now all leveraged at levels greater than or equal to where Lehman Brothers was when it imploded. The Fed is leveraged at 78 to 1. The ECB is leveraged at over 26 to 1. Lehman Brothers was leveraged at 30 to 1.

   

  6)   The Central Banks have no idea how to exit their strategies. Fed minutes released from 2009 show Janet Yellen was worried about how to exit when the Fed’s balance sheet was $1.3 trillion (back in 2009). Today it’s over $4.5 trillion.

   

  We are heading for a crisis that will be exponentially worse than 2008. The global Central Banks have literally bet the financial system that their theories will work.  They haven’t. All they’ve done is set the stage for an even worse crisis in which entire countries will go bankrupt.

   

  The situation is clear: the 2008 Crisis was the warm up. The next Crisis will be THE REAL Crisis. The Crisis in which Central Banking itself will fail.

   

  Smart investors are preparing now.

   

  We just published a 21-page investment report titled Stock Market Crash Survival Guide.

   

  In it, we outline precisely how the crash will unfold as well as which investments will perform best during a stock market crash.

   

  We are giving away just 1,000 copies for FREE to the public.

   

  To pick up yours, swing by:

  https://www.phoenixcapitalmarketing.com/stockmarketcrash.html

   

  Best Regards

   

  Graham Summers

  Chief Market Strategist

  Phoenix Capital Research

   

   

   

   

   

   

   

   

   

  

  

  

  

• How Turkey's Erdogan "Risks The Destruction Of The Country"

  As those who frequent these pages are no doubt aware, Turkish President Recep Tayyip Erdogan has lost his mind.

  

  To the extent Washington’s favorite autocrat had any sanity left going into the summer, he lost it completely in the wake of June elections that saw AKP lose its absolute majority in Parliament. That meant Erdogan would have a more difficult time rewriting the political rule book on the way to consolidating his power in an executive presidency. 

  Adding insult to injury, the election showed increased voter support for the pro-Kurdish HDP which Erdogan equates with the PKK, Ankara’s terrorist boogeyman. 

  All in all, Erdogan decided the outcome needed to be undone. After intentionally undermining the coalition building process, Erdogan – gun to his head – had to call for new elections. Conveniently, Ankara decided it needed to reignite the conflict with the PKK, a move which immediately plunged the country into violence, affording Erdogan an opportunity to play the “this is why Turkey needs a strongman” card on the way to securing a “better” ballot box result in early November. 

  Next, he shot down a Russian fighter jet and invaded Iraq. 

  

  All of this comes as Turkey’s role in financing the ISIS terror machine has been laid bare for the world to see. Ankara was long suspected of facilitating the flow of foreign fighters into Syria and the country’s role in funding and arming the various Sunni militants battling the SAA is well known. But allegations that Erdogan’s family may be leveraging the network Barzani and the Iraqi Kurds use to pipe Kurdish crude to Ceyhan (in defiance, mind you, of SOMO) on the way to helping ISIS smuggle stolen oil are new, and have made the world reconsider how we should view Turkey.

  At this point, it’s not clear what will happen next, but what we do know is that the US has rolled back requests that Turkey step up strikes in Syria and the Russians are fully prepared to shoot down Turkish F-16s that venture into Syrian airspace. Meanwhile, Erdogan still has troops in Iraq, much to Baghdad’s chagrin. 

  Here with a take on why Erdogan is dangerous is Burak Bekdil, an Ankara-based, Turkish columnist for the Hurriyet Daily 

  *  *  *

  Excerpted from “Turkey’s Dangerous Ambitions” via The Gatestone Institute

  It is the same old Middle East story: The Shiite accuse Sunnis of passionately following sectarian policies; Sunnis accuse the Shiite of passionately following sectarian polices; and they are both right. Except that Turkey’s pro-Sunni sectarian policies are taking an increasingly perilous turn as they push Turkey into new confrontations, adding newcomers to an already big list of hostile countries.

  Take President Recep Tayyip Erdogan’s recent remarks on the centuries-old Shiite-Sunni conflict: they amusingly looked more like a confession than an accusation: “Today we are faced with an absolute sectarianism. Who is doing it? Who are they? Iran and Iraq,” Erdogan said.

  This is the same Erdogan who once said, “The mosques are our barracks, the domes our helmets, the minarets our bayonets and the faithful our soldiers….” Is that not sectarian?

  So, with a straight face, the President of one sectarian country (Sunni Turkey) is accusing another country (Shiite Iran and Shiite-dominated Iraq) of being sectarian.

  Erdogan went on: “What about the Sunnis? There are Sunni Arabs, Sunni Turkmen and Sunni Kurds [in Iraq and Syria]. What will happen to their security? They want to feel safe.”

  Never realizing that its ambitions to spread Sunni Islam over large swaths of the Middle East, especially Syria and Iraq, were bigger than its ability to do so, Turkey now finds itself confronting a formidable bloc of pro-Shiite countries: Russia, Iran, Syria, Iraq, and (not to mention the much smaller Lebanon).

  Even before the crisis with Russia that began on November 24 — over Turkey’s shooting down a Russian SU-24 along the Turkish-Syrian border — has shown any sign of de-escalation, another Turkish move had sparked a major dispute with neighboring Iraq.

  Through its efforts to oust Syria’s non-Sunni president, Bashar al-Assad, and build a Muslim Brotherhood-type of Sunni Islamist regime in Damascus, Turkey has become everyone’s foe over its eastern and southern borders — in addition to having to wait anxiously for the next Russian move to hit it — not knowing where the blow will come from.

  As Professor Norman Stone, a prominent expert on Turkish politics, explained in a recent article: “Erdogan’s adventurism has been quite successful so far, but it amounts to an extraordinary departure for Turkish foreign policy, and maybe even risks the destruction of the country. How on earth could this happen? The background is an inferiority complex, and megalomania.” 

  

  

  

  

  

• Coming To America? Somalia, Brunei Ban Christmas To Avoid Damage To Muslim Faith

  The governments of both Somalia and Brunei have prohibited public festivities celebrating Christmas saying that they could damage the Muslim faith. Of course, as we saw yesterday, this kind of suppressive, micro-aggression is already here in America (at Cornell University) but while Mistletoe and crosses are banned here, Brunei's Sultan Hassanal Bolkiah has banned "hats or clothes that resemble Santa Claus," fearing they could "provoke al-Shabab to carry out attacks."

   

  As Al Jazeera reports, Somalia has issued a ban on Christmas celebrations in the Muslim-majority country after the Southeast Asian sultanate of Brunei announced a similar prohibition earlier this month with the threat of five years in jail.

   Sheikh Mohamed Khayrow, director general of Somalia's religious affairs ministry, said on Tuesday that Christmas and New Year celebrations threatened the country's Muslim faith.

   

  "There should be no activity at all," he told reporters, adding security forces had been ordered to break up any such festivities.

   

  "All events related to Christmas and New Year celebrations are contrary to Islamic culture, which could damage the faith of the Muslim community."

   

  Sheikh Nur Barud Gurhan, of the Supreme Religious Council of Somalia, also warned against celebrations, saying they could provoke al-Shabab "to carry out attacks".

   

  Last year, the armed group launched a Christmas Day attack on the African Union's heavily fortified headquarters in the capital Mogadishu, killing three AU soldiers and a civilian.

   

  Somalia, which issued a similar ban in 2013, follows the Islamic calendar that does not recognise January 1 as the beginning of the year.

   

  There are almost no Christians left living in the country, although a bombed-out Italian-built Catholic cathedral remains a city landmark Mogadishu.

   

  Foreign diplomats, aid workers, and soldiers living in the AU compound are permitted to mark the day privately.

  Similarly, Brunei's Sultan Hassanal Bolkiah has also banned public celebrations of Christmas.

  Religious leaders in the oil-rich sultanate warned the ban on Christmas would be strictly enforced, with violators facing up to five years in jail.

   

  "Using religious symbols like crosses, lighting candles, putting up Christmas trees, singing religious songs, sending Christmas greetings … are against Islamic faith," imams said in sermons published in the local press.

   

  The government warned last year that Muslims would be committing an offence if they so much as wore "hats or clothes that resemble Santa Claus".

   

  Christians represent about nine percent of Brunei's 430,000 population.

   

  Businesses have been warned to take decorations down and authorities have stepped up spot checks across the capital. Hotels popular among Western tourists that once boasted dazzling lights and giant Christmas trees are now barren of festive decor.

  *  *  *

  No, this is not from The Onion.

  We presume therefore that any of this would be unacceptable?

  

  Just checking.

  

  

  

  

  

• Dozens Killed In Huge Nigeria Gas Plant Explosion

  A massive explosion has occurred at an industrial gas plant (owned by Inter Corp Oil) in the southeastern Nigeria town of Nnewi. Local media reports the blast occurred while a truck was discharging its contents, and the ensuing fireball has left over 100 people burned to death.

   

  Explosion at chicason gas plant Nnewi pic.twitter.com/O3a9IjlzFE

  — Mcdonald ezenwa (@makavelli49) December 24, 2015

   

  Nigeria's Vanguard reports,

  Tragedy occurred, Thursday in the industrial town of Nnewi, Anambra state when an industrial Gas plant suddenly exploded and with over 100 persons burnt to death.

   

   

  

   

  The explosion rocked the Inter Corp Oil limited(LPG Gas Plant), an subsidiary of Chikason Group.

   

  According to an eye-witness, the fire incident which started at about 11am, was caused by an explosion when a truck  was discharging its contents.

   

  The source hinted that all the customers who went to the gas plant to get a refill were allegedly burnt to death while some of the victims who were in the neighborhood and passers-by also got caught in the inferno.

   

  At the scene of the incident, the charred bodies of the victims and other  severely burnt persons  were taken to Nnamdi Azikwe University Teaching Hospital, NAUTH, Nnewi.

   

  It was gathered that the  inferno did not allow rescue workers into the factory where hundreds were allegedly trapped.

  *  *  *

  

  

   

  The horrific scene…

  

   

  Is this what happens when a 'poor' nation loses enough of its oil revenues that safety standards (and the costs associated with them) get abused?

  

  

  

  

  

• Faltering Faith, Losing Hope, & Rising Charity – 15 Striking Findings From 2015

  Every year, Pew Research Center looks back at the most memorable facts that illustrate important trends shaping our world. From faltering faith in government to the decline of Christians in America and from increased racial tensions to the shrinking American middle-class, here are some of our most striking findings of 2015.

  Authored by George Gao via Pew Research,

  1. Just 19% of Americans say they can trust the federal government always or most of the time. That’s among the lowest levels in over 50 years. The long-term erosion of public trust is mirrored by a steep decline in the belief that the government is run for the benefit of all Americans.

  

   

  2. The American middle class is shrinking. After more than four decades of serving as the nation’s economic majority, the U.S. middle class is now matched in size by those in the economic tiers above and below it. A separate analysis also finds that globally, the middle class is more promise than reality. (See where you fit in the U.S. and worldwide with our interactive calculators.)

   

   

  3. For the first time since the 1940s, more immigrants from Mexico are leaving the U.S. than coming into the country. The shift is due to several reasons, including slow economic recovery after the Great Recession that may have made the U.S. less attractive, as well as stricter enforcement of U.S. immigration laws, particularly at the border.

  

   

  4. There’s a substantial rise in the share of Americans who say the country needs to continue making changes to give blacks equal rights with whites. In July 2015, six-in-ten (59%) Americans said changes are needed, up from 46% in March 2014. These findings come in a year where racial tensions were high in much of the country, from protests over police shootings to student strikes at universities. Our poll also shows that a racial divide in public opinion persists: Blacks are much more likely than whites to say changes are needed.

  

   

  5. Millennials surpassed Baby Boomers in sheer numbers to become the largest U.S. generation. There are an estimated 75.3 Millennials (ages 18 to 34) compared with 74.9 million Baby Boomers. This racially diverse, economically stressed and politically liberal group is also taking over American jobs: Millennial workers this year grew to outnumber Gen X workers, making them the largest share of the U.S. labor force.

  

   

  6. For news about politics and government, social media may be for the Millennial generation what local TV is for the Baby Boomer generation. Six-in-ten (61%) online Millennials say they get political news on Facebook in a given week, a much larger percentage than any other source for news. That’s a stark contrast to internet-using Baby Boomers, for whom local TV tops the list. These trends also reflect a major shift taking place in the news world, as social networking sites increasingly become an integral part of Americans’ news experience.

  

   

  7. For American teens, it’s not just a Facebook and Instagram world. While these two social media sites are the most popular, a majority (71%) of teens say they use more than one of the seven social networking sites we asked about. Much of this frenzy is facilitated by mobile devices: Nearly three-quarters of U.S. teens have access to a smartphone.

  

   

  8. People in countries with significant Muslim populations express overwhelmingly negative views of ISIS, according to our spring survey in 11 countries. Recent attacks in Paris, Beirut and Baghdad linked to the Islamic State in Iraq and Syria (ISIS) have once again brought terrorism and Islamic extremism to the forefront of international relations. Majorities in most of the 11 countries express unfavorable views of ISIS, but the exception is Pakistan, where a majority offer no opinion.

  

   

  9. Islam will grow faster than any other major religion in the world over the next four decades, according to our religious projections. The number of Muslims will grow more than twice as fast as the overall world population between 2010 and 2050, and, in the second half of this century, will likely surpass Christians as the world’s largest religious group. Driving these changes are simple demographics: Muslims have more children than members of other religions, and they’re also relatively younger.

  

   

  10. Christians are declining as a share of the U.S. population, while the number of U.S. adults who do not identify with any organized religion is growing. While the U.S. remains home to more Christians than any other country, the percentage of Americans identifying as Christian dropped from 78% in 2007 to 71% in 2014. By contrast, religious “nones,” driven in large part by Millennials, have surged seven percentage points in that time span to make up 23% of U.S. adults last year.

  

  11. Nearly 59 million immigrants have arrived in the U.S. in the past fifty years, after the passage of a landmark 1965 bill that rewrote U.S. immigration policy. Today, a near-record 14% of the country’s population is foreign-born compared with just 5% in 1965, and that share is expected to rise to 18% by 2065. New settlers today also look very different from the predominately European immigrants of the 19^th and 20^th centuries: Among immigrants who have arrived since 1965, half (51%) are from Latin America and one-quarter are from Asia.

  

   

  12. Multiracial Americans account for 6.9% of adults, and they are growing at a rate three times as fast as the population as a whole. For much of the nation’s history, America has discussed race in the singular form. But with the rise of interracial couples, combined with a more accepting society, the language of race is changing. More than half of multiracial Americans are proud of their background and feel more open to other cultures. But a majority (55%) also say they have been subjected to slurs or jokes because of their racial background.

  

   

  13. Scientists and the American public are often far apart when it comes to views about science-related issues. Members of the science community, for example, are much more likely to say genetically modified foods and foods grown with pesticides are safe to eat, and that climate change is mostly due to human activity, according to our recent survey of U.S.-based members of the American Association for the Advancement of Science.

  

   

  14. A global median of 54% consider climate change a very serious problem, according to our survey of 40 nations. But there are regional differences on views of climate change, with people from Latin America and Africa expressing more concern than others. Before delegates from 195 nations approved a landmark climate accord in Paris this year to limit carbon emissions, our spring survey found a median of 78% supporting such a deal.

  

   

  15. Reporters for niche outlets now fill more seats in the Senate press gallery than do journalists who work for daily newspapers. The face of the Washington press corps has changed markedly in recent years, transformed by this increase in the number of journalists working for “niche” publications and digital startups.

  

  *  *  *

  So faltering Faith in government, losing Hope in the American Dream, and the need for more Charity to manage retirees and refugees.

  

  

  

  

  

• Best "Santa Rally" In 4 Years Ends With Lump Of Coal

  Happy Holidays…

   

  This is the best 'week before Christmas' since 2011… Did we pull forward all that hope-strewn Santa Rally meme?

  

   

  Best week for stocks since the first week of October… A Total melt-up off Friday's OPEX lows

  

   

  On the day an overnight dip was bought… and then puked into the early close

  

   

  Seems like everyone and their pet reindeer was hedged…

  

   

  And credit started to weaken notably…

  

   

  And Bonds diverging…

  

   

  Notably, Energy broke a 3-day winning streak despite higher oil prices

  

   

  Post-FOMC, stock gave back most of their post-Fed gains…

  

   

  And even stocks decoupled from oil's exuberance…

  

   

  Treasury yields did not play along with equity exuberance today but ended the week up 4-5bps (curve flat)

  

   

  The USDollar Index slipped lower again today to end the shortened week down 0.8%… worst week in 3 weeks and worst 4 weeks sicne August black monday crash

  

   

  Commodities were all higher on the week (as the dollar slid)…

  

   

  WTI Crude was up over 5% on the week – its best week since the end-of-August "Andy Hall Ramp' Melt up.

  And what inspired this ripfest… surgingh oil and gasoline prices – "unequivocally good" for Americans – oh wait!

  

   

  Charts: Bloomberg

  

  

  

  

• Has The Great Carry Unwind Arrived: Yen Surges After Warning USDJPY 100 Coming

  For all the talk that the BOJ would unleash more stimulus, buy REITs, more ETFs (both existent or non-existent), or outright stocks, today the USDJPY did something it has not done in 7 weeks: the world’s preferred carry trade currency just slumped to the lowest level since early November. If it wasn’t for  the recent bounce in crude, and if the traditional USDJPY-ES correlation pair had not broken down as a result, the S&P would be well below 2000 at this moment.

  One reason for this is the epic confusion delivered by the BOJ one week ago, when instead of delivering its traditional “forceful” intervention, Kuroda & Co., disappointed the market by presenting half-measures which sent the USDJPY briefly spiking only to see it plunge shortly thereafter.

  

   

  But another, perhaps more troubling catalyst, was the call overnight by JPM’s Tohru Sasaki, Tokyo-based head of Japan markets research, who as Bloomberg reports, warned that the USDJPY will gain 110 next year from about 121 now, the most bullish among around 60 forecasts compiled by Bloomberg. Worse, he sees the equilibrium exchange rate at “below 100.”

  Sasaki believes that the time to be contrarian has arrived: “What investors like to hear is that the yen is weak and stocks are up — but if everyone’s constantly betting that way, at some point they’re going to get burned,” Sasaki, who worked at the Bank of Japan for more than a decade before joining JPMorgan in 2003, said in a Dec. 18 interview. “It’s possible that equity prices keep going up forever, because everyone is working to maximize their returns. But in the forex market, it will never happen — there’s an up and down.”

  If correct, this is a big problem for the BOJ, for Japan, Inc., for Abenomics and certainly for the Nikkei, which has soared in recent years only because of the Yen’s devaluation, as Japan – unlike Europe – has actually reaped the profitable benefits of export-stimulating currency debasement. Recall

  This is how Albert Edwards explained this a month ago:

  Japanese corporate profits since 2013 have boomed like never before. Abe hopes and prays this will spill over and spark a positive wage/price spiral. Yet, in the absence of further Japanese QE, the yen has been paddling sideways against the dollar in a ¥125-118 range since last November – and the yoy decline will soon drop away to zero. In fact, that is already the case on the BoE trade-weighted yen measure – see chart below.

  

  Sasaki’s view is quite contrarian and clashes with the consensus among analysts for the yen to slide to 125 per dollar next year, which would complete a five-year decline of 38 percent. The problem, as the recent ECB fiasco showed, is that if everyone expects the same thing, just the opposite happens.

  What is more troubling for the crowd, is that Sasaki has a history of being spot on:

  The yen has also become “significantly” undervalued after the BOJ’s trade-weighted index slid to an eight-year low in June, according to Sasaki. A Bloomberg gauge of consumer purchasing power parity shows the yen is 39 percent undervalued compared to the dollar, the most among major currencies.

   

  It’s not the first time JPMorgan has gone against the grain. Sasaki’s contrarian call for the currency to rally in the first half of 2014 proved prescient. In the second half of the same year, he escalated his forecast for yen weakness following a surprise BOJ easing, predicting 120 per dollar for Sept. 30 of this year. It closed that day at 119.88.

  Think Goldman or Gartman, just the opposite.

  More disturbing is the BOJer’s prediction that the Bank of Japan can no longer drive Yen weakness:

  Many bears are counting on BOJ Governor Haruhiko Kuroda to drive weakness, after two rounds of stimulus since April 2013 helped push the currency to a 13-year low of 125.86 per dollar in June. Analysts are almost evenly split on the chances of an expansion of the quantitative and qualitative easing program. JPMorgan sees additional QQE late in 2016 having no lasting impact on the yen.

  Incidentally this is precisely what we warned in early September when we presented an IMF report in which the monetary fund confirmed what we had been saying for years, namely that central banks are now monetization constrained, something which explains the BOJ’s recent backtracking.

  The result of all this skepticism, is that what until recently was the world’s most profitable trade – long USDJPY – is rapidly losing steam: “Yen declines are slowing, with this year’s 1 percent loss just a fraction of the at-least 11 percent tumbles each year from 2012. Hedge funds are also closing bets on depreciation, slashing so-called net shorts by the most since August in the week to Dec. 15, Commodity Futures Trading Commission data show.”

  Sasaki’s near term recommendation is for at least 5 big figures of USJPY downside. :

  Sasaki expects an unwinding of bearish positions among domestic investors too, driving the yen to 115 by March 31 next year. They include the 8.5 trillion yen in bets against the yen, 10 trillion yen in overseas holdings of investment trusts and the 50 trillion yen in retained earnings at Japanese corporations that could see increased hedging, JPMorgan estimates.

  Sasaki adds, that “different from past episodes of the yen carry trade, this time the major sellers of the yen are Japanese,” he said, referring to a strategy where investors borrow yen cheaply to invest in higher-yielding nations. “Japanese will need to unwind those positions eventually. The yen is no longer the ideal funding currency.”

  It he is correct, not only will the Nikkei plunge, but the weakness will quickly spill over the US, where Yellen herself will have no choice but to launch even more QE, in the process weakening the dollar and potentially leading to even more Yen weakness in a feedback loop.

  But the main reason why we are virtually certain the right trade here is to be short the USDJPY (and thus long the Yen), is the following blurb from Goldman’s FX crucifier, Robin Brooks from this past Saturday:

  … the BoJ’s 2% target is a long way away, however further progress towards this goal should lead to a decline in real rates – as the nominal curve is anchored by QE – and a decline in both JPY spot and forwards (Exhibit 4). We think the BoJ is closer to easing further to attempt to achieve a successful reflation than it is to giving up altogether, and so we continue to expect $/JPY higher. We recommend being long $/JPY as part of our 2016 top trade recommendation (along with short EUR/$) and forecast $/JPY at 130 in 12 months.

  Three days later, the USDJPY is 100 pips lower.

  To summarize, in finance, there are many unknowns, but one thing is absolutely certain: anyone who listens to Goldman’s advice to clients, ends up looking like this.

  

  

  

  

  

  

• "Unstoppable" California Gas Leak Now Being Called Worst Catastrophe Since BP Spill

  Since initially reporting on California's Alison Canyon gas leak, more details have emerged on the scale (and potential for no solution) of the problem as the infamous Erin Brockovich writes, "the enormity of the Aliso Canyon gas leak cannot be overstated. Gas is escaping through a ruptured pipe more than 8,000 feet underground, and it shows no signs of stopping," as according to the California Air Resources Board, methane – a greenhouse gas 72 times more impactful in the atmosphere than carbon dioxide – has been escaping from the Aliso Canyon site with force equivalent “to a volcanic eruption” for about two months now.

  New infrared footage exposes the massive leak..

   

  Infographic of leak (and potential solution)

  

   

  As TheAntiMedia.org's Claire Bernish details, methane gas continues spewing, unchecked, into the air over southern California from a fractured well to an underground storage site — at such an alarming rate that low-flying planes have necessarily been diverted by the FAA, lest internal combustion engines meet highly volatile gas and, well, blow the entire area to hell.  

  This is, indeed, the biggest environmental catastrophe since the BP Deepwater Horizon oil rig exploded in the Gulf of Mexico in 2010; and for now, there is no way to stop it.

  This methane disaster is worse than can be sufficiently described in words, because while it’s estimated well over 100,000 pounds of methane spew into the atmosphere every hour, the leak can’t be halted, at least until spring. Even then, that stoppage depends entirely on the efficacy of a proposed fix — which remains a dubiously open question.

  According to the California Air Resources Board, methane — a greenhouse gas 72 times more impactful in the atmosphere than carbon dioxide — has been escaping from the Aliso Canyon site with force equivalent “to a volcanic eruption” for about two months now. So far, the total leaked gas measures somewhere around 100,000 tons — adding “approximately one-quarter to the regular statewide methane emissions” during that same time frame.

  “The relative magnitude of emissions from the leak compared to other sources of methane in the State underscores the urgency of stopping the gas leak. This comes on top of any problems caused by odor and any potential impacts from exposure,” states the initial report on the Aliso leak by air quality officials.

  “The enormity of the Aliso Canyon gas leak cannot be overstated. Gas is escaping through a ruptured pipe more than 8,000 feet underground, and it shows no signs of stopping. As the pressure from the weight on top of the pipe causes the gas to diffuse, it only continues to dissipate across a wider and wider area,” explained Erin Brockovich, who spent time in nearby Porter Ranch investigating the leak.

  Officials and experts are concerned, and they can’t recall another leak of this magnitude in decades — if ever. “I asked this question of our staff of 30 years,” said Steve Bohlen, who recently left his position as state supervisor of oil and gas. “This is unique in the last three or four decades. This is an unusual event, period.”

  Though methane, itself, has no odor, the addition of odorants methyl mercaptan and tetrahydrothiophene — a safety measure to alert people by smell to the presence of natural gas — has made the enormous methane seepage impossible to ignore. Thousands of households have evacuated the area, despite little help, much less information, from the gas company about when they might be able to return. As reported by the Los Angeles Times, SoCalGas spokesperson Michael Mizrahi claimed the company had paid to relocate and house 2,092 households — but that effort is severely lacking, says Los Angeles City Attorney Mike Feuer.

  Yesterday, the city attorney’s office sought a restraining order to mandate SoCalGas relocate residents in the affected area within 48 hours of their request; and it is also seeking a “special master” to oversee the entire relocation operation, which is currently being handled by the gas company. Not only does the present relocation lack speed and coordination, but a housing crunch has resulted in surrounding areas — in some cases landlords, who prefer year-long leases to shorter terms, have driven rent as high as $8,500 per month. Hotels are operating at capacity, and in “some of those hotel rooms there are not enough beds for the people who are being moved,” explained chief deputy to the city attorney, James P. Clark.

  “It’s time Porter Ranch residents had direct and complete answers about all facets of this leak,” Clark continued, “including what caused it, how to stop it, and what will be done to assure it never happens again. They should receive better, quicker, and completely adequate relocation assistance.”

  On Thursday, Los Angeles Unified School District board members voted unanimously to close two Porter Ranch schools and relocate their 1,900 students and staff to different locations for the foreseeable future. A local emergency has been declared by the Los Angeles County Board of Supervisors.

  Multiple lawsuits have now been initiated against SoCalGas and/or its parent company, Sempra Energy. A Los Angeles firm representing three of the families, who filed their suit Friday, described in a statement that the well has been “leaking noxious odors, hazardous gases, chemicals, pollutants, and contaminants due to a massive well failure and blowout. However, SoCalGas failed to inform residents of neighboring communities of the disastrous gas leak in a timely manner, putting the health and well-being of thousands of families in jeopardy.” Those suits allege “negligence, strict liability of ultra-hazardous activity, private nuisance, inverse condemnation, and trespass.”

  A class-action lawsuit has also been filed on behalf of the Save Porter Ranch group; and City Attorney Mike Feuer filed a civil suit earlier this month due to the leak’s continued threat to residents’ health and damage to the environment, alleging failure by SoCalGas to prevent the leak and further exacerbation of “the effects of that failure by allowing the acute odor and health problems faced by the community to persist for more than one month, to say nothing about the indefinite time it will persist into the future,” state the court documents. “No community should have to endure what the residents of Porter Ranch have suffered from the gas company’s continued failure to stop that leak,” Feuer stated.

  SoCalGas insists there will be no long-term health effects resulting from the persistent leak; but as Brockovich pointed out, “no one really knows the potential long-term side effects of benzene and radon, the carcinogens that are commonly found in natural gas.” In an email to the Los Angeles Daily News, SoCalGas stated they were “providing air filters for people’s homes” and “have established a claims process for those who feel they may have suffered harm or injury. And our top priority remains stopping this leak as quickly and safely as possible.

  “While the odor added to the leaking gas can cause symptoms for some, the gas is not toxic and county health officials have said the leak does not pose a long-term health risk.”

  But what’s making this massive leak so difficult to stop pertains to the storage ‘container,’ itself. “We have the largest natural gas storage system in the world,” boasts Chris McGill, vice president of the American Gas Association. In the United States, old underground oil fields are often put to use as storage vessels for natural gas — because, hey, that geology worked just fine to hold oil for millions of years, so why not natural gas?

  In fact, there are some 300 such depleted subterranean oil fields being employed this way around the United States. Aliso Canyon, a natural gas storage site since the 1970s, has one of the largest capacities: 86 billion cubic feet. During the summer, gas earmarked for winter heating is pumped into these underground cavities by SoCalGas — and the process is reversed with the turn of the seasons. However, this year, workers encountered what quickly became evident was anything but a typical hiccup. As Wired reported:

  “On October 23, workers noticed the leak at a 40-year-old well in Aliso Canyon. Small leaks are routine, says Bohlen, and SoCalGas did what it routinely does: put fluid down the well to stop the leak and tinker with the well head. It didn’t work. The company tried it five more times, and the gas kept leaking. At this point, it was clear the leak was far from routine, and the problem was deeper underground.”

  Beginning December 4th, SoCalGas crews began drilling a relief well to intercept the fissured pipe. Cement will then be poured into both to seal the wells permanently. Of course, for this to work, crews must locate that original pipe, which is a mere seven inches in diameter, thousands of feet underground — without accidentally creating any sparks, whatsoever. Work near the leak site, therefore, has been prohibited after nightfall, when lighting equipment could potentially cause such a spark; though drilling for the relief well is situated far enough away to continue nonstop.

  Flaring, or setting a deliberate fire to burn off excess gas, simply isn’t an option. The mammoth scope of this leak means a flare would ultimately complicate matters even further.

  “There is no stone being left unturned to get this well closed,” Bohlen stated. “It’s our top priority.”

  In the meantime, it will be months without any possibility of halting this disaster-in-motion. Sickened, uprooted, and furious residents can rest assured, though, because even as methane spews nonstop into the air, SoCalGas did have this consolation:

  “We are deeply sorry for the frustration.”

  

  

  

  

  

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• A Christmas 'Safe-Space' – Cornell Bans Menorahs, Crosses, & Mistletoe

  Happy Holidays from the ‘friendly’ micro-aggressives at Cornell…

  From page 2 of Cornell’s “Fire Safety Guidelines For Holiday Displays”

  

   

  Beware of those dangerous ‘Star of Davids’ and terroristic Mistletoe?

  It seems ‘inflammatory’ has a whole new meaning.

   

  h/t @JudithShulevitz

  

  

  

  

  

• What Fresh Horror Awaits The Economy After Fed Rate Hike?

  Submitted by Brandon Smith via Alt-Market.com,

  There is one predominant reality that must be understood before a person can grasp the nature of the Federal Reserve and the decisions it makes, and that reality is this: The Fed’s purpose is not to defend or extend American markets or the dollar; the Fed’s job is ultimately to DESTROY American markets and the dollar. I have been repeating this little fact for years because it seems as though many otherwise intelligent people simply will not accept the truth, which is why they have trouble comprehending the actions that the Fed initiates.

  When analysts make the claim that the Fed has positioned itself "between a rock and a hard place" in terms of policy, this is not entirely true.  The Fed is exactly where it wants to be in terms of policy; but the central bank has indeed positioned the U.S. ECONOMY between a rock and a hard place, by design.

  Globalists see the U.S. dollar and the U.S. economy as expendable (for the most part), and this sacrifice is meant to create distracting chaos as well as geopolitical advantage towards a new fully centralized world economic system.  You can read the considerable evidence for this agenda in my article 'The Fall Of America Signals The Rise Of The New World Order'.

  If you believe the Fed is the sole purveyor of the global economic crisis and is at the top of the internationalist pyramid, then you probably predicted that the privately controlled central bank would “never in a million years” raise interest rates (many prominent people within the alternative economic scene did). If you believe that the Fed’s primary goal is to prolong the life span of the “American empire,” again, you probably predicted that the Fed would never raise interest rates. There is a serious normalcy bias when it comes to parts of the alternative economic world and their position on the Federal Reserve. They refuse to acknowledge that the Fed is a deliberately preset time bomb meant to vaporize the U.S. economic system and currency. And as long as this continues, they will never be able to determine what is likely to happen next within our fiscal structure.

  There is no way around it: If you cannot grasp the root motivations of the Fed, then you will become cognitively crippled in your struggle to see the next pitfall in the near-term economic future.

  In August, I made this prediction concerning the Fed rate hike decision:

  "The Federal Reserve push for a rate hike will likely be determined before 2015 is over. Talk of a September increase in interest rates may be a ploy, and a last-minute decision to delay could be on the table. This tactic of edge-of-the-seat meetings and surprise delays was used during the QE taper scenario, which threw a lot of analysts off their guard and caused many to believe that a taper would never happen. Well, it did happen, just as a rate hike will happen, only slightly later than mainstream analysts expect.

   

  If a delay occurs, it will be short-lived, triggering a dead cat bounce in stocks, with rates increasing by December as dismal retail sales become undeniable leading into the Christmas season."

  I made the prediction (as well as my prediction on the taper in 2013) on the foundation that the Fed is only an appendage of a greater elitist banking machine. The Fed as an institutional idea is not sacrosanct for the elites, and is at the very least replaceable. The dollar is slated for demolition. And though it may continue on for a time in a more marginalized capacity, the “Fed note” as we know it today will soon be crushed under the weight of what the International Monetary Fund calls the “global economic reset.” In other words, every part of my prediction turned out correct because I accepted the reality that the Fed will invariably take the most destructive policy actions at the worst possible time with the purpose of crisis in mind.

  Central bankers also have a tendency to follow patterns. They rarely change strategies on a whim. Most of the decisions we see made by the Fed, the European Central Bank, the Bank of Japan, etc. were likely made months, if not years, in advance and follow the same strategies used during previous crises.

  For example, the Fed process of raising interest rates this December followed almost exactly the process they used to introduce the taper of QE3 in 2013: a buildup of rhetoric in mainstream news during the first half of the year and then a fake-out in September, followed by months of uncertainty in markets and then quick passage of the policy in December. The Fed also has a habit of raising interest rates at the onset of economic instability or right in the middle of a downturn, as it did in 1928-1929, triggering the Great Depression, and in 1931, adding fuel to the fire of financial catastrophe. These particular catalyzing policy actions are partly what Ben Bernanke was referring to on Nov. 8, 2002, in a speech given at “A Conference to Honor Milton Friedman … On the Occasion of His 90th Birthday”:

  "In short, according to Friedman and Schwartz, because of institutional changes and misguided doctrines, the banking panics of the Great Contraction were much more severe and widespread than would have normally occurred during a downturn.

   

  Let me end my talk by abusing slightly my status as an official representative of the Federal Reserve. I would like to say to Milton and Anna: Regarding the Great Depression. You’re right, we did it. We’re very sorry. But thanks to you, we won’t do it again."

  Based on this pattern of policy actions leading to fiscal disaster, I believe alternative analysts can predict with some certainty what is likely to happen now that the Fed has raised rates in the middle of the most pervasive economic contraction since the Great Depression was initiated (as Bernanke admitted) by central bankers. Here are some trends that I believe will become exponential as we move into 2016.

  Market Turmoil Going Critical

  This might seem like an easy prediction to make; the IMF and the Bank for International Settlements have both been publishing “warnings” on a possible negative financial event if the Fed were to raise rates. I just want to point out first that the Federal Reserve takes its marching orders from the BIS, so the BIS would certainly know if a Fed policy change will result in collapse.  We don't have to make predictions, we only have to look at where the BIS is positioning itself in order to appear as though it is a prognosticator with our "best interests" at heart.

  Second, market turmoil is a guarantee given the fact that banks and corporations have been utterly reliant on near-zero interest rates and free overnight lending from the Fed. They have been using these no-cost and low-cost loans primarily for stock buybacks, purchasing back their own stocks and reducing the number of shares on the market, thereby artificially elevating the value of the remaining shares and driving up the market as a whole. Now that near-zero lending is over, these banks and corporations will not be able to afford constant overnight borrowing, and the buybacks will cease. Thus, stock markets will crash in the near term.

  This process has already begun with increased volatility leading up to and after the Fed rate hike. Watch for far more erratic stock movements (300 to 500 points or more) up and down taking place more frequently, with the overall trend leading down into the 15,000-point range for the Dow in the first two quarters of 2016. Extraordinary but short lived positive increases in the markets will occur at times (Christmas and New Year’s tend to result in positive rallies), but shock rallies are just as much a sign of volatility and instability as shock crashes.

  It is hard to say how fast and how far markets will drop by the end of 2016. I believe we will see a repeat of the 2008-2009 market chaos, but we are entering into some unknown territory being that the crisis we are experiencing is not a purely deflationary one like the Great Depression. Rather, this is a “stagflationary” collapse with elements of the Great Depression and the Weimar inflationary disaster.

  The Fed Will Continue To Hike Interest Rates

  I believe the Fed will continue to hike rates throughout 2016 despite any current or future negative economic signals. It has ignored the global contraction so far and will ignore future events. Why? The Fed is setting the stage for a collapse. Period.

  Mainstream analysts claim skepticism over the Fed’s publicly announced “dot plot” schedule of at least four rate hikes in 2016. I am not skeptical. I think they are going for broke and opening the gates to fiscal hell.

  But wouldn’t rate hikes result in a stronger and more desirable dollar? Possibly, in the short term. However, many people are unaware that a supposedly “strong” dollar index relative to other national currencies is just as much a death knell for the greenback as a weak dollar index.

  Petrodollar Status Lost

  Oil producers have refused to cut production despite the fact that many nations no longer have storage capacity for excess reserves. International demand continues to decline, causing a global oil glut so intense that tankers carrying oil are now being forced to sit offshore waiting for space to dump their cargo. Some are even turning around mid-trip and going back to where they came from.

  Why have OPEC nations refused to cut production? Because they plan to diversify away from the dollar and into a basket of currencies in order to “stabilize” oil prices, rather than reduce supply. The icing on the cake is the recent decision by Congress and the Obama administration to allow the removal of the 40-year-old oil export ban within the U.S. With the lifting of the ban, the U.S. now becomes a competitor in the global oil market in the middle of the worst oil glut since the early 1980s. This might not seem like the smartest move to many analysts, but the Fed is not the only institution out to derail the United States. Certain elitists within our own government are also making the worst possible decisions at the worst possible time, and they are doing this quite deliberately.

  According to the current developments in oil markets, I believe the next major economic trigger event will be the removal of the dollar’s petro-currency status. The “strong” dollar (relative to the dollar index) is now driving down prices at a rate that is giving OPEC nations whiplash. Saudi Arabia has already hinted at a depeg from the dollar, as low oil value continues to drive oil producers into debt.

  With the U.S. now entering the market as an oil competitor, I do not see any compelling reason for OPEC nations to continue pegging oil sales to the dollar. With the loss of petrostatus, the dollar will be progressively torn apart. This will lead into the eventual removal of the dollar’s world reserve status, which I have been warning about for years, most recently in my article “The Global Economic Reset Has Begun.”

  Geopolitical Distractions

  I do not see all of these economic developments taking place in an open vacuum. It makes far more sense for them to progress in the background during geopolitical upheaval with terrorism being the main distraction for the general public. I believe 2016 will be labeled the “year of the terrorist,” as ISIS attacks expand to every corner of the U.S. and in numerous EU nations. This “fog of war” is completely necessary to hide the actions of the most dangerous terrorists: international financiers and elites bent on morphing entire global political and financial structures into something more centralized and more sinister.

  Other distractions are certainly possible, but there are far too many trigger points around the world at this time to make any kind of prediction as to which ones (if any) will be used. The false East/West paradigm continues and is useful in that it provides a rationale for the eventual dump of the U.S. dollar by Eastern nations (including China). Russian and NATO tensions could be used to foment regional wars or even a world war if that is in the cards. I do not see this as the endgame, though.

  Rather, economic collapse is the greatest weapon at the disposal of globalists. National panic, riots, looting, starvation, magnified crime: All of these things result in mass die-offs and desperation. Desperation leads to calls for "strong leadership", and strong leadership usually results in totalitarianism. It might seem sensationalist to tie all of these possible outcomes to the Fed rate hike decision, but give it a little time. Those who make accusations of sensationalism and “fear mongering” today will be asserting tomorrow that such developments were “easily predictable.”

  

  

  

  

  

• The World's Strangest Currencies

  For centuries, humans from all around the world have tried to use different things as money. Some forms, which most people are familiar with today, have been effective catalysts for trade over thousands of years. Other currencies, from squirrel pelts to parmesan cheese, have had their time or place in human history, but were ultimately unsuccessful or made obsolete.

  The path to finding the best money has been long and riddled with trial and error. Here are just some of the world’s strangest currencies that we discovered in our research.

   

  

   

  Source: The Money Project

  

  

  

  

• China Proposes A Fix For Its Crashing Housing Market: "Transplant" 100 Million Farmers Into Its Cities

  Following China’s Central Economic Work Conference which concluded on Monday, and which mapped out China’s economic priorities for next year, global markets soared on speculation that China will, once again, unleash some form of stimulus, which in turn sent commodities surging over the past three days even though ironically any incremental injections, monetary or fiscal, will simply force domestic producers – already on the brink of bankruptcy – to produce more, export even more, and accelerate the global deflationary tide which earlier today forced the US to fire the first trade war salvo after the Department Of Commerce announced Chinese steel imports will be taxed at 256%.

  What the market once again is missing is that when it comes to China, it is no longer a question whether the PBOC or Beijing will inject a few billion into the economy (which have a “credit impulse” halflife of a few weeks at most) which they may well do, but a question of leverage: with consolidated debt/GDP of over 300% as of the end of this quarter (compared to 282% a year ago), China is now the most levered nation in the world behind Japan, more so than even the US.

  

  Until this leverage comes down substantially, either through defaults or inflation, China will no longer be the world growth dynamo as it was in the early and mid days of the financial crisis, when it had “only” 160% in leverage.

  As such it is only natural to fade the market’s now traditional bullish misinterpretation of what China tried to convey to the market.

  However, one thing that did catch our attention, is that for the first time, China officially admitted not only that it has a major housing bubble in the form of a massive excess inventory overhang, but that unless addressed said bubble could lead to an even greater crash in the economy.

  According to the official mouthpiece of the communist party, Xinhua, “China will continue to actively destock its massive property inventory
  over concerns that the ailing housing market could derail the economy.”

  Xinhua adds that along with cutting overcapacity and tackling debt, destocking will be a major task in 2016. This is key because not only does it preclude any speculation about more stimulus, it actually suggests that Beijing is far more focused on the risks emanating from the overindebted economy and thus actually reducing leverage.

  It was here that, in a rare moment of rationality and insight, China’s political leaders actually made a lot of sense: they admitted that the main reason why China’s housing market is moribund is because as a result of the housing bubble which burst in 2014, prices are still too high, and need to come down substantially more!

  “Obsolete restrictive measures [in the property market] will be revoked,” said the statement, without specifying which “restrictive measures” it was referring to. To rein in house prices, China has been trying to curb real estate speculation, with policies such as “home purchase restriction” that only allows registered residents to buy houses. It is believed the restrictive policies mainly affected the property markets in third- and fourth-tier cities, which saw the most supply glut.

  As we have shown before, and as Xinhua adds, “the property market took a downturn in 2014 due to weak demand and a supply glut. This cooling continued into 2015, with sales and prices falling, and investment slowing.”

  Furthermore, as we have also shown before, when it comes to household wealth, in China real estate is of far greater importance for the perception of wealth than the stock market – in fact, as a percentage of relative wealth, for Chinese residents the real estate market is the equivalent to the stock market for Americans.

  

  

   

  Xinhua confirms as much saying that “property investment’s GDP contribution in the first three quarters of this year hit a 15-year low of 0.04 percent. The property market is vital to steel and cement manufacturers, as well as furniture producers; its poor performance would breed financial risks.“

  So far, all of this surprisingly makes a lot of sense as China demonstrates an impressive ability to diagnose the causes of its economic slowdown.

  Where things, however, suddenly veer dramatically off course and into sheer delusion, is China’s proposal how to “solve” its affliction.

  In brief, Beijing is hoping to “transplant” 100 million farmers into registered urban residents, who no longer being migrant workers, will rush to buy real estate in the process soaking up some of the millions of vacant square meters of excess capacity real estate. At least that’s how the thinking goes: “attendees of the meeting agreed that rural residents that move to urban areas should be allowed to register as residents, which would encourage them to buy homes in the city. Property developers have been advised to reduce home prices, according to the statement.”

  More from Xinhua:

  Nearly 55 percent of the population live in cities but less than 40 percent are registered to do so. There are around 300 million migrant workers but most are denied “hukou” (official residence status). In addition to housing rights, a hukou gives the holder equal employment rights and social security services, and their children are allowed to be enrolled in city schools.

   

  Starting next year, China will roll out policy to transform 100 million farmers into registered urban residents, according to Xu Shaoshi, head of the National Development and Reform Commission, on Tuesday. No deadline for completion was specified.

  The punchline: “Ni Pengfei, a researcher at the Chinese Academy of Social Sciences, estimated that if 70 percent of migrant workers buy homes in the cities, it would solve the 2.2 billion square meters of housing inventory.”

  And since these migrant workers would be unable to afford local homes at going rates, they would get preferential prices: the government is suggesting a reduction of home prices. The monthly income for migrant workers in 2014 was 2,864 yuan (440 U.S. dollars), while property can easily exceed 10,000 yuan per square meter. People’s Daily, the flagship newspaper of the ruling Communist Party of China, added in an editorial on Wednesday that “cutting home prices is an inevitable and wise option for developers in destocking, particularly for those in third- or fourth-tier cities.”

  At this moment we are supposed to forget the disastrous consequences of what happened when China tried to “transplant” 100 million farmers into stock traders, and just focus on real estate, where we will admit that in theory, this idea may even make sense: 100 million potential buyers granted deeply discounted home prices will do miracles for China’s ghost cities and millions of vacant apartments.  Because, quite simply, what the Politburo is proposing, is to dramatically accelerate the rural-to-urban migration that has been taking place over the past 30 years, and to pull forward some 10 years of urban worker migration.

  There is just one problem – or rather risk – and it happens to be the one which only we touched upon over a month ago, in “Here Is The Biggest, And Most Underreported, Risk Facing China“, a risk which has since been picked up by both the NYT and the WSJ: social upheaval and public unrest.

  As we have been discussing over the past two months, most recently yesterday in “China’s Cost To Avoid The Dreaded Working Class Revolution: A Record CNY11.1 Trillion, And Rising“, while China’s biggest economic problems are record debt and excess capacity, the biggest risk is a suddenly very angry population which can no longer find either employment or acceptable wages.

  The result has been a record surge in labor strikes in the past few years, culminating with November of 2015, a record month. 

  

  

   

  So what does Beijing think will happen when its already imploding commodity companies, those who happen to be the biggest employers across the country, are faced with 100 million new able-bodied workers, all recently moved into their brand new urban apartments which cost them far less than comparable costs for existing employees?

  The answer: a deflationary wage neutron bomb, as millions upon millions of these migrant workers are hired over their already employed peers, who are suddenly expendable now that more ambitious, and less demanding workers are there to fill their shoes: expendable in a country of of 1.4 bilion without any social safety net! Which is great news for the 100 or so million migrants… and very bad news for the 100 million existing workers whom they will replace.

  What happens then? The same thing that we have been showing ever since 2014 when we presented China’s riot police drills against a “working class insurrection“… drills which took place because it is only a matter of time before China has to deal with the real thing.

  

  

  

   

  The conclusion: China has shown admirable aptitude in diagnosing its problem, and a terrifying lack of vision in its proposed solution. Then again, since none of the other conventional avenues to boost the housing market are available, perhaps it makes sense: with no other options, Beijing is resorting to only measure it knows will work if only for a while, before social unrest finally gets out of control.

  Then again, the “developed countries” are not doing anything more prudent: the western central banks know well they have blown the biggest asset bubble ever, one which will have dire consequences, far worse than the aftermath of the Lehman collapse, but the prerogative is simple: kick the can for as long as possible or else accelerate the social collapse as all modern and insolvent Ponzi schemes are exposed.

  Is it any wonder that China is now doing precisely the same?

  At the end, both “solutions” are doomed to an explosive failure, but for now sit back and just enjoy every day as it comes along, and try not to think too much about the future: with the increasingly more chaotic decisions made by the “leaders” of the developed and emerging worlds, there may not be one.

  

  

  

  

  

• 7 Examples Of Demonizing Dissension & Public Opinion

  Submitted by Paul Philips via NewParadigm.ws,

  As the Western world's "powers that be" tighten their tyrannical controlling noose on humanity's dissension and public opinion, it has never been more important to remember the quote from Orwell‘s novel 1984: "In a time of universal deceit, telling the truth is a revolutionary act."

  To countermeasure this much-needed dissension and free public opinion to raise awareness and free humanity the powers that be have taken a severe stance on punishing those who oppose their views regardless of truth or untruth to advance an oppressive agenda.

  So, in response, during these times of universal deceit and oppression, here are 7 examples of unjustly demonizing dissension and public opinion.

  1. Medical dissention and the AMA’s gagging orders

  

  To get an even larger slice of the medical monopoly the highly influential AMA (American Medical Association) a wing of the medical/pharmaceutical establishment has announced plans to put in gag orders designed to control and prevent doctors from speaking out publically on ‘dubious alternative medical practices.’  Should doctors go outside of the AMA’s guidelines then they could face having their licenses revoked while being unjustly accused of quackery…

  -This unfairly biased stance will even further hit integral doctors offering help and advice on track-record proven effective alternative medical practices.

  What has the US come to? People, are you going to allow this suppression of free speech? History has shown us time after time that medical advancements resulting in humanitarian contribution has come from challenging medical orthodoxy.  

   

  2. Climate change

  

  At a recent talk in Austin, Texas for the yearly South by Southwest Festival (SXSW) Al Gore, former vice-president, made a number of pseudo-scientific statements provably wrong about climate change with all its data manipulation in support of this monumental hoax.   

  Gore described climate change as ‘settled science’ but nothing could be further from the truth. Climate change is far from settled…

  No doubt the audience was filled with supporters of the church of climatology who I doubt would be able to answer these questions challenging  climate change.

  The powers that be want you to believe in climate change because it’s part of their hidden agenda for power, profit and political gain. Their modus operandi is to punish those who disagree, regardless of the facts contradicting climate change.

  As more and more people realise they’ve been had when it comes to climate change the powers that be resort to extreme countermeasures: In the talk Gore told his audience to ramp up their angst against climate change "deniers," Some, in support of this extremist left-wing agenda have made films which includes calling global warming critics as as loathsome and villainous.

  -The idea that someone should be punished for differences of opinion is the ultimate tyrannical approach. But what do you expect from a bunch of hysterical authoritarians pushing an agenda based on false pretexts who fear having their lies exposed?  

   

  3. War objection

  

  Another case of demonizing dissension or opinion exists through clamping down on anti-war activists. In the UK, the indefinable terms ‘non-violent extremist’ or ’domestic extremist’ could be used to stigmatize or even criminalize individuals as part of a newly developed aggressive anti-terrorist  deradicalization programme called PREVENT which could for example target anti-war activists.

  Through country-wide legislation PREVENT has made it the statutory duty for educational establishments, local authorities, NHS trust, police and prisons services to provide ongoing information on those deemed as suspects ‘drawn into terrorism.’

  Besides unjustly stigmatizing or even making criminals out of entire Muslim communities PREVENT has been described as flawed with vague definitions while threatening to erode civil liberties. For instance, officials representing the Child Protection Agency, from a number of signs listing identifiable behavioural characteristics have warned parents that their children may be at risk of being radicalized, which has been met with much criticism.

  As a response a number of organizations such as Together Against Prevent have united to campaign against PREVENT. 

   

   

  4. Shutting up the Political dissenters

   

  

  Democracy’s long-term moral decline is exemplified by silencing political dissenters on a scale more reminiscent than ever of a dictatorship.

  The alternative media has reported many cases where peaceful protesters have been met with extreme pettiness, violence and overreaction from authorities. Take, for example, the recent case of a woman who was apprehended then convicted and fined under the public order act for shouting out “Cameron has blood on his hands” as he switched on the Christmas lights at her home town. At the time the woman was protesting over disability benefit cuts.

  Then there’s the authorities’ agent provocateurs deployed to create unscrupulous violent reactions leading to unjustified arrests and bad reputation, deliberately manufactured to unfairly justify the clampdown on peaceful protesters.  

   

  5. Political correctness

  Political correctness has little to do with protecting minority people or groups from being offended. It’s really about shutting people up, not granting them the right to justly criticise anything while accusing them of something should they talk out.

   

  6. Whistleblower suppression

  

  In these truly dark times universal deceit and propaganda affects us all. Political reality has been bought and sold as a mass-media package made to manipulate the masses’ and their general consensus reality with all the needed cliché’s and falsehoods.

  -Through artful mass-media censorship the powers that be have created the perfect illusion to gain approval from the masses on the actions they take, allowing them to slyly advance their hidden enslavement agenda.

  In true Bernaysian fashion the masses have been programmed and brainwashed through mass media propaganda. Controlled by a small number of elite individuals the masses will never see known as the ‘invisible government.’

  Thus, we have an illusory enemy, illusory war, illusory retribution, illusory diversion and distraction; the illegitimate has been made legitimate…

  My point

  Against the backdrop of insidious forever accelerating modern fascism I doff my cap to those courageous whistleblowers. The masses not only need to understand the  secrets that the powers that be have been harbouring as revealed by whistleblowers like Julian Assange and Edward Snowden, but should also understand how they fit into the modern-day context.

  That way the awakened masses, having connected the dots, can then spread the word on what’s really happening in the world to others. Raising awareness, peaceful activism and becoming conscious is the key to world change.

   

  7. Vaccinations

  

  The fact that mandatory vaccinations such as SB 271 are being forced on people regardless of their circumstance; by authorities not giving any consideration to the threat of potential injury for some from vaccine toxicity, that it’s based on pseudoscience, ignoring religious objection, or discarding the alternative opinion that immunity is better handled from a naturopathic point of view… should be enough to send a red flag warning…

  -I have written extensively on why vaccinations should be avoided at all costs (see SB 271).

  *  *  *

  All in all

  As consistent with the above quote from Orwell‘s novel 1984 dissension and public opinion has never been so needed to bring back sanity into an insane world by exposing the lies and ulterior motives of the powers that be.

  Those in positions of authority involved in demonizing dissension or opinion need to understand that they’ve been deceived and are being played like others as pawns in a very big game.  

   

  

  

  

  

  

• TSA Moves To Make Ineffective Body Scanners Mandatory

  Submitted by Mike Krieger via Liberty Blitzkrieg blog,

  The $160 million bill includes $120 million for the body scanners now in place in hundreds of airports nationwide, according to newly disclosed figures obtained by POLITICO. The rest of the money went to the agency’s “naked” X-ray scanners, which it pulled from airports two years ago amid worries about health risks and the devices’ detailed images of travelers’ bodies.

   

  A recent security audit found that TSA had failed to find fake explosives and weapons in 96 percent of covert tests. And members of Congress familiar with the classified details say the body scanners are to blame for much of the problem.

   

  Johnson said that while bomb detection is obviously a complex undertaking, “these things weren’t even catching metal.”

   

  – From the post: Big Brother Idiocy – TSA Spent $160 Million on Naked Body Scanners that Fail 96% of the Time

  Long time Liberty Blitzkrieg readers will be well aware of the fact that I’ve never gone through one of the TSA’s ridiculous and completely pointless naked body scanners. Whatever shred of human dignity an American citizen has left is relinquished the moment one consents to raising his or her arms in the air like a prisoner, while a machine that never met a terrorist it could catch scans an image of your body in yet another superfluous display of imperial slave-training.

  Have you ever stopped to think about how ridiculous your fellow travelers look when they go through one of these things. Take a look at the following images and think about them for a second.

   

  

  

  

  Reflect upon what the thoughtless consent to such demeaning behavior does to the psyche of an American citizen. Can such people truly think of themselves as free, empowered individuals, or have they been conditioned to think of themselves as helpless prisoners, grateful to the all powerful security state for their continued survival? Moreover, note that the “hands up” pose is the one a passenger is required to assume, the exact same posture police force upon people during a confrontation.

  Of course, this intentional demoralization and slave-condiitoning of the American public is happening all across U.S. society. Since it primarily operates at the subconscious level, most people don’t even recognize it, but happening it most certainly is.

  What’s worse, these pointless machines don’t even work, and the entire TSA spectacle is pure security theater. But don’t take my word for it. We learned the following in the post, Big Brother Idiocy – TSA Spent $160 Million on Naked Body Scanners that Fail 96% of the Time:

  It’s now becoming clear exactly how many tens of millions of dollars the TSA spent on body scanners that have missed airport security threats, outraged passengers and brought the agency under congressional scrutiny.

   

  The $160 million bill includes $120 million for the body scanners now in place in hundreds of airports nationwide, according to newly disclosed figures obtained by POLITICO. The rest of the money went to the agency’s “naked” X-ray scanners, which it pulled from airports two years ago amid worries about health risks and the devices’ detailed images of travelers’ bodies.

   

  A recent security audit found that TSA had failed to find fake explosives and weapons in 96 percent of covert tests. And members of Congress familiar with the classified details say the body scanners are to blame for much of the problem.

   

  Johnson said that while bomb detection is obviously a complex undertaking, “these things weren’t even catching metal.”

   

  “If you really want to keep using those, and I’m not saying we shouldn’t, at a minimum we should put a metal detector on the other side,” the Wisconsin Republican said in an interview. “Why not go through two? You’ve just gotta use common sense.”

  So despite a 96% failure rate, the TSA’s response is to double down and begin the process of making body scanner use mandatory.

  For the record, I’m not saying that choosing to get a pat down is particularly dignifying, but it is nevertheless a form of non-compliance. It is a way of saying I’m not going to play your game and go through these ineffective machines with my hands up in the air like a convict and pretend they are actually doing something.

  Apparently, the TSA is fed up with some of us peasants making such a choice, so they have begun the process of removing the voluntary opt-out option.

  Time reports:

  The Transportation Security Administration (TSA) screeners at airports can now force passengers to go through body scanners, according to a new policy change.

   

  The Department of Homeland Security (DHS) has updated its protocol to no longer allow passengers to opt out of being electronically scanned at through Advanced Imaging Technology (AIT) machines at checkpoints. Before the change, people could choose a physical screening.

   

  “While passengers may generally decline AIT screening in favor of physical screening, TSA may direct mandatory AIT screening for some passengers,” the DHS issued in a Dec. 18 policy update.

   

  The change weakens the opt-out rule but doesn’t entirely eliminate it, a TSA spokesman told TIME. “Passengers undergoing screening will still have the option to decline an AIT screening in favor of a physical screening,” agency spokesman Mike England said in a statement. “However, some passengers will still be required to undergo AIT screenings as warranted by security considerations in order to safeguard transportation security.”

  A couple of points to make here. First of all, the TSA is saying that body scanner screening may be mandatory for some passengers, but it fails to make clear the criteria that would disqualify someone from opting out. This is troubling since it’s reminiscent of the due process destroying no-fly list (see: How Obama is Using the Grossly Unconstitutional “No Fly List” to Push Gun Control).

  Indeed, the only thing the TSA is alluding to is the fact some passengers will be denied the right to opt-out “in order to safeguard transportation security,” something we know is a sham since the body scanners have a 96% failure rate.

  So what’s actually going on? My view is that this is simply another example of government conditioning the populace to accept a slave-like mentality in exchange for a false promise of protection. If the government can convince people to engage in pointless security theater that doesn’t work just to take a flight, what won’t they be capable of forcing people to do a few years down the road?

  

  

  

  

  

• Sri Lankan Government Official Busted For "Smuggling Gold Bars In Rectum"

  Amid ongoing efforts by Indian authorities to monetize (read confiscate) the citizenry's precious metals (which we most recently detailed as an utter failure here and here), it appears the current suppressed low prices for gold have reignited demand and thus smuggling. Following the biggest seizure of smuggled gold earlier this year, The Guardian reports a 42-year-old-man, claiming to be a government official, was caught smuggling$15,000 of gold bars (hidden in his rectum) after police noted him "walking suspiciously."

  As Sri Lankan newspaper The Nation reports, the man, from a suburb of Sri Lanka's capital Colombo, had been spotted by customs staff after arriving on a midnight flight from Singapore.

  The man, now arrested on suspicion of smuggling, claimed to be Coordinating Secretary to the Ministry of Post, Postal Services and Muslim Religious Affairs.

   

  More than 70 people have been arrested for smuggling gold in 2015 alone.

  Seeing that the man was 'walking suspiciously,' airport security stopped to search him, custom's spokesman Leslie Gamini told the BBC.

  Officials found 400g of gold, in the form of four bars, hidden in his rectum.

   

  The gold is reportedly worth around two million Sri Lankan rupees ($15,000)

  As The Guardian details, the latest apparent smuggling attempt follows a series of other incidents this year where people have concealed gold in their bodies. Officials said more than 70 people have been arrested this year for smuggling gold in Sri Lanka.

  Smugglers typically buy gold from places where the precious metal is relatively cheap and where there are fewer trade restrictions, such as Dubai and Singapore, aiming to sell it on in India – the largest gold consumer in the world. The import duty for gold in India is high: currently 10% for a 100g bar.

   

  Overall consumption was at 642 tonnes in India this year. Chinese consumption stood at 579 tonnes, according to the Thomson Reuters GMFS gold survey. “A fall in prices of gold in the recent months has been one of the reasons for the increased demand for gold in India,” Jayant Sinha, minister of state for finance, told local media.

   

  When India first started trying to control gold imports in 2013, in an attempt to tackle a widening trade deficit, smugglers went to the extent of getting human mules to swallow nuggets or hiding gold bars in dead cows.

   

  Earlier this year, police in the western state of Gujarat said they had made the single biggest seizure of gold smuggled into India after arresting six people attempting to leave an airport with 60kg of the metal flown in from Dubai.

   

  In India, smugglers risk a jail term of up to seven years, although such a penalty is rare and the main deterrent is confiscation of the gold.

  And, as we recently noted, while the government continues to wonder why gold-holders aren’t flocking to offload their gold. But not to worry, it will eventually make sure any scheme works:

  “A finance ministry official said if banks fail to win over temples, the government could intervene directly as it is looking for a big boost to the scheme to keep both imports and the current account deficit under control.”

  Shades of 1933 all over again. One would imagine that outright gold confiscation from Hindu temples would result in massive protests and quite a bit of bloodshed. And while most rational people would assume that the government would be smart enough to avoid doing something so drastically stupid, this is the same government that developed the cockamamie gold monetization scheme in the first place. Never underestimate the idiocy of government bureaucrats, especially when those bureaucrats are trying to save face.

  Let’s hope for the sake of the Indian people that their government learns its lesson and quietly shelves its futile attempts to monetize private gold holdings. If it really wanted to monetize gold, it would end any restrictions on the importation, transfer, and use of gold as money and allow markets to determine what money they wanted to use. Control is hard to give up, but the Indian economy would be far better off with gold as money instead of rupees.

  

  

  

  

  

• This Is How You Vaporize An ISIS Training Camp

  From the time Russia began airstrikes in Syria on September 30, the Ministry of Defense has been a serial producer of videos depicting Moscow’s air campaign against anti-Assad elements. 

  Whether or not the footage shows what The Kremlin says it does is probably debatable. That is, there’s no way for the public to distinguish between an ISIS training camp and an FSA position in the often grainy clips the MoD posts on YouTube, but one thing is for sure: Russia is conducting a lot of airstrikes in the skies above Syria. 

  Part of the plan is of course to embarrass the US. Washington has supposedly been flying combat missions against ISIS for some 15 months with little to nothing to show for it in terms of tangible results. That could be because the US has the wrong “strategy” or it could be by design (i.e. Washington might merely be seeking to “contain” ISIS rather than destroy the group and its revenue stream). Whatever the case, Moscow is keen on showing that when it comes to getting serious about fighting terror, nobody does it better than Russia. 

  Recently, the MoD’s videos have focused increasingly on depictions of airstrikes against Islamic State’s oil infrastructure and crude trucks. The world has woken up to the fact that ISIS pulls in between $500 million and $1 billion per year in revenue from its illicit oil trade and The Kremlin is determined to cut off the funds not only to debilitate ISIS, but also to anger the Turks who Russia insists are involved in the trafficking of stolen oil. 

  And so, without further ado, we bring you the latest from the Defense Ministry which has released the following two clips depicting a strike on an ISIS training camp in Idlib (note the fleeing soldiers) and the destruction of a column of tanker trucks.

  

  

  

  

• Mapping The Ongoing 'World War' In Syria & Iraq

  Via GEFIRA.org,

   

  	Turkey has deployed troops to Northern Iraq near Mosul and the Shaqlawa region. Source Cihan Turkey is also deploying troops on the Syrian border to protect the Tomb of Suleyman Shah Source Wikipedia
  	Spain has deployed the PATRIOT missile system as part of NATO’s obligation to protect Turkey. Source Nato
  	Russia has deployed an S-400 air defense system, and stations Su-24 bombers at the Russian Hmeimim military base in Latakia. Source EuroNews
  	Britain is carrying out airstrikes in Syria and Iraq. The UK bombers are stationed in Cyprus. Source The Guardian
  	Hundreds of Iranian troops arrived in Syria in October. Source The Guardian In the media there is widespread rumour that Iranian advisers and special forces are also operating in Iraq.
  	Australia has sent 300 military trainers to Iraq; it is also conducting airstrikes there. The Australian air force is stationed in the UAE Source The Guardian Australia’s Air Task Group is conducting air combat and supports operations in Iraq and Syria. Source Australian Government
  	Denmark has committed over 100 military trainers to Iraq in 2015 at the request of the USA. Source The Local
  	By deploying F-16s to Jordan and sending military trainers to Kurds, the Netherlands, in concert with a number of other countries led by the United States, is helping to break the fighting power of the ISIS terrorist organisation. Source Dutch Ministry of Defence
  	The US is to deploy a specialised force to Iraq to build pressure on Islamic State militants. Source BBC There are US soldiers to train Kurds in Northern Iraq. Source: Deutsche Welle US is conducting air strikes in Syria from the Turkish Base Incirlik. The US is also conducting airstrikes in Iraq. Source  Reuters
  	France is conducting air strikes from its carrier located in the Persian Gulf. The strikes are directed against targets in Iraq and Syria. Source The National Interest
  	Italian forces have been present in the Middle East as part of the western coalition against Isis for over a year, but until now they have played merely a supporting role. The Italian forces in the coalition consist of fighter jets, unarmed drones and a KC767 refuelling aircraft, all of which are being operated from an airbase in Kuwait. Source: Source The Local
  	Israel is conducting different air strikes against Hezbollah in Syria  and the Assad government. Israel  supports the Jihadist movement against Assad. Source Reuters

   

  

  

  

  

  

• The Trade Wars Begin: U.S. Imposes 256% Tarriff On Chinese Steel Imports

  Two weeks ago, when looking at the latest import price index data, we showed something disturbing: China has become an all out exporter of deflation. As the chart below shows, In November, import prices from China decreased 1.5% over the past 12 months, the largest year-over-year drop since the index declined 1.7% for the year ended in January 2010.

  

   

  Howdid this happen? As we explained, with all of its domestic markets fully saturated, China has had no choice but to export its soaring commodity production as we explained in “Behold The Deflationary Wave: How China Is Flooding The World With Its Unwanted Commodities.” 

  As we noted then, shipments of steel, oil products and aluminum are reaching for new highs, according to trade data from the General Administration of Customs.  That’s because mills, smelters and refiners are producing more than they need amid slowing domestic demand, and shipping the excess overseas.

  

   

  Logically, the less domestic demand for steel, and the greater China’s steel exports, the lower the price continues to tumble, now at a 10 year low.

  

  That’s
  because mills, smelters and refiners are producing more than they need
  amid slowing domestic demand, and shipping the excess overseas. 

  The flood of Chinese supplies is roiling manufacturers around the world and exacerbating trade frictions. The steel market is being overwhelmed with metal from China’s government-owned and state-supported producers, a collection of industry associations have said. The nine groups, including Eurofer and the American Iron and Steel Institute, said there is almost 700 million tons of excess capacity around the world, with the Asian nation contributing as much as 425 million tons.

  According to Macquarie’s Colin Hamilton, head of commodities research, it is about to get even worse: the price of hot-rolled coil, used in everything from fridges to freight containers, may decline about 13 percent next year. The nation’s steel exports, which have ballooned to more than 100 million metric tons this year, may stay at those levels for the rest of the decade as infrastructure and construction demand continues to falter.

  

  A worker walks on stacks of steel pipes at a storage yard in Shanghai.

  China’s metals industry is facing the same problem that OPEC has had to deal with over the past year: a huge supply glut faced with declining global demand, only unlike OPEC there is no “efficient, rational” producer cartel that can (or in the case of OPEC could) implement production limits.

  While falling steel prices are partly driven by the collapse in raw materials and lower output costs, “it’s just more to do with the fact the industry was built for demand growth that hasn’t come through,” Hamilton said last week. “We’re past peak steel demand. I think provided there is overcapacity in the Chinese system and given where demand is, it’s going to be like this for some time.”

  Well, maybe not: there is one thing that could dramatically slow down China’s metal exports – tariffs, anti-dumping duties and other forms of protectionism.

  “What may slow down the exports is anti-dumping and protectionist measures that several countries have taken against cheap imports,” said Ernst & Young’s Agrawal. “We’re going to see an impact. More and more countries are raising their objections.”

  In other words, a trade war.

  To be sure India has already done just that:

  India plans to step up its protection for debt-laden domestic steelmakers by imposing a minimum price on steel imports among other measures, Steel Secretary Aruna Sundararajan said in an interview this week. The import curbs are necessary to ensure a “level-playing field” for Indian companies after restrictions imposed in September failed to stop a decline in prices, she said.

  And now it’s America’s turn.

  According to a report released Tuesday by the US Department Of Commerce, corrosion-resistant steel imports from China were sold at unfairly low prices and will be taxed at 256 percent.

  The measure is clearly aimed exclusively at China’s dumping of steel on the US market, and its relentess exports of deflation.

  According to Bloomberg, imports from India, South Korea and Italy will be taxed at lower rates. Imports from Taiwan and Italy’s Marcegaglia SpA will not face anti-dumping tariffs. The government found dumping margins of 3.25 percent for most South Korean steel imports, with Hyundai Steel Co.’s shipments subject to duties of 3.5 percent. Imports from Italian companies excluding Marcegaglia will be taxed at 3.1 percent. Indian imports are subject to duties from 6.6 percent to 6.9 percent.

  Which means that the biggest “beneficiary” of this dramatic import price surge will be none other than Beijing.

  “We’re concerned that the dumping that’s occurring is at higher levels than these determinations reflect,” Tim Brightbill, a partner at Wiley Rein LLP, a law firm representing U.S. steelmaker Nucor Corp., said Tuesday in an interview. “We have serious concerns that these preliminary duties are not enough at a time when unfairly priced imports continue to surge into the U.S. market at unprecedented rates.”

  According to some the US foray into trade wars was long overdue:

  U.S. producers including Nucor, U.S. Steel Corp. and Steel Dynamics Inc. filed cases in June alleging that some products from China, India, Italy, South Korea and Taiwan had been dumped in the U.S., harming domestic companies. In November, the government found that all those countries, except Taiwan, subsidized their domestic production by as much as 236 percent of its price.

  The tarfiff hike comes on the heels of a previous announcement from November 3, which saw countervailing duties as high as 236%. Together these create a barrier to imports of these steel products from China, said Caitlin Webber, an analyst at Bloomberg Intelligence in Washington.

  “A 500 percent duty is obviously prohibitive,” Webber said in an interview. “The lower ones are much less prohibitive and would probably have a lower impact on imports.”

  This means that suddenly China’s steel exporters will have to scramble to find a comparably large market  in which to sell their wares as now exporting to the US is prohibitively expensive and would result in massive losses to domestic producers.

  According to Bloomberg calls to the spokesman’s office at China’s Ministry of Commerce in Beijing weren’t answered. An official who answered a call to the China Iron & Steel Association couldn’t immediately comment. Not like they would have much to say.

  The problem for China is that as we have explained previously, unless local commodity producers can keep generating some cash flow, even if it is negligible, China will be swept in a default wave that will sweep away all the overlevered producers of steel and other commodities, leading to social unrest or worse.  We already know that at current prices more than half of China’s commodity producers can’t even make one coupon payment. What happens now when the rush to the bottom enters the final laps and the bottom falls out of prices?

  

  Which also means that now that the US has fired the first trade war shot, it will be up to China to retaliate. It will do so either by further devaluing its currency or by reciprocating with its own protectionist measures against the US, or perhaps by accelerating the selling of US Treasurys. To be sure, it has several choices, clearly none of which are optimal from a game theory perspective, but now that the US has openly “defected” from the “prisoner’s dilemma” game, all bets are off.

  

  

  

  

  

• India To Pay $4.5 Billion For Putin's "Jewels" In Largest Defense Deal In A Decade

  Russia’s vaunted S-300 and S-400 missile systems have been in the news quite a bit of late. 

  Last month, Moscow and Tehran officially revived a long stalled contract worth some $800 million that will see a handful of S-300s delivered to Tehran over the next several months. The deal was initially reached in 2007 but was put on hold in 2010 amid the international sanctions on Iran. Putin lifted the ban earlier this year, citing progress on the Iran nuclear deal. 

  Needless to say, the US and Israel were not amused. “We made clear time and again our objections to any sale of the S-300 missile system to Iran,” US State Department spokesman Mark Toner said.

  “The S-300 is exclusively a defensive weapon, which can’t serve offensive purposes and will not jeopardize the security of any country, including, of course, Israel,” Sergei Lavrov remarked in April, after Russia decided to move ahead with the contract. 

  Lavrov is correct, but Israel’s concern isn’t that the Iranians are planning a preemptive strike. Rather, Netanyahu worries that the systems will be used to protect Tehran’s nuclear sites and/or be diverted to Lebanon or Syria. “Israeli concern about a future missile deal between Russia and Iran pertains to the possible transfer of this weapons system to Bashar Assad’s regime in Syria or to Hezbollah, which would significantly limits the Israel Air Force’s freedom of activity in Syrian or Lebanese skies,” an unnamed Israeli official told Haaretz last spring. 

  Well as it turns out, advanced Russian air defense systems did indeed end up in Syria and Assad’s army as well as Hezbollah are indeed among the beneficiaries. 

  Rumors were already circulating that Russia had sent S-400s to Latakia when Turkey shot down one of Moscow’s warplanes near the Syrian border. In the aftermath of that incident, Russia made it official and deployed the weapons to protect The Kremlin’s interests in the event anyone else gets any ideas about taking pot shots at a Sukhoi.

  As we reported earlier this month, Israel has been secretly training against an S-300 in Crete in what looks like an effort to learn how to beat the system in the event the units end up protecting Iranian and Syrian interests on the ground.

  On Wednesday, the S-400 was back in the news. As Bloomberg reports, India is set to buy five S-400s for some $4.5 billion from Russia as part of a broader initiative by PM Narendra Modi to upgrade the country’s military. Here’s more: 

  Indian Prime Minister Narendra Modi heads to Moscow after approving what’s set to be his nation’s biggest weapons deal with Russia since 2001, reaffirming a military partnership that newer suppliers like the U.S. will find difficult to dislodge.

   

  The S-400 air defense missile systems, which India plans to buy, are among the “crown jewels” of Russia’s defense capability, according to Jon Grevatt, Asia-Pacific defense-industry analyst for IHS Jane’s. The two-day visit starting Dec. 23 will also include a private dinner with Russian President Vladimir Putin and an event at the Kremlin with Russian and Indian chief executives.

   

  “Russia and India have a very strong partnership that the U.S. can only aspire to,” said Grevatt. “Sales from America may ebb and flow, but the sales from Russia will remain strong because there are so many ongoing programs between the two countries.”

   

  The $150 billion that Modi plans to spend to upgrade his military could be a welcome diversion for Putin, who’s bracing for a second year of recession amid Western sanctions. Although the U.S. emerged as India’s biggest defense supplier last fiscal year, the Asian nation’s links with Russia stretch back to their Soviet-era ties.

  

   

  India’s defense acquisition panel last week approved the purchase of five S-400 systems. While the price is still to be negotiated, it’s likely to cost about $4.5 billion, a defense ministry official said, asking not to be identified because the detail isn’t public yet.

   

  That would make it the biggest deal by value since 2001, when India agreed to buy 140 Su-30MK Sukhoi fighter jets, which the Stockholm International Peace Research Institute estimates to be worth as much as $5.4 billion.

  Bloomberg goes on to list more possible deals between the two countries:

  • Kamov OAO may name an Indian partner to build 200 Ka-226T light military cargo helicopters in India; the deal may be valued at $1 billion, India TV reported
  • Lease of a second nuclear-powered attack submarine from Russia. First submarine was leased in 2012 for $1 billion over 10 years
  • Indian navy order for three Russian frigate warships. India paid about $1 billion for three Talwar-class frigates in 1997
  • Agreement to re-start joint development of a fifth-generation fighter aircraft, stalled for two years over cost differences. Estimated project value: $10 billion

  So here again is “isolated” Russia forced to peddle antiquated Soviet military technology to tiny, rogue states. Oh, wait. Actually this is Moscow selling the most advanced air defense technology on the planet to one of the world’s most important emerging economies with whom The Kremlin has a long and very amicable relationship.

  For anyone still buying the Putin “isolation” story, we encourage you to speak to PM Modi who had the following to say about the Russian leader this week: 

  “The best thing is that he knows how to maintain relations. He has a special strength to sacrifice for the relations. It is rarely found.”

  

  

  

  

  

  

• Paul Craig Roberts 'Evaluates' Donald Trump

  Authored by Paul Craig Roberts,

  Donald Trump, judging by polls as of December 21, 2015, is the most likely candidate to be the next president of the US.

  Trump is popular not so much for his stance on issues as for the fact that he is not another Washington politican, and he is respected for not backing down and apologizing when he makes strong statements for which he is criticized. What people see in Trump is strength and leadership. This is what is unusual about a political candidate, and it is this strength to which voters are responding.

  The corrupt American political establishment has issued a “get Trump” command to its presstitute media. Media whore George Stephanopoulos, a loyal follower of orders, went after Trump on national television. But Trump made mincemeat of the whore.

   

  Stephanopoulos tried to go after Trump because the world’s favorite leader, President Putin of Russia, said complimentary things about Trump, and Trump replied in kind.

  According to Stephanopoulos, “Putin has murdered journalists,” and Trump should be ashamed of praising a murderer of journalists. Trump asked Stephanopoulos for evidence, and Stephanopoulos didn’t have any. In other words, Stephanopoulos confirmed Trump’s statement that American politicians just make things up and rely on the presstitutes to support invented “facts” as if they are true. Trump made reference to Washington’s many murders.

  Stephanopoulos wanted to know what journalists Washington had murdered. Trump responded with Washington’s murders and dislocation of millions of peoples who are now overrunning Europe as refugees from Washington’s wars. But Trump's advisors were not sufficiently competent to have armed him with the story of Washington’s murder of Al Jazerra’s reporters.

  Here is a report from Al Jazeera, a far more trustworthy news organization than the US print and TV media:

  “On April 8, 2003, during the US-led invasion of Iraq, Al Jazeera correspondent Tareq Ayoub was killed when a US warplane bombed Al Jazeera’s headquarters in Baghdad.

   

  “The invasion and subsequent nine-year occupation of Iraq claimed the lives of a record number of journalists. It was undisputedly the deadliest war for journalists in recorded history.

   

  “Disturbingly, more journalists were murdered in targeted killings in Iraq than died in combat-related circumstances, according to the group Committee to Protect Journalists.

   

  “CPJ research shows that “at least 150 journalists and 54 media support workers were killed in Iraq from the US-led invasion in March 2003 to the declared end of the war in December 2011.”

   

  “’The media were not welcome by the US military,’” Soazig Dollet, who runs the Middle East and North Africa desk of Reporters Without Borders told Al Jazeera. ‘That is really obvious.’”

  A political candidate with a competent staff would have immediately fired back at Stephanopoulos with the facts of Washington’s murder of journalists and compared these facts with the purely propagandistic accusations against Putin which have no basis whatsoever in fact.

  The problem with Trump is the issues on which the public is not carefully judging him. I don’t blame the public. It is refreshing to have a billionaire who can’t be bought expose the insubstantialality of all the Democratic and Repulican candidates for president. A collection of total zeros.

  Unlike Washington, Putin supports the sovereignty of countries. He does not believe that the US or any country has the right to overthrow governments and install a puppet or vassal.

  Recently Putin said: “I hope no person is insane enough on planet earth who would dare to use nuclear weapons.”

  Unfortunately for Putin and for Trump, if news reports can be believed, Trump recently said that he would use nuclear weapons against ISIS. This is a disqualifying statement. There is no reason to need nukes to defeat a force as small as ISIS. More importantly, as the US is the only country to use nuclear weapons against the population of another country, for the US to do so again would confirm for the Russian and Chinese governments that the US government is insane, untrustworthy, and in need of extermination before Russia and China are attacked. You cannot use nuclear weapons without consequence.

  As I have said in a number of interviews, Trump’s problem is that he has no movement behind him, no advisors that he can trust, and he does not understand the issues. Trump has learned that forceful statements are appreciated by voters. Therefore, he doesn’t differentiate intelligent forceful statements from insane statements. As long as his statements are forceful, Trump thinks that they work.

  Recently I watched a video of a woman described as a “Trump advisor” who repeaded neocon nazi William Kristol’s statement: “What’s the use of nuclear weapons if you can’t use them?”

  How did a William Kristol neocon nazi get on Trump’s staff? What more proof do we need that even if Trump is elected, the establishment will prevail despite Trump.

  Trump cannot be a dissident politician without a dissident staff. He doesn’t know the people who would comprise a dissident staff. Trump knows how to make deals, and the Establishment will staff up a Trump presidency with deals. The minute Trump takes office, he would be already captured.

  In France Marine Le Pen’s National Front Party could bring political change. In the UK Nigel Farage’s UK Independence Party or Jeremy Corbyn’s Labour Party could bring political change. But in the US there is no prospect of change from elections. Change can only come from collapse or from bloody revolution. The American Establishment will not accept change.

  And most likely, the American Establishment would assassinate Le Pen and Farage and Corbyn before accepting change in France and the UK.

  These are the facts on the ground. How Russia and China deal with them remains to be seen.

  

  

  

  

  

• Obama Warns World's Anti-Christians: "The Wrong Shall Fail, The Right Prevail"

  Presented with little comment…

  Statement by the President on Persecuted Christians at Christmas

   

  During this season of Advent, Christians in the United States and around the world are preparing to celebrate the birth of Jesus Christ.  At this time, those of us fortunate enough to live in countries that honor the birthright of all people to practice their faith freely give thanks for that blessing.  Michelle and I are also ever-mindful that many of our fellow Christians do not enjoy that right, and hold especially close to our hearts and minds those who have been driven from their ancient homelands by unspeakable violence and persecution. 

   

  In some areas of the Middle East where church bells have rung for centuries on Christmas Day, this year they will be silent; this silence bears tragic witness to the brutal atrocities committed against these communities by ISIL.

   

  We join with people around the world in praying for God’s protection for persecuted Christians and those of other faiths, as well as for those brave men and women engaged in our military, diplomatic, and humanitarian efforts to alleviate their suffering and restore stability, security, and hope to their nations.  As the old Christmas carol reminds us:

   

  The Wrong shall fail,

   

  The Right prevail,

   

  With peace on earth, good-will to men.

  *  *  *

  So, to translate a little… America (The Right), will prevail over The Wrong (terrorists who shall not be named as Muslims but are anti-christian)… thanks to peace on earth (and airstrikes and boots on the ground) and good-will to men (and women, as long as they are not radicalized).

  

  

  

  

  

• Brazilians Cancel Vacation Plans As 50 Million Metric Tons Of "Noxious Mud" Turns Ocean Brown

  2015 was not kind to Brazil. 

  In addition to a seemingly intractable political crisis that has rendered Congress effectively useless when it comes to passing legislation aimed at shoring up an increasingly precarious fiscal situation, the country is also mired in what might as well be a depression. 

  Inflation is running in the double-digits, unemployment is soaring, and output has collapsed in the face of an epic downturn in commodity prices, slowing demand from China, and a yuan deval that drove a stake through the heart of the already beleaguered emerging world. 

  The BRL has suffered mightily throughout and will likely need to “adjust” further before it’s all said and done. That, in turn, will put still more pressure on inflation, ensuring that not only can Copom not cut to save the economy, it will in fact be forced to hike in January, a procyclical move that will likely deal another blow to GDP.

  None of that bodes well for the summer Olympic games in Rio. As we’ve detailed in a series of posts dating back to July, Olympians will be forced to deal with some rather unpleasant circumstances including a lack of air conditioning and television in Olympic village and feces-ridden water. And that assumes the games happen at all after longtime Olympic power provider Aggreko pulled out of a tender to supply generators.

  Now, in what Bloomberg calls “the year’s final indignity,” Brazilians are being forced to cancel their vacation plans due to a “waves of noxious mud” that have polluted the ocean in the wake of the dam collapse in November that “buried entire communities and devastated national parks.” 

  

  For those who missed it, you can read the entire account of what happened here, but suffice to say a Samarco (which is jointly run by BHP Billiton and Vale) tailings dam burst, sending a river of toxic mud into nearby villages. Here are a few images from the scene: 

  

  

  

  As Bloomberg goes on to note, “50 million metric tons of sludge is spreading off the coast between Rio de Janeiro and Bahia states, turning the pristine blue waters brown along an expected 30 miles of beaches.” Here’s a bit more from Ibama, the country’s environmental agency (translated):

  Mining waste formed a wave of mud which directly affected 663 km on the Doce River and its tributaries, reaching the ocean in 21/11, in Linhares, Espirito Santo.

   

  

   

  The destruction of Permanent Preservation Areas occurred on the stretch of 77 km of waterways of Fundão dam to the Carmel River in San Sebastian the Superb (MG). The impacts on the marine environment are still ongoing and have not been evaluated in this report.

  
  Direct environmental and social harm, such as death and disappearance of persons were found; Insulation populated areas; displacement of communities for the destruction of housing and urban structures; habitat fragmentation; destruction of permanent preservation areas and native vegetation; slaughter of farm animals and impact on rural production and tourism, with interruption of economic revenue; restrictions on fishing; slaughter of domestic animals; death of wildlife; decimation of wild fish populations in closed season; difficulties in electricity generation by hydro hit; change in the quality and quantity of water, and the suspension of their use for the people and wildlife such as supply and watering; in addition to the sense of danger and helplessness of the population at various levels.

  “I was really worried. Everyone who thought of going for the end of the year will have to cancel,” said Paula de Souza Vieira, a 23 year-old who spoke to Bloomberg. Here’s more:

  Vieira, thought she’d found the perfect spot: A palm-tree lined stretch of empty sand on the edge of a national preserve about 400 miles (640 kilometers) north of Rio de Janeiro. But a dam disaster in southeast Brazil that sent waves of noxious mud downstream into the Atlantic Ocean forced her to scrap her trip.

   

  Some coastal hotels and restaurants, which rely on the New Year’s holiday as a major source of revenue, have seen cancellations surge because of the accident. Reservations for the New Year’s holiday plunged by more than half at the Arana bed and breakfast in Regencia Village, where Vieira planned to stay with her girlfriend.

   

   “Nobody is going to pay 2,000 reais for a holiday package to go to a place where people say the mud is,” said owner Dulce Mendonca. While the water supply hasn’t been affected, the ocean is thick and brown with sludge, she said. Fishermen aren’t allowed to fish, and people are being cautioned to stay out of the water.

  Earlier this week, the death toll from the dam collapse was raised to 17. As The Sydney Morning Herald wrote, “the Samarco partners were hit with a fine of 20 billion Brazilian reals in November, and a court in the Brazilian city of Belo Horizonte ruled last week that 10 per cent of that must be paid with 30 days.” In other words, BHP and Vale will need to pay some $500 million by January 17. “A federal court has ruled that the potential damages from the disaster could be about 20.2bn reais ($5.2bn; £3.4bn),” BBC adds. “The companies’ assets were frozen amid concerns that Samarco does not have enough resources to cover the cost of damages and compensation.” 

  So, in addition to a variety of disease-causing viruses that, thanks to Brazil’s lack of waste water treatment centers, are already present in quantities that in some tests measured up to 1.7 million times the level of what would be considered hazardous on a Southern California beach, there’s now 50 tons of mine sludge in the water as well. 

  As for Paula de Souza Vieira (mentioned above), it turns out she would likely have canceled her trip even if it weren’t for the mud – she joined the swelling ranks of Brazil’s unemployed this month after getting fired from her job as a television producer.

  

  

  

  

  

• Caught On Tape: Hezbollah Fighter Calmly Dodges Missile Launched By Syrian Rebels

  Over the past several months, we’ve attempted to explain why Washington’s strategy to arm anti-Assad elements in Syria is even more absurd now than it was initially. 

  At this point, anyone who follows the conflict is well aware that ISIS and al-Nusra have powerful, wealthy benefactors in Ankara, Riyadh, and Doha and the US hasn’t always been too keen on cutting off the flow of weapons and money to Sunni extremists battling the SAA. In other words: the US and its regional allies are largely responsible for the rise of the very same terrorists they claim to be fighting. 

  As ridiculous as that most certainly is, the “unintended” consequences of supplying weapons to the mishmash of rebels and militants fighting for control of Syria took a further turn for the absurd last month when the FSA’s First Coastal Division used a US-supplied TOW to destroy a Russian helicopter conducting a search and rescue operation following the downing of an Su-24 near the Syrian border. That rather brazen act effectively proved that the US, Turkey, and Saudi Arabia are but one degree of separation away from open warfare with the Russians. Additionally, it woke the world up to what’s been going on around Aleppo for months. The FSA has been using TOWs supplied by the US and its allies to shoot at the SAA, Hezbollah, and Iran’s Iraq-based Shiite militias who were called to the fight by Tehran. Here’s the point: the Shiite militiamen who are on the receiving end of those TOW attacks are the very same soldiers that are assisting the US-trained Iraqi regulars in the fight against ISIS in Iraq. In short: they are enemies on one side of the border, but tolerated on the other side where they function as the most effective force battling ISIS (of course the militias recently threatened to kill any US troops who come to Iraq, but that’s another story).

  If that’s not ridiculous enough for you, consider also that al-Nusra recently released a video thanking the FSA for sharing their TOWs, which means, once again, that the US is knowingly arming terrorists. 

  

  Well, for those readers who have enjoyed our coverage of the TOW story, we bring you the following clip which appears to depict Syrian rebels firing a missile at a Hezbollah fighter (note the yellow flag near the vehicle) sitting in a truck. In a remarkable example of remaining cool under fire (literally), the soldier simply pulls forward, dodging death by a few feet at the last second.

  

  

  

  

  

• "Devastated" Short Who Launched Online Begging Campaign To Fund Margin Call Was Right: KaloBios Disintegrates

  Back on November 19, we told the tragic tale of one Joe Campbell. It went as follows.

  In early November, the company which we dubbed as “one of the countless fly-by-night biotech pennystocks”, the now infamous drug developer KaloBios Pharmaceuticals said it would wind down its operations and that it had engaged restructuring firm Brenner Group to help liquidate its assets. The company said it was “highly unlikely that exploring strategic options could generate a viable transaction within the time frame, given its limited cash resources.

  At that moment the stock was trading between $1-2/share, representing a market cap between $5 and $10 million, or liquidation value.

  Then, on the night of November 18 America’s “most hated person” and recently charged with stock fraud Martin Shkreli, whose price-gouging antics were the catalyst that unleashed the late summer biotech rout, got involved.

  As KBIO announced after the close of November 18, the company “has been informed that an investor group comprised of Martin Shkreli and associates together have acquired more than 50% of the outstanding shares of KaloBios, and that the company is in discussions with Mr. Shkreli regarding possible direction for the company to continue in operation.

  The stock exploded higher, and has since hit a whopping $16/share in the pre-market, an increase of over 650%.

  

   

  Back then we asked if this is merely “Blatant manipulation? Perhaps – after all, this is not much different from what Oprah Winfrey did with Weight Watchers stock which jumped simply because the media diva had bought sizable stake in WTW stocks. Ultimately, it will be up to the SEC to decide.”

  It turned out it was the FBI who made the decision less than a month later, and the conclusion was less than favorable to Shkreli.

  Where this story got entertaining, or woefully tragic, depending on one’s perspective, is that one trader, Joe Campbell, was on the wrong side of KBIO massive surge. One E-trader, Joe Campbell, decided to go $35,000 short KBIO “and now owes $ETFC a wonderful $106K.” Campbell provided the following snapshots of his tragedy:

  

  

  

   

  But what brought fame (or perhaps infamy) to Campbell is what he did next: the “devastated” trader became the first, perhaps in history, to launch a GoFundMe campaign seeking to “crowdfund” his $106,445 margin call, in other words to beg online for sympathetic souls to fund his $106K margin call.

  It is unknown if he got enough money for the entire margin call: a subsequent update noted that he had managed to collect over $5,000, at which point the grateful Campbell fell off the radar screen.

  

   

  But while Joe’s tale ended here (and some have suggested his entire story may also have been nothing but a fabrication), the story of KaloBios was only just getting started.

  A few days later, after Martin Shrekli announced on Thanksgiving Day he had purchased 70% of the stock, leaving virtually no float available to cover shorts, the stock prices exploded even higher, hitting a whopping $45.82/share, or nearly $200 million in market cap.

  

  Bear in mind this is a company that just a few weeks earlier was effectively broke.

  Turnaround in progress. $KBIO pic.twitter.com/5dseMG3B8I

  — Martin Shkreli (@MartinShkreli) November 23, 2015

  At that point, the narrative switched over to Shrekli who as is widely known by now, was arrested and charged for conducting a Ponzi scheme involving his prior company. However, while KaloBios was left untouched, the fact that its CEO (for about a month) and largest shareholder may be going to prison, meant only bad news were in store for the recently broke, then reincarnated, and now about to be broke again biotech.

  And this is where we go back to the the beginning, because moments ago, KaloBios released an 8-K in which it effectively admitted that it was game over for the little biotech that could not. In the filing, KBIO announced that not only would it most likely be delisted in a week, and that its outside auditor firm, Marcum, has resigned, but that its CFO, Christopher Thorn, has resigned.

  Notice of Delisting or Failure to Satisfy a Continued Listing Rule or Standard; Transfer of Listing.

   

  On December 18, 2015, KaloBios Pharmaceuticals, Inc. (the “Company”), received a letter from The NASDAQ Stock Market LLC (“Nasdaq”), which stated that the Nasdaq Listing Qualification Staff (the “Nasdaq Staff”) has determined to delist the Company’s securities pursuant to its discretionary authority under Listing Rule 5101. The Nasdaq Staff cited a number of reasons for their decision, including the recent criminal indictment and arrest of Martin Shkreli, the Company’s controlling shareholder, former Chairman and former Chief Executive Officer, based on allegations of securities fraud, among other things, as well as the arrest and indictment of Evan Greebel, the Company’s former outside counsel, based on similar allegations, and a civil complaint from the U.S. Securities and Exchange Commission filed against Mr. Shkreli and Mr. Greebel based on similar allegations. Additionally, as previously disclosed, on November 17, 2015, the Nasdaq Staff notified the Company that the Company is not in compliance with the filing requirements set forth in the Nasdaq’s Listing Rule 5250(c)(1) because it has not filed its Quarterly Report on Form 10-Q for the period ended September 30, 2015, which constitutes an additional basis for delisting.

   

  The Company has not yet determined whether it will appeal the Nasdaq Staff’s decision to delist the Company’s securities. The deadline for the Company to request an appeal is December 28, 2015. If the Company does not appeal, the Company’s common stock will be suspended from trading on Nasdaq at the opening of business on December 30, 2015.

   

  Item 4.01.    Changes in Registrant’s Certifying Accountant.

   

  On December 21, 2015, the Company was notified by its independent registered public accounting firm, Marcum LLP (“Marcum”), that Marcum has resigned as the Company’s independent registered public accounting firm. Marcum’s resignation was not due to any reason related to the Company’s reporting or accounting operations, policies or procedures. Marcum was engaged by the Company as the Company’s independent registered public accounting firm on December 8, 2015, and accordingly, Marcum has not provided a report or completed any review on any of the Company’s consolidated financial statements. There have been no “disagreements” (within the meaning of Item 304(a) of Regulation S-K) with Marcum on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedures. There were no “reportable events” as that term is defined in Item 304(a)(1)(v) of Regulation S-K.

   

  The Company provided Marcum with a copy of the disclosures it is making in this Form 8-K and requested that Marcum furnish the Company with a letter addressed to the Securities and Exchange Commission stating whether it agrees with the above statements. A copy of Marcum’s letter dated December 23, 2015 is filed as Exhibit 16.1 hereto.

   

  Item 5.02.    Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.

   

  On December 21, 2015, Christopher Thorn, the Company’s Interim Chief Financial Officer, submitted his resignation from the Company.

  Bottom line: when (if) KBIO reopens, it will be on the pink sheets, and the company will have virtually no value, meaning that Joe Campbell’s short would have been not only spot on, but profitable. Instead, due to Shrekli’s now worthless intervention, Campbell is in the hole for an amount greater than his entire life’s savings.

  * * *

  One month ago, when observing this farce from as far away as possible, we wrote:

  Which brings us back to Joe Campbell and his now famous margin call: did he liquidate enough other assets to cover the margin call? What about the hundreds of other shorts who piggybacked and shorted at the close yesterday only to wake up with comparable massive margin calls?

   

  And what happens if Shkreli’s plan is indeed to rerun the “Volkswagen” scenario and unleash an epic short squeeze that sends the price of the company into the stratosphere, unlinked from any fundamentals, but merely soaring ever higher as desperate shorts pay any price just to get out.

   

  We hope to find out, as suddenly this until recently bankrupt company whose price has exploded in the past two days, has become not only a poster child for everything broken and manipulated with the market (think 2014’s CYNK one year forward) but has the market following with morbid fascination to find out how the tragicomedy of “Shkreli vs the Shorters” concludes.

  We now know how the story ends, the way it always does on a long-enough timeline…

  

  

  

  

  

• "Dash-For-Trash" Melt-Up Erases Post-Fed "Policy Error" Losses

  The bigger they are…

   

  The "Dash For Trash" continues…

  

   

  As The open was another big short squeeze… 2nd biggest short squeeze day in 2 months and 2nd biggest 2-week squeeze in 10 months

  

   

  Bad Breadth-er…

  

   

  The S&P 500 was ramped perfectly into the Green year-to-date… "Mission Accomplished"

  

   

  Small Caps and S&P are back in the green post-FOMC…

  

   

  With stocks back above bonds post-FOMC and the miracle of crude from worst to first…

  

   

  And The Dow and The S&P 500 to the 200DMA/500DMA cross…

  

   

  This is the best 3-day run for Trannies since the bounce off the August Black Monday lows…

  

   

  No, this is not China… this is American stocks TODAY!!!

  

   

  Nike went from hero to zero…

  

   

  FANGs are not playing along…

  

   

  Here's why stocks are ripping…

  

   

  But something odd is going on again in the Oil ETF/Vol complex…

  

   

  "Oil Prices may be showing signs of stabilization here" said one spewing head on CNBC!! – yeah just like in August? One big stop-run…

  

   

  Treasury yields continued to rise today with 30Y reaching pre-Fed levels before bonds rallied into the close…

  

   

  The USDollar Index fell after overnight strength – reversing a recent intraday pattern…

  

   

  Anything look odd here in commodity-land?

  

   

  And RBOB soared over 7%…

  

   

  As Bob Pisani says "it makes perfect sense."

   

  Charts: Bloomberg

  Bonus Chart: The number of barrels of oil an ounce of gold will buy is highest in 30 years…

  

  

  

  

  

• This Is Canada's Depression: Surging Crime, Soaring Suicides, Overwhelmed Food Banks "And The Worst Is Yet To Come"

  Back in March, we brought you “Drugs, Prostitution, Violence Plague Oil Boom Towns Gone Bust,” in which we detailed the plight of towns like Sidney and Bainville, Montana, where the slump in oil revenue has made it all but impossible for local authorities to cope with surging crime rates that some attribute to the influx of oil workers the communities experienced in the good old days of high crude prices. 

  The problem, apparently, was that despite the dramatic slump in oil, companies hadn’t yet begun to cut jobs or slash capex and so, officials were left with less money to put towards policing their growing populations. 

  As dangerous as it may be for small towns to experience exponential growth in what The Washington Post described as “highly paid oil workers living in sprawling ‘man camps’ with limited spending opportunities,” what’s even more dangerous is the prospect that suddenly, the majority of those workers will be jobless. That is, if there’s anything that’s more conducive to raising the crime rate than legions of highly paid young men living in small towns with “limited spending opportunities,” it’s legions of formerly highly paid young men stuck in small towns with limited job opportunities. 

  With that in mind, America can look north to Calgary for a preview of what’s in store for America’s oil boom towns.

  Although Alberta’s largest city bares little resemblance to Sidney and Bainville, the three do have one thing in common: oil. “Calgary boasted one of the lowest jobless rates in Canada as crude prices rose over $100 a barrel [but] it’s now reeling after a global glut pushed prices down by two-thirds,” Bloomberg notes.

  

  For our part, we’ve spent quite a bit of time documenting the city’s trials and travails:

  • “Canada Crude Contagion: Calgary Home Prices Drop Most In 2 Years”
  • “Canada’s Biggest Oil Casualty To Date: Calgary’s Nexen Shutters Oil Trading Desk”
  • “The Canadian Housing Bubble Has Begun To Burst”
  • “Canada’s Oil Patch Confidence Crashes”
  • “Canada Mauled by Oil Bust, Job Losses Pile Up – Housing Bubble, Banks at Risk”
  • “The Stage Is Set For A Massive Housing Market Correction in Canada’s Oilpatch”

  As we noted earlier this year, resource revenue makes up nearly a third of Alberta’s annual revenue:

  

  “Alberta’s real GDP is expected to expand in 2015, but at a much slower pace of 0.6%. This is down from the Second Quarter forecast of 2.8%,” provincial authorities wrote in March, in their quarterly fiscal update. That underscores just how significant the swift decline in crude prices is for the province. Since then, the government’s projection for 2015 GDP has fallen by a full percentage point, as the economy is now expected to contract by 0.6%. Here’s more from the latest fiscal update:

  The sharp decline in oil prices has substantially reduced capital spending in the energy sector. Oil and gas investment is expected to fall over 30% in 2015, with weakness carrying into 2016. Conventional investment has been hit especially hard. Rig activity has declined almost 50% through the first seven months of 2015. 

   

  
  

   

  Lower oil prices are weighing on production and exports. Although exports remain an important driver in Alberta’s economy, the forecast for oil production has been revised lower since March. This mainly reflects unplanned disruptions in oil sands production and the significant slowdown in conventional drilling. In addition, weakness in the oil and gas sector has spread to other sectors of the economy. Alberta machinery manufacturing has fallen 20% since January. This can be mainly traced to declining industrial machinery and equipment manufacturing, which primarily serves the oil industry. 

  Needless to say, this has had a dramatic impact on jobs. As we reported on Tuesday, Canada is expected to lose some 100,000 oil and gas sector jobs by the end of the year. Jobs like those Jillian Berling-MacKenzie, 25, and her boyfriend used to have. Here’s Bloomberg:

  Jillian was one of the lucky few of her graduating geology class to secure full-time work this year, at oil company ConocoPhillips. She bought a house with her boyfriend, also a newly graduated geologist with a job, before they both became victims of the cuts. A friend’s company has provided some contract work paying slightly more than employment insurance as Berling-MacKenzie tries to land positions just about anywhere, seeing no postings she qualifies for in her field.

  And then there’s Keely Eng, 27, who was fired from an engineering position in March at Nexen and is now so worried about her future in the field that she simply threw in the towel and decided to go to medical school: 

  The dearth of opportunities has Keely Eng, 27, seeking a career change. Eng was let go from an engineering position in March at Nexen, the Cnooc Ltd. subsidiary. Dreading an extended job hunt, Eng took medical school exams and has applied to several programs.

  And don’t forget about Kevin Mulligan, 61, who was let go by Stampede and now works with his wife making Christmas decorations: 

  Kevin Mulligan, 61, was among Stampede workers who “got the Tuesday boot,” he said. The former park maintenance manager, six years from retirement, is helping his wife with a Christmas wreath-making side business to supplement severance payments while job-hunting.

  
  

   

  “My new job is finding a job,” Mulligan said.

  As The Financial Post notes, Alberta’s troubles go beyond falling crude prices. “Apart from the protracted price declines, Alberta’s oil and gas sector has also had to contend with a 20 per cent hike in corporate taxes, a carbon tax and new regulatory policies to limit rein in carbon emissions,” the Post writes, adding that “a new provincial royalty regime is to be announced in January, leaving Alberta oil and gas producers under a cloud of uncertainty [while] the new federal government also plans to unveil new policies, including a review of the regulatory process, which the sector sees as more burden in an already difficult environment for the industry.”

  As we pointed out three weeks ago, the real casualties in Canada are no longer metaphorical economic objects, but the very people who until recently enjoyed comfortable lives only to succumb to an unprecedented collapse in the local economy. According to the chief medical examiner’s office, 30% more Albertans took their lives in the first half of this year compared to the same period last year. Here are the numbers:

  • From January to June 2014, there were 252 suicides in Alberta.
  • During the same period this year, there were 327.
  • If the trend continues, Alberta could be on track for 654 suicides this year.
  • In an average year, there are 500, according to the Centre for Suicide Prevention.

  Well, in the latest abysmal news out of Alberta, Bloomberg reports that food bank use and crime are now soaring amid the protracted slide in crude. “Calgary’s unemployment rate rose to 6.9 percent in November from 4.6 percent a year earlier, Statistics Canada data show, as 21,100 more were put out of work,” Bloomberg writes. “Home sales have fallen 21 percent this year as the average price skidded 2.6 percent, according to the Calgary Real Estate Board.” Here’s more: 

  Crime is rising, home prices are falling and food banks are overwhelmed in Calgary as job losses spread. And the worst isn’t yet over in the heart of Canada’s oil patch.

   

  Some of the city’s largest employers are poised to cut more jobs in 2016 as they reduce spending for a second straight year, adding to an estimated 40,000 oil and natural gas positions lost across the nation since the crude price rout began 18 months ago.

   

  “We all know someone who has lost a job,” Naheed Nenshi, the city’s mayor, said in a speech this month, lamenting the “funeral”-like atmosphere in the business community.

   

  Brown Bagging for Calgary’s Kids is providing 16 percent more school lunches than in September — about 2,900 across 187 schools. The rise is unprecedented, said Tanya Koshowski, the group’s executive director. Food bank use jumped 23 percent in Alberta in the year ended March 2015, the country’s biggest increase, according to Food Banks Canada.

   

  Police are pointing to economic decline and rising drug use to explain Calgary’s crime surge. In the first 10 months of 2015, commercial break-ins almost doubled from a year earlier, bank robberies were up 65 percent and home invasions increased 52 percent, Calgary Police Service data show.

  Here are the graphs from CPS:

  

  

  And here are the visuals from Food Banks Canada:

  

  

  While it’s not possible to definitively identify the proximate cause, it seems clear that the same mindset which is driving the suicide rate higher is also compelling Albertans to commit crimes. As Nancy Bergeron, who has answered distress centre phone lines for a few years, puts it, “people are just at wit’s end.”

  Why? Because, as we put it previously, “simply because the price of a commodity has dropped to a third of what it was just over a year ago, and the shocking impact has been a paralysis of every aspect of financial, economic and social life, first in Alberta, and soon everywhere else across Canada, as the local recession (on its way to a depression) spreads across the country and eventually crosses the U.S. border.”

  One person who isn’t concerned is Greg Cosma, a 58-year-old engineer was let go from Cenovus in October and now builds houses for Habitat For Humanity as a volunteer.

  His message to new graduates hoping to find gainful employment in Canada’s oil patch: “If you’re good at something, you have a future. Don’t sweat it.”

  *  *  *

  Full Calgary Police Service report

  2015 1st Quarter Statistical Report

  

  

  

  

  

• The Big Short: "Every American Should See This Movie & Be F##king Pissed Off"

  Submitted by Jim Quinn via The Burning Platform,

  

  “The truth is like poetry, and most people fucking hate poetry.”

  The Big Short opens nationwide today. But it happened to have one showing last night at a theater near me. My youngest son and I hopped in the car and went to see it. I loved the book by Michael Lewis. The cast assembled for the movie was top notch, but having the director of Anchorman and Talledaga Nights handle a subject matter like high finance seemed odd.

  The choice of Adam McKay as director turned out to be brilliant. The question was how do you make a movie about the housing market, mortgage backed securities, collateralized debt obligations, collateralized debt swaps, and synthetic CDOs interesting for the average person. He succeeded beyond all expectations.

  Interweaving pop culture icons, music, symbols of materialism, and unforgettable characters, McKay has created a masterpiece about the greed, stupidity, hubris, and arrogance of Wall Street bankers gone wild. He captures the idiocy and complete capture of the rating agencies (S&P, Moodys). He reveals the ineptitude and dysfunction of the SEC, where the goal of these regulators was to get a high paying job with banks they were supposed to regulate. He skewers the faux financial journalists at the Wall Street Journal who didn’t want to rock the boat with the truth about the greatest fraud ever committed.

  What makes the movie great are the characters, their motivations, their frustrations, their anger at a warped demented system, and ultimately their hollow victory when the entire edifice of fraud came crashing down on the heads of honest hard working Americans. The movie does not glorify the men that ended up making billions from the demise of the housing bubble. But it clearly defines the real bad guys.

  Steve Carell plays Mark Baum (based on the real life character Steve Eisman). He’s the kind of prick who would fit in perfectly on TBP. He is abrasively hysterical with his foul mouthed commentary and insults to authority. He is the heart and soul of the movie. You feel his pain throughout. Carrell should win an Academy Award for his performance.

  Christian Bale’s quirky performance as one eyed Dr. Michael Burry, whose Asberger’s Syndrome actually allowed him to focus on the minutia and discover the fraud before everyone else, is top notch. Ryan Goseling is hysterical in his role as the narrator of the story. Brad Pitt plays a supporting role, but does it with his usual class.

  Ultimately, it is a highly entertaining movie with the right moral overtone, despite non-stop profanity that captures the true nature of Wall Street traders. This is a dangerous movie for Wall Street, the government, and the establishment in general. They count on the complexity of Wall Street to confuse the average person and make their eyes glaze over. That makes it easier for them to keep committing fraud and harvesting the nation’s wealth.

  This movie cuts through the crap and reveals those in power to be corrupt, greedy weasels who aren’t really as smart as they want you to think they are. The finale of the movie is sobering and infuriating. After unequivocally proving that Wall Street bankers, aided and abetted by the Federal Reserve, Congress, the SEC, and the mainstream media, destroyed the global financial system, put tens of millions out of work, got six million people tossed from their homes, and created the worst crisis since the Great Depression, the filmmakers are left to provide the depressing conclusion.

  No bankers went to jail. The Too Big To Fail banks were not broken up – they were bailed out by the American taxpayers. They actually got bigger. Their profits have reached new heights, while the average family has seen their income fall. Wall Street is paying out record bonuses, while 46 million people are on food stamps. Wall Street and their lackeys at the Federal Reserve call the shots in this country. They don’t give a fuck about you. And they’re doing it again.

  Every American should see this movie and get fucking pissed off. The theater was deathly silent at the end of the movie. The audience was stunned by the fact that the criminals on Wall Street got away with the crime of the century, and they’re still on the loose. I had a great discussion with my 16 year old son on the way home. At least there is one millennial who understand how bad his generation is getting screwed.

  Merry Fucking Christmas America from a Wall Street banker

  

   

  

  

  

  

  

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• Something Just Snapped In China

  While Sweden is over-flowing with excess cash on bank balance sheets, it appears that banks in Hong Kong are desperate to borrow Yuan (or scared to lend) as overnight HIBOR just exploded higher to 9.45% – a record for the interbank offered rate. The HKD and CNY/CNH FX markets remain relatively stable (with Yuan fixed marginally higher again for the 3rd day).

  From sub-2% a week ago (before The Fed hiked rates) to 9.45%, the overnight rates has exploded…

  

   

  It appears as though it could be year-end window-dressing-related as 1-week rates also soared – but we do note the extent of the spikes are unprecedented even for year-end liquidty needs.

  The last time 1-week rates spiked like this, US equity markets crashed…

  

   

  Did a Chinese/Hong Kong bank just blow-up and suck all the liquidity out of the room? Or is this delayed blowback from The fed's RRP?

  We suspect it is unrelated but we do note that Caixin earlier reported the banking regulator has suspended the private-equity arms of 17 commercial lenders.

   

  Charts: Bloomberg

  

  

  

  

  

• Christmas 2015: Will Syria & Iraq Become Washington's Stalingrad?

  Submitted by Ron Holland via PravdaReport.com,

  73 years ago on Christmas Eve 1942 German troops sang Silent Night on a European wide radio Christmas program from the distant battlefields of Nazi conquest outside Leningrad in the North and from surrounded Stalingrad on the southern Eastern Front to the Middle East. Also all across Nazi occupied Europe, from Italy and Norway to the Atlantic coastlines of Fortress Europe the soldiers sang to their families and listeners back home starting to question the promises of Nazi victory propaganda.

  The Dangers of Empire Overreach in 1942 & 2016

  Yes Germany excelled at propaganda, as does the establishment cable and print news media in the United States today. Although the radio show had the intended propaganda effect of temporarily raising civilian morale, Germany and their fair weather allies were already stretched way too thin around the expansive parameter of Nazi conquered and occupied territory.

  Now on Christmas 2015 there is a Washington military effort also stretched too far among our many distant conquests, peacekeeping missions, occupations and attempts to secure oil resources and pipelines. Our foreign policy is designed to perpetuate the failing petrodollar system. Like the Germans 70 plus years ago, our allies and local populations generally hate us and our attempts to go after local resistance groups only results in the growth of more anti-American groups we describe as terrorists.

  In America Today Political Correctness Is Just Fascism By Another Name

  Unlike the German's singing Christmas hymns in the 1940's, in the Washington politically correct military today the songs would certainly be secular rather than religious in nature. American soldiers are not permitted to promote Christianity because in the modern US military soldiers are often court martialed even for failing to remove Bible verses from their computers.

  But there are some scary parallels between the Nazi Empire of the 1940's and the Washington Empire and conquests today that revolve around the Petrodollar system that has maintained the dollar reserve currency status since the end of World War Two. This dollar world reserve currency model required that oil was only priced and sold in dollars forced all foreign nations buying and importing oil to keep major dollar reserves to pay for their oil imports guaranteed a permanent and expanding demand for dollars around the world.

  Three Middle East countries first broke the oil/dollar requirement and threatened the petrodollar system including Iraq, Libya and Iran hence the US military attempts to violently overthrow these governments to maintain Washington hegemony and the dollar.

  Washington's War Fever

  America has plenty of population to increase military forces unlike Germany in 1942 but we are reaching the limit to voluntary military enlistments in a time of permanent war and repeated overseas assignments. Also the continuous terror threats since 9/11 as well as real and orchestrated plots are being questioned by a growing number of alternative Internet media sites and polls show Americans no longer trust Congress or the media establishment.

  I fear the political leadership has determined a real war of limited scope and duration may be the best way to regain control of the situation and inspire the American people to sacrifice and support their political leadership. Also a war scenario will allow Washington, Wall Street and the Federal Reserve to transfer the blame for the looming death of the Petrodollar to foreign adversaries like Russia, China and Iran. This will provide political cover to a decade long recession and dramatically reduced economic growth and prosperity as the death of the petrodollar works its way through the US economy over the next few years.

  Looking Back To 1942

  Few military historians would question that the German Wehrmacht was the best led, trained and most highly motivated military force in the world. But remember Germany still lost the war because they were out numbered and fighting on too many fronts.

  The German weapon superiority was complete until the Soviet T-34 and KV tanks entered the picture and the overwhelming manufacturing power of the US, Soviet Union and the British Empire doomed Germany to eventual defeat although it wasn't necessarily apparent at the time.

  Today on Christmas 2015 the well-led and highly motivated American forces with the best in weaponry, aircraft and carriers are also stretched far too thin across Afghanistan, Asia and the Middle East. While Republican politicians in the presidential debates want to put "boots on the ground" in Iraq and Syria, the Obama Administration has reduced funding for weapons and soldiers resulting in far too few troops, air and naval forces to cover the multiplying trouble spots across the Middle East and Asia. This is even more concerning when you see our aircraft and naval vessels goading China into a fight or military incident in the Spratly Islands.

  Like the Germans 70 plus years earlier we want to control oil and gas reserves, resources and pipelines while keeping the military pressure on China, Russia and Iran. Our previous actions have already destroyed the countries of Iraq and Syria and more nations in the Middle East are now considering switching to Russia over the US.

  Remember the German Reich didn't have enough troops to defend its conquered lands and had to rely on weak allied troops. Thus when the Soviet's encircled Stalingrad they attacked the weak German flanks held only by second-rate Rumanian troops without the modern weaponry required to hold back the Soviet attack and the rest is history.

  It is much the same for outnumbered American troops today in or near the Shia Crescent. Bush invaded Iraq to overthrew Saddam but took out the leading country able to hold the Sunni line against Iran. Although we had much freedom of action earlier after the fall of the Soviet Union but now with Putin's leadership and a modernized Russian military the Washington days of having a free pass to pursue our goals in the Middle East without Russian hindrance and pushback are over.

  Washington's Petrodollar System Is Dying!

  Today the Washington Petrodollar system is in terminal collapse with China, Russia, Iran and many nations trading oil and natural gas with a wide variety of currencies and credits. In addition, the refugees from our Middle East actions have weakened the euro and now threaten the stability of Europe. This has made the dollar rise in value temporarily against the euro and I believe this is a planned outcome. All designed to weaken the euro and provide the appearance of near term strength to the dollar in a desperate attempt to buy time for US political leadership.

  In closing, Washington is in a race to create instability, possibly a military incident and even a limited war before the final Petrodollar collapse in order to put the blame of a future dollar and debt crisis on a foreign adversary rather at than at home where it belongs. The problem for them in early 2016 is time may be running out as markets and currencies are reacting to the consequences of too much world debt, market and central bank manipulation and a global recession resulting in the collapse of oil demand and prices.

  So my suggestion for investors is to follow China and Russia and increase your personal gold holdings now at record low prices. Also consider diversifying portfolios outside US stocks and jurisdictional, regulatory and presidential executive order risks.

  I hope I'm wrong but I fear Washington is trying to provoke a war in the Middle East to cover the coming collapse of the Petrodollar system and the American economy when the dollar is no longer the world reserve currency. The war is necessary to blame the coming dollar and debt collapse on Russia and China rather where it belongs on Wall Street, the central banking cartel and Washington political establishment.

  Remember while a Washington provoked war or conflict is likely to start in the Shia Crescent; it could spread across the Middle East and into Europe.

  

  

  

  

  

• How Would World Markets Respond To 4% Chinese GDP Growth? UBS Explains "The Dragon's Tail"

  When it comes to explaining why the post-crisis world has been defined by lackluster aggregate demand and a deceleration in global trade, all roads lead to China. 

  Indeed, the country’s attempt to mark a difficult transition from an investment-led, smokestack economy to a consumption and services-led model has contributed mightily to an epic downturn in commodities which has in turn conspired with an expected Fed tightening cycle and a laundry list of country-specific political risk factors to push EM to the brink of disaster. 

  All of this is complicated by the fact that no one really knows how China’s economy is actually doing.

  Everyone knows the “official” GDP prints are a joke and alternative measures such as the Li Keqiang index and the CBB paint a worrying picture of how the world’s engine of global growth and trade is really performing. “National sales revenue, volumes, output, prices, profits, hiring, borrowing, and capital expenditure were all weaker than the prior three months,” the CBB reported just days ago, commenting on the performance of the Chinese economy in Q4. The profit reading is “particularly disturbing,” CBB President Leland Miller said, before noting that the share of firms reporting earnings gains has slipped to the lowest level ever recorded.

  As we documented last month, the credit impulse in China rolled over and died in October as banks are reluctant to lend in the face of rising NPLs and corporates are reluctant to borrow in the face of an acute overcapacity problem.

  Meanwhile, Beijing’s deficient deflator math – which causes the NBS to habitually overstate GDP in times of rapidly falling commodity prices – only adds to the confusion.

  So, how swiftly (or not) is China’s economy actually growing? Well, no one knows, but as we noted last week, you can hardly blame the sellside penguin brigade for sandbagging the numbers.

  

  Effectively, Wall Street is forced to produce forecasts they know are erroneous because trying to estimate actual output in China would mean missing the “official” mark every single time.

  Be that as it may, UBS has endeavored to analyze what would happen should real Chinese GDP growth (so netting out deflation) hit 4% (where it almost certainly already stands). 

  “We try to simultaneously determine the reaction to an extremely unlikely China ‘worst case’ shock on China-hit economies in different regions, and on different asset markets,” UBS says. Again, this caught our eye because not only is this not “extremely unlikely,” it’s actually already the case, so we’re all ears when it comes to assessing the cross-market impact. 

  “We see the government ramping up monetary and fiscal policy support and accelerating growth supportive reforms, which is why our base case continues to see a grind-down rather than sharp plummet in Chinese GDP growth through 2017,” UBS begins, in an effort to justify their 6.2% 2016 GDP target for 2016 and 5.8% outlook for 2017. 

  However, they go on to note that Beijing could fail to ease monetary and fiscal policy “sufficiently” leading to “a highly improbable event” that would see China’s GDP slowing to 4% “with fixed investment contracting (yes, this can happen in China); real imports collapsing, and import prices declining further.”

  “In this worst case scenario,” UBS continues, “falling investment and commodity prices will likely drive both producer prices and the GDP deflator into deeper negative growth territory [while] nominal GDP would likely drop to 1.3%, as the government delivers as many interest rates and RRR cuts as is necessary.” 

  “The most important channel through which the Dragon’s Tail scenario can affect other markets is trade, although financial linkages and market contagion could also have a significant impact on some markets and asset prices,” UBS says. Here’s the visual: 

  

  And here’s UBS’ take on the impact for DM and EM going forward:

  Commodity exporters and regional economies with extensive trade and economic links with China will likely be most affected, while the impact through financial linkages is likely to be concentrated in Hong Kong and Singapore. Of course, as this past summer showed, the impact of contagion is hard to predict and quantify, and could spread to markets and asset classes beyond the usual vulnerable countries with twin deficits and high leverage. Developed economies will most likely feel a chill, but not be critically affected.

   

  In EM, Asia-ex-Japan growth would be hardest hit by a Dragon’s Tail scenario, especially Hong Kong, Taiwan, Korea and ASEAN. Latin America would be hard hit not only by trade but also investment flows and a simultaneous knock-on impact on commodity prices, with Argentina most affected. EMEA would be more affected by its indirect trade and commodity price exposures.

  In the DM world, Australia’s 2016 GDP growth should stay positive but drop sharply to almost zero in a Dragon’s Tail scenario, as Japan would return to recession and CPI deflation in contrast to our current positive base case forecasts. Europe’s 2016 GDP growth should stay positive in a Dragon’s Tail scenario, but slip back to only 1% with Germany, Finland, Austria and France the most exposed.

  Of all the economies we track, the US would be the most insulated from a China worst case scenario, in which its 2016 GDP dip would likely dip to a still healthy 2.3% level thanks to its more domestically rooted growth engine. With softer global inflationary pressures, US CPI would likely also soften, potentially slowing the Federal Reserve’s pace of tightening to leave the Funds rate at 0.875% by end- 2016 instead of our current baseline forecast of 1.38%. In this scenario, the Euro would also likely end 2016 at 1.10 against the USD instead of the 1.20 we currently expect. The USD would gain strongly against EM and commodity currencies, however. 

  Right. Got it. So once again, we encourage you to bear in mind that this isn’t, as UBS says, a “highly improbable” event. 

  Rather, this is something that’s already happened, so if you put any stock in UBS’ forecast for how things will shape up in the event that real GDP touches 4% in China, you should probably go ahead and factor in more pain ahead for Argentina and Brazil, a sextuple recession for Japan, and a decisively less steep “flight path” for the Fed.

  In other words: if you’re the type that’s inclined to predict a resurgence in global economic acitivity, a rebound in commodity prices, and a smooth, successful exit from seven years of “unconventional” Keyneisan insanity, you can just go ahead and give it up. 

  

  

  

  

  

• Donald Trump Explains What "Schlonged" Really Means

  “She got schlonged!” 

  That’s what GOP frontrunner Donald Trump had to say about Hillary Clinton’s primary loss to now President Barack Obama in 2008.

   “She lost. I mean, she lost,” Trump added, just in case anyone was confused about the meaning of the term “schlonged.” 

  Predictably, the liberal media was offended by the brazen billionaire’s assessment but, in keeping with his steadfast refusal to apologize or even to backtrack on controversial commentary, the Trump campaign is sticking with the “schlonging”, a move which has the political punditry tracing the term’s history. 

  Here’s Trump:

  Once again, #MSM is dishonest. “Schlonged” is not vulgar. When I said Hillary got “schlonged” that meant beaten badly.

  — Donald J. Trump (@realDonaldTrump) December 23, 2015

  NPR’s @NealConan said “schlonged” to WaPo re: 1984 Mondale/Ferraro campaign: “That ticket went on to get schlonged at the polls.” #Hypocrisy

  — Donald J. Trump (@realDonaldTrump) December 23, 2015

  For those on TV defending my use of the word “schlonged,” bc #MSM is giving it false meaning-tell them it means beaten badly. Dishonest #MSM

  — Donald J. Trump (@realDonaldTrump) December 23, 2015

  Here’s an excerpt from the WaPo‘s take: 

  “Given Trump’s history of vulgarity and misogyny, it’s entirely possible that he had created a sexist term for ‘defeat’ (as far as I know there is no such slang verb in Yiddish),” Pinker wrote. “But given his history with sloppy language it’s also possible that it’s a malaprop.”

   

  Trump’s problem? He’s a gentile who, linguistically, may have wandered too far from home.

   

  “Many goyim are confused by the large number of Yiddish terms beginning with ‘schl’ or ‘schm’ (schlemiel, schlemazzle, schmeggegge, schlub, schlock, schlep, schmutz, schnook), and use them incorrectly or interchangeably,” he wrote. “And headline writers often ransack the language for onomatopoeic synonyms for ‘defeat’ such as drub, whomp, thump, wallop, whack, trounce, clobber, smash, trample, and Obama’s own favorite, shellac (which in fact sounds a bit like schlong). So an alternative explanation is that Trump reached for what he thought was a Yinglish word for ‘beat’ and inadvertently coined an obscene one.”

  And here’s a bit from the NPR piece Trump references:

  As it turns out, the use of “schlong” as a verb is not unprecedented in political discourse. As the Washington Post’s Justin Moyer pointed out, NPR’s own Neal Conan used it on the air in 2011, explaining that the Walter Mondale-Geraldine Ferraro presidential ticket “went on to get schlonged at the polls” in the 1984 election.

  As it now appears increasingly likely that the general election will see Trump face off against Hillary, it’s a virtual certainty that the American people will ultimately be the ones who end up getting “schlonged. 

  Enjoy it America.

  

  

  

  

• Economists Confirm Financial Aid Is Inflating Student Loan Bubble

  Submitted by Samuel Bryan via SchiffGold.com,

  A paper recently published by the National Bureau of Economic Research confirms that a large percentage of the increase in college tuition can be explained by increases in the amount of available financial aid.

  

  Peter Schiff was saying this as far back as 2012. That summer, Peter appeared on CNBC and debated an economist with the Progressive Policy Institute. Peter insisted that colleges are “basing their prices on the fact that students can borrow money with government guarantees.”

  Economists Grey Gordon and Aaron Hedlund wrote their paper for the NBER after creating a sophisticated model of the college market. When they crunched the numbers, it confirmed exactly what Peter said in 2012. The demand shock of ever-increasing financial aid accounted for almost all of the tuition increase:

  Specifically, with demand shocks alone, equilibrium tuition rises by 102%, almost fully matching the 106% from the benchmark. By contrast, with all factors present except the demand shocks, net tuition only rises by 16%. These results accord strongly with the Bennett hypothesis, which asserts that colleges respond to expansions of financial aid by increasing tuition.”

  George Mason University economist Alex Tabarrok pointed out that Gordon and Hedlund revealed the inevitable outcome of government financial aid policy in his analysis of their paper for the Foundation for Economic Education:

  "Remarkably, so much of the subsidy is translated into higher tuition that enrollment doesn’t increase! What does happen is that students take on more debt, which many of them can’t pay.”

  According to Gordon and Hedlund, the spike in tuition driven by increased financial aid actually crowds out additional enrollment. But students who do enroll end up taking out $6,876 in loans compared to $4,663 absent the increased availability of financial aid. The end-result, a surging loan default rate from 17% to 32%:

  "Essentially, demand shocks lead to higher college costs and more debt, and in the absence of higher labor market returns, more loan default inevitably occurs.”

  The NBER paper coincides with a study released this summer by the Federal Reserve Bank of New York. Its major conclusion:

  We find that institutions more exposed to changes in the subsidized federal loan program increased their tuition disproportionately around these policy changes, with a sizable pass-through effect on tuition of about 65%.”

  This is not just a bunch of economic theory. These studies reflect the realities we see in America today. A White House study released in September revealed that about 73% of student loans are being repaid. That means 27% are not. And that number will likely grow in the years ahead.

  A case currently working its way through the federal court system could pave the way for student loan debtors to discharge their obligations through bankruptcy. The federal student loan bill currently stands at more than $1.3 trillion, and it’s increasing at a rate of about $2726.27 per second. Some 7.5 million student debtors are now severely behind in paying their student loans.

  In a nutshell, the federal government is destroying the value of a college degree. Peter summed up the problem during an interview with Tom Woods:

  "Government wanted to make college more affordable. They made it more expensive. And at the same time, they destroyed the value of the degree. It costs more to get a degree, and the degree is worth less, because everyone now has one.”

  Meanwhile, the American taxpayer is on the hook for all of this student loan debt.

  To learn more about the student loan debt crisis and how it may impact you directly, get Peter’s exclusive white paper The Student Loan Bubble: Gambling with America’s Future. You can download it free HERE.

  

  

  

  

  

• 9 Of The Top 10 U.S. Occupations Pay Miserly Wages

  With Dora Mekouar of VOAnews

  9 of 10 Largest US Occupations Pay Miserly Wages

  Of the 10 largest occupations in the United States, only one – registered nurse – makes more than the national average when it comes to all U.S. jobs.

  Nurses make $69,790 annually while the average U.S. worker makes $47,230, according to the Bureau of Labor Statistics. The bureau’s Occupational Employment Statistics program provides employment and wage estimates for more than 800 occupations nationwide.

  More Americans worked as retail salespersons or cashiers in May 2014 than in any other job, accounting for about 6 percent of total U.S. employment.

  

  Cashiers at work at Walmart. About 3.4 million Americans work as cashiers. (AP Photo)

  The 10 largest occupations include retail salespersons and cashiers, food preparation and serving workers, general office clerks, registered nurses, customer service representatives, and waiters and waitresses. That combined group of workers accounted for 21 percent of total U.S. employment in May 2014.

  

  Waitress Laura Haege carries a breakfast to be serve at the Waveland Cafe, June 19, 2015, in Des Moines, Iowa. (AP Photo)

  The annual average wages for those largest occupations — excluding nurses — ranged from $19,110 for combined food preparation and serving workers, to $34,500 for secretaries and administrative assistants. Food preparation and serving workers also had one of the lowest paying occupations overall, as did fast food cooks ($19,030), shampooers ($19,480), and dishwashers ($19,540).

  Here is the full breakdown of the top 10 occupations from the BLS:

  

  On the opposite end of the spectrum, the highest paying jobs include certain physicians and dentists, chief executives, nurse anesthetists and petroleum engineers.

  So-called STEM jobs — occupations requiring science, technology, engineering, or math-related degrees — accounted for about 6.2 percent of all U.S. jobs. There are 100 different occupations that account for the STEM jobs. Seven of the 10 largest STEM occupations were related to computers.

  Ninety-three of the 100 STEM occupations had mean wages that were significantly above the U.S. jobs average. The highest paying STEM occupations included petroleum engineers ($147,520) and physicists ($117,300). The lowest paying STEM jobs included agricultural and food science technicians ($37,330) and forest and conservation technicians ($37,990).

  Overall, the most lucrative U.S. jobs included management, legal, and computer and mathematical occupations.

  The lowest paying included food preparation and serving, personal care and service, and farming, fishing, and forestry occupations. Each had an annual mean wage of about $25,000 or less.

  * * *

  Here is the chart of the average annual wages of the top 10 US occupations:

  

  

  

  

  

  

• Foursquare Is Now Twosquare: Latest Tech Bubble Casualty Has Valuation Slashed By 60%

  First it was Dropbox.

  In late October ago we reported that one of the numerous “unicorns” prancing around Silicon Valley was about to have a very rude wake up call when Dropbox was warned by its investment bankers that it would be unable to go public at a valuation anywhere near close to what its last private round (which had most recently risen to $10 billion from $4 billion a year ago) valued it at.

  Than it was Jack Dorsey’s “other” company, Square (which soon may have a higher valuation than Twitter).

  In early November we wrote that “another company realized just how big the second “private” tech bubble, one we profiled first in January of 2014, truly is. That company is Jack Dorsey’s Square, which earlier today filed a prospectus in which it said that the “initial public offering price per share of Class A common stock will be between $11.00 and $13.00.” Assuming a mid-point price of $12 and applying the 322.9 million shares outstanding after the offering, it means a valuation of $3.9 billion.  The problem is that in its last private fundraising round, Square was valued at about $6 billion…“

  Then, one month ago it was the turn of Snapchat, the fifth most highly valued private tech start up.

  According to FT, “Snapchat has been marked down by one of its most high-profile investors, raising further questions about the soaring valuations of private technology companies. Fidelity, the only fund manager to have invested in the four-year-old company best known for disappearing photos, wrote down the value of its stake by 25 per cent in the third quarter. It had valued each share at $30.72 at the end of June but dropped the valuation to $22.91 by the end of September.”

  Fast forward to today, when the latest semi-unicorn to drop like a fly was none other than Foursquare, a company which makes apps that do something that most other apps already do as well if not better.

  Actually make that Twosquare, or rather Oneandathirdsquare, because according to ReCode, the company is close to finalizing a funding round that will see the company’s value plunge to $250 million, almost two-thirds less than the $650 million it was “valued” at two years ago.

  ReCode, which explains that the startup “makes apps that let you find local restaurants and stores and “check in” to them” adds that the company has also talked to potential buyers. So it could still conceivably sell instead of finishing up the funding, which should raise at least $20 million and as much as $40 million. Or, conceivably, it may do neither if investors realize that now that the tech bubble has burst the only way they “get out” is without another down round in 6-9 months, because unfortunately just like virtually all other tech bubble 2.0 names, this one has zero hope of ever generating a profit either.

  According to ReCode, at least one new investor will participate in this round; previous investors include DFJ Growth, Microsoft, Silver Lake Partners, Spark Capital, Union Square Ventures and Andreessen Horowitz.

  Most importantly, in 2013, Foursquare raised $35 million in a round that valued the company at about $650 million. We can’t wait to see if after the 2017 valuation round, the company will have a “zero dot” prefix ahead of the number of pro forma “corners.”

  The good news for the late stage investing idiots who inflated this particular tech bubble in hopes even greater idiots will emerge, is that unlike “luxury online retailer” Gilt Group which is trying to go public at a quarter of its recent private round valuation, Foursquare has raised less, or $121 million, than its so-called valuation. Then again, throw in one more downround, and 4Square will also have raised more in cash than it has in equity value.

  How did this collapse happen? ReCode tells the story:

  Foursquare, which used to be one of New York’s buzziest startups, launched in 2009 as a social service that let you tell friends what bar or restaurant you were hanging out at — the same concept as Dodgeball, Foursquare CEO Dennis Crowley’s previous company. Foursquare eventually evolved into an ad-supported service that was meant to help you find places to eat, drink or shop, and last summer Crowley said the company had 50 million active users.

   

  But while Crowley has said Foursquare could make real money from advertising, its growth has never matched its valuation, a reality the company and its backers are now tacitly conceding.

   

  Crowley has also spent the past few years talking up the company’s data assets, accumulated via its users’ travels. That data could theoretically be valuable to a big platform company like Microsoft, which has already invested in Foursquare, or Twitter, which is already using Foursquare to power its location function.

  But we thought Twitter was hoping that Four Square (or Microsoft) would buy it? This second tech bubble sure is getting confusing.

  Luckily, even if Foursquare meets an untimely demise sooner rather than later (and considering its “cash flow”, make that sooner) when its potential investors finally realize they are throwing lots of good money after even more bad money, the entrepreneurial spirit will be alive and well, concocting of the next great idea such as this one:

  

   

  The good news, sarcastically of course, is that as the WSJ reminds us, there is a whole lot of this kind of “greater idiocy” still to go.

  

  

   

  And then there’s this

  

  

  

  

  

• Equity Markets Will Be Increasingly Accident Prone In 2016

  BofAML's Economics of Volatility framework has been anticipating the 2015 starting point to a turn in volatility for the last two years. From here on we expect to see a rising trend in equity volatility levels, a trend that could last 1-2 years, transporting us from the low volatility regime of the last 3 years towards a sustained high volatility regime.

  The Economics of Volatility framework – a quick refresher

   

  The framework attempts to forecast the transitions from low volatility environments to high volatility ones, and vice versa. These periods can last a few years at a time, as do the transitions themselves. The ends of peak and trough periods in interest rates lead declines and rises in mean volatility levels by around 2 years.

   

  During low volatility environments, the inevitable volatility spikes that occur as new information hits the market will get washed over with plentiful risk capital, such that the spike is quickly suppressed. In high volatility environments, higher mean volatility levels can be sustained due to a reduced supply of risk capital.

  The global equity derivative team's expectation for a turn in the volatility cycle follows from a clear turn higher in 5Yr real rates in 2013, and allows for a 2-year lag (Chart 6). High volatility regimes may resemble periods like 1998-2003 or 2008-2011, as two examples. Transition periods can also take various forms. Unlike the 1996-1998 transition period which was gradual and well behaved, the 2008-2009 transition was short and violent, as a suppressed and overdue re-pricing of risk finally manifested itself. It’s hard to predict the exact form the next transition will take. While our base case is for an orderly transition, we are wary of the possibility of unpleasant surprises resulting from an unwinding of the highly unusual monetary policy of the last 7 years.

  

  Unwinding extreme easy monetary policy is a tightening

  The monetary tightening cycle which started with the 2013 taper has continued its progress, reflected in rising 5yr real rates. This in turn has driven a significant tightening in global liquidity as capital flows from developed to emerging markets start to reverse, evidenced in a slowdown and reversal of FX reserve accumulation.

  Tightening liquidity combined with fragility: equity markets are accident prone

  Chart 7 shows a measure of global US$ liquidity derived from the momentum of the Fed’s balance sheet. Historically we see that tightening cycles have typically started at high liquidity levels. The current cycle in fact started in anticipation of the tapering of the open-ended QE3 program in 2013, with the impact evident in the sharp turn in the 5Yr TIPs rate (Chart 6), and the subsequent fall in US$ liquidity.

  

  Given how far liquidity has already dropped, it is going to be interesting to watch the impact of the more traditional part of the tightening cycle – actual rate hikes – which are expected to start imminently. Combined with our view of an increased likelihood of local shocks due to deteriorating trading liquidity, we may find the markets more accident prone in 2016 than they have been in some time.

  

  

  

  

  

• The World Economy Explained With Two Cows: New Normal Edition

  'Keep It Simple Stupid' is the underlying narrative of the "two cows explain economics" meme… but, in light of the 'new normal' reality unleashed by ever-intervening central planners, some of the key political, economic, and corporate systems needed a re-work…

  Productivity 'increases'… or slave labor?

  

   

  It's not a cow, it's a unicorn…

  

   

  It's not easy being Greek…

  

   

  Manipulation and lies…

  

   

  China or America?

  

   

  Venezuela or America?

  

   

  Aha, America…

  

   

  Find more here at imgur

  

  

  

  

  

• Orwell's Nightmare Is Here – China Just 'Gamified' Obedience To The State (And Soon It'll Be Mandatory)

  Submitted by Claire Bernish via TheAntiMedia.org,

  As if further proof were needed Orwell’s dystopia is now upon us, China has now gamified obedience to the State. Though that is every bit as creepily terrifying as it sounds, citizens may still choose whether or not they wish to opt-in — that is, until the program becomes compulsory in 2020. “Going under the innocuous name of ‘Sesame Credit,’ China has created a score for how good a citizen you are,” explains Extra Credits’ video about the program. “The owners of China’s largest social networks have partnered with the government to create something akin to the U.S. credit score — but, instead of measuring how regularly you pay your bills, it measures how obediently you follow the party line.”

  In the works for years, China’s ‘social credit system’ aims to create a docile, compliant citizenry who are fiscally and morally responsible by employing a game-like format to create self-imposed, group social control. In other words, China gamified peer pressure to control its citizenry; and, though the scheme hasn’t been fully implemented yet, it’s already working — insidiously well.

  Zheping Huang, a reporter for Quartz, chronicled his own experience with the social control tool in October, saying that “in the past few weeks I began to notice a mysterious new trend. Numbers were popping up on my social media feeds as my friends and strangers on Weibo [the Chinese equivalent to Twitter] and WeChat began to share their ‘Sesame Credit scores.’ The score is created by Ant Financial, an Alibaba-affiliated company that also runs Alipay, China’s popular third-party payment app with over 350 million users. Ant Financial claims that it evaluates one’s purchasing and spending habits in order to derive a figure that shows how creditworthy someone is.”

  However, according to a translation of the “Planning Outline for the Construction of a Social Credit System,” posted online by Oxford University’s China expert, Rogier Creemers, it’s nightmarishly clear the program is far more than just a credit-tracking method. As he described it, “The government wants to build a platform that leverages things like big data, mobile internet, and cloud computing to measure and evaluate different levels of people’s lives in order to create a gamified nudging for people to behave better.”

  While Sesame Credit’s roll-out in January has been downplayed by many, the American Civil Liberties Union, among others, urges caution, saying:

  “The system is run by two companies, Alibaba and Tencent, which run all the social networks in China and therefore have access to a vast amount of data about people’s social ties and activities and what they say. In addition to measuring your ability to pay, as in the United States, the scores serve as a measure of political compliance. Among the things that will hurt a citizen’s score are posting political opinions without prior permission, or posting information that the regime does not like, such as about the Tiananmen Square massacre that the government carried out to hold on to power, or the Shanghai stock market collapse. It will hurt your score not only if you do these things, but if any of your friends do them.” And, in what appears likely the goal of the entire program, added, “Imagine the social pressure against disobedience or dissent that this will create.”

  Social pressure, of course, can be highly effective given the right circumstances. China seems to have found exactly that in the intricate linking of people’s scores to their contacts, which can be seen publicly by anyone — and then upping the ante through score-based incentives and rewards. Rick Falkvinge pointed out a startling comparison:

  “The KGB and the Stasi’s method of preventing dissent from taking hold was to plant so-called agents provocateurs in the general population, people who tried to make people agree with dissent, but who actually were arresting them as soon as they agreed with such dissent. As a result, nobody would dare agree that the government did anything bad, and this was very effective in preventing any large-scale resistance from taking hold. The Chinese way here is much more subtle, but probably more effective still.”

   

  As Creemers described to Dutch news outlet, de Volkskrant, “With the help of the latest internet technologies, the government wants to exercise individual surveillance. The Chinese aim […] is clearly an attempt to create a new citizen.”

  Chinese internet specialist at the Swedish Institute of International Affairs, Johan Lagerkvist, said the system is“very ambitious in scope, including scrutinizing individual behavior and what books people read. It’s Amazon’s consumer tracking with an Orwellian political twist.”

  James Corbett has been tracking the implementation of Sesame Credit for some time. Introducing the ubiquitous tracking system for a recent episode of the Corbett Report, he mused:

  “Coming soon to a New World Order near you: social credit! Earn points by behaving like the government wants you to behave! Get penalized if you don’t act like a doubleplusgood citizen! What could be more fun?”

  Indeed, because mandatory enrollment in Sesame Credit is still a few years away, its true effectiveness won’t be measurable for some time. But even a reporter’s usual wariness appears knocked off-kilter, as Zheping Huang summarized his personal experience, “Even if my crappy credit score doesn’t mean much now, it’s in my best interest I suppose to make sure it doesn’t go too low.”

  And that, of course, is precisely why gamifying State obedience is so terrifying.

  

  

  

  

  

• Commerce Department Releases Consumer Spending Data Early – Worst YoY Growth Since May 2013

  In yet another government SNAFU, the US commerce department has released spending data prematurely. Instead of tomorrow morning, its website released the data at 1923ET.. and it is not good. Despite a 0.3% rise in November, thanks to downward revisions, the YoY growth in Spending was just 2.9%. May 2013 was the last time YoY growth was weaker than this and corresponds with spending weakness seen in each of the last 3 recessions.

   

  The figure, which was to be made public Wednesday with the agency’s
  report on personal income and spending, was released early on the Bureau
  of Economic Analysis’ website

  Personal consumption in Nov. rose to $12.43t, up 0.3% from a revised $12.39t in Oct.

  That constitutes a 2.94% rise YoY…

  

   

  Deep in recessionary territory.

   

  Charts: Bloomberg

  

  

  

  

  

• Chinese Executive Who Was Once Kidnapped By Angry Investors Disappears

  Back in August, angry investors captured Shan Jiuliang, the head of Fanya Metals Exchange, in a daring predawn raid on a luxury hotel in Shanghai.

  The citizen’s arrest (depicted in the rather dramatic image shown below) came after Fanya stopped making payments on WMPs it issued. As we reminded readers at the time, WMPs are marketed to investors through as a high yielding alternative to savings deposits. Investors aren’t often aware of exactly what they’re investing in or how risky it might be or that in many cases, issuers borrow short to lend long resulting in a perpetual case of maturity mismatch. 

  

  “Fanya, based in the southwestern city of Kunming, bought and stockpiled minor metals such as indium and bismuth, while also offering high interest, highly-liquid WMPs from its offices in Shanghai and its financing branch in Kunming,” FT explained. Over the summer, the exchange ran into “liquidity problems” at which point those who had bought the company’s financial products had their funds (billions worth) frozen. Investors began to protest.

  

  The situation began to deteriorate rapidly after that, and within a month, investors decided to take matters into their own hands by flying in from all corners of the country to ambush Shan and deliver him to local authorities. He was later released.

  

  As the RBA put it in a report out earlier this year, “a key issue is whether the presumption of implicit [state] guarantees is upheld or the authorities allow failing WMPs to default and investors to experience losses arising from these products.” That may indeed be a key issue, but as we noted in “The 8 Trillion Black Swan: Is China’s Shadow Banking System About To Collapse?,” in the event investors are forced to take losses, the key issue is what those investors will do next.

  Similarly, FT says that “one of the risks posed by high interest rate shadow banking in China is the possibility that it will erode support for the Communist party among the urban middle classes who have benefited most from China’s increasing prosperity.”

  In other words: if China’s multi-trillion dollar WMP market implodes and the state doesn’t step in to bail investors out, there’s a very real risk of social upheaval as evidenced by what happened to Shan in August.

  Well, if Xi and his attack dog Fu Zhenghua are serious about rooting out corruption in China’s financial markets, you’d think they’d spend a little more time getting to the bottom of things like $6.4 billion in missing funds tied to WMPs issued by an indium exchange than on arresting securities officials for frontrunning the national team. 

  Sure enough, Imagi Animation Studies (another company run by Shan) now says it can’t locate its leader. “In a filing to the Hong Kong stock exchange, Imagi Animation Studies, a company controlled by Shan Jiuliang, said it had “lost contact” with the Fanya founder. It said he last attended a board meeting on October 15 but did not turn up for a meeting on December 11 and had not been reachable,” FT reports, adding that “announcements that a company has ‘lost contact’ with its leader are usually the first and sometimes only sign that a Chinese executive has become ensnared in the country’s three-year anti-corruption campaign.” 

  Party officials have reportedly occupied Fanya’s offices and are now rummaging through files and documents presumably in an effort to figure out where the money is and what happened over the summer that forced Shan to freeze the WMP payouts. 

  As noted above, the Politburo isn’t particularly keen on the witnessing a popular revolt triggered by some kind of dramatic meltdown in financial markets. Indeed, the main reason the PBoC spent CNY1.5 trillion in Q3 propping up the SHCOMP was to keep the legions of farmers and housewives-turned day traders (who China encouraged to leverage their life savings by buying grossly overvalued stocks on margin) from losing their minds in the midst of the summer selloff. 

  Given that, it seems likely that Beijing will end up bailing out Fanya’s disgruntled investors rather than risk ongoing protests – or worse. As for Shan, we imagine Xi will be none to pleased about having to shell out CNY36 billion to fix a problem that very well might have arisen from mismanagement, greed, or both. On that note, we’ll close with a quote from an attorney who helps foreign firms ensnared by Xi’s anti-corruption probe:

  “The best thing you can do is establish processes for who is likely to be taken away, and how to make sure they aren’t disappeared forever.”

  *  *  *

  Full Imagi filing

  Imagi Filing

  

  

  

  

  

• Increasingly Durable Correlations

  Submitted by Jeffrey Snider via Alhambra Investment Partners,

  There are a few correlations that I find particularly compelling.

  The first is Chinese RMB (or CNY) next to WTI crude oil, as both are proxies in their own way of multi-dimensional crosscurrents between global “dollar” finance and real economy function. Since March, that correlation has come into renewed and tight focus. In the past few days, the CNY has traded and fixed narrower, perhaps indicating an end to the latest run that has demonstrated huge “dollar” tightness. WTI, however, is still on the way down “catching up” to CNY and thus signaling instead only a short-term pause in the financial downgrade and downdraft.

  

   

  The second is the Russian ruble compared to more “mid-grade” US corporate junk. Again, you have the same overtones of finance and real economy, with both indications presenting heavy energy exposure but nowhere limited to just that. The ruble declares Russia’s expected oil fortunes, and thus the ability to “service” dollar financial conditions, but also more than that as the overall Russian economy sinks toward its next abyss. The BofAML High Yield Master II index is very much the same, undoubtedly with a high proportion of energy-related junk obligors but increasingly the selloff attains much more shifting risk perceptions about those raw economic circumstances (the credit cycle in general, as the worst of junk increasingly has already greatly strained the boundaries of expectations for default).

  

  Here, unlike January and February, the ruble has held up comparatively well after August 24 and 25. Given the state of the Russian economy, I’m not too sure that isn’t an ill omen in terms of the junk bubble. In other words, in the first “dollar” wave the ruble declined faster and sharper, while this time it is US junk that throws off so much complacency. To me, that says a lot about how “transitory” was viewed in both participants only to converge at this later stage.

  In more succinct terms, there remains a serious global problem across both economy and finance. Given the very distinct elements contained in each of these individual indications, that they would come together so well and for so long leaves little to chance (or continuing recovery, for that matter). A few weeks might be random, a half year very unlikely so (CNY/WTI) while nearly a year and a half (RUB/HY) establishes a lot of credibility.

  

  

  

  

• "Canadians Should Be Concerned" As Energy Sector Job Losses Spike To 100,000 This Year

  It's grim up north… and getting grimmer. Amid soaring suicide rates, Canada's once-booming oil patch is rapidly accelerating its downward trajectory. "Canadians should be concerned in times like these," warned Tim McMillan, president and chief executive of the Canadian Association of Petroleum Producers, noting that the oil and gas sector will see 100,000 job losses by the end of this year. Even if oil prices rise early and fast next year, Financial Post reports, it may take a while for Canadian oilsands to rebound as the industry has mothballed a number of long-term projects.

  Over the past year, we have extensively chronicled the tragic story of Alberta – Canada's once booming oilpatch – disintegrate slowly at first, then very fast, into an economic and financial wasteland:

  • "Canada Crude Contagion: Calgary Home Prices Drop Most In 2 Years"
  • "Canada's Biggest Oil Casualty To Date: Calgary's Nexen Shutters Oil Trading Desk"
  • "The Canadian Housing Bubble Has Begun To Burst"
  • "Canada's Oil Patch Confidence Crashes"
  • "Canada Mauled by Oil Bust, Job Losses Pile Up – Housing Bubble, Banks at Risk"
  • "The Stage Is Set For A Massive Housing Market Correction in Canada's Oilpatch"

  And, in one of the latest articles of this sad series describing the Alberta "bloodbath", we said that the worst casualty of Canada's recession has been the local commercial real estate market, where office vacancies are about to surpass the aftermath of the (first) great financial crisis.

  

  But, it turns out the biggest casualty of Canada's recession, which unless oil rebounds strongly soon will follow Brazil into an all out depression, are people themselves. As CBC reports the suicide rate in Alberta has increased dramatically in the wake of mounting job losses across the province.

  Sadly, as The Financial Post reports, the situation looks set to get worse… as policy uncertainty has exacerbated the pain of low prices…

  The oil and gas sector will see 100,000 job losses by the end of this year, including 40,000 direct jobs, as a combination of policy uncertainties and low crude oil prices decimates the sector, the head of the country’s oil and gas industry group says.

   

  “Canadians should be concerned in times like these,” Tim McMillan, president and chief executive of the Canadian Association of Petroleum Producers, said in an interview. “We have a lot of big policy pieces moving around. We need … to ensure we can compete in a slower price environment and if prices do bounce back , that we are the preferred investment jurisdiction and that we are picking up more than our fair share.”

   

  Apart from the protracted price declines, Alberta’s oil and gas sector has also had to contend with a 20 per cent hike in corporate taxes, a carbon tax and new regulatory policies to limit rein in carbon emissions.

   

  Meanwhile, a new provincial royalty regime is to be announced in January, leaving Alberta oil and gas producers under a cloud of uncertainty. The new federal government also plans to unveil new policies, including a review of the regulatory process, which the sector sees as more burden in an already difficult environment for the industry.

   

  McMillan said those burdens are chipping away at Alberta’s competitiveness as an energy jurisdiction. In the 1990s, Canada attracted 37 per cent of all oil and gas investments in North America, a figure that now stands at 17 per cent, he said.

   

  Furthermore, on Friday, American lawmakers lifted a 40-year ban on U.S. crude oil, which would bring a new competitor into the already-crowded international suppliers market. McMillan said while scrapping the export ban will bring more efficiency to the North American oil landscape, Canada should try to forge its own path to international markets.

  However, as Financial post goes on to say, even if oil prices rise early and fast next year, it may take a while for Canadian oilsands to rebound as the industry has mothballed a number of long-term projects.

  Canada has led the world in deferments since the oil crisis unfolded in November last year, with just under 40 projects scaled back due to low prices and lack of market access, according to Texas-based energy investment and merchant bank Tudor, Pickering, Holt & Co.

  As we concluded previously, Nancy Bergeron, who has answered distress centre phone lines for a few years, says this year has been the hardest. "People are just at wit's end and they're contemplating it, right?"

  Why? Simply because the price of a commodity has dropped to a third of what it was just over a year ago, and the shocking impact has been a paralysis of every aspect of financial, economic and social life, first in Alberta, and soon everywhere else across Canada, as the local recession (on its way to a depression) spreads across the country and eventually crosses the U.S. border.

  

  

  

  

  

• Police Whisper Into Protesters’ Ear: “Keep On Protesting”

  Former New York Times reporter Chris Hedges has previously noted that oppressive regimes fall when their soldiers stop obeying orders and start following the will of the people.

  Hedges gave an example from the U.S.  In 2010, Hedges, Daniel Ellsberg and 131 veterans were arrested for holding an anti-war protest in front of the White House.

  Everyone was arrested, their wrists tied with plastic restraints, and hauled off to jail.  So – on the surface – it looked like the police unquestioningly cracked down on the protest.

  But Hedges says (in a speech broadcast on public radio station last week) that – as their wrists were being tied – the police officer whispered in the protesters ears:

  “Keep protesting.  Keep doing what you’re doing, because these wars stink.”

  Hedges later explained that the police were vets, too.  And they knew recent American wars have been fought for oil and geopolitical power … not to protect America.

  Postscript: American military heroes have also blown the whistle on things which could have led to nuclear war.

  And Pulitzer prize-winning reporter Seymour Hersh claims that top-level U.S. military officials are disregarding Obama’s dangerous orders to oust Syria’s Assad.

  No wonder veterans are considered terrorists by the USG.

  

  

  

  

• Six Signs That 2016 Will Be Much Worse Than 2015

  Submitted by GlobalGold's Claudio Grass via Acting-Man.com,

  A Turbulent Year

  In the course of 2015 we have witnessed several events that had, and will have, negative repercussions on individual freedom. Orwellian totalitarianism is increasingly creeping into our everyday lives. How much more intrusive will the violations of our liberties become and for how long will the establishment get away with this? These are questions that remain unanswered.

   

  

  United we move toward a perfectly monitored society – the US Congress has just passed the controversial CISA spying law – the worst possible version of it – by sneaking it into a budget bill. This utterly corrupt method of enacting laws that would not get passed on their own because they are such a huge affront to decency and civilization has become the norm in the “land of the free” – which ironically is “exporting democracy” by force of arms all over the world!

  With regards to the financial system, no real solution was found to issues such as those in the euro zone. Furthermore, the financial system as a whole once again got deeper into debt. For how much longer can central banks and governments continue kicking the can down the road without any real reform? I will try to answer these questions and identify trends for 2016 by looking at six key issues that have had an impact this year.

   

  1. Geopolitical Developments

  We have witnessed a number of troubling geopolitical developments during this past year. From the continuing conflict between Russia and Ukraine, territorial disputes between Japan and China, the escalating proxy war in Syria, the refugee crisis in Europe, the rise of religious tensions all over world to the rise of the Islamic State, the world has become increasingly unstable.

   

  

  Yet another finger-wagger: Abu Bakr al-Baghdadi, the self-anointed “Caliph” of the medieval retro-state that has sprung up in Syria and Iraq.

  Going into the details of these conflicts is beyond the scope of this article, but the fact is that all of these developments harbor the potential for large-scale escalation. From the perspective of the West, the conflicts and wars of the past decades were for the most part far away. Only now do we realize that this will change as we have already begun to see in 2015. The times of conventional warfare, when two armies met on the battlefront, are over. Future conflicts and wars will be fought closer to home. We should get ready for a period of increased instability, particularly with respect to politics and security issues.

   

  2. Totalitarianism is on the Rise

  The sudden rise of ISIS and its affiliates is a disturbing development that has produced a smorgasbord of feelings, ranging from fear to rage to sadness and more. Ultimately though, they all lead to the same result: States are seeking more control over their citizens by curbing individual liberties.

  One example is that Western countries are limiting the use of cash, under the guise of fighting terrorism and illicit activities. JP Morgan has placed restrictions on the amount of cash one is allowed to deposit and several European countries have banned cash transactions exceeding a certain size. Looking to the future, it seems that this trend will continue to worsen and that we are headed toward an Orwellian police state in which no one is entitled to financial privacy anymore.

  Another hot-button issue is gun control. Since it became known that the San Bernardino shooting and the Paris attacks were apparently carried out with legally obtained arms, there have been increased calls for massive restrictions on private gun ownership. Disarming the masses is a necessity to control them and that is exactly what our governments are gradually doing.

  “The strongest reason for the people to retain the right to keep and bear arms is, as a last resort, to protect themselves against tyranny in Government” – Thomas Jefferson.

   

  

  FRONTEX operational territory; insert: Frontex uniform. This paramilitary bureaucracy is headquartered in Warsaw and threatens to override the sovereignty of EU member nations.

  On the EU level, a disturbing development is the fact that FRONTEX (the EU agency responsible for border management) has stated that it will intervene to secure the EU’s borders should the refugee crisis get out of hand, even if the respective countries oppose its action. On a global level, the Transatlantic Trade and Investment Partnership (TTIP) says that arbitration courts will have the potential to annul national sovereignty when it comes to jurisprudence. We expect this trend toward ever greater centralization to continue.

   

  3. The “Rescue” of Greece: Coming to a Country Near You?

  At the beginning of this year, the topic of a potential “Grexit” dominated news cycles over several weeks. It seemed like a realistic possibility that Greece might leave the euro zone. Instead, after yet another one billion euro bailout package, Greece was “saved” and a “Grexit” was off the table (for the time being). Once again, political idiocy prevailed over economic rationale. In the end, delaying the inevitable failure of the Greek financial system is all that was achieved.

   

  

  Desperate Greek pensioners queuing at an ATM during the “bank holiday”. Many of them realized a number of facts far too late: a) that fractionally reserved banks are de facto insolvent and cannot pay the vast majority of their depositors in extremis (especially if the central bank backstop is withdrawn); b) that the European elites would expropriate them in an eye-blink for “their own good”; and c) that any vote that doesn’t conform to the wishes of the EU bureaucracy is worth precisely nothing – even in the “cradle of democracy”.

   

  More astonishing than the fact that Greece – a country that represents less than one third of one percent of the world GDP – received another huge bailout package, was how it all played out. A bank holiday was announced, capital controls were implemented, cash withdrawals were massively restricted, the stock market closed and any assets inside the banking system (even safety deposit boxes) were no longer accessible to their owners. This is an unprecedented level of infringement on private ownership that has never been seen in a modern Western country.

   

  4. Fed Hikes Interest Rates

  The Fed hikes interest rates for the first time since the financial crisis of 2008. For the past 7 years we have had an interest rate band between 0-0.25%, which is essentially “money for nothing”. With its decision, the Fed became the first large (and the leading) central bank to effectively hike interest rates.

   

  

  The effective federal funds rate (a weighted average) has jumped to the highest level since late 2008. This “high level” is still next to nothing though – click to enlarge.

   

  Meanwhile, on the other side of the Atlantic, the ECB cut its deposit rate (slightly) deeper into negative territory and prolonged its QE program that is now expected to continue until March 2017. Since last summer, the media continuously speculated about a rate hike and its timing. So, will interest rates start to normalize after the long-awaited change in monetary policy? We don’t think so! We believe that the main reason the Fed decided to hike rates was to regain some of its lost credibility.

  For the past seven years the monetary floodgates have been open with no clear positive effect on the real economy. A continuation of zero interest rate policy (ZIRP) would have been an admission of failure. With this slight rate hike of 25bps, the Fed is trying to show the world that its policy during the financial crisis worked.

  We all know that the economy in the US is not as healthy as the Fed would like us to believe. When we throw in the potentially explosive impact the failing shale industry could have on the economy and the strength of the dollar, that is likely to increase further due to this rate hike, we doubt that this move by the Fed is the turning point and that the Fed will continue hiking rates as it has done previously in such cycles. The Fed raised interest rates because it had to, but don’t expect the monetary shenanigans to be over. There are a lot more to come!

   

  5. Defaults Surge as Global Debt Explodes

  2015 has seen the greatest number of corporate defaults since the financial crisis. Many of the companies that are defaulting are from the energy and materials sector. Why? It is the logical outcome of the excessive borrowing by corporations who were misled by close-to-zero interest rates. And, of course, we must not forget the boom in the shale industry.

  With a barrel of oil costing over USD100, shale oil was a very interesting investment. Now with oil hitting rock bottom, some oil producers are operating at a loss and only continue operations to be able to make their interest payments. The number of corporate bonds Standard & Poor’s rates as junk or speculative, has gone up to 50% from a previous 40%. Unfortunately, the world did not learn its lesson after the financial crisis and instead of deleveraging, it has accumulated even more debt, as the chart below illustrates. Of course it not only corporations that are responsible; governments have not learned their lesson either.

   

  

  No deleveraging is in sight – click to enlarge.

   

  The issue of debt will continue to be with us for some time to come; the house of cards will eventually collapse, but we think that politicians and central bankers have the will to “do whatever it takes” to prolong its eventual demise. What we will likely see in 2016, however, is a massive increase in defaults. Yields on high-yield bonds are already at alarming levels.

  What exactly will be responsible for the next crisis is hard to foresee. The trigger might be the possible collapse of the shale industry, or the strengthening dollar, that will make it very hard for emerging market countries to repay their debts, or a completely unexpected sector (who knew what sub-prime was back in 2006?).

   

  6. Oil Price Collapse

  Crude oil prices fell to their lowest levels in nearly 11 years, as crude oil declined to nearly USD35 per barrel. The price of oil has been on a continuous downward trend and has plunged nearly 70% since the summer of 2014. From our perspective, the main factor that led to this decline is the US shale oil “revolution”.

  It was truly a revolution, considering that the boom in shale oil production allowed production in the US to surpass that of Saudi Arabia, previously the world’s largest oil producer. Meanwhile, OPEC hasn’t changed its stance as it insists on maintaining its strategy to increase its market share, even if this comes at the expense of further oil price declines.

   

  

  US crude oil production has more than doubled from the multi-decade lows reached in 2008/9

   

  I am not an expert on oil and therefore it am not going to provide predictions on where the oil price is heading next. I would rather want to discuss the impact of the oil price movement to date. First of all, a collapse of the oil price, a commodity that is widely used in industry, has historically always been a herald of recessionary tendencies. In my view, the oil price clearly signals that the economy is not as healthy as is portrayed by the mainstream media.

  Secondly, the ongoing failure of companies in the shale industry has the potential to bring on a crisis that could dwarf the previous financial crisis. Last, but definitely not least, is the question of how oil exporters such as Saudi Arabia, will finance their budgets when oil revenues massively decrease and they are no longer able to buy their population’s silence with gifts.

   

  How can we Position Ourselves in such an Environment?

  The outlook for the future looks bleak: continuously growing debt, looming defaults on a major scale and geopolitical tensions. So how can we best position ourselves?

  In times like these, when it seems impossible to predict even the near future, we seek security. Precious metals like gold and silver represent wealth and value. They give their owners a degree of independence and protection from the whims of governments. In light of recent events in Greece, it turns out that gold and silver are only a safe investment as long as one has full control over it and can access it at any time. Holding gold outside of the banking system is therefore essential in my view.

  Those who know me know that I am Swiss and rather biased towards my home country. To me, Switzerland strikes the perfect balance between international neutrality with a history of a safe and stable political landscape, and an environment that encourages investment and guarantees private ownership rights.

  

  

  

  

  

• "When Is The Crash Going To Happen?" – Mark Spitznagel Revisits "The Ticking Time Bomb"

  Submitted by Mark Spitznagel via Pensions & Investments,

  Since the question “when is the crash going to happen?” is always asked, we thought it particularly timely to update the research we have done on the topic. Timing a crash can be a fool's errand, and fortunately such efforts are largely irrelevant if you are tail hedging (though they are quite relevant if you aren't). When tail hedging efficiently, the extreme asymmetries in payoffs, by definition, removes any need to time the top. But this doesn't mean that exercises in timing are without merit.

  As we showed in previous research, without a doubt (or at least with over 99% confidence), bad things happen with increasing expectation when conditioning on higher Q ratios ex ante. That is, when Q is high, large stock market losses are no longer a tail event but become an expected event. Factoring time into the equation, and again based on history, the confidence interval around the median time would point to an expectation that the crash should commence right about now.

  

  Monetary policy has proven to be very effective over the past seven years in elevating asset markets. However, its effect has been limited to the price of assets (the “title” to existing capital), but not the price of new capital. This differential is depicted in the Q ratio, where one can think of the numerator as representing the aggregate price of the stock market and the denominator as the aggregate book value. The higher the ratio, the further the stock market is priced relative to the reality of the underlying capital, and the greater the implied return on that aggregate capital above the average aggregate cost of capital. This ratio has always had its breaking point, much to the frustration of interventionist monetary policy, as the numerator ultimately crashes back to the denominator, rather than the denominator catching up to the numerator (a fact that Keynesians from Paul Krugman to James Tobin himself have considered a central puzzle of economics). Indeed, the continued deviation of this ratio from its long run historical average is something that both economic history and, best of all, economic logic dictate as unsustainable.

  The question becomes how deviations and extremes in the Q ratio are ultimately corrected. The short answer is: they are corrected via the numerator, i.e., through corrections in the aggregate stock market value. The further the Q ratio has deviated from its long run historical average, simply put, the further the stock market has to fall to correct that deviation (this is what the market's homeostatic process does so predictably well).

  

   

  There are regularities in the “stopping time” to the market's homeostatic correcting of extreme Q deviations, and as we saw recently in China, even massive interventions can't ultimately stop such corrections. An equity holder should be very aware of the current valuation environment, the magnitude of the drop that is to be expected, and the inherent cyclicality behind the amount of time between crashes. We are currently beyond the median amount of time, historically, before we would expect to see at least a 20% correction of the stock market (the numerator). Most importantly perhaps, the majority of the losses tend to happen in a concentrated plunge at the tail end of the path down to minus 20%. For instance, in just the last two months before the market passes through our 20% drawdown trigger, it typically (on average) has experienced a loss of nearly the entire 20%.

   

  

   

  The very high probability of a crash currently implied by history flies in the face of a very low probability of a crash currently implied by the options market. The same beliefs that have pushed the market to extreme valuations have also returned option prices back to near record lows. If there is elevated risk in the equity market to the degree we have seen, counter-intuitively, it is not at all priced into options markets.

  

   

  To use my favorite investing metaphor, the pot odds – the payoff, or the size of the pot relative to the price of calling – are very favorable compared to the hand odds – the likelihood of making the best hand; that is, we are getting the best of it.

  In the recent August volatility (or in any other crashes we have seen), the tide turned both too surprisingly and too quickly for most to fully re-position until it was much too late. The future need not look like the past, but for an equity holder (or an opportunistic trader), the price of equity tail risk is not currently representative of that which has proven itself throughout history under similar (if not far less risky!) circumstances. How much further the rally stretches, whether another 10% or 100%, does not matter to an efficient tail hedger; it only adds to the expected magnitude and timing of a pending crash—which grows larger and sooner with each uptick in the stock market and tick of the clock—thus adding to the expected profitability and strategic advantage of the hedge.

  

  

  

  

  

• Meanwhile, In Hawaii…

  On Sunday we noted that while Obama’s possible successor was busy laying out her (or his) ideological vision for the future of America, the President was busy playing 18 holes in Hawaii, where the First Family is enjoying their annual $4 million, taxpayer-funded Christmas in paradise.

  Of course the President wants to make sure the press stays in the loop so he graciously allowed reporters to tag along as he wrapped up a round at the Mid Pacific Country Club on Monday.

  While those in attendance didn’t get anything notable from the commander in chief on foreign policy or anything else of geopolitical significance, they did get to witness this epic chip shot: 

  And they’ll be plenty more where that came from. Obama played 9 rounds on last year’s trip.

  A question for Mr. Trump: do “losers” make 40ft. chip shots?

  

  

  

  

  

• Crude Extends Gains After API Reports Unexpectedly Large Inventory Draw

  Following last week’s huge build reported by DOE, crude inventories reported by API tonight dropped 3.6 million barrels (drastically different from the 2.3mm build expected). WTI is rallying on the news, despite a 1.5 million barrel build at Cushing (up notably from last week’s 847k) – the 7th weekly build in a row.

  Total Inventories saw a drawdown…

  

   

  But Cushing saw the 7th weekly build in a row…

  

   

  The reaction was modest as algos came to terms with the ‘build’ at Cushing, the ‘draw’ overall, and the strength of the Brent ‘arb’

  

   

  Charts: Bloomberg

  

  

  

  

  

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• Janet Yellen Fights the Tide of Falling Interest

  by Keith Weiner

   

  On Wednesday Dec 16, Federal Reserve Chair Janet Yellen announced that the Fed was raising the federal funds rate by 25 basis points.

  Let’s get one thing out of the way. This is not a move towards free markets. Whether the Fed sets interest lower, or whether it sets interest higher, we still have central planning. We still have price fixing of interest rates.

  Interest rates may be set too low. However, forcing interest up is no cure. We need to eliminate central planning, and move to a free market in interest. This is impossible in our present monetary regime.

  Anyway, given the system as it is, the Fed is going to have to take back this interest rate hike. Here is Exhibit A of our case: a graph of the 10-year US Treasury bond yield.

  
  Source: Yahoo Finance

  At least the US dollar still has interest. Switzerland, and several countries in the European Union, don’t. Their currencies are drowning under the zero line. For example, the Swiss government 10-year bond takes 0.16% per year from lenders. That’s right, if you fork over your francs to buy that bond, you get back less at the end. Germany is little better, with their five-year bond charging investors 0.1%.

  The global trend for over three decades has been falling interest. The yield on the 10 year Treasury even fell after the Fed’s announcement. Yellen thinks to fight this megatrend, but that’s absurd. Let’s look at why.

  The process that sets the interest rate is complex. I have written many words on its terminal decline. However, there are two simple reasons why the trend remains downward.

  One, banks today have a business model called maturity transformation. They borrow short term to lend long term.

  To understand this, consider the simple example of buying a house. Only, you don’t get a normal mortgage. You get a balloon loan due tomorrow morning. Every day, you have to borrow anew. This would be crazy for an individual homeowner to attempt.

  However, it’s what banks do. They risk an increase in their cost of funding. That would be a problem, because the interest they receive on their bonds is fixed.

  The problem isn’t just reduced cash flows. When the cost of funding goes up, some bondholders are obliged to sell bonds. That causes a drop in the price of bonds, and all bondholders take capital losses. With reduced capital, banks have to cut back on lending. Funding to business is reduced, and there can be a recession.

  Two, falling interest has driven down the yields of stocks and real estate. This has been a process of borrowing ever more, of going deeper into debt. What else should we expect people to do, with ever cheaper cost to borrow? They borrow, to increase their leverage, to own more assets. At least, there are more assets in dollar terms. But remember, prices are rising in this process, so there aren’t necessarily more assets in reality.

  Picture both assets and liabilities rising together. It is a ratchet, that cannot go backwards. Any significant interest hike causes the prices of all assets to drop. That turns many balance sheets upside down. For some, liabilities exceed assets. Their bankruptcies lead to liquidations, which causes further asset declines. Assets must be sold, but no one can get funding to buy them, and everyone’s balance sheet is under stress.

  Janet Yellen will want to avoid this catastrophe. She won’t want to be remembered as the Fed Chair who caused a repeat of 2008. She will find that it’s easier to take another hit of financial heroin. Interest rates will go down.

   

  This article is from Keith Weiner’s weekly column, called The Gold Standard, at the Swiss National Bank and Swiss Franc Blog SNBCHF.com.

  

  

  

  

• USS ISIS STRaTeGY…

  

  

  

  

  

• The New World Disorder – How Empires Die

  Submitted Jeff Thomas via InternationalMan.com,

  The state-owned Bank of China has been ordered by an American court to hand over customer information to the US. The bank has refused to comply, as to do so would violate China’s privacy law. The US court has subsequently ordered the Bank of China to pay a fine of $50,000 per day.

  Any guess as to how this is likely to turn out?

  China is a sovereign nation, halfway around the globe from the US, yet the US seems to feel that it’s somehow entitled to set the rules for China (as well as the other nations in the world). When China sees fit to develop islands in the South China Sea that it has laid claim to for centuries, it begins to hear threatening noises from the US military. A candidate for US president declares that he would buzz the islands with Air Force One, the Presidential jet, saying, "They'll know we mean business."

  All over the world, those who live outside the US are increasingly observing that the US has become so drunk with power that they’re threatening both friend and foe with fines, trade restrictions, monetary sanctions, warfare, and invasions.

  And in so-observing, those of us who have studied the history of empires note that history is once again repeating itself. Time and time again, great empires build themselves up through industriousness and sound economic management only to subsequently decline into debt, complacency, and an entitlement mind-set.

  Over the millennia, empires as disparate as Persia, Rome, Spain, and Great Britain rose to dominate the world. Of course, we know how those empires turned out and, by extension, we might hazard an educated guess as to how the present American Empire will end.

  In the final throes of empire-decline, we invariably observe the more sociopathic trends of a failing power, such as we’re seeing today from the US.

  First and foremost, any empire declines as a result of economic mismanagement. Decline from within (pandering to the populace with “bread and circuses”) and without (endless conquest and/or maintenance of dominance over far-flung geography) drain even the wealthiest government. Even eighteenth-century Spain, with all its billions in stolen New World gold, could not pay its ever-increasing bills and warfare-driven debt.

  Typically, the empire of the day enjoys the world’s greatest fighting force/armada/weapons build-up yet, when the money runs out, the war machine simply stops. Soldiers think more about their empty bellies than how much ammunition they have left. Generals continue to issue orders, but they cease to be followed after the supply lines begin to dry up.

  And the leaders of a collapsing empire invariably make a fatal mistake: they assume that all the goodwill the empire gained when it was on its rise is permanent – that it will continue, even if the empire behaves like the world’s foremost bully.

  This is never the outcome. Invariably, as the decline nears its end, allies, without ever saying so, begin to withdraw their support. We see this today, as European leaders (America’s most essential allies) realise that the empire is becoming an arrogant liability and they begin cutting deals with the other side, as European leaders are now doing with Russia and others.

  For a century or more, there’s been much talk amongst highly placed government and industry leaders of a New World Order, and there can be no doubt that this has been a long-term objective for Western leaders. They see themselves as being at the head of this order, with the rest of the powers coming along for the ride and the non-powers being forced to comply.

  The US, with its ever-expanding draconian legislation, clearly intends to bring this Orwellian ideal to fruition in the relatively near future as they speed up the process of dominance over all. With some countries, such as the traditional allies, it’s intended to be implemented through coercion and a promise of inclusiveness. For those who the US does not hold close, but needs as trading partners, this is intended to be achieved through fines, trade restrictions, and sanctions (if possible) and force (if necessary). The lesser countries will be overcome through bullying or, if necessary, invasion.

  But, again, empires decline principally through loss of economic power. And the US is attempting the greatest world-control in history at the same time as the money is running out.

  Many people (conspiracy theory advocates and otherwise) acknowledge that an effort exists to create a New World Order, with the US at its head and the EU as its little brother and co-conspirator. Many of these theorists believe that Russia and China only pretend to oppose the order but secretly only seek to have a place at the table.

  I think not.

  Political leaders, more often than not, tend to have sociopathic tendencies. Above all their other goals, the desire to be omnipotent reigns supreme. Most leaders will do extraordinarily stupid things to maintain or expand their own personal power. Countless leaders have destroyed their own country rather than relinquish power over it.

  To think that leaders of other great powers, such as China and Russia, will willingly comply just to get to break bread with the US in the same room is a faulty assumption.

  Of course, as we’re observing, the US is now obsessively demonstrating its perceived power over all, bulling its allies, invading one small nation after another, and threatening its trading partners. They fail, as do all sociopaths, to even consider that it can all come crashing down and, for that reason, are failing to see the warning signs as they occur.

  Of course, it’s important to remember that those leaders of other nations, who are holding the cards, will not wish to utterly destroy the US. They will not seek a Treaty of Versailles. They will hope to re-invent America as a consumer, but without its fangs.

  To whatever level the US falls in the coming years, their leaders won’t see it coming. They’ll understand that there’ll be pushback from trading partners, but they’ll believe it can be overcome with a combination of cajoling and force. What they will thoroughly fail to see coming is that when the knives are drawn by the other major nations, America’s allies, too, will have had enough. They’ll see a better future with those nations that are still behaving in a reasonable fashion than to continue to side with the fearful US Goliath.

  As Doug Casey has stated, “Countries fall from grace with amazing speed.” Quite so. Just as the Roman senators that had previously supported Caesar joined in with those that openly opposed him and took part in his assassination, so America’s formerly staunch allies will join in when the other major powers make their move. There’s been an unstated deterioration in the loyalty of US allies in recent years and, when they turn, I believe they will do so decisively. The Caesar that was bowed to only yesterday will find himself alone in his fate tomorrow when the knives are drawn against him.

  So, what do we take away from this? An interesting little history lesson? Well, hopefully more. Hopefully, we’ll recognise that, as threatening as the US Goliath is at present, there will, at some point in the coming years, be dramatic and rather sudden change. When this occurs, our lives, liberty, and wealth will not be unaffected.

  In my opinion, we shall see a “New World Disorder” – a dramatic decline in US hegemony, coupled with a scramble by other nations to fill the void. Those who fare best within it will be those who made the necessary preparations ahead of time.

  *  *  *

  Unfortunately, there’s little any individual can practically do to change the trajectory of this trend in motion. The best you can and should do is to stay informed so that you can protect yourself in the best way possible, and even profit from the situation.

  We think everyone should own some physical gold. Gold is the ultimate form of wealth insurance. It’s preserved wealth through every kind of crisis imaginable. It will preserve wealth during the next crisis, too.

  But, if you want to be truly “crisis-proof”, there is more to do…

  Most people have no idea what really happens when a currency collapses, let alone how to prepare…

  How will you protect your savings in the event of a currency crisis? This just-released video will show you exactly how. Click here to watch it now.

  

  

  

  

  

• Caught On Tape: U.S. Senator Issues Dire Warning On Unchecked Executive Power

  Submitted by Mike Krieger via Liberty Blitzkrieg blog,

  The deliberations of the Constitutional Convention of 1787 were held in strict secrecy. Consequently, anxious citizens gathered outside Independence Hall when the proceedings ended in order to learn what had been produced behind closed doors. The answer was provided immediately. A Mrs. Powel of Philadelphia asked Benjamin Franklin, “Well, Doctor, what have we got, a republic or a monarchy?”

   

  With no hesitation whatsoever, Franklin responded, “A republic, if you can keep it.”

  I actually can’t believe I’m writing this, but the following speech from freshman U.S. Senator Ben Sasse (R, Neb) is so thoughtful and inspiring, it should be required viewing for all American citizens.

  To hear a U.S. Senator sound more like a statesman than a corrupt hack politician for sale to the highest bidder, is such a breath of fresh air I almost can’t believe it’s real. Rather than talking down to voters, he challenges them to become more enlightened, nonpartisan-thinkers with a sense of history. He challenges all of us to shake ourselves from an ignorant, fear-based stupor and reclaim the true genius and beauty at the heart of the American experiment.

  Take the time to watch this. The entire thing, and then share it with everyone you know.

  "The problem of a weak Congress and executive growth should be bad news to all of us and, more importantly, to every constituent who cast their votes for us under the impression that Congress made decisions – not suggestions. I think the weakness of the Congress is not just undesirable, but is actually a dangerous thing for America."

  Thank you Ben Sasse, for proving that there remains a remnant of wise, honorable, decent people in U.S. government.

   

  Finally, while we’re on the topic of executive overreach, here’s what Obama has planned for gun control in the new year…

  From Roll Call:

  Senior congressional aides and sources in the gun-control community expect the White House to use its executive powers to tighten federal gun laws shortly after President Barack Obama returns from a Hawaiian vacation in early January.

   

  White House Press Secretary Josh Earnest said Thursday he anticipates a legal review to continue through the holidays.

   

  Since the deadly shooting in San Bernardino, Calif., White House officials have been, as Earnest has put it, “scrubbing through the law” to determine whether and how Obama can use his constitutional authorities to make it harder for terrorists and other potential mass shooters to legally obtain firearms.

   

  On both sides of the Capitol, sources involved in the guns debate say, as one senior House GOP leadership aide put it, “something is brewing on guns.”

   

  The hot-button issue returned to the front burner of American politics following the lethal Islamic State-inspired California shooting.

  Since, however, Republican lawmakers have blocked Democratic measures on stiffening gun laws; and Democrats have kept a mental health bill the GOP has tied to mass shootings from passing, saying they would rather close loopholes in gun laws first.

   

  A recent CNN/ORC poll suggests the American public is siding with GOP arguments. The survey found a majority (52 percent) of those polled oppose tighter gun laws. And a Washington Post/ABC News poll found 53 percent are against the assault weapons ban the White House has endorsed.

   

  “So part of our solution is to consider the range of authorities that are vested in the executive branch to try to advance some of those common-sense policies,” Earnest said. “And we certainly do want to make sure that any sort of steps that the president would take have a strong legal basis in the law.”

  So there you have it. A majority of Americans do not want tighter gun laws. Nevertheless, King Obama thinks he know best, and will simply do as he pleases.

  This is not what freedom looks like.

  

  

  

  

  

• China "Suspends" Another Unofficial PMI Data Release To Make "Major Adjustment"

  For the second time in two months, an economic data series that indicate drastically weak performance in China has been "suspended." Having seen Markit/Caixin's flash gauge of China's manufacturing discontinued in October (having plunged notably divergently from the government's official data), Bloomberg reports that the publishers of the alternative China Minxin PMI will stop updating the series to make a "major adjustment."

   

  Guess which time series was just "suspended"…

  

   

  As Bloomberg details,

  Release of the unofficial purchasing managers index jointly compiled by China Minsheng Banking Corp. and the China Academy of New Supply-side Economics will be suspended starting this month, the Beijing-based academy said in an e-mailed statement Monday, about six hours before the latest monthly data were scheduled for release.

   

  Minxin’s suspension is the second in recent months as policy makers in the world’s second-largest economy struggle to arrest a deceleration in growth. Another early estimate of China’s manufacturing sector, a flash gauge of a purchasing managers index compiled by Markit Economics and sponsored by Caixin Media, was discontinued Oct. 1.

  Minxin’s PMI readings are based on a monthly survey covering more than 4,000 companies, about 70 percent of which are smaller enterprises. The private gauges have shown a more volatile picture than the official PMIs in the past year.

  The manufacturing PMI declined to 42.4 in November from 43.3 in October, while the non-manufacturing reading fell to 42.9 from 44.2, according the the latest release. The factory gauge fell to a record low of 41.9 in August. China’s official PMI from the National Bureau of Statistics fell to a three-year low of 49.6 in November.

  For September, the now-discontinued flash Markit/Caixin PMI fell to a six-year low, while the official PMI reading showed a modest improvement.

  *  *  *

  Because nothing inspires confidence like removing transparency of just the worst data series. We assume the "major adjustment" needed is akin to America's "double-seasonal adjustment" because how could it be possible that official figures remain so 'healthy' when every private survey (pre-discontinuation) has shown utter collapse…?

  

  

  

  

  

• Presenting The Stunning Difference In How Blacks And Whites Are Killed By Guns

  If one were asked to name the top five issues on America’s collective mind as we head into 2016, gun violence would almost certainly make the list. 

  A string of incidents that culminated in the massacre in San Bernardino earlier this month has put gun control back in the limelight as the nation debates the best way to prevent mass shootings. 

  Some suggest gun violence should be a designated as a public health issue. “Supporters, including doctors and medical associations, say that designating gun violence – which they define to include homicides, suicides and injuries – as a public health issue will save lives,” US News & World Report wrote over the summer. “Doctors already counsel patients about a range of safety issues, including avoiding lead paint, wearing seatbelts, getting vaccinated and dealing with the dangers of backyard pools. If the designation were to change, they could more often ask patients about whether they keep a gun in the home and, if so, how it is secured.”

  That rather surreal sounding idea is in many ways reflective of how frustrated America has become with the issue. The right to keep and bear arms is not only enshrined in the Constitution, it’s also part of the country’s consciousness and identity – even most gun control advocates would likely be loath to see citizens’ gun rights curtailed wholesale. Even so, the perception that gun violence is on the rise and the nation is powerless to stop it has led some to question whether it may be time to consider taking a more drastic approach when it comes to limiting access to firearms. 

  What gets lost in the debate is the fact that when it comes to gun violence, mass shootings really aren’t the problem. That is, as horrific as they are and as often as they seem to be occurring, “less than 2 percent of more than 33,000 gun deaths in [America] are due to mass shootings,” Trace wrote, earlier this month. 

  “The gun control debate often plays out in monolithic fashion in this country,” WaPo writes, adding that “the traditional understanding is that there’s one overarching problem — gun violence — that can be addressed by a more or less uniform set of solutions: better background checks, improved technology, etc.” 

  However, “one shortcoming of this approach is that it elides over the sometimes drastic differences in how different populations experience gun violence and gun ownership in their lives.” WaPo goes on to present the following rather stunning chart from The Brookings Institute. As you can see, there’s a marked difference between how African Americans and whites are killed by firearms. More specifically, “among whites, 77 percent of gun deaths are suicides. But among black Americans, 82 percent of gun deaths are homicides.”

  

  Consider that, then consider the following chart which depicts parents’ perceptions of the risks their children face. We present it below and leave the issue for readers to discuss:

  

  

  

  

  

  

• Liberty Imperiled – Welcome To Cop-Land

  Submitted by Matthew Harwood via TomDispatch.com,

  If you’ve been listening to various police agencies and their supporters, then you know what the future holds: anarchy is coming — and it’s all the fault of activists.

  In May, a Wall Street Journal op-ed warned of a “new nationwide crime wave” thanks to “intense agitation against American police departments” over the previous year. New Jersey Governor Chris Christie went further. Talking recently with the host of CBS’s Face the Nation, the Republican presidential hopeful asserted that the Black Lives Matter movement wasn’t about reform but something far more sinister. “They’ve been chanting in the streets for the murder of police officers,” he insisted. Even the nation’s top cop, FBI Director James Comey, weighed in at the University of Chicago Law School, speaking of “a chill wind that has blown through American law enforcement over the last year.”

  According to these figures and others like them, lawlessness has been sweeping the nation as the so-called Ferguson effect spreads. Criminals have been emboldened as police officers are forced to think twice about doing their jobs for fear of the infamy of starring in the next viral video. The police have supposedly become the targets of assassins intoxicated by “anti-cop rhetoric,” just as departments are being stripped of the kind of high-powered equipment they need to protect officers and communities.  Even their funding streams have, it’s claimed, come under attack as anti-cop bias has infected Washington, D.C.  Senator Ted Cruz caught the spirit of that critique by convening a Senate subcommittee hearing to which he gave the title, “The War on Police: How the Federal Government Undermines State and Local Law Enforcement.” According to him, the federal government, including the president and attorney general, has been vilifying the police, who are now being treated as if they, not the criminals, were the enemy.

  Beyond the storm of commentary and criticism, however, quite a different reality presents itself. In the simplest terms, there is no war on the police. Violent attacks against police officers remain at historic lows, even though approximately 1,000 people have been killed by the police this year nationwide. In just the past few weeks, videos have been released of problematic fatal police shootings in San Francisco and Chicago.

  While it’s too soon to tell whether there has been an uptick in violent crime in the post-Ferguson period, no evidence connects any possible increase to the phenomenon of police violence being exposed to the nation. What is taking place and what the police and their supporters are largely reacting to is a modest push for sensible law enforcement reforms from groups as diverse as Campaign Zero, Koch Industries, the Cato Institute, The Leadership Conference, and the ACLU (my employer). Unfortunately, as the rhetoric ratchets up, many police agencies and organizations are increasingly resistant to any reforms, forgetting whom they serve and ignoring constitutional limits on what they can do.

  Indeed, a closer look at law enforcement arguments against commonsense reforms like independently investigating police violence, demilitarizing police forces, or ending “for-profit policing” reveals a striking disregard for concerns of just about any sort when it comes to brutality and abuse. What this “debate” has revealed, in fact, is a mainstream policing mindset ready to manufacture fear without evidence and promote the belief that American civil rights and liberties are actually an impediment to public safety. In the end, such law enforcement arguments subvert the very idea that the police are there to serve the community and should be under civilian control.

  And that, when you come right down to it, is the logic of the police state.

  Due Process Plus

  It’s no mystery why so few police officers are investigated and prosecuted for using excessive force and violating someone’s rights. “Local prosecutors rely on local police departments to gather the evidence and testimony they need to successfully prosecute criminals,” according to Campaign Zero . “This makes it hard for them to investigate and prosecute the same police officers in cases of police violence.”

  Since 2005, according to an analysis by the Washington Post and Bowling Green State University, only 54 officers have been prosecuted nationwide, despite the thousands of fatal shootings by police. As Philip M. Stinson, a criminologist at Bowling Green, puts it, “To charge an officer in a fatal shooting, it takes something so egregious, so over the top that it cannot be explained in any rational way. It also has to be a case that prosecutors are willing to hang their reputation on.”

  For many in law enforcement, however, none of this should concern any of us. When New York Governor Andrew Cuomo signed an executive order appointing a special prosecutor to investigate police killings, for instance, Patrick Lynch, president of the Patrolmen’s Benevolent Association, insisted: “Given the many levels of oversight that already exist, both internally in the NYPD [New York Police Department] and externally in many forms, the appointment of a special prosecutor is unnecessary.” Even before Cuomo’s decision, the chairman of New York’s District Attorneys Association called plans to appoint a special prosecutor for police killings “deeply insulting.”

  Such pushback against the very idea of independently investigating police actions has, post-Ferguson, become everyday fare, and some law enforcement leaders have staked out a position significantly beyond that.  The police, they clearly believe, should get special treatment.

  “By virtue of our dangerous vocation, we should expect to receive the benefit of the doubt in controversial incidents,” wrote Ed Mullins, the president of New York City’s Sergeants Benevolent Association, in the organization’s magazine, Frontline. As if to drive home the point, its cover depicts Baltimore State Attorney Marilyn Mosby under the ominous headline “The Wolf That Lurks.” In May, Mosby had announced indictments of six officers in the case of Freddie Gray, who died in Baltimore police custody the previous month. The message being sent to a prosecutor willing to indict cops was hardly subtle: you’re a traitor.

  Mullins put forward a legal standard for officers accused of wrongdoing that he would never support for the average citizen — and in a situation in which cops already get what former federal prosecutor Laurie Levenson calls “a super presumption of innocence."  In addition, police unions in many states have aggressively pushed for their own bills of rights, which make it nearly impossible for police officers to be fired, much less charged with crimes when they violate an individual’s civil rights and liberties.

  In 14 states, versions of a Law Enforcement Officers’ Bill of Rights (LEOBR) have already been passed, while in 11 others they are under consideration.  These provide an “extra layer of due process” in cases of alleged police misconduct, according to Samuel Walker, an expert on police accountability. In many of the states without a LEOBR, the Marshall Project has discovered, police unions have directly negotiated the same rights and privileges with state governments.

  LEOBRs are, in fact, amazingly un-American documents in the protections they afford officers accused of misconduct during internal investigations, rights that those officers are never required to extend to their suspects. Though the specific language of these laws varies from state to state, notes Mike Riggs in Reason, they are remarkably similar in their special considerations for the police.

  “Unlike a member of the public, the officer gets a ‘cooling off’ period before he has to respond to any questions. Unlike a member of the public, the officer under investigation is privy to the names of his complainants and their testimony against him before he is ever interrogated. Unlike a member of the public, the officer under investigation is to be interrogated ‘at a reasonable hour,’ with a union member present. Unlike a member of the public, the officer can only be questioned by one person during his interrogation. Unlike a member of the public, the officer can be interrogated only ‘for reasonable periods,’ which ‘shall be timed to allow for such personal necessities and rest periods as are reasonably necessary.’ Unlike a member of the public, the officer under investigation cannot be ‘threatened with disciplinary action’ at any point during his interrogation. If he is threatened with punishment, whatever he says following the threat cannot be used against him.”

  The Marshall Project refers to these laws as the “Blue Shield” and “the original Bill of Rights with an upgrade.’’ Police associations, naturally, don’t agree. "All this does is provide a very basic level of constitutional protections for our officers, so that they can make statements that will stand up later in court," says Vince Canales, the president of Maryland's Fraternal Order of Police.

  Put another way, there are two kinds of due process in America — one for cops and another for the rest of us. This is the reason why the Black Lives Matter movement and other civil rights and civil liberties organizations regularly call on states to create a special prosecutor’s office to launch independent investigations when police seriously injure or kill someone.

  The Demilitarized Blues

  Since Americans first took in those images from Ferguson of police units outfitted like soldiers, riding in military vehicles, and pointing assault rifles at protesters, the militarization of the police and the way the Pentagon has been supplying them with equipment directly off this country’s distant battlefields have been top concerns for police reformers. In May, the Obama administration suggested modest changes to the Pentagon’s 1033 program, which, since 1990, has been redistributing weaponry and equipment to police departments nationwide — urban, suburban, and rural — in the name of fighting the war on drugs and protecting Americans from terrorism.  

  Even the idea that the police shouldn’t sport the look of an occupying army in local communities has, however, been met with fierce resistance. Read, for example, the online petition started by the National Sheriffs' Association and you could be excused for thinking that the Obama administration was aggressively moving to stop the flow of military-grade equipment to local and state police agencies. (It isn’t.)  The message that tops the petition is as simple as it is misleading: “Don’t strip law enforcement of the gear they need to keep us safe.”

  The Obama administration has done no such thing. In May, the president announced that he was prohibiting certain military-grade equipment from being transferred to state and local law enforcement. “Some equipment made for the battlefield is not appropriate for local police departments,” he said. The list included tracked armored vehicles (essentially tanks), bayonets, grenade launchers, camouflage uniforms, and guns and ammo of .50 caliber or higher. In reality, what use could a local police department have for bayonets, grenade launchers, or the kinds of bullets that resemble small missiles, pierce armor, and can blow people’s limbs off?

  Yet the sheriffs' association has no problem complaining that “the White House announced the government would no longer provide equipment like helicopters and MRAPs [mine-resistant ambush-protected vehicles] to local law enforcement.” And it’s not even true. Police departments can still obtain both helicopters and MRAPs if they establish community policing practices, institute training protocols, and get community approval before the equipment transfer occurs. 

  “Helicopters rescue runaways and natural disaster victims,” the sheriff’s association adds gravely, “and MRAPs are used to respond to shooters who barricade themselves in neighborhoods and are one of the few vehicles able to navigate hurricane, snowstorm, and tornado-strewn areas to save survivors.”

  As with our wars abroad, think mission creep at home. A program started to wage the war on drugs, and strengthened after 9/11, is now being justified on the grounds that certain equipment is useful during disasters or emergencies. In reality, the police have clearly become hooked on a militarized look. Many departments are ever more attached to their weapons of war and evidently don’t mind the appearance of being an occupying force in their communities, which leaves groups like the sheriffs' association fighting fiercely for a militarized future.

  Legal Plunder

   In July, the American Civil Liberties Union and the ACLU of Arizona sued law enforcement in Pinal County, Arizona, on behalf of Rhonda Cox. Two years before, her son had stolen some truck accessories and, without her knowledge, fitted them on her truck. When the county sheriff’s department arrested him, it also seized the truck.

  Arriving on the scene of her son’s arrest, Cox asked a deputy about getting her truck back. No way, he told her. After she protested, explaining that she had nothing to do with her son’s alleged crimes, he responded “too bad.” Under Arizona law, the truck could indeed be taken into custody and kept or sold off by the sheriff’s department even though she was never charged with a crime. It was guilty even if she wasn’t.

  Welcome to America’s civil asset forfeiture laws, another product of law enforcement’s failed war on drugs, updated for the twenty-first century. Originally designed to deprive suspected real-life Scarfaces of the spoils of their illicit trade — houses, cars, boats — it now regularly deprives people unconnected to the war on drugs of their property without due process of law and in violation of the Fifth and Fourteenth Amendments. Not surprisingly, corruption follows.

  Federal and state law enforcement can now often keep property seized or sell it and retain a portion of the revenue generated. Some of this, in turn, can be repurposed and distributed as bonuses in police and other law enforcement departments.  The only way the dispossessed stand a chance of getting such “forfeited” property back is if they are willing to take on the government in a process where the deck is stacked against them.

  In such cases, for instance, property owners have no right to an attorney to defend them, which means that they must either pony up additional cash for a lawyer or contest the seizure themselves in court.  “It is an upside-down world where,” says the libertarian Institute for Justice, “the government holds all the cards and has the financial incentive to play them to the hilt.”

  In this century, civil asset forfeiture has mutated into what’s now called “for-profit policing” in which police departments and state and federal law enforcement agencies indiscriminately seize the property of citizens who aren’t drug kingpins. Sometimes, for instance, distinctly ordinary citizens suspected of driving drunk or soliciting prostitutes get their cars confiscated. Sometimes they simply get cash taken from them on suspicion of low-level drug dealing.

  Like most criminal justice issues, race matters in civil asset forfeiture. This summer, the ACLU of Pennsylvania issued a report, Guilty Property, documenting how the Philadelphia Police Department and district attorney’s office abused state civil asset forfeiture by taking at least $1 million from innocent people within the city limits. Approximately 70% of the time, those people were black, even though the city’s population is almost evenly divided between whites and African-Americans.  

  Currently, only one state, New Mexico, has done away with civil asset forfeiture entirely, while also severely restricting state and local law enforcement from profiting off similar national laws when they work with the feds. (The police in Albuquerque are, however, actively defying the new law, demonstrating yet again the way in which police departments believe the rules don’t apply to them.) That no other state has done so is hardly surprising. Police departments have become so reliant on civil asset forfeiture to pad their budgets and acquire “little goodies” that reforming, much less repealing, such laws are a tough sell.

  As with militarization, when police defend such policies, you sense their urgent desire to maintain what many of them now clearly think of as police rights. In August, for instance, Pinal County Sheriff Paul Babeu sent a fundraising email to his supporters using the imagined peril of the ACLU lawsuit as clickbait. In justifying civil forfeiture, he failed to mention that a huge portion of the money goes to enrich his own department, but praised the program in this fashion:

  "[O]ver the past seven years, the Pinal County Sheriff’s Office has donated $1.2 million of seized criminal money to support youth programs like the Boys & Girls Clubs, Boy Scouts, YMCA, high school graduation night lock-in events, youth sports as well as veterans groups, local food banks, victims assistance programs, and Home of Home in Casa Grande."

  Under this logic, police officers can steal from people who haven’t even been charged with a crime as long as they share the wealth with community organizations — though, in fact, neither in Pinal County or elsewhere is that where most of the confiscated loot appears to go. Think of this as the development of a culture of thievery masquerading as Robin Hood in blue.

  Contempt for Civilian Control 

  Post-Ferguson developments in policing are essentially a struggle over whether the police deserve special treatment and exceptions from the rules the rest of us must follow. For too long, they have avoided accountability for brutal misconduct, while in this century arming themselves for war on America’s streets and misusing laws to profit off the public trust, largely in secret. The events of the past two years have offered graphic evidence that police culture is dysfunctional and in need of a democratic reformation.

  There are, of course, still examples of law enforcement leaders who see the police as part of American society, not exempt from it. But even then, the reformers face stiff resistance from the law enforcement communities they lead. In Minneapolis, for instance, Police Chief Janeé Harteau attempted to have state investigators look into incidents when her officers seriously hurt or killed someone in the line of duty. Police union opposition killed her plan. In Philadelphia, Police Commissioner Charles Ramsey ordered his department to publicly release the names of officers involved in shootings within 72 hours of any incident. The city’s police union promptly challenged his policy, while the Pennsylvania House of Representatives passed a bill in November to stop the release of the names of officers who fire their weapon or use force when on the job unless criminal charges are filed. Not surprisingly, three powerful police unions in the state supported the legislation. 

  In the present atmosphere, many in the law enforcement community see the Harteaus and Ramseys of their profession as figures who don’t speak for them, and groups or individuals wanting even the most modest of police reforms as so many police haters. As former New York Police Department Commissioner Howard Safir told Fox News in May, “Similar to athletes on the playing field, sometimes it's difficult to tune out the boos from the no-talents sipping their drinks, sitting comfortably in their seats. It's demoralizing to read about the misguided anti-cop gibberish spewing from those who take their freedoms for granted.”

  The disdain in such imagery, increasingly common in the world of policing, is striking. It smacks of a police-state, bunker mentality that sees democratic values and just about any limits on the power of law enforcement as threats. In other words, the Safirs want the public — particularly in communities of color and poor neighborhoods — to shut up and do as it’s told when a police officer says so. If the cops give the orders, compliance — so this line of thinking goes — isn’t optional, no matter how egregious the misconduct or how sensible the reforms. Obey or else.

  The post-Ferguson public clamor demanding better policing continues to get louder, and yet too many police departments have this to say in response: Welcome to Cop Land. We make the rules around here.

  

  

  

  

  

• 272 Islamic State Terrorists Are Hiding In Europe, 150 More Are On Their Way, Dagbladet Reports

  It has been over a month since the November 13 Paris terrorist suicide bombings and mass shootings and the subsequent warzone-like shutdown of Brussels, and Europe was just starting to emerge from its terrorized shell.

  However, for a continent which wants to “use global issues as excuses to extend its power”, issues such as terrorism in the words of the infamous 2008 AIG presentation, which serve as an “excuse for greater control over police and judicial issues; increase extent of surveillance” a return to normalcy is unacceptable.

  And since fear of the unknown must constant by stoked in order to justify any government intervention in personal privacy and public affairs, Norwegian newspaper Dagbladet reported that two waves of Islamic State terrorists are said to have been trained for terror attacks in Europe – either for suicide bombings, or for Paris-style handgun attacks.

  According to the paper, the first wave is said to already have travelled to Europe. The cell was trained for attacks in Europe and  originally consisted of 300 fighters. 28 of the 300 have lost their lives in Syria – in bombings, firefights, or from other causes. Dagbladet is told that the remaining 272 fighters have travelled to Europe. The sleeper cell is said to be instructed to lay low. Dagbladet is aware that other sources have another estimate of the number of IS terrorists in Europe. This estimate is below 100.

  The second wave is still with the terror group in Syria – after having received training in a militant camp between Sinjar and Mosul in Iraq. The inbound cell consists of 150 fighters who are still in Syria. They are said to have had training in a militant camp between Sinjar and Mosul in Iraq. 112 of the 150 have completed their training. Approximately two weeks ago several of the 112 travelled from the militant camp, to the IS controlled city of Deir el Zour in Syria. Dagbladet is told the fighters travelled to Syria using a total of 11 cars.

  It is unclear if the cars were Ford F250 trucks or purchased from Texas car auctions by Turkish middlemen.

  From Deir el Zour they travelled on to Raqqa – IS’ most important city in Syria, and the «capital» of the terrorist group?s so-called «caliphate», and the neighbouring city of Tabaqah. A German IS fighter is said to be a leader in this group.

  

  Dagbladet’s source claims that IS fighters trained for
  terror attacks in Europe
  have used this building in the IS «capital» in
  Syria. Picture: Private / Dagbladet

  Dagbladet has obtained the information from a source with deep insight into IS in Syria. The source has previously given information which proved to be correct.

  According to Dagbladet’s source, the first wave of fighters was trained in Raqqa. There they were trained to perform two different types of terror attacks, Dagbladet is told.

  • One group is said to be trained to become martyrs through suicide attacks. Dagbladet?s source describes these fighters as being «completely brainwashed».
  • The second group is said to be trained to plan attacks using handguns and suicide belts.

  Both methods were used during the Paris attacks on November 13.

  The Norwegian Police Security Service (PST) confirmed to Dagbladet that they are familiar with the information.

  “PST is aware that similar information exists. I do not want to go into more detail about the information PST possesses, regarding the information that Dagbladet has obtained” Trond Hugubakken, head of communications at PST, says.

  “Intelligence is, and will always be, uncertain. Intelligence work is for a big part about making uncertain information more certain. The stream of terror related information is vast. Some of this information is correct, lots of it is incorrect. I do not want to go into more detail about the information PST possesses, regarding the information that Dagbladet has obtained: Hugubakken added.

  “The amount of information usually increases considerably related to, and in the aftermath of, terror attacks. This was also the case with the terror attacks in Paris in November. PST is continuously working to verify and analyse the information we receive, in order to supply the Norwegian authorities with the best possible foundation on which to decide how to relate to the threat situation we are facing all the time.”

  And now that Europeans are again solidly worked up with angst and concerns that there is a massive ISIS sleeper cell among them, somewhere, and the it is best to leave all this surveillance stuff to the government (a government which will soon request every last trace of essential Liberty in order to provide a little temporary Safety, Ben Franklin’s warning to the contrary nowithstanding), it is time to ease back just a little:

  Dagbladet has no concrete information about possible attacks on Norwegian soil.

  Surely, if that changes, the Dagbladet “source” will promptly advise.

  

  

  

  

  

• Feudalism: Then & Now

  The complicated financial landscape today has made everyone “slaves to the central bank” while ordinary people have found themselves stuck in debt, and spending all they have just to get by.

   

  

   

  As SHTFPlan.com’s Mac Slavo concludes,

  The few who are able to save at all have lost value by saving during extended periods of ZIRP and have instead been sidelined as hedge funds and Wall Street bankers have used virtually free money to buy up assets – like houses – which force the middle class types to rent rather than buy. 

   

  It is truly a vicious cycle, and it will leave humanity at the bottom again, reversing all the gains of the 1776 revolution – as we are all serfs now.

  

  

  

  

  

• Live Feed Of First SpaceX Rocket Launch Since June Falcon 9 Explosion

  On June 28, everything was normal for about 2 minutes and 18 seconds when Elon Musk’s SpaceX launched its latest unmanned Falcon 9 rocket tasked with delivering cargo to the International Space Station. One second later the rocket exploded.

  Nasa’s unmanned @SpaceX rocket explodes at start of #ISScargo supply mission pic.twitter.com/ZmJ6cNJE2Q

  — BBC Breaking News (@BBCBreaking) June 28, 2015

  Since then there was an orbital hiatus at Elon Musk’s rocket company until tonight, when in a few minutes, a new SpaceX’s Falcon 9 rocket is set to deliver 11 satellites to low-Earth orbit for ORBCOMM, a Machine-to-Machine communication and Internet of Things solutions.

  The ORBCOMM launch is targeted for an evening launch from Space Launch Complex 40 at Cape Canaveral Air Force Station. If all goes as planned, the 11 satellites will be deployed approximately 20 minutes after liftoff, completing a 17-satellite, low Earth orbit constellation for ORBCOMM.

  Perhaps just as importantly, this mission also marks SpaceX’s return-to-flight as well as its first attempt to land a first stage on land. The landing of the first stage is a secondary test objective.

   

  Update:

  The Falcon 9 first stage landing is confirmed. Second stage continuing nominally. pic.twitter.com/RX2QKSl0z7

  — SpaceX (@SpaceX) December 22, 2015

  

  

  

  

  

• Germans Scramble To Buy Weapons Amid Nationwide Spike In Migrant-Driven Crime

  Submitted by Soeren Kern via The Gatestone Institute,

  • The scramble to acquire weapons comes amid an indisputable nationwide spike in migrant-driven crime, including rapes of German women and girls on a shocking scale, as well as physical assaults, stabbings, home invasions, robberies and burglaries — in cities and towns throughout the country.

  • German authorities, however, are going to great lengths to argue that the German citizenry's sudden interest in self-defense has nothing whatsoever to do with mass migration into the country, despite ample evidence to the contrary.

  • The spike in violent crimes committed by migrants has been corroborated by a leaked confidential police report, which reveals that a record-breaking 38,000 asylum seekers were accused of committing crimes in the country in 2014. Analysts believe this figure — which works out to more than 100 crimes a day — is only a fragment: many crimes are not reported.

  • "Anyone who asks for the reasons for the surge in weapons purchases encounters silence." — Süddeutsche Zeitung

  Germans, facing an influx of more than one million asylum seekers from Africa, Asia and the Middle East, are rushing to arm themselves.

  All across Germany, a country with some of the most stringent gun-control laws in Europe, demand is skyrocketing for non-lethal self-defense weapons, including pepper sprays, gas pistols, flare guns, electroshock weapons and animal repellants. Germans are also applying for weapons permits in record numbers.

  The scramble to acquire weapons comes amid a migrant-driven surge in violent crimes — including rapes, robberies and aggravated assaults — in cities and towns throughout the country.

  German authorities, however, are going to great lengths to argue that the German citizenry's sudden interest in self-defense has nothing whatsoever to do with mass migration into the country, despite ample evidence to the contrary.

  In recent weeks, German newspapers have published dozens of stories with headlines such as: "Germany is Afraid — And Grabs for the Weapon," "Germans are Arming Themselves: The Demand for Weapons Explodes," "More and More People are Buying a Weapon," "Security: Hands Up!" "The Need for Security Increases," "Boom in Weapons Stores," and "Bavarians are Arming Themselves— Afraid of Refugees?"

  The German daily newspaper Die Welt recently produced a video report about Germany's surge in sales of self-defense weapons, which was titled "The Weapons Business is Profiting from the Refugee Crisis." (Image source: Die Welt video screenshot)

  Since Germany's migration crisis exploded in August 2015, nationwide sales of pepper spray have jumped by 600%, according to the German newsmagazine, Focus. Supplies of the product are now completely sold out in many parts of the country and additional stocks will not become available until 2016. "Manufacturers and distributors say the huge influx of foreigners in recent weeks has apparently frightened many people," Focus reports.

  According to KH Security, a German manufacturer of self-defense products, demand is up by a factor of five, and sales in September 2015 — the month when the implications of German Chancellor Angela Merkel's open-door migration policy began to dawn on many Germans — were the highest since the company was founded 25 years ago. The company says there is an increased demand not only for self-defense weapons, but also for home alarm systems.

  Another manufacturer of self-defense products, the Frankfurt-based company DEF-TEC Defense Technology, has reported a 600% increase in sales this fall. According to CEO Kai Prase:

  "Things took off beginning in September. Since then, our dealers have been totally overrun. We have never experienced anything like this in the 21 years of our corporate history. Fear: This is not rational. The important term is: 'refugee crisis.'"

  The same story is being repeated across Germany. According to the public broadcaster, Mitteldeutscher Rundfunk, citizens in Saxony can regularly be seen queuing up in large numbers waiting for gun shops to open.

  A store owner in the Saxon town of Pirna said he is now selling up to 200 cans of pepper spray each day, compared to five cans a week before the migrant crisis began. He said he is seeing many new customers who are not the typical clientele, including women of all ages and men who are buying weapons for their wives.

  Günter Fritz, the owner of a gun shop in Ebersbach, another town in Saxony, told RTL News, "Since September, all over Germany, also at my shop, sales of self-defense products have exploded." He added that his clients come from all walks of life, ranging "from the professor to the retired lady. All are afraid."

  Andreas Reinhardt, a gun shop owner in the northern German town of Eutin, said he now sells four to five self-defense weapons each day, compared to around two per month before the recent influx of asylum seekers. "The current social upheaval is clearly driving the current rush to self-defense," he said. "I never thought that fear would spread so quickly," he added.

  Eric Thiel, the owner of a gun shop in Flensburg, a city on the Baltic Sea coast, said that pepper spray is no longer available: "Everything is sold out. New supplies will not arrive until March. Everything that has to do with self-defense is booming enormously."

  Wolfgang Mayer, the owner of a gun shop in Nördlingen, a town in Bavaria, said he has an explanation for the surge in gun licenses: "I think with the influx of refugees, the rise in break-ins and the many tricksters, the people are demanding greater protection."

  Mayer added that there is a growing sense within German society that the state cannot adequately protect its citizens and therefore they have to better protect themselves. "Since the summer, sales of pepper spray have increased by 50%," Mayer said, adding that buyers are mainly women, of all ages — from the student in the city up to the widowed grandmother.

  Pepper spray and other types of non-lethal self-defense weapons are legal in Germany, but a permit is required to carry and use some categories of them. Officials in all of Germany's 16 federal states are reporting a spike in applications for such permits, known as the small weapons license (kleinen Waffenschein).

  In the northern German state of Schleswig-Holstein, nearly 10,000 people now hold a small weapons license, an "all-time record level," according to the regional interior ministry. Retailers in the state are also reporting an "unprecedented surge" in sales of self-defense weapons, with supplies of pepper spray sold out until the spring of 2016.

   

  In Saxony, retailers are reporting an unprecedented boom in sales of pepper spray, tear gas, gas pistols and even cross bows. Some stores are now selling more self-defense weapons in one day than they did in an entire month before the migrant crisis began.

   

  Saxon officials are also reporting a jump in the number of people applying for the full-fledged firearms license (großen Waffenschein). The rush to arms can be attributed to a "subjective decline in the people's sense of security," Saxon Interior Minister Markus Ulbig said.

   

  In Berlin, the number of people holding a small weapons license increased by 30% during the first ten months of 2015 compared to the same period in 2014, while the number of those holding the full-fledged firearms license jumped by some 50%, according to local police.

   

  In Bavaria, more than 45,000 people now hold a small weapons license, 3,000 more than in 2014. This represents a "significant increase," according to the regional interior ministry. As in other parts of Germany, Bavarian retailers are also reporting a boom in sales of self-defense weapons, including gas pistols, flare guns and pepper spray.

   

  In Stuttgart, the capital city of Baden-Württemberg, local gun shops are reporting a four-fold increase in sales of self-defense weapons since August. One shop owner said she now sells more weapons in one week than she normally sells in one month. She added that she has never seen such high demand.

   

  In Heilbronn, another city in Baden-Württemberg, local officials report that sales of pepper spray have doubled in 2015. According to one shopkeeper, the demand for pepper spray began surging in August, when many mothers started purchasing the product for their school-aged daughters. "Our clients are extremely afraid," the shopkeeper said. "We are seeing this everywhere."

   

  In Gera, a city in Thuringia, local media reported that at one store, the entire inventory of 120 cans of pepper spray was sold out within three hours. The store, which subsequently sold out of another batch of 144 cans, is now on a waiting list to obtain more because of supplier shortfalls.

  A woman in Gera who bought pepper spray for her 16-year-old daughter said:

  "I think it is fundamentally proper for me to protect my daughter. She is at that age where she is out alone in the evening. If she says she needs this for protection, I think this is not unjustified. Of course, due to the current situation that we now have in Germany. We just do not know who is here. There are quite a lot of people who are not registered."

  The same trend toward self-defense is being repeated in the German states of Brandenburg, Mecklenburg-Vorpommern, Saxony-Anhalt and North Rhine-Westphalia, where spiraling levels of violent crime perpetrated by migrants is turning some neighborhoods into no-go zones.

  Apologists for mass migration are accusing German citizens of overreacting. Some point to recent studies — commissioned by pro-migration groups — which claim, implausibly, that the number of crimes committed by migrants is decreasing, not increasing.

  Others deny that the rush to self-defense has anything to do with migrants at all. They blame a variety of different factors, including the early darkness associated with the end of daylight savings time, the jihadist attacks in Paris (which occurred in November, three months after sales of self-defense weapons began to spike), and the need for protection from wild wolves in parts of northern Germany.

  The Süddeutsche Zeitung described the deception this way:

  "Anyone who asks for the reasons for the surge in weapons purchases encounters silence. Officially, the regulatory agencies say that anyone who applies for the small weapons license does not need to provide a justification and therefore the government offices have no explanation. 'But it is true that sometimes we clearly get the message that they are afraid because of the refugees,' says one, on condition that his name and office will not be mentioned in the newspaper. 'People have already told me: I want to protect my family.' We have reported this to the Ministry…

   

  "The retailers also say nothing officially about the reasons for the increase in sales. Call a small gun shop. Many refugees arrived at the end of August, and since September the numbers are up, can there not be a connection? 'If you do not use my name: Sure, what else?' Says the man on the phone. The people who come to the store are afraid. They believe that among the refugees there are 'black sheep.' Some customers openly admit it."

  Empirical evidence shows an indisputable nationwide spike in migrant-driven crime, including rapes of German women and girls on a shocking scale, as well as sexual and physical assaults, stabbings, home invasions, robberies, burglaries and drug trafficking.

  The spike in violent crimes committed by migrants has been corroborated by a confidential police report leaked to a German newspaper. The document reveals that a record-breaking 38,000 asylum seekers were accused of committing crimes in the country in 2014. Analysts believe this figure — which works out to more than 100 crimes a day — is only a fragment: many crimes are not reported.

  Not surprisingly, a new poll shows that 55% of Germans are pessimistic about the future, up from 31% in 2014 and 28% in 2013. The poll shows that 42% of those between the ages of 14 and 34 believe their future will be bleak; this is more than double the number of those (19%) who felt this way in 2013. At the same time, 64% of those aged 55 and above are fearful about the future.

  The poll also shows that four-fifths (79%) of the German population believe the economy will deteriorate in 2016 due to the financial burdens created by the migration crisis, and 70% believe that member states of the European Union will drift further apart in the coming year. The most predictable finding of all: 87% of Germans believe their politicians will experience a decline in public support during 2016.

  

  

  

  

  

• 2015 – The Year In Money

  Huge mega-mergers. Anemic hedge fund returns. Billion-dollar venture capital deals. Bloomberg breaks down 2015's record highs and lows.

   

  The Stock Market…

  

  

   

  The Bond Market…

  

  

   

  Deals…

  

  

  

  

  

  

   

  Venture Capital…

  

  

   

  Jobs…

  

  

   

  Ups & Downs…

  

  

  

  

   

  Read more here at Bloomberg.com

  

  

  

  

• Dramatic Amateur Video Captures Moment Deadly Chinese Landslide Buries 33 Buildings

  In a year marked by numerous dramatic (and often deadly) infrastructure failures in China’s industrial sector, culminating with several deadly explosions at its port towns, the latest tragedy to strike took place yesterday in China’s southern town of Shenzhen where at least 91 people were missing after a giant mound of mud and construction waste spewed out of an overfull dump site in a southern China boomtown and buried 33 buildings in the country’s latest industrial disaster.

  As Reuters reports, the site should have been closed down in February, but according to local workers, mud and waste had continued to be dumped there, a news portal run by the city government in Shenzhen said. The latest incident takes place over a year after a government-run newspaper warned Shenzhen would run out of space to dump the waste left behind from a building frenzy.

  The mudslide at the business park had covered an area of more than 380,000 square meters (94 acres) and was 10 metres (11 yards) deep in parts, Shenzhen Vice Mayor Liu Qingsheng told reporters, according to Xinhua. Almost 3,000 rescuers were at the scene, Xinhua said, with sniffer dogs and drones. Rescuers were focusing on several areas where sensors had detected signs of life, it added.

  

  Fourteen factories, 13 low-rise buildings and three dormitories were among the buildings flattened. Xinhua said 14 people had been rescued and more than 900 people had been evacuated from the site by Sunday evening. State television said the 91 missing included 59 men and 32 women.

  A nearby section of China’s major West-East natural gas pipeline exploded, state television added, though it was not clear if this had any impact on the landslide. Xinhua said the pipeline was owned by PetroChina, China’s top oil and gas producer, that the 400-meter-long ruptured pipe “has been emptied” and a temporary pipe will be built.

  Premier Li Keqiang ordered an official investigation into Sunday’s landslide in Shenzhen, just across the border from Hong Kong. The mudslide smashed into multi-storey buildings at the Hengtaiyu industrial park in the city’s northwestern Guangming New District, toppling them within seconds in collisions that sent rivers of earth skyward. Villager Peng Jinxin said the mud came like “huge waves”, as residents ran out of the way.

  “At one point the running mud was only ten meters away from me,” Peng told the official Xinhua news agency.

  The frequency of industrial accidents in China has raised questions about safety standards following three decades of breakneck growth in the world’s second-largest economy. Just four months ago, more than 160 people were killed in huge chemical blasts in the northern port city of Tianjin.

  State television showed scenes of devastation in Shenzhen, with crumpled buildings sticking up from heaps of brown mud which stretched out across the industrial park.

  Besides new buildings, a network of subway lines is being built in Shenzhen, and mounds of earth are being excavated and dumped at waste sites. “Shenzhen has 12 waste sites and they can only hold out until next year,” the official Shenzhen Evening Post, published by the city government, said in October, 2014.

  Once a quiet fishing village, Shenzhen was chosen by Beijing three decades ago to help pioneer landmark economic reforms, and it has boomed ever since.

  The Ministry of Land Resources said the accumulation of a large amount of waste meant that mud was stacked too steep, “causing instability and collapse, resulting in the collapse of buildings”.

  * * *

  And in this age of ubiquitous cell phone use, there was an immediate amateur video recording capturing the landslide as it happened:

  

  

  

  

  

• The Fed Never Solved The Mystery Of The "Missing Inflation", And Now It Has A Big Problem

  Back in June, this website first “solved” the “mystery” behind America’s missing inflation, when we showed that a record number of US renters are unable to afford housing, suggesting that record amounts of “disposable income” were being diverted for use as a shelter “tax” instead of being spent on true discretionary goods and services, leading (together with the Obamacare tax) to the broad and distressing decline in not only traditional retail sales and moribund consumer spending, and the “secular” economic slowdown observed over the past several years.

  We followed this in September with another expose titled  “The Mystery Of The “Missing Inflation” Solved, And Why The US Housing Crisis Is About To Get Much Worse” explaining why the Fed is about to make a historic mistake and unleash an even more acute housing crisis if it hikes into an economy where the only core inflationary “impulse” if that from rent inflation, at a time when median real household incomes have tumbled to levels last seen in 1989.

  

  As we explained in July, one major problem is that the Fed’s measures of inflation are wrong, if not with malicious intent, then purely due to definitional purposes. But a bigger problem for the the Fed’s measures of how the overall economy is doing (and/or overheating) is that the Fed telling the vast majority of Americans that inflation is negligible, leads to riotous laughter.

  The reason for this is a simple, if dramatic, one: the U.S. transformation from a homeownership society, to one of renters.

  

   

  In fact, the only age group that has seen an increase in homeownership in the “New Normal” are those aged 65 and over!

  

  Showcasing the plight of renters was the “State of the Nation’s Housing” report from the Center for Housing Studies, according to which for American renters 2013 marked another year with a record-high number of cost burdened households – those paying more than 30 percent of income for housing. In the United States, 20.7 million renter households (49.0 percent) were cost burdened in 2013.

  As more Americans are forced into a limited number of rental units, prices have exploded at a far greater pace than what is officially reported in the shelter or core CPI metric, for all – but especially for those in the lower income buckets: as seen in the lower right chart, the rental “cost burden” of households making under $30,000 is the higest ever, at well over 70%. 

  

  It gets worse: a whopping 11.2 million, or more than a quarter of all renter households, had “severe cost burdens, paying more than half of income for housing.” The median US renter household earned $32,700 in 2013 and spent $900 per month on housing costs. Renter housing costs are gross rents, which include contract rents and utilities.

  But the punchline is that, as noted above, all this was taking place in the years following 2000, when gains in typical monthly rental costs exceeded the overall inflation rate, while median income among renters fell further and further behind. As a result, the share of renter households facing severe cost burdens grew dramatically, reaching a new record high of 28 percent in 2011, and if adding in those with moderate burdens, just under half of all renters were cost burdened in 2013. These rates are substantially higher than a decade ago and roughly twice what they were in 1960.

  

   

  As we explained three months ago, the implications for not just the US economy, but for US demographics and society as a result of this “stagflationary” rental environment are profound. They are also the reason why the biggest US generation by number of participants – the Millennials, at 82 million strong – and the one generation that was supposed to be the dynamo that pushes the US out of its post-crisis funk is, simply said, crushed.

  Millennials are also expected to continue experiencing rent burdens as they age. Having entered the labor market during and following the Great Recession, those in the millennial generation have received lower wages and experienced higher rates of unemployment and underemployment than their older counterparts at this point in their lives. As a result, millennials have less wealth accumulated, have delayed forming new households, and are less likely to become owners at the age that older generations had previously. In combination, we are likely to see additional household formation by millennials over the next decade and expect a relatively higher share to remain renters during that period.

  In fact, far from confirming the “bullish thesis” that Millennials will eventually move out of their parents basement and buy (or rent) their own housing while starting new households, just the opposite was found to be taking place:

  In 2015, 15.1 percent of  25 to 34 year olds were living with their parents, a fourth straight annual increase, according to an analysis of new Census Bureau data by the Population Reference Bureau in Washington. The proportion is the highest since at least 1960, according to demographer Mark Mather, associate vice president with PRB. “The phenomenon of young adults, facing their own financial challenges, forced to squeeze in the homes of their parents. And new data show the trend is getting worse, not better.”

  

  As Bloomberg redundantly added, “It takes young people longer these days to find jobs with decent wages. Young adults need to spend more time getting the necessary education and skills before they can become self-sufficient. The recession likely exacerbated this trend.”

  Perhaps the best visual summary of the “mystery of the missing inflation” was the following interactive map showing that in virtually all major seaboard metro areas, including the major cities in California, New York, and Florida, the number of households with a cost burden is 50% or higher.

   

  

   

  This is how we concluded in September:

  All of this could have been avoided if only the Fed has observed the “missing” and soaring rental inflation that was right in front of its nose all the time, and which it did everything in its power to ignore just so the 1% can keep their ZIRP and QE, and become even wealthier on the back of the middle class and the 80 million of 25-34 year old Americans who have found out the hard way that not only is the American Dream of owning a home officially dead, it has been replaced with the American nightmare of completely unffordable renting.

  So why do we bring up this very critical topic today? One reason: as Deutsche Bank’s Dominic Konstam wrote out over the weekend, not only is it still “all about the rental inflation”, but it is this “mystery” of missing inflation, which we exposed not once but twice over the past 6 months, that has so stumped and confused the Fed, it is now piling policy mistake upon policy mistake.

  As a reminder, in the last CPI print before the Fed’s rate hike announcement, even as headline inflation barely rose from the year ago period pushed lower by the ongoing collapse in energy prices, it was core inflation that printed at 2.0% and give the Fed the green light it had been so eagerly anticipating, to hike.

  Only there is one problem.

  Here is what Konstam said about the prospects for US benign inflation, why the German bank “remains strongly opposed to a view that inflation will shock to the upside”, and how rental inflation is at the core of everything.

  From a theoretical perspective we have a bigger problem with a bearish inflation outlook in that core inflation ex housing remains extremely weak on both a PCE and CPI basis. OER/rental inflation is therefore the main “culprit” for the Fed in achieving its inflation “target”.

  Define irony: the one thing that is crushing millions of Americans and more than a quarter of all US renting households – those who can barely afford to rent even as their real median incomes continue to slide – is what the Fed interpreted as a green light to hike!

  Konstam continues:

  The trouble is that rents are running high not because house prices are booming and/or construction is sawing but because structurally new entrants to the housing market are renters not owners. This is reflected in the very low first time homebuyer rate, less than 30 percent.

  Now, prepare to be amazed: remember how we said above core inflation rose 2.0% in November from a year ago. Well, if you strip out housing, core inflation was just barely above 1%. Worse, on a Core PCE basis, if one excludes housing inflation, one gets the lowest inflationary print since the financial crisis!

  

  And here is absolute punchline which if one ignores everything we have said above, is a must read:

  Rent is however a “tax”. In this instance it is not something that represents real growth or discretionary consumption. If OER was soaring on the back of house prices and housing construction that allowed for wealth extraction, i.e. prior to the crisis, the outlook would be very different. As we have highlighted before, the stagflation concept in housing is a negative for structural demand and therefore pricing power.

  If only every economist would read these 68 short words, there would be no confusion why there is no economic recovery, why retail sales are foundering, why wage growth is non-existent, and why corporate CEOs are the most bearish they have been since 2012. In short: everyone would know why not only the Fed failed with its ZIRP policies, but why it is compounding this failure with another failure by hiking rates.

  So what does all of this mean? Well, the US economy is now one where “taxes” define growth.

  • On the one hand, there is the Supreme Court mandated “tax” that is Obamacare, which quarter after quarter is the biggest source of GDP growth as it forces US consumers to spend billions on (soaring) health insurance, in the process giving the impression of healthy Personal Consumption Expenditures and a growing US economy.  Don’t feel like paying this tax? Sorry – it’s the law.
  • On the other hand, there is the “tax” that is rent: a tax which has soared in recent years, vastly outpacing median incomes (which have been declining) as landlords can hike asking rents to whatever levels they choose: after all owning a new home has become virtually impossible for what little is left of the US middle class. Don’t feel like paying this tax? Fine, just prepare to live under a bridge or in a tent.

  Combined, these two taxes are draining hundreds of billions in disposable income from American households, and leading to the secular stagnation that so many supposedly intelligent economists are observing every day unfold before their very eyes, and yet which so very few can explain even though the reasoning is so simple a 10 year old without a formal economic education can understand that when one pays the bulk of one’s disposable income on the two core essentials, housing and health – whose prices keep soaring with every passing day – there is virtually no money left for everything else.

  No wonder then that the Fed will not grasp any of this before it is far too late.

  And the biggest irony: for the Fed these two largest economic “taxes” which force “spending” and which push up “inflation” are precisely the catalysts that served as the basis for the Fed’s decision to hike rates in a desperate attempt to give the impression that the US economy is recovering, when in reality the Fed has been looking at the economy’s fundamental deterioration in the face, and reached the absolutely wrong conclusion, convincing itself it now has the “green light” to proceed with a rate hike!

  

  

  

  

  

• Why Capitalists Are Repeatedly "Fooled" By Business Cycles

  Submitted by Frank Shostak via The Mises Institute,

  According to the Austrian business cycle theory (ABCT) the artificial lowering of interest rates by the central bank leads to a misallocation of resources because businesses undertake various capital projects that — prior to the lowering of interest rates —weren’t considered as viable. This misallocation of resources is commonly described as an economic boom.

  As a rule, businessmen discover their error once the central bank — which was instrumental in the artificial lowering of interest rates — reverses its stance, which in turn brings to a halt capital expansion and an ensuing economic bust.

  From the ABCT one can infer that the artificial lowering of interest rates sets a trap for businessmen by luring them into unsustainable business activities that are only exposed once the central bank tightens its interest rate stance.

  Critics of the ABCT maintain that there is no reason why businessmen should fall prey again and again to an artificial lowering of interest rates.

  Businessmen are likely to learn from experience, the critics argue, and not fall into the trap produced by an artificial lowering of interest rates.

  Correct expectations will undo or neutralize the whole process of the boom-bust cycle that is set in motion by the artificial lowering of interest rates.

  Hence, it is held, the ABCT is not a serious contender in the explanation of modern business cycle phenomena. According to a prominent critic of the ABCT, Gordon Tullock,

  One would think that business people might be misled in the first couple of runs of the Rothbard cycle and not anticipate that the low interest rate will later be raised. That they would continue to be unable to figure this out, however, seems unlikely. Normally, Rothbard and other Austrians argue that entrepreneurs are well informed and make correct judgments. At the very least, one would assume that a well-informed businessperson interested in important matters concerned with the business would read Mises and Rothbard and, hence, anticipate the government action.

  Even Mises himself had conceded that it is possible that some time in the future businessmen will stop responding to loose monetary policy thereby preventing the setting in motion of the boom-bust cycle. In his reply to Lachmann (Economica, August 1943) Mises wrote,

  It may be that businessmen will in the future react to credit expansion in another manner than they did in the past. It may be that they will avoid using for an expansion of their operations the easy money available, because they will keep in mind the inevitable end of the boom. Some signs forebode such a change. But it is too early to make a positive statement.

  Do Expectations Matter?

  According to the critics then, if businessmen were to anticipate that the artificial lowering of interest rates is likely to be followed some time in the future by a tighter interest rate stance, their conduct in response to this anticipation will neutralize the occurrence of the boom-bust cycle phenomenon. But is it true that businessmen are likely to act on correct expectations as critics are suggesting?

  Furthermore, the key to business cycles is not just businessmen’s conduct but also the conduct of consumers in response to the artificial lowering of interest rates — after all, businessmen adjust their activities in accordance with expected consumer demand. So on this ground one could generalize and suggest that correct expectations by people in an economy should prevent the boom-bust cycle phenomenon. But would it?

  For instance, if an individual John, as a result of a loose central bank stance, could lower his interest rate payment on his mortgage why would he refuse to do that even if he knows that a lower interest rate leads to boom-bust cycles?

  As an individual the only concern John has is his own well being. By paying less interest on his existent debt John’s means have now expanded. He can now afford various ends that previously he couldn’t undertake.

  As a result of the central bank’s easy stance the demand for John’s goods and services and other mortgage holders has risen. (Again it must be realized that all this couldn’t have taken place without the support from the central bank, which accommodates the lower interest rate stance.)

  Now, the job of a businessman is to cater to consumers’ future requirements. So whenever he observes a lowering in interest rates he knows that this most likely will provide a boost to the demand for various goods and services in the months ahead.

  Hence if he wants to make a profit he would have to make the necessary arrangements to meet the future demand.

  For instance, if a builder refuses to act on the likely increase in the demand for houses because he believes that this is on account of the loose monetary policy of the central bank and cannot be sustainable, then he will be out of business very quickly.

  To be in the building business means that he must be in tune with the demand for housing. Likewise any other businessman in a given field will have to respond to the likely changes in demand in the area of his involvement if he wants to stay in business.

  A businessman has only two options — either to be in a particular business or not to be there at all. Once he has decided to be in a given business this means that the businessman is likely to cater for changes in the demand for goods and services in this particular business irrespective of the underlying causes behind changes in demand.

  Failing to do so will put him out of business very quickly. Now, regardless of expectations once the central bank tightens its stance most businessmen will “get caught.” A tighter stance will undermine demand for goods and services and this will put pressure on various business activities that sprang up while the interest rate stance was loose. An economic bust emerges.

  We can conclude that correct expectations cannot prevent boom-bust cycles once the central bank has eased its interest rate stance. The only way to stop the menace of boom-bust cycles is for the central bank to stop the tampering with financial markets. As a rule however, central banks respond to the bust by again loosening their stance and thereby starting the new boom-bust cycle phase.

  

  

  

  

  

• Traders Panic-Buy Stocks Into The Close Despite Crude And Credit Crumble

  Artist's impression of Fed credibility…

   

  Since The Fed unleashed its rate-hike, things for the confidence-inspiring awesomeness have not gone well…

  

   

  Trannies were worst post-Fed, Small Caps best but they are all red…

  

   

  Stocks and bonds decoupled early in the overnight European session, then recoupled when Europe closed then stocks just went full retard into the close…

  

   

  Here's your day summarized… come on!!!

  

   

  As the machines lifted stocks to the opening ramp highs…

  

   

  But credit just laughed…

  

  As the algos ran the stops to the pre-opex dump… (that was a 140 point rip in The Dow in the last 30 minutes… on absolutely no news whatsoever)

  

   

  FANGs were dumped and then pumped into the close but remain red post-Fed…

  

   

  Stocks continue to leak lower towards credit's inevitable endgame…

  

   

  Meanwhile Waddell & Reed's canary in the coalmine is flashing red… Is WDR the marginal liquidator-at-any-price?

  

  h/t@BeardedMiguel

   

  And The TED Spread is soaring…

  

   

  The USDollar was sold from early in the US session to the end of the EU session, then flatlined…

  

   

  Treasury bonds were well bid in the early session (notably 5Y, 7Y, and 10Y bonds are unchanged on the year now in yield terms)

  

   

  The weaker dollar broadly speaking helped commodities with silver and gold doing well..

  

   

  But crude's January contract expiration seemed to keep volatility under control (despite the surge into NYMEX close across the complex)

  

   

  Charts: Bloomberg

  Bonus Chart: "Fed Says"

  

  

  

  

  

• Whistleblower Exposes Exactly How The Government Spies On Your Cell Phone

  Submitted by Derrick Broze via TheAntiMedia.org,

  The release of a secret U.S. government catalog of cell phone surveillance devices has revealed the names and abilities of dozens of surveillance tools previously unknown to the public. The catalog shines a light on well-known devices like the Stingray and DRT box, as well as new names like Cellbrite, Yellowstone, Blackfin, Maximus, Stargrazer, and Cyberhawk.

  

   

  The Intercept reports:

  “Within the catalogue, the NSA is listed as the vendor of one device, while another was developed for use by the CIA, and another was developed for a special forces requirement. Nearly a third of the entries focus on equipment that seems to have never been described in public before.”

   

  Anti Media has reported extensively on the Stingray, the brand name of a popular cell-site simulator manufactured by the Harris Corporation. The Electronic Frontier Foundation describes Stingrays as “a brand name of an IMSI (International Mobile Subscriber Identity) Catcher targeted and sold to law enforcement. A Stingray works by masquerading as a cell phone tower – to which your mobile phone sends signals to every 7 to 15 seconds whether you are on a call or not – and tricks your phone into connecting to it.”

  As a result, whoever is in possession of the Stingray can figure out who, when, and to where you are calling, the precise location of every device within the range, and with some devices, even capture the content of your conversations.

  Both the Harris Corp. and the Federal Bureau of Investigations (FBI) require police to sign non-disclosure agreements (NDA) related to the use of the devices. Through these NDAs local police departments have become subordinate to Harris, and even in court cases in front of a judge, are not allowed to speak on the details of their arrangements. Due to this secrecy, very little has been known about how exactly the Stingrays work.

  The bit of publicly available information was disclosed through open records requests and lawsuits filed by journalists and researchers. This new catalog provides even more detail about how the devices operate.

  We already knew that Stingrays drain the battery of a targeted device, as well as raise signal strength. We also knew that as long as your phone is on, it could be targeted. Some newer details include the fact that the Stingray I and II will not work if the user is “engaged in a call.” Also, the device can gather data from phones within a 200 meter radius. And the next generation Hailstorm device is even capable of cracking encryption on the newer 4G LTE networks.

  A number of the devices in the catalog are Digital Receiver Technology (DRT) boxes, also known as dirt boxes, which can be installed in planes for aerial surveillance. DRT was recently purchased by Boeing. We first learned of dirt boxes in late 2014, when the Wall Street Journal revealed a cell phone monitoring program operated by the U.S. Marshals Service, using Cessna planes mounted with Stingrays. AntiMedia has also reported on surveillance planes equipped with thermal imaging technology.

  Other devices include:

  • Cellbrite: “a portable, handheld, field proven forensic system for the quick extraction and analysis of 95% cell phones, smart phones and PDA devices,” capable of extracting “information such as phone book, pictures, video, text messages, and call logs.”
  • Kingfish: a Stingray-like device that is “portable enough to be carried around in a backpack.”
  • Stargrazer: “an Army system developed to deny, degrade and/or disrupt a targeted adversary’s command and control (C2) system,” which “can jam a handset and capture its metadata at the same time it pinpoints your target’s location. But watch out — the Stargazer may jam all the other phones in the area too — including your own.”
  • Cyberhawk: which is capable of gathering “phonebook, names, SMS, media files, text, deleted SMS, calendar items and notes” from 79 cell phones.

  Jennifer Lynch, a senior staff attorney at the Electronic Frontier Foundation, told the Intercept that the use of these tools is part of the militarization of the police in the U.S.: “We’ve seen a trend in the years since 9/11 to bring sophisticated surveillance technologies that were originally designed for military use — like Stingrays or drones or biometrics — back home to the United States.”

  The Office of the Director of National Intelligence, the FBI, NSA, and U.S. military declined to leave a comment with the Intercept regarding the catalog. Marc Raimondi, a Justice Department spokesperson, told the Intercept that the Department “uses technology in a manner that is consistent with the requirements and protections of the Constitution, including the Fourth Amendment, and applicable statutory authorities.”

  The Intercept notes that Raimondi worked for Harris Corp. for six years prior to working for the DOJ.

  Secrecy surrounding the use of these devices has been a contentious topic of debate for several years. Truth In Media recently reported that four members of the House Oversight Committee sent letters to 24 federal agencies including the Department of State and the Securities and Exchange Commission, demanding answers regarding policies for using the controversial surveillance technology.

  House Oversight Committee Chairman Jason Chaf­fetz, ranking member Elijah Cummings, and Reps. Will Hurd (R-Texas) and Robin Kelly (D-Ill.), as members of the committee’s IT subcommittee, issued requests for information related to the potential use of stingrays.

  Chaf­fetz also recently introduced the Stingray Privacy Act, which would expand newly established warrant requirements for the Department of Justice and Department of Homeland Security to all federal, state, and local agencies that use the cell-site simulators.

  In September, the DHS joined the DOJ by announcing warrant requirements for the use of Stingray equipment, but those rule changes have come under fire for possible loopholes which may allow the continued use of surveillance equipment without a warrant.

  “Because cell-site simulators can collect so much information from innocent people, a simple warrant for their use is not enough,” Jennifer Lynch told the Intercept. “Police officers should be required to limit their use of the device to a short and defined period of time. Officers also need to be clear in the probable cause affidavit supporting the warrant about the device’s capabilities.”

  At this point, it’s painfully obvious that America is the home of the Police-Surveillance State. Awakened hearts and minds everywhere should continue to educate themselves and their communities about the dangers of these tools. We should also support initiatives to create technology that can defend against the prying eyes and ears of Big Brother. Privacy is a dying notion in a nation of fools determined to be safe rather than liberated. If you give a damn, now is the time to stand up and be heard.

  

  

  

  

  

• Monday Humor? America's "Most Polluted" Nuclear Weapons Site To Become National Park

  On Sunday, we brought you “Huge Fukushima Cover-Up Exposed, Government Scientists In Meltdown,” in which we highlighted a piece from Sean Adl-Tabatabai who asks whether government-funded researchers are intentionally downplaying rising levels of radiation in the Pacific Ocean stemming from the 2011 meltdown in Japan.  

  “In March 2011, Japan’s Fukushima Daiichi nuclear power plant suffered multiple meltdowns following a massive earthquake and tsunami. The exploding reactors sprayed massive amounts of radioactive material into the air, most of which settled into the Pacific Ocean,” Adl-Tabatabai writes, adding that “a study presented at the conference of the American Geophysical Union in San Francisco on Dec. 14, shows that radiation levels from Alaska to California have increased since samples were last taken.”

  But while Adl-Tabatabai worries that perhaps Americans are getting a sugar-coated version of story thanks to the fact that the Woods Hole Oceanographic Institution has received millions in government funding, he may be overestimating the public’s interest in the dangers of being exposed to nuclear waste because as AP reports, “thousands of people are expected next year to tour the Hanford Nuclear Reservation, home of the world’s first full-sized nuclear reactor, near Richland, about 200 miles east of Seattle in south-central Washington.” Here’s more: 

  The nation’s most polluted nuclear weapons production site is now its newest national park.

   

  [Visitors] won’t be allowed anywhere near the nation’s largest collection of toxic radioactive waste.

   

  The Manhattan Project National Historic Park, signed into existence in November, also includes sites at Oak Ridge, Tennessee, and Los Alamos, New Mexico. The Manhattan Project is the name for the U.S. effort to build an atomic bomb during World War II.

   

  At Hanford, the main attractions will be B Reactor – the world’s first full-sized reactor – along with the ghost towns of Hanford and White Bluffs, which were evacuated by the government to make room for the Manhattan Project.

   

  The B Reactor was built in about one year and produced plutonium for the Trinity test blast in New Mexico and for the atomic bomb dropped on Nagasaki, Japan, that led to the surrender of the Japanese.

   

  Starting in 1943, more than 50,000 people from across the United States arrived at the top-secret Hanford site to perform work whose purpose few knew, French said.

   

  The 300 residents of Richland were evicted and that town became a bedroom community for the adjacent Hanford site, skyrocketing in population. Workers labored around the clock to build reactors and processing plants to make plutonium, a key ingredient in nuclear weapons.

   

  The park will tell the story of those workers, plus the scientists who performed groundbreaking research and the residents who were displaced, said Chip Jenkins of the National Park Service, which is jointly developing the park with the Energy Department.

  And a bit more color from the government’s Hanford webpage:

  Post World War II tensions between the U.S. and Russia brought about the “Cold War” and drove continued atomic weapons production and Hanford’s plutonium production mission.  Additional reactors were constructed next to the Columbia River as the two nations began to develop and stockpile nuclear weapons.  In 1959, construction began on the last Hanford reactor, dubbed “N.” N Reactor was a dual-purpose facility which produced plutonium for atomic weapons as well as steam for generating electricity. It was the only dual-purpose reactor in the United States and was so advanced that President John F. Kennedy came to Hanford in September of 1963 for its dedication.  Starting in the mid 60’s through 1971, the older reactors were shut down leaving only N Reactor operating on the Site.  N Reactor continued its mission of producing plutonium and electricity until 1987.  Since that time Hanford’s mission has been to clean up the site after decades of weapons production activities.

  Here are a few images from the site:

  

  

  

  

  

  

  

  *  *  *

  For anyone planning a family trip to the country’s most polluted nuclear site, you can rest assured that “everything is clean and perfectly safe,” Colleen French, the U.S. Department of Energy’s program manager for the Hanford park says.

  “Any radioactive materials are miles away.”

  

  

  

  

  

• Chasing Unicorns – 5 Investing Myths That Will Hurt You

  Submitted by Lance Roberts via RealInvestmentAdvice.com,

  In the summer of 1885 William R. Travers, prominent NYC businessman and builder of Saratoga Race Track, was vacationing in Newport, Rhode Island. He pointed out a long line of beautiful yachts tied up in the harbor. When he was informed that they all belonged to Wall Street brokers he simply asked,

  “Where are their clients’ yachts?”.

  When it comes to investing, there is nothing more dangerous to an individual’s future outcomes than falling prey to the many myths perpetrated on them by Wall Street. The investment business is, after all, just that – a business.

  What Wall Street has learned, as the days of commission-based trading have been relegated to computerized trading, is that fee based management is a very profitable annuitized business model. The only trick is keeping individuals fully invested at all times so fees can be collected. This need has generated some of the biggest “myths” in the investment world to keep investors piling money into mutual funds, hedge funds and advisory accounts. Here are 5-myths worth thinking about.

  1) Stay Invested – The Market Always Returns 10%

  You have heard this one plenty. “Over the long-term” the stock market has generated a 10% annualized total return. So, just plunk your money down and you will be wealthy.

  

  The statement is not entirely false. Since 1900, stock market appreciation plus dividends has provided investors with an AVERAGE return of 10% per year. Historically, 4%, or 40% of the total return, came from dividends alone. The other 60% came from capital appreciation that averaged 6% and equated to the long-term growth rate of the economy.

  However, there are several fallacies with the notion that the markets long-term will compound 10% annually.

  1) The market does not return 10% every year. There are many years where market returns have been sharply higher and significantly lower.

  2) The analysis does not include the real world effects of inflation, taxes, fees, and other expenses that subtract from total returns over the long-term.

  3) You don’t have 144 years to invest and save.

  The chart below shows what happens to a $1000 investment from 1871 to present including the effects of inflation, taxes, and fees. (Assumptions: I have used a 15% tax rate on years the portfolio advanced in value, CPI as the benchmark for inflation and a 1% annual expense ratio. In reality, all of these assumptions are quite likely on the low side.)

  

  As you can see, there is a dramatic difference in outcomes over the long-term.

  From 1871 to present the total nominal return was 9.07% versus just 6.86% on a “real” basis. While the percentages may not seem like much, over such a long period the ending value of the original $1000 investment was lower by an astounding $260 million dollars.

  Importantly, as stated previously, and as I will discuss more in a moment, the return that investors receive from the financial markets is more dependent on the “WHEN” you begin investing.

  2) I Can Beat/Outperform The Stock Market

  No, you can’t and the data proves it.

  Dalbar recently released their 21st annual Quantitative Analysis Of Investor Behavior study which continues to show just how poorly investors perform relative to market benchmarks over time and the reasons for that under performance.

  It is important to note that it is impossible for an investor to consistently “beat” an index over long periods of time due to the impact of taxes, trading costs, and fees. Furthermore, there are internal dynamics of an index that affect long term performance which do not apply to an actual portfolio such as share repurchases, substitution, and replacement effects.

  However, even the issues shown above do not fully account for the underperformance of investors over time. The key findings of the study show that:

  • In 2014, the average equity mutual fund investor underperformed the S&P 500 by a wide margin of 8.19%.The broader market return was more than double the average equity mutual fund investor’s return. (13.69% vs. 5.50%).
  • In 2014, the average fixed income mutual fund investor underperformed the Barclays Aggregate Bond Index by a margin of 4.81%. The broader bond market returned over five times that of the average fixed income mutual fund investor. (5.97% vs. 1.16%).
  • Retention rates are
    • slightly higher than the previous year for equity funds and
    • increased by almost 6-months for fixed income funds after dropping by almost a year in 2013.
  • In 2014, the 20-year annualized S&P return was 9.85% while the 20-year annualized return for the average equity mutual fund investor was only 5.19%, a gap of 4.66%.
  • In 8 out of 12 months, investors guessed right about the market direction the following month. Despite “guessing right” 67% of the time in 2014, the average mutual fund investor was not able to come close to beating the market based on the actual volume of buying and selling at the right times.

  

  Most importantly, despite what Wall Street and advisors want you to believe, 50% of the shortfall was directly attributable to psychology – both theirs and yours. The other 50% came down to lack of capital to invest.

  So, the next time you hear the mainstream media chastise investors for not beating some random benchmark index, just realize they didn’t either. 

  3) Your Financial Plan Says You Will Be Just Fine

  One the biggest mistakes that investors make are in the planning assumptions for their retirement. As I discussed previously:

  “There is a massive difference between compounded returns and real returns as shown. The assumption is that an investment is made in 1965 at the age of 20. In 2000, the individual is now 55 and just 10 years from retirement. The S&P index is actual through 2014 and then projected through age 100 using historical volatility and market cycles as a precedent for future returns.”

  

  “While the historical AVERAGE return is 7% for both series, the shortfall between ‘compounded’  returns and ‘actual’  returns is significant. That deficit is compounded further when you begin to add in the impact of fees, taxes and inflation over the given time frame.

  The single biggest mistake made in financial planning is NOT to include variable rates of return in your planning process.”

  So, look at your financial plan projections. If they are a smooth curve upwards, you are going to be very disappointed.  

  4) If You’re Not In, You’re Missing Out

  It is often stated that you should remain invested in the markets at all times because there has NEVER been a 10-year period that has produced negative returns for investors. That is simply not true.

  

  Okay, but over 20-years investors have never lost money, right? Not really.

  

  There are two important points to take away from the data. First, is that there are several periods throughout history where market returns were not only low, but negative. Secondly, the periods of low returns follow periods of excessive market valuations. 

  In other words, it is vital to understand the “WHEN” you begin investing that affects your eventual outcome.

  The chart below compares Shiller’s 10-year CAPE to 20-year actual forward returns from the S&P 500.

  From current levels history suggests returns to investors over the next 20-years will likely be lower than higher. We can also prove this mathematically as well as shown.

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

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

  Therefore, IF we assume that GDP could maintain 4% annualized growth in the future, with no recessions, AND IF current market cap/GDP stays flat at 1.25, AND IF the current dividend yield of roughly 2% remains, we get forward returns of:

  (1.04)*(.8/1.25)^(1/10)-1+.02 = 1.5%

  Regardless, there are a “whole lotta ifs” in that assumption. More importantly, if we assume that inflation remains stagnant at 2%, as the Fed hopes, this would mean a real rate of return of -0.5%. This is certainly not what investors are hoping for.

  5) You Can’t Time The Market – Just Buy And Hold

  There are no great investors of our time that “buy and hold” investments. Even the great Warren Buffett occasionally sells investments. Real investors buy when they see value, and sell when value no longer exists. 

  While there are many sophisticated methods of handling risk within a portfolio, even using a basic method of price analysis, such as a moving average crossover, can be a valuable tool over the long term holding periods. Will such a method ALWAYS be right? Absolutely not. However, will such a method keep you from losing large amounts of capital? Absolutely.

  The chart below shows a simple moving average crossover study. The actual moving averages used are not relevant, but what is clear is that using a basic form of price movement analysis can provide a useful identification of periods when portfolio risk should be REDUCED. 

  Importantly, I did not say risk should be eliminated; just reduced.

  

  Again, I am not implying, suggesting or stating that such signals mean going 100% to cash. What I am suggesting is that when “sell signals” are given that is the time when individuals should perform some basic portfolio risk management such as:

  • Trim back winning positions to original portfolio weights: Investment Rule: Let Winners Run
  • Sell positions that simply are not working (if the position was not working in a rising market, it likely won’t in a declining market.) Investment Rule: Cut Losers Short
  • Hold the cash raised from these activities until the next buying opportunity occurs. Investment Rule: Buy Low

  The reason that portfolio risk management is so crucial is that it is not “missing the 10-best days” that is important; it is “missing the 10-worst days.” The chart below shows the comparison of $100,000 invested in the S&P 500 Index (log scale base 2) and the return when adjusted for missing the 10 best and worst days.

  

  Clearly, avoiding major drawdowns in the market is key to long-term investment success. If I am not spending the bulk of my time making up previous losses in my portfolio, I spend more time growing my invested dollars towards my long term goals.

  Chasing A Unicorn

  There are many half-truths perpetrated on individuals by Wall Street to sell product, gain assets, etc. However, if individuals took a moment to think about it, the illogic of many of these arguments are readily apparent.

  Chasing an arbitrary index that is 100% invested in the equity market requires you to take on far more risk that you realize. Two massive bear markets over the last decade have left many individuals further away from retirement than they ever imagined. Furthermore, all investors lost something far more valuable than money – the TIME needed to achieve their goal.

  To win the long-term investing game, your portfolio should be built around the things that matter most to you.

  • Capital preservation
  • A rate of return sufficient to keep pace with the rate of inflation.
  • Expectations based on realistic objectives.  (The market does not compound at 8%, 6% or 4% every year, losses matter)
  • Higher rates of return require an exponential increase in the underlying risk profile. This tends to not work out well.
  • You can replace lost capital – but you can’t replace lost time. Time is a precious commodity that you cannot afford to waste.
  • Portfolios are time-frame specific. If you have a 5-years to retirement but build a portfolio with a 20-year time horizon (taking on more risk) the results will likely be disastrous.

  The index is a mythical creature, like the Unicorn, and chasing it has historically led to disappointment. Investing is not a competition, and there are horrid consequences for treating it as such.

  So, the next time a financial professional encourages you to just “buy and hold” for the long-term, maybe you should question just whose “yacht” are you buying?

  

  

  

  

  

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• "America's Ship Is Sinking" Former Bush Official Exposes The Unfixable Corruption Inside The Establishment

  “This ship is sinking,” retired U.S. Army Colonel Lawrence Wilkerson tells Abby Martin, adding that “today the purpose of US foreign policy is to support the complex that we have created in the national security state that is fueled, funded, and powered by interminable war.”

  The former national security advisor to the Reagan administration, who spent years as an assistant to Secretary of State Colin Powell during both Bush administrations reflects on the sad but honest reflection on what America has become as he exposes the unfixable corruption inside the establishment and the corporate interests driving foreign policy.

  “It’s never been about altruism, it’s about sheer power.”

  

  

  

  

  

• A Decade Of 'Tech'tonic Shifts

  How times have changed for the top 20 biggest companies in the world by market capitalization…

   

  

   

  The question now is, will ‘old’ become ‘new’ again?

   

  Source: Goldman Sachs

  

  

  

  

• "This Is Not Normalizing… And No, We Don't Have Any Precedent"

  Submitted by Adam Taggart via PeakProsperity.com,

  Financial repression authority Daniel Amerman returns this week to discuss the ramifications of the Federal Reserve's first interest rate hike in nearly a decade:

  The key to understand the situation here is that this is not normalizing, and we don’t have a precedent. We really don’t. We’re kind of all being soothed and reassured by the Wall Street Journal and Bloomberg and the financial authorities that we’ve been down this path before, we’ve been down it many times, more often than not we’ve had rising markets as a result and, really, there’s nothing to worry about. The issue with that is there are many things this time that are entirely different, and what is presented as 'normalizing', for instance, is going back to say a projected interest rate cycle like we saw in the 2000’s or the 1990’s. What’s completely different, among many other things, is that we’ve never had rates forced so low before, and they’ve never been so low for so long. So, if you look, say at a long-term graph since 1954, what’s been going on with the Fed funds rates, we’ve had plenty of reversals in interest rate direction, but they’ve been these brief little dips that look nothing whatsoever like this.

   

  The other big issue, and this goes back to our prior conversation on financial repression, is that I don’t think you can take any interest rate increases from the 2000’s, 1990’s, 1980’s, 1970’s as being comparable. Because, we have the greatest degree of national debt outstanding that we’ve had since the 1940’s and the 1950’s. So, you have to go much further back in time to see how a rate increase works when you have a country that’s just absolutely massively in debt. And, it’s a very different process than these recent historicals they’re talking about.

   

  I just read the statement from the Federal Reserve and what they clearly showed was this was not normal. And, one of the clear ways that they showed it is that they made crystal clear that they would be keeping their current holdings of U.S. government and agency debt in roughly the 2.4 to 2.5 trillion dollar range, until this is fully confirmed and they’re sure they’re going forward with the interest cycle and so forth. Now, that by itself tells you this isn’t normal. Typically, if you’re talking about driving interest rates down, you want liquidity in the system, and you provide liquidity through asset purchases. If you want to drive interest rates up, you want to tighten the system and you might remove money from the system let’s say by selling many of those assets. And, they’ve made clear on the front end that they’re not doing that.

   

  And, I think this, again, ties very closely into what we’ve talked about before, with the size of the national debt, with financial repression and so forth. For financial repression to work, for the government to keep a lid on and control of interest rates, they need a large captive audience. One of the largest components of captive audience is the federal funds currently holding such a large portion of the U.S. national debt. So, if they were to follow a true normalizing cycle, they should be selling those and they’re not.

   

  Our national debt is a fantastic sum that most of can’t really understand. How could we possibly be that badly in debt? How can we make the payments on that debt in terms of principle and interest and so forth? And, people are right that if we were in a normal market situation, we would be in a huge degree of difficulty with the national debt. But, again, this is something that’s happened many times over the centuries. And, what governments typically do, their most popular choice when they get deeply into debt is they increase their control over the markets so they knock out the interest rate risk for themselves, they push rates way down as they’ve done to historical lows. There’s more to it than that (we'd need another full hour more to talk about financial repression), but basically, they transfer wealth from savers to the government in the process of paying down the debt, in a process that most people don’t understand. 

  Click the play button below to listen to Chris' interview with Daniel Amerman (60m:03s)

  

  

  

  

  

• Caught On Tape: The Ssssurprising Way Indians 'Deal' With Government Corruption

  Unhappy with the demands for bribes from local officials, a disgruntled snake-charmer in the Uttar Pradesh region of Northern India took anti-corruption matters into his own hands…

   

   

  Act of Terror? Or patriot?

  

  

  

  

  

• After Record 10-Day Devaluation Streak China Fixes Yuan Stronger

  Since The IMF ‘blessed’ the Yuan with the same ambivalence-to-currency-manipulation as the rest of the world’s competitive devaluers, China weakened the currency for 10 straight days (a record streak). But the streak is over as tonight PBOC has decided to strengthen the Yuan fix (although admittedly by a small amount) to 6.4753 (barely off the 4 year lows).

   

  It appears a pattern is developing…

  

   

  10 days down and 1 day up… is the new “stability’

   

  Chart: Bloomberg

  

  

  

  

  

• The Great Disconnect Is Palpable

  Submitted by Jeffrey Snider via Alhambra Investment Partners,

  The Fed’s industrial production series also includes estimates on total motor vehicle assemblies. Auto sales in general have been one of the only bright spots in the economy, especially since the 2012 slowdown (even though it has been boosted artificially via credit far, far more than income gains). Given that trend, it is still difficult to assess whether activity in recent months is meaningful. After surging in July, auto activity in terms of industrial production has slumped – now pushed into a fourth month.

  Auto production is quite volatile, even where the Fed has attempted to “smooth out” that tendency via its seasonal adjustment factors, so more analysis is needed to establish some confidence about interpretation. Still, at the very least, it raises concerns expressed in the growing (surging) inventory of autos counted in manufacturer’s numbers but stuffed (unsold to end users) on dealer lots and in wholesale limbo.

  

  Furthering those concerns, economic reports out of Canada today showed not just broad-based wholesale sales declines but also a four-month slide also in auto sales at that wholesale level. Canada being a primary exporter of autos to the US, the coincidence of further weakening is not likely to be random and yet another negative commentary on the state of US “demand.”

  The agency also released October data for wholesale trade, which fell 0.6 per cent to $54.7 billion — its fourth-straight monthly drop.

  It said lower trade figures were recorded in four areas that, when combined, represent 64 per cent of all sales.

  Sales fell by three per cent to $10.5 billion in the food, beverage and tobacco category — its third decrease in four months. The category of motor vehicle and parts registered a 2.1 per cent drop to $9.5 billion, its fourth-straight tumble. [emphasis added]

  Taken together with the rather steep drop in US industrial production, the risks of a full-blown and perhaps severe recession have undoubtedly grown. Unlike what the FOMC is trying to project via the federal funds rate, a rate that isn’t being fully complemented, either, at this point, visible economic risk is not just rising it is exploding. Nowhere is that more evident than in junk bonds and high yield. The collapse in those markets and tiers has been produced not through actual defaults, which, though slightly rising, remain historically low, but rather through greatly shifting perceptions of defaults that increasingly look likely and in bulk.

  That is as much economic commentary as anything that the FOMC might produce. The credit cycle in that respect is not so much monetary policy as a direct component of the foundation of the economy. In other words, if the Fed were truly correct in its economic assessments, that the economy isn’t now overheating but is about to, junk bonds would trade more so with that theme given that it would more than imply continued historically low default rates. There would be no such explosion, as there is now, in the perception of that animating risk factor.

  

  Even so, estimates for default rates next year are conspicuously nowhere near keeping up with price behavior, almost assuredly because the models ratings agencies and selling firms use to project such things depend upon the same economic expectations and modeled forecasts as those which Janet Yellen uses to assure herself there is nothing to fear, economically and financially speaking. So the great disconnect is palpable even here:

  So far in the month of December, three companies in the energy sector have combined to add $1.8 billion in default volume to the year-to-date total in institutional leveraged loan defaults. The three defaults will push the default rate even higher than the current 11-month rate of 1.7%.

  The data come from the latest report on leveraged loan defaults from Fitch Ratings. The firm also forecasts that the leveraged loan default rate in 2016 will rise to 2.5%, or $24 billion.

  The incongruity is obvious; the default rate in just leveraged loans is only to rise to 2.5% (from 1.7% the 11 months so far cataloged of 2015) yet leveraged loan prices, and only those of the most liquid and highly traded names, have sunk in the past week to levels last seen (on the way down) in the days just prior to Lehman Brother’s collapse!

  

  That complements the price behavior from CCC’s which have already bled above the Lehman threshold for comparison. There is some great disconnect where junk bond prices are collapsing so far, with no end in sight, but the mainline estimates for defaults and the economy that is supposed to keep them low has hardly budged. Something is greatly out of line and increasingly it looks like that complacency is hugely misplaced.

  Default rate estimates and mainstream commentary about the economy that conditions them continue to mark the favored track but that is nothing like what these junk bond prices are saying – same market, different worlds. The economic risks have heavily shifted and just in the past few months, a recession perception that is gaining a much wider audience. The industrial production figure was, in that respect, a major indication that that is the right insight.

  Even the NBER will consider IP as a recession marker on its own if it is blatant enough, which it certainly was, given more mixed signals in other economy-wide indications (such as unstable GDP and the BLS’s unemployment rate and Establishment Survey that never seem to produce spending or even wage growth?).

  The NBER does not define a recession in terms of two consecutive quarters of decline in real GDP. Rather, a recession is a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in real GDP, real income, employment, industrial production, and wholesale-retail sales.

  Those last three are already in the recession category, as wholesale sales have persistently contracted this year while retail sales continue to underperform the dot-com recession experience.

  The Committee also may consider indicators that do not cover the entire economy, such as real sales and the Federal Reserve’s index of industrial production (IP). The Committee’s use of these indicators in conjunction with the broad measures recognizes the issue of double-counting of sectors included in both those indicators and the broad measures. Still, a well-defined peak or trough in real sales or IP might help to determine the overall peak or trough dates, particularly if the economy-wide indicators are in conflict or do not have well-defined peaks or troughs.

  I have no idea whether IP is enough for the NBER to consider a recession already (probably not), nor is it at all clear that such “official” determinations actually matter (they likely don’t). What is important and relevant is that even the NBER, the same economists who didn’t declare the Great Recession until December 1, 2008, long after the full panic and devastation had begun, considers IP a major factor. In other words, as you can plainly see from junk debt, we have been handed a major point of escalation in a startlingly broad fashion (maybe including Canada); that junk bonds are on to something that the “rest” of markets (outside the “dollar”, of course) will not yet consider.

  If certain high yield segments, especially leveraged loans, are already priced to the collapse point of 2008, then that suggests something potentially awful about the future course. Industrial production already at -1.2% without any inventory correction yet tells the same worry. It is nowhere near what Janet Yellen had in mind when in her first press conference hinted at March 2015, the six-month point after QE’s end, as the first rate hike. It is, however, the same fears that kept her at bay for three-quarters of the year thereafter. Unfortunately for her, as these prices and data points increasingly survey, it is that progression that should have mattered most rather than blindly depending upon an economic trend that is forced more and more remote, a truly nasty downside gaining increasing visibility instead.

  

  

  

  

  

• Obama Abruptly Waives 1980 Foreign Investment in Real Property Tax Act

  Submitted by Gordon T. Long of the Financial Repression Authority

  Obama Abruptly Waives 1980 Foreign Investment in Real Property Tax Act

  The Financial Repression Authority has consistently shown that Regulatory changes which “Ring Fence” US investors choices is a cornerstone of the Macro-Prudential Policy of “Financial Repression”. Through stealth programs like FATCA and PFIC the US government has steadily and quietly limited Americans ability to take cash out of the country and to invest abroad, other than through profitable public exchange traded products sold by the financial industry.  However, it is one thing to shut the doors to American investing abroad but it is quite another to fully open the doors to foreigners! It begs the question why, why now and why the change needed to happen so urgently?

  This week, as the BOJ, ECB and PBOC all continued to aggressively expand credit  the Federal Reserve was “full ahead” in the process of withdrawing approximately $1 Trillion of liquidity to achieve its December FOMC decision to increase the Fed Funds rate by 0.25%. To counteract this policy initiative and the alarming collapse in the HY & IG bond market, the US government immediately opened the floodgates to easy foreign credit in a major policy reversal. A policy decision which was rushed through congress with almost no time for congressional debate. Obviously what was not lost on the White House was the fact that the now troubled $2.2 Trillion of High Yield bonds peddled to yield starved investors since the financial crisis matches 2/3’s of the $3.5 Trillion increase in the Federal Reserves balance sheet during the same period.

  FIRPTA was implemented during a better era for Americans in response to international investors in the late 1980s and early 1990s buying U.S. farmland, as well as the more publicly visible buying of trophy U.S. property by the Japanese.  The US government has now expediently waived FIRPTA.

  Bloomberg reports:

  President Barack Obama signed into law a measure easing a 35-year-old tax on foreign investment in U.S. real estate, potentially opening the door to greater purchases by overseas investors, a major source of capital since the financial crisis.

   

  Contained in the $1.1 trillion spending measure that was passed to avoid a government shutdown is a provision that treats foreign pension funds the same as their U.S. counterparts for real estate investments. The provision waives the tax imposed on such investors under the 1980 Foreign Investment in Real Property Tax Act, known as FIRPTA.

   

  “FIRPTA has historically made direct investment in U.S. property a non-starter for trillions of dollars worth of foreign pensions,” said James Corl, a managing director at private equity firm Siguler Guff & Co. “This tax-law modification is a game changer” that could result in hundreds of billions of new capital flows into U.S. real estate.

   

  Foreign investors have flocked to U.S. real estate since the global economic meltdown, drawn by the relative yields and perceived safety of assets from office towers and shopping centers to apartments and warehouses. The demand has helped drive commercial real estate prices to record highs. Many foreign investors structured their purchases to make themselves minority investors and bypass FIRPTA.

   

  REIT Purchases

   

  The new law also allows foreign pensions to buy as much as 10 percent of a U.S. publicly traded real estate investment trust without triggering FIRPTA liability, up from 5 percent previously.

   

  “By breaking down outdated tax barriers to inbound investment, the FIRPTA relief will help mobilize private capital for real estate and infrastructure projects,” Jeffrey DeBoer, president and chief executive officer of the Real Estate Roundtable, an industry lobbying group, said in a statement.

   

  Cross-border investment in U.S. real estate has totaled about $78.4 billion this year, or 16 percent of the total $483 billion investment in U.S. property, according to Real Capital Analytics Inc. Pension funds accounted for about $7.5 billion, or almost 10 percent, of the foreign total, according to the New York-based property research firm.

   

  “Foreign pensions are such a low percentage of foreign investment in U.S. real estate because of FIRPTA,” Corl said.

   

  Investment Surges

   

  Foreign investment has surged from just $4.7 billion in 2009, according to Real Capital. Foreign buying this year as a percentage of total investment in U.S. real estate is about double the 8.1 percent average in the 10 years through 2012.

   

  Despite a perception that FIRPTA was a response to the wave of Japanese buying of trophy U.S. property in the late 1980s and early 1990s, including Rockefeller Center and Pebble Beach, the act was actually passed in 1980 in response to international investors buying U.S. farmland. Under old rules, foreign majority sellers had to pay 10 percent of gross proceeds from the sale of U.S. real estate as well as additional federal, state and local levies that could increase the total tax burden to as much as 60 percent, according to the National Association of Real Estate Investment Trusts.

   

  The change “is a huge deal,” said Jim Fetgatter, chief executive of the Association of Foreign Investors in Real Estate. “There’s no question” it will increase the amount of foreign investment in U.S. property, he said.

  Warning

  The FRA predicts that Americans will face significant increases in US property taxes over the next five years starting in 2016. With the change in FIRPTA Americans should additionally expect property values to increase in 2016-2017.

  Clearly, foreigners, the “1%” and property owners will all gain from this, but most Americans will simply face significantly increasing property taxes on elevated asset values to fund the ever increasing government debt burden.

  Americans owning a house can be expected to initially focus on their net worth being higher, and not that they once again will have even less disposable income. Some will learn painfully why the number one killer of small business is cash flow, not profits..

  

  

  

  

  

• Star Wars Smashes Opening Weekend Box Office Record, But Will It Be Enough?

  This weekend the force was strong with thirty (and forty, and fifty) year-olds, wishing to awaken memories of their youthful days with an admirable redo of the first Star Wars movie, first released nearly 40 years ago. But the force has never been stronger with Disney which is expected to rake in a record-breaking $238 million in opening weekend box office sales in the US and Canada, and a near-record $279 million overseas, a grand total of well over half a billion around the globe.

  That is just the beginning of an epic annuity created by Disney under director J.J. Abrams. As the WSJ notes, “Star Wars: The Force Awakens” isn’t just a hit, but the spark Disney needs for years of sequels, toys, videogames, television series, theme-park attractions and more that it is planning or already producing.”

  Although it has been a decade since the last “Star Wars” movie, Disney and Mr. Abrams’ has to revive a franchise that has been largely dormant since the release of “Return of the Jedi” in 1983. A trio of prequels—produced by then-independent Lucasfilm between 1999 and 2005 and directed by George Lucas—performed well financially but were largely scorned by fans, who considered them inferior to the original trilogy. However, with the new Star Wars, Disney has a sure hit on its hands, and the only question is just how far will it go?

  The “Star Wars” sequel easily routed the prior record for a domestic movie opening of $209 million set by “Jurassic World” in June, and caps the Top 5 of biggest weekend box-offices, all attained in recent years by fantasy-fiction films ranging from Iron Man 3, to the original Avengers and its “Age of Ultron” sequel:

  

   

  The movie also set new opening weekend records in the U.K., Germany, Australia, Russia, and 14 other countries. It wasn’t a smash hit everywhere, though, and produced less than “sensational” ticket sales in countries such as Brazil, Japan and Mexico, while it underperformed in South Korea, where a more popular local film also was released at the same time.

  Still, the only reason the Star Wars sequel may have failed to achieve the biggest international opening of all time, is because it has yet to open in China: the Chinese release is delayed to January next year as all quota slots for imported movies are taken for this year.

  How did the watching public react to the movie? According to Dow Jones, there was little disappointment with U.S. moviegoers giving it an average grade of A, according to market research firm CinemaScore, mirroring its very strong reviews and boding well for word-of mouth.

  On Friday, 63% of the audience was male, but by Saturday that percentage dropped to 58% as the fanboy-driven early crowds started to broaden, said Dave Hollis, executive vice president of distribution at Disney’s movie studio. “Seeing the way younger audiences and women are responding bodes really well for the future of the franchise,” Mr. Hollis said.

  “The Force Awakens” was designed to emulate the original in style and substance. It returned stars Harrison Ford, Carrie Fisher and Mark Hamill to their original roles and introduced a new cast of Jedi Knights, storm troopers and imperial officers led by Daisy Ridley and John Boyega.

   

  Coming out of a screening at the TCL Chinese Theater in Los Angeles, stay-at-home mother Jessica Sisoer, who had waited in line 12 days with other hard-core fans, said the new movie “felt like going home” because it reminded her so much of the original trilogy.

  Among the factors that will determine if it rivals the all-time global box-office record of $2.79 billion held by “Avatar” is whether strong word-of-mouth draws infrequent moviegoers, how many times fans return to theaters to watch again. The biggest question mark, however, is how the movie will perform in China, the world’s second biggest movie market, where “Star Wars” isn’t well known because the original trilogy was never released there.

  As DJN adds, the film, which cost a little over $200 million to produce, is now poised to gross well over $1 billion, and could go much higher, particularly with people expected to take time off from work during the holidays.

  And yet, despite the movie euphoria, Disney stock tumbled on Friday, closing down 4% at the days lows, following a surprising downgrade by BTIG’s Rich Greenfield, who downgraded DIS stock from Neutral to Sell on Friday, lobbing a $90 price target, with the thesis that “Disney management made a fundamental mistake by overpaying for sports rights based on overly aggressive multichannel video subscriber projections. Not only did Disney overpay for individual sports rights packages, they also acquired too many sports rights in an effort to prevent new competitors such as Fox Sports 1 and NBC Sports from growing stronger. As a result, we believe Disney’s cable network profitability will meaningfully underperform investor expectations – with cable networks representing 44% of Disney’s segment operating income. We are now estimating that Disney’s FY2017 cable network operating income will be DOWN year-over-year, with total Disney FY2017 operating income flat.”

  Not even expectations of record global box office receipts by Star Wars were enough to appears Greenfield:

  While we believe the strength of Star Wars Episode VII: The Force Awakens (estimated at $2.6 bn in global box office) will lead to Disney modestly exceeding consensus expectations for fiscal (Sept) 2016 earnings, we now believe consensus earnings are too high for FY2017 and far too high for FY2018. We believe if Star Wars Episode VII does not exceed $2.0 billion in worldwide box office revenue, Disney will miss our FY2016 and consensus earnings estimates as well.

   

  Given that we now expect Disney EPS growth to slow dramatically and miss current Street consensus EPS expectations in both FY2017 and FY2018, we believe its current multiple is unwarranted. We are now forecasting EPS growth of just 3%-4% in FY2017 and 6% in FY2018. In turn, we are reducing our rating on Disney to SELL from Neutral with a $90 one-year price target. Our $90 one-year price target is based on a P/E of 15x FY2017, which also equates to 14x FY2018. Disney is currently trading at 20x FY2016, 19x FY2017 and 18x FY2018 based on our estimates.

  • In March 2015, with Disney shares at $106, we downgraded the stock from Buy to Neutral (link), nearly five years after we put a Buy on the stock. Our downgrade was based on the view that even though consensus EPS expectations still needed to move higher, Disney shares were approaching full value.
  • Despite a temporary correction in August 2015, Disney shares have continued to climb higher since our March downgrade, having notably outperformed their media industry peers over the past year and currently sitting just 7% below their all-time peak of $122. We believe Disney’s outperformance has been driven by film slate excitement, most notably Star Wars Episode VII: The Force Awakens (which opened last night), despite increasing concerns facing Disney’s cable network franchise.

  The conclusion: “#FadetheForce: Downgrade to SELL with $90 Price Target.”

  In other words, not even world records may be enough for a stock priced beyond record perfection, and a very forlorn looking Luke Skywalker better have something big up his sleeves for 2017 when the next sequel, Episode VIII, is due.

  

  

  

  

  

• False Premises: The Biggest Myths About The Fed's Rate Hike

  Submitted by Bill Bonner via Bonner & Partners (annotated by Acting-Man.com's Pater Tenebrarum),

  False Premise

  The Fed did as expected. It announced it would raise its key rate by a quarter of a percentage point to 0.5% and gradually raise it up over the next three years.

  Reports the Financial Times: “Historic gamble for Yellen, as Fed makes quarter-point rise.” If all goes well, we’ll be back to “normal” in 2019 – 10 years after the long emergency began!

   

  

  Esmeralda, one of the many forecasters known to be superior to the Fed (a lot cheaper too).

  But wait …

   

  

  The daily effective federal funds rate, a volume-weighted average of trades arranged by major brokers. It is now at its highest point since late 2008, ending seven years of “ZIRP” – click to enlarge.

   

  How does the Fed know what a normal rate will be in 2019? Won’t conditions change? Besides, there are sidewalk astrologers and mall palm readers with a better record of market forecasting than the Fed.

  To borrow a phrase from George Soros, our mission at the Diary is to “find the trend whose premise is false and bet against it.” Is it true that the Fed is really going to follow through with its promise to return interest rates back to normal?

  Is it true that terrorists are out to get us? Is it true that Donald Trump is a fool? Of course, we are all fools… but some more than others. The wise man is the one who knows he is a fool. For our part, we deny it. And we resent readers who remind us.

  But we admit to being wrong, from time to time. (Any man who has been married for as long as we have must be accustomed to this kind of admission.) And since investors so heartily endorsed the Fed’s move, we will reexamine our position.

  The premises of the rate increase are several:

  …that the Fed knows best what interest rate is good for the economy…

  …that a recovery is sufficiently established to permit an end to the emergency micro rates of the last seven years…

  …and that otherwise everything is more or less hunky-dory.

   

  The “Dollar Recession”

  And they are all false? We dismiss the first one as poppycock. No serious economist – if there are any left – would believe that the Fed can do a better job of setting the price of credit than willing buyers and sellers.

  As to the second premise – that the recovery is solid – we present evidence to the contrary practically every day. Today, we submit to the jury some additional facts:

  • Last month, U.S. industrial production fell more than any time in the last three and a half years. This marks the eighth monthly decline in 10 months. This slowdown is shadowed overseas by what Deutsche Bank describes as “a huge global dollar nominal GDP recession – the worst since the 1960s.”
  • According to the Fed, there are now 61 million people of working age in the U.S. who don’t have jobs. That’s out of 204 million people between 15 and 64 years old. So, if you pass five people on the street, the odds are that one and a half of them is jobless.
  • The “labor participation rate” – the amount of people in the working-age population either employed or looking for work – is at its lowest level since 1977. For men, it has never been lower.

  If it were true that the economy was in good health, how is it possible that men would have a harder time finding a job than ever before?

   

  

  Everything is awesome, unless it isn’t. In terms of a lagging indicator the construction of which obfuscates more than it reveals, everything is fine. Most other indicators (especially the leading kind) say it just isn’t so.

  Cartoon by Ben Garrison

   

  When the Going Gets Tough

  Now, we turn to the third premise – that everything else is more or less hunky-dory. Supposedly, in this wide world of everything that is not directly under the Fed’s control, or included in its inventory of conceits and fantasies, there is nothing that poses a serious obstacle on the road to normalcy.

  If this were true, we are wrong. Because our guess is that the Fed is trapped and that it cannot continue down this road for long. It is only a matter of time until it runs into trouble. What kind of trouble?

  You can get any kind of “facts” you want. But on the road to normalcy, the Fed is bound to encounter a normal stock market sell-off or a normal recession. Ms. Yellen has dismissed worries of a recession. But unless the Fed has triumphed over the business cycle – which we doubt – a recession will appear sooner or later.

   

  

  A long term chart of “real GDP growth” – as useless a statistic as GDP is, this chart does reveal two important facts: 1. the Fed has no control over the business cycle, and 2. its influence on the economy is thoroughly negative, as even in terms of this massaged and in many ways phony aggregate (inter alia it is designed to make things look better than they actually are), growth is in a persistent downtrend – click to enlarge.

   

  In the face of such adversity, how likely is it that the Fed will persevere? The Fed’s future actions are “data dependent,” says Yellen. But imagine if Christopher Columbus had taken a “fact-dependent” voyage across the Atlantic.

  Fact No.1: He ran out of food.

  Fact No.2: His men were sick and dying of scurvy, malnutrition, and other diseases.

  Fact No.3: India was not where he thought it was.

  Any one of these facts, presented to him forcefully by his crew, would have been enough to cause him to turn around. When the going gets tough, “fact-dependent” travelers go home.

   

  

  1492: Christopher Columbus and what’s left of his malnourished and scurvy-mangled crew arrives in “India”

  

  

  

  

  

• Superheroes Of The GOP Debate

  With Hillary Clinton cast as their arch-nemesis, the new ‘avenging superheroes’ – some the same as the old avengers – of the GOP presidential nominee race each have their own unique skills…

   

  

   

  Source: Ben Garrison

  

  

  

  

  

• Paul Craig Roberts Warns "Everything Is Disintegrating"

  The American people are asleep at the wheel. The blame is not totally their’s, but they do bare the brunt of the blame. The mainstream media does not report what is happening within our economy or the geopolitical arena, unless they can spew on and on about the endless rainbows, unicorns and how “America is the greatest and Putin is the devil." As Paul Craig Roberts warns, we are facing a world in change and the pace is quickening.

  Via The Daily Coin,

  Below is a conversation that is unlike any that I have heard before. When preparing for interviews Dave Kranzler and I usually go over what we are going to discuss, how to get the show started and how we will hand off the conversation. It’s a good formula that has served us well. We are very, very grateful Dr. Roberts had other ideas.

  Our world, as many of you know, is experiencing massive, unprecedented change at an ever increasing pace. Dr. Paul Craig Roberts, is not only one of the foremost economist in the world, but he also has one of the world’s most respected voices covering the geopolitical landscape.

  The American people are asleep at the wheel. The blame is not totally their’s, but they do bare the brunt of the blame. The mainstream media does not report what is happening within our economy or the geopolitical arena, unless they can spew on and on about the endless rainbows, unicorns and how “America is the greatest and Putin is the devil.” No depth of coverage, nothing of real value reported, so the American people are left ignorant and wanting for truth. When you work 2 or more part time jobs, are struggling with keeping a roof over your head and the kids need new shoes, it becomes a challenge to seek the truth even though you know the “report” Brian Williams just delivered is a fabricated piece of fantasy. There is almost no truth to be found in the American mainstream media.

  One of the best ways to understand what is happening today in places like Syria, Ukraine and the Middle East is to take a step back and see what history has shown. Most all situations in the human experience have roots in the past. As Mark Twain said, “History does not repeat itself, but it does rhyme.” that certainly applies to the ever encroaching American police state, the unfolding war in Syria, Ukraine, and the Middle East. Does that sound like world war or is it just me?

  What has happened over the past several years in places like Iraq, Libya and Syria have roots in the late 1990’s. The Project for a New American Century, a “think-tank”, founded by Dick Cheney, one of the most die-hard neocons the world has ever seen, developed a plan to invade – that’s right, invade – 7 countries in 5 years. Their plan is taking longer than originally thought, but I am not sure if Russian and Chinese resistance was part of the calculation. The development of al-Queada, that has now morphed into ISIS, has not gone as planned either. ISIS appears to be morphing into their own entity that the CIA is having a hard time controlling. The rogue band of mercenaries are going rogue in a way that was not foreseen.

  Dr. Roberts describes the evolution of the “deep state” and how the neocons have a strangle hold on the American political process that is hard to shake. These psychopathic warmongers are not concerned with anything except power, blood-lust and their own sense of “destiny”. The tapestry that Dr. Roberts weaves begins with Nixon, the Vietnam War and winds it’s way through the latest meeting between President Putin and Secretary of State, John Kerry. The picture is clear and details how we have arrived at the brink of nuclear annihilation. The three part series is not to be missed. To get the whole picture you need to listen all the way through. It was intentionally broken into smaller pieces to allow the info to sink in. As I said we are facing a world in change and the pace is quickening. Give this a good listen and let us know what you think.

  Dr. Paul Craig Roberts: The Law Only Applies to the Helpless Pt 1

   

  Dr. Paul Craig Roberts: NeoCons Run America Pt 2

   

   

  Dr. Paul Craig Roberts: Everything is Disintegrating

   

  

  

  

  

  

• California's Worst Gas Leak In 40 Years (And Crews Can't Stop It)

  While world leaders signed the 'historic' agreement signed in Paris to fix the world's "greatest threat," a natural gas storage site in southern California is belching 145,000 pounds per hour of Methane – a greenhouse gas 70 times more potent than carbon dioxide. What is worse, while official proclaim this a "top priority" a fix won't arrive until spring as emergency crews recognize "the leak was far from routine, and the problem was deeper underground."

  

  As Wired reports, in just the first month, that’s added up to 80,000 tons, or about a quarter of the state’s ordinary methane emissions over the same period.

  The Federal Aviation Administration recently banned low-flying planes from flying over the site, since engines plus combustible gas equals kaboom.

   

  Steve Bohlen, who until recently was state oil and gas supervisor, can’t remember the last time California had to deal with a gas leak this big. “I asked this question of our staff of 30 years,” says Bohlen. “This is unique in the last three or four decades. This is an unusual event, period.”

   

  Families living downwind of the site have also noticed the leak—boy, have they noticed. Methane itself is odorless, but the mercaptan added to natural gas gives it a characteristic sulfurous smell. Over 700 households have at least temporarily relocated, and one family has filed a lawsuit against the Southern California Gas Company alleging health problems from the gas. The gas levels are too low for long-term health effects, according to health officials, but the odor is hard to ignore.

   

  Given both the local and global effects of the gas leak, why is it taking so long to stop? The answer has to do with the site at Aliso Canyon, an abandoned oil field. Yes, that’s right, natural gas is stored underground in old oil fields. It’s common practice in the US, but largely unique to this country. The idea goes that geological sites that were good at keeping in oil for millions of years would also be good at keeping in gas.

   

  Across the US, over 300 depleted oil fields, of which a dozen are in California, are now natural gas storage sites. “We have the largest natural gas storage system in the world,” says Chris McGill, a vice president of the American Gas Association. And the site at Aliso Canyon is one of the largest in the country, with a capacity of 86 billion cubic feet. Aliso became a natural gas storage site in the 1970s. Each summer, SoCalGas pumps natural gas into the field, and each winter, it pumps it out. The sites are basically giant underground reserves for winter heating.

   

  On October 23, workers noticed the leak at a 40-year-old well in Aliso Canyon. Small leaks are routine, says Bohlen, and SoCalGas did what it routinely does: put fluid down the well to stop the leak and tinker with the well head. It didn’t work. The company tried it five more times, and the gas kept leaking. At this point, it was clear the leak was far from routine, and the problem was deeper underground.

  Here’s the new plan:

  SoCalGas began drilling a relief well on December 4.  The relief well will intercept the steel pipe of the original well—all of seven inches in diameter—thousands of feet below ground. Then crews will pour in cement to seal the wells off permanently. “Relief wells are a proven approach to shutting down oil and gas wells,” said SoCalGas in a statement.

  As if finding a skinny pipe hundreds of feet below ground weren’t hard enough, the presence of all that explosive natural gas adds an extra layer of complication. A tiny spark and everything can go boom. So at the leaking well site, work is restricted to daylight, says Bohlen, as lighting equipment could produce stray sparks. (The relief well is far enough away that drilling there can proceed 24/7.) Back in 1975, a well at Aliso Canyon caught fire because of sparks from sand flying up the well.

  And crews can’t set a deliberate fire, also known as flaring, which they often do at other remote areas with excess gas. The leak is so big and the flare would be so hot that it could make the mess even harder to contain.

  “There is no stone being left unturned to get this well closed. It’s our top priority,” says Bohlen. But even that is slow, with months of drilling to come as methane continues to billow into the air.

  

  

  

  

  

• Either Martin Shkreli's Twitter Was Hacked Or He Has Gone Totally Insane

  This just happened…

  

   

  As it appears Martin Shkreli has taken on the persona of a gangsta rapper…

  

   

  So, either the world’s “most hated” man has been hacked, or he has gone totally insane: both appear equally likely at this point

  

  

  

  

• The Fed Has Delivered Far More Than Just A Lump Of Coal This Time

  Authored by Mark St.Cyr,

  If one meme has been constant these subsequent years since the great financial melt down of 2008 it’s been: BTFD (buy the dip) Not just some dips – but every dip. And why not? The Federal Reserve had all but assured Wall Street that since its first intervention into the markets and the resulting “risk on” behavior it produced resembling a Pavlovian experiment, it would indeed reincarnate the procedure every-time there seemed to be even the slightest hiccup in the markets. “Emergency monetary policy measures” would indeed be left in place for “an extended period.”

  Wall Street didn’t need any secret decoder ring to read the hidden message that laid within. i.e., “The Fed’s got your back so buy, buy, buy!” And they did horns-over-hooves tripling the values of many of the major indexes sending them to never before seen in the history of mankind highs. Even the dot-com era highs were taken out. And all of it, and I do mean – all of it – on fairy-tale reporting of economic measurements. Need an example? 5% unemployment rate signals people are getting jobs. However, don’t pay any attention to the 94 million (and growing) that can’t and – are out of the workforce. All while the food stamp program and other government assistance program roles have swelled to historic levels. Because, other than that: “Everything is awesome!”

  The problem with all of this is that it’s now becoming apparent to everyone. The amount of mal-investment along with just how intertwined all the subsequent carry trades and more is becoming frightfully obvious and can no longer be hidden from view. The real problem now facing the Fed. which I believe they themselves did not fully comprehend was the extent in which all of this was: so blatantly obvious. Again: to anyone who truly wanted to look.

  Without the Fed’s interventionism – there is (and was) no market. And now with the raising of rates; no one will be able to miss or avoid that fact any longer. No matter how hard they try.

  Another of the problems for the Fed. began to express itself when they seemingly became comfortable with this new paradigm and even appeared to relish this new-found fame and power as they took to any (and just about every) media source whenever needed and delivered either sedative policies or, soothing tones with near immediacy as to help quell any and all market fears. Over these ensuing years the frequency of appearance by Fed. speakers across the media has only been rivaled by the grueling tour of some where-are-they-now rock-band. I have a feeling they’re not going to relish this new limelight as they did the old.

  This past Wednesday they unwittingly threw back their own curtain and implied, “See, we fixed it. Nothing to see here. The economy is just fine. So – we’re raising rates” to what appeared to be thunderous applause. However, what that motion truly revealed was not some blank or empty space. No, what they unknowingly revealed was a caged monster whose door just came unhinged. The resulting consequences began to bear its teeth Thursday and Friday. Yet, figuratively, that monster is still within the theater. The ensuing days is probably when this beast actually hits the streets, as in Wall Street. Then, all bets are off on exactly what mayhem we’ll see as a result. However, what we do know is this: It ain’t gonna be a present anyone wanted under their tree.

  Suddenly we’re finding out (much like cockroaches) when you see one nasty issue – there’s many more just hidden from view. No where is this analogy more fitting then what is currently taking place in the High Yield space. e.g., junk bonds. First there were signs of stress just weeks ago. Then almost overnight (literally) many woke to the news that their “investments” were suddenly gated. Gated as in: Want your money? Sorry, maybe later, if not much later along with maybe not worth that much at all. Thanks for investing!

  These are only the first warning shots being fired as to just how precarious, as well as onerous, this debt monster that the Fed. has unleashed might be along with the resulting chaos. For the tentacles of this beast combined with its destructive power is going to give the Kracken a run for its money in my estimation. What we’re not talking about is some monetary policy that can now be moved around with the frequency of some elf on a shelf. That’s fantasy land. This bane tale is currently becoming all too real.

  I am now quite convinced that all of this was not only absolutely lost within the halls of the Eccles building rather, what might be even worse is that it seems it may have not even had been contemplated or, thought to be unfathomable by its very creators. I feel I can say this soundly by what I observed during the subsequent press conference given by the Fed. Chair Ms. Yellen on Wednesday.

  What absolutely left me slack-jawed was her tone, tenor, and facial expressions during her opening remarks. Usually when one is delivering statements about monetary policy and other matters they tend to take on a tone of mundane, somber, expressionless, drawn out reading from prepared texts. It’s not like you’re going to see entertainment (well, maybe comedy come to think of it but I digress.) These are more or less information dispensing venues. Read the text. Answer any questions. Thanks, see you in a few months. This one was far, far different in what it revealed to my eye.

  Ms. Yellen seemed to be almost giddy in her demeanor when delivering the news that the Fed. would indeed raise rates. It appeared as if the act of raising rates was some type of banner announcement where “Mission Accomplished” should be brought up in bright lights and champagne bottles uncorked. I implore anyone who thinks I’m exaggerating to find that conference in any search engine and watch for themselves with a more discerning eye. It truly was uncharacteristic by any Fed. Chair that I can recall. Yes these indications are subtle. Yet, to a trained or informed eye – they are there nonetheless. Noticing subtle variations such as these are required if one is serious about understanding Negotiations 101.

  It may sound like something inconsequential however, what I would argue is it shows just how clueless the Fed. truly might have been. The only thing worse is it may show that they truly did believe their own press. e.g., That the economy really was as good as they said (or thought) it was. If that’s the case – then we really are in trouble. Big time!

  This act of raising rates was not some seminal event as to mark the economy’s return to health. If one is truthful (although most continue to kid themselves) the Fed. raising rates on Wednesday was more or less an act of desperation as to “get off of zero.” Hopefully, without causing too much stress so that if and when the economy does show signs of stuttering (which it clearly is) the Fed. would then have some dry powder in reserve as to cut once again. Hopefully (once again) instilling the same Pavlovian reaction they’ve come to expect. That’s a far, far, far (did I say far?) cry from doing it because the economy is getting a clean bill of health. Or, “Mission Accomplished” sign off from extreme monetary measures.

  Again, I must implore anyone: watch her opening remarks again and you’ll see it clearly. But you shouldn’t just stop there. What you should do is also watch the Q&A. For this too was also quite revealing.

  When asked about the possible effects upcoming on bond yields and more some of the questions seemed to just confound the Fed. Chair appearing to catch her off guard like a deer in the headlights. So striking were some of the moments of silence even Tom Keene of Bloomberg™ commented during his show how he was taken aback. I believe the word he used was “stunning.” I have to agree with him. However, I myself was even more stunned on the non-answering answering composition of Fed. speak Ms. Yellen retorted at length. I mean, just how many ways can one use “transitory?” After a while I wished hearing transitory itself had been more transitory.

  If we are in fact witnessing the first stages of a blatant, as well as avoidable policy error by the Fed. the resulting mayhem will be far worse than anyone ever expected. And I use the word “avoidable” precisely for that reason. For it has been clear to anyone without a Ph.D in economics; who has just a modicum of common sense; and acquired their education at the school of hard knocks; that this economy was not only far worse off than any of the reporting stated but – was being made that way with the consistent heavy hand of intervention being carried out by the Fed. itself. And this fact is coming to light brighter, and more plainly visible with each passing day. All to what I feel will be the Fed’s horror. Yet, it will be us that has to navigate the real life nightmare filled with debt leviathans and carry trade tentacles rivaling the Kracken for tenacity as well as fury.

  This will probably go down as the first time Wall Street will have ever wished the Fed. had indeed left only a lump of coal in their bonus stockings rather, than the surprise they might wake to this holiday year-end. If you want to see a clue about just how much of a bloodbath is still possible in the once highly touted arena of fixed income – just look at Jefferies™.

  It’s now self-evident: Winter is not coming… It’s all ready here.

  And the Fed. is expecting you to be happy with their latest present. For by all indications expressed they thought long, hard, and decided this was exactly the right gift, at the right time. Just don’t look for any gift return receipt. The exchange window for returns to BTFD once again are currently closed. That’s an option I’m confident they also did not contemplate fully. For I’m sure they felt they knew exactly what they were doing – and the “markets” would be thrilled.

  Ho, Ho, Ho?

  

  

  

  

  

• Peak "Office Space"

  With the unprecedented surge in unicorns and incessant faith in the ever-increasing productivity of a globalization-crushed American worker, it is perhaps a surprise that the “office space” provided to the intellectual capital-providing, wage-stagnating middle-American, has never been smaller…

   

  

  It seems since The Fed unleahes its ‘temporary emergency policy’, the need for “office space” has collapsed… because, in the new normal, all that matters for shareholder wealth creation is ‘buybacks’ not productivity.

   

  Source: Goldman Sachs

  

  

  

  

  

• CISA: “Just Another Example Of Corruption”

  Last week, Congress passed CISA by hiding it in the middle of a sure-to-pass spending bill, and Obama signed it into law … even though the Department of Homeland Security had previously said that the bill will HURT national security and destroy privacy (numerous experts agreed).

  And – just like with previous spying laws – the government has a secret interpretation of CISA which will make it even worse.

  So why was the bill passed?

  As the American public is starting to learn  – and politicians from both side of the aisle admit – corruption has thoroughly destroyed America.

  The highest-level NSA whistleblower in history – William Binney – the high-level NSA executive who created the agency’s mass surveillance program for digital information, 36-year NSA veteran widely regarded as a “legend” within the agency, who served as the senior technical director within the agency, and managed thousands of NSA employees –  explains that corruption is what’s motivating mass surveillance against the American people … and it’s what’s making us vulnerable to terrorism.

  Washington’s Blog asked Binney what he thought of CISA, and he said:

  This is just another example of the White House, leadership (if you want to call it that) in Congress, the intelligence committees, and the intelligence agencies manipulating the system to get what they want (more money and more knowledge to control).
   

   

  Clearly, CISA would not stand on it’s own; so, they had to sneak it through buried inside a massive funding bill at the end of the year.

   

  Again, we see just another example of corruption in our government in Washington DC. They don’t have the courage or backbone to stand for what they want out in the open where there can be an honest debate like we are suppose to have in a democracy.

   

  The established political parties should not be confused as to why citizens are sick of them. Our only solution is to fire them all in the next election and try to get honest citizens in these jobs.

  Binney points out:

  It would be good if most people in DC read the [articles of impeachment against Richard Nixon].  Nixon did only a miniscule amount of what the last two presidents and their co-conspirators have done and continue to do.

  He’s right …

  And it’s not just the politicos … Binney says we also have to fire the bums running the intelligence agencies. And see this.

  

  

  

  

• Putin Blasts Interventionist US Foreign Policy, Calls Forcible Regime Change "Intolerable"

  “Let’s remember why we became part of a coalition to stop [Libyan dictator Muammar] Gaddafi from committing atrocities against his people.” 

  That’s from Hillary Clinton who defended here foreign policy credentials in Saturday night’s third Democratic presidential debate. Hitting back at Bernie Sanders, who accused her of being “too much into regime change and a little bit too aggressive without knowing what the unintended consequences might be,” the former Secretary of State said the US “will not get the support on the ground in Syria to dislodge ISIS if the fighters there – who are not associated with ISIS, but whose principal goal is getting rid of Assad – don’t believe there is a political diplomatic channel that is ongoing.”

  “I am not giving up on Libya and no one should,” she added. 

  Unfortunately, we probably should “give up” on Libya, because the power vacuum created by Gaddafi’s fall has turned the country into a lawless wasteland and a breeding ground for ISIS. For those who might have forgotten what “democratic regime changed” looked like in Libya, allow us to refresh your memory: 

  Ah, yes, a peaceful transition in the true spirit of democracy.

  For his part, Putin asked the following: “Who gave the West the right to carry out regime change?” Here’s the clip from 2011: 

  Well, in the wake of Hillary’s comments during the debate, Putin is out with a bit of fresh criticism with regard to what Russia calls illegitimate attempts to bring about the downfall of governments deemed “undesirable” by Western powers. 

  “Outsiders forcing change of legitimate powers in other countries is intolerable,” Putin told Rossiya TV. 

  While geopolitical disagreements are “inevitable and “all right”, foreign policy needs to be conducted “by civilized rules”, he continued. We assume that “civilized rules” do not include arming and funding Sunni extremists especially ones who The Pentagon knows are likely to establish Salafist principalities within the borders of sovereign states.

  Putin went on to say that by becoming a puppet of the US, “Europe has given up [an] independent foreign policy” thereby surrendering part of its sovereignty to US.”

  When it comes to intervening in order to keep the geoplotical scales in balance, “Russia isn’t afraid” to step in, and will always act with “maximum caution,” (we’re not entirely sure one can classify the rather rapid and aggressive deployment in Syria as being conducted with “maximum caution”, but it’s certainly a more cautious approach than arming any and all anti-government elements in hopes that one of them will turn out not to be extremists).

  In the end though, Putin concedes that Russia has no catch-all solution for color revolutions. The “only recipe for how to deal with them is to strengthen international law,” he concludes.

  Exactly. Which means that at some point, the international community needs to insist that the US and its allies both in the Mid-East and Europe cease the ubiquitous practice of fomenting discord within sovereign states. It never works where “works” means a stable deomcracy takes root in the ashes of a dictatorship. Between Libya, Iraq, and Syria, the US truly has “become Death, the destroyer of worlds.”

  

  

  

  

  

• Market Figures Out Fed No Longer Has Its Back

  Submitted by John Rubino via DollarCollapse.com,

  US stocks soared while the Fed was meeting to raise interest rates this week – though it’s not clear why that should be so since monetary tightening isn’t generally a good thing for stock prices.

  In any event, it didn’t last. Over the past 48 hours the Dow is down more than 3%, with many, many individual stocks down far more.

  Why the quick reversal? For one thing, that’s pretty much how it always goes. The Fed tends to aim its statements directly at traders, who are so desperate for adult supervision that they can’t help responding positively. But when the Fed goes quiet, reality once again bites, and the general trend turns negative.

  That it’s happening so quickly is a sign of how different things are this time around.

  The Fed is now – for the first time in adult memory for half the world’s traders and money managers – tightening rather than loosening monetary conditions. A quick look at financial history is all it takes to lead anyone with leveraged money at risk to lighten up.

  Equally important — and vastly more strange when you think about it — this tightening comes at a time when major parts of the global economy are either grinding to a halt or imploding. See Torrent Of Bad News Greets Fed As It Prepares to Raise Rates for some of the disturbing events reported while the Fed was meeting.

  And since then (that is, in just two days), a whole new series of similarly-scary stories have surfaced, including:

  China Beige Book Shows ‘Disturbing’ Economic Deterioration

  (Bloomberg) – China’s economic conditions deteriorated across the board in the fourth quarter, according to a private survey from a New York-based research group that contrasted with recent official indicators that signaled some stabilization in the country’s slowdown.

  National sales revenue, volumes, output, prices, profits, hiring, borrowing, and capital expenditure were all weaker than the prior three months, according to the fourth-quarter China Beige Book, published by CBB International. The indicator is modeled on the survey compiled by the Federal Reserve on the U.S. economy, and was first published in 2012.

   

  The world’s second-largest economy lacks the kind of comprehensive data available on developed nations, making it harder for investors to get a clear read — particularly as China transitions from reliance on manufacturing and investment toward services and consumption. Official data on industrial production, retail sales and fixed-asset investment all exceeded forecasts for November, while consumer inflation perked up and a slide in imports moderated.

   

  Earnings Deterioration

   

  The Beige Book’s profit reading is “particularly disturbing,” with the share of firms reporting earnings gains slipping to the lowest level recorded, CBB President Leland Miller wrote in the release. While retail and real estate held up reasonably well, manufacturing and services performed poorly, with revenues, employment, capital expenditure and profits weakening.

  The survey shows “pervasive weakness,” Miller wrote in the report. “The popular rush to find a successful manufacturing-to-services transition will have to be put on hold for a bit. Only the part about struggling manufacturing held true.”

   

  Japan’s November Exports Fell 3.3%

  (Khaleej Times) – Japan’s exports in November fell at the fastest pace in almost three years as shipments to Asia declined in a worrying sign that weakness in overseas demand could curb economic growth.

  Japan’s gross domestic product is likely to avoid a contraction for the time being as domestic demand has performed better than expected, but declining exports highlight the risks that China’s slowdown and turmoil in emerging markets pose to the outlook.

  Ministry of Finance data showed on Thursday that exports fell 3.3 percent in November from a year earlier, more than the median estimate for a 1.5 percent annual decline in a Reuters poll. That was the biggest decline since a 5.8 percent year-on-year fall in December 2012.

   

  Hedge Funds Just Had Their Worst Quarter Since the Crisis

  (Bloomberg) – Hedge fund closures surged in the three months to the end of September as money managers reeled from declines in commodity and equity markets, while high-yield credit spreads widened.

  The number of funds liquidated climbed to 257, up from 200 in the previous three months, according to a report from Hedge Fund Research Inc. on Friday, and taking total closures in the first nine months to 674, compared with 661 during the same period last year. Cargill Inc.’s Black River Asset Management shut four units, while Armajaro Asset Management LLP also closed one of its funds.

  Liquidations rose “as investor risk tolerance fell sharply, and energy commodities and equities posted sharp declines, resulting in net capital outflows, wider performance dispersion and meaningful differentiation between hedge funds,” Kenneth Heinz, president of HFR, said in a statement.

   

   

  Bond funds see record outflows after junk jitters

  (CNBC) – Investor fears about liquidity in junk bonds have leaked into the investment grade sector of the market, with redemptions from corporate bond funds hitting record highs in the week running up to the Federal Reserve meeting.

  Global bond funds saw their largest outflows since June 2013 in the week to Wednesday 16th December, with some $13 billion being pulled from the sector, including, high-yield and investment-grade strategies.

  BofAML said the “carnage in fixed income” was still focused on junk bond funds, which saw $5.3 billion of the outflows. Meanwhile, corporate investment-grade debt funds saw around $4.8 billion in net redemptions, according to separate data from Thomson Reuters Lipper which also showed that the net outflows from bond funds over the period were the largest weekly outflows since Lipper started tracking fund flow data in 1992.

  There’s more, but you get the point. These are the kinds of things that happen in the early stages of recession, not the middle of an expansion. As such, they’re usually signals to a central bank to ease conditions.

  But the Fed has locked itself into tightening for a while, and will need a serious crisis to make a change of course possible. That’s what the markets are figuring out, that they can’t count on free money falling from the sky in the next couple of months, no matter what happens.

  So, for the first time in a long time, they’re responding to fundamentals rather than artificial easy money. And the fundamentals, by any historical or common sense standard, are terrible.

  

  

  

  

  

• Hedge Fund AUM Falls By Most Since Crisis As Desperate Managers Cut Fees To Keep Clients

  Make no mistake, it’s been a tough year for the 2 and 20 crowd. 

  Between an inexorable slump in commodities (which has led directly to a burgeoning HY crisis), the volatility that comes with pervasive monetary policy confusion, a “surprise” China deval, tail risk galore, and a variety of spectacular blow ups (see Ackman and Valeant), it’s become abundantly clear that when it comes to truth in advertising, hedge funds fail miserably as protecting against massive fat tail events apparently isn’t their cup of tea after all (see here for more).

  Even risk parity has suffered in an environment characterized by increasingly interdependent and correlated markets.

  Well, now that pension funds (and everyone else for that matter) have come to the realization that in a market backstopped by the central bank put, it makes a lot more sense to just buy the SPY for a fraction of a percentage point (in terms of expense ratios) than to pay 2 and 20 for someone to ride the beta train with the most leverage possible hoping that the Fed will prevent any events that actually need hedging, and now that HY is finally rolling over just like we said it would, the liquidations are multiplying. 

  “Funds depend on institutional investors such as insurers and pension schemes, who cannot afford to miss minimum return targets and are themselves under pressure from boards that oversee investments,” FT writes.

  “Most [fund] managers prefer to haggle like rug-salesmen at a bazaar; institutional investors would rather shop at Ikea,” says Simon Ruddick, founder of consultant Albourne and that means the trend shown in the following graph is likely to reverse going foward:

  

  In a sign that things are getting progressively worse, “the number of funds liquidated climbed to 257 [in Q3], up from 200 in the previous three months,” Bloomberg notes, citing Hedge Fund Research Inc.

  Total closures in the first nine months of the year hit 674, while AUM fell by $95 billion to $2.87 trillion during the quarter, “the most since the fourth quarter of 2008, when the industry lost $314.4 billion amid the global financial crisis.” 

  “The HFRI Fund Weighted Composite Index declined by more than 4 percent in the three months through September, its biggest quarterly drop in four years, as money managers were caught out by the devaluation of the Chinese yuan in August, which pummeled markets, and as oil and gold prices slumped,” Bloomberg adds.

  Now obviously – as noted above and as we documented extensively in the wake of the flash crashing madness that unfolded on August 24 – hedge funds are supposed to be a safe haven when market turmoil strikes but as it turns out, they aren’t particularly adept at actually “hedging” and so, when the black swans come calling, the losses pile up. 

  So what’s a “poor” hedgie to do? Well, cut fees for one thing. Here’s FT again:

  Many hedge funds are cutting fees and negotiating with investors to trim some of their hefty costs and avert withdrawals after another mediocre year for returns.

   

  The industry has been shifting for several years away from its traditional model of charging 2 per cent of assets and keeping 20 per cent of profit. Some funds are already wooing customers with fees closer to 1 per cent and 15 per cent, people in the industry say.

   

  Management fees declined this year in every strategy except event driven, falling to a mean of 1.61 per cent from 1.69 per cent, according to JPMorgan’s Capital Introduction Group.

   

  Several big-name funds have closed to outside investors or shut entirely this year: Michael Novogratz’s $2bn fund at Fortress Investment Group shut in October after having lost 17.5 per cent in 2015, and this month BlueCrest pushed out external investors, saying 2 and 20 was “no longer a particularly profitable business”.

   

  Carlyle’s Claren Road, facing an exodus of half its clients after losses, delayed giving some money back, and offered reduced fees if investors agreed to stay with the fund for another two years, according to people familiar with the offer.

   

  Glenview Capital manager Larry Robbins, whose fund is down 17 per cent this year, has now offered existing clients a chance to put new money into a healthcare-focused side fund, with no fees of any kind.

  Of course at the end of the day, if you’re losing double-digits, it really doesn’t matter if the fee is 1 and 15 or 2 and 20 – you’re losing money and underperforming benchmarks that can bought via ultra-low cost vehicles and on that note, we’ll close with the following quote from Emma Bewley, Connection Capital’s head of fund investment: 

  “If you’re pushing for lower management fees to save minimal basis points on a fund where you are unhappy with performance, as a fiduciary, you have to decide whether you want to keep that fund at all.”