• Turkish Shootdown of Russian Jet: What You Need to Know

  A U.S. official told Reuters that the Russian jet was inside of Syria when it was shot down:

  The United States believes that the Russian jet shot down by Turkey on Tuesday was hit inside Syrian airspace after a brief incursion into Turkish airspace, a U.S. official told Reuters, speaking on condition of anonymity.

  Russia denies that the Russian fighter jet – which was bombing ISIS – ever entered Turkish air space, and has put out its own map purporting to prove that claim.

  The Russian jet pilots who parachutted free of their burning plane were then purportedly killed by Turkish rebels inside Syria.  If true, this is a war crime.

  Then – when a Russian helicopter tried to save the pilots – it was shot down by American-backed Syrian rebels – using weapons provided to them by the United States  – and a Russian marine was killed.

  Russia is deploying a warship off the Syrian coast to “destroy any threats to Russian planes”.   Many believe this is the start of World War III.

  While the U.S. and NATO tried to blame Russia, German Vice-Chancellor Sigmar Gabriel slammed Turkey:

  “This incident shows for the first time that we are to dealing with an actor who is unpredictable according to statements from various parts of the region – that is not Russia, that is Turkey,” Gabriel said, as cited by DPA news agency. He added that Turkey was playing “a complicated role” in the Syrian conflict.

  Indeed, NATO-member Turkey is MASSIVELY supporting ISIS, provided chemical weapons used in the jihadi’s massacre of civilians, and has been bombing ISIS’ main on-the-ground enemy – Kurdish soldiers – using its air force.  And some of the Turkish people are also unsympathetic to the victims of ISIS terrorism.Turkey was also instrumental in the creation of ISIS.  An internal Defense Intelligence Agency (DIA) document produced recently shows, the U.S. knew that the actions of “the West, Gulf countries and Turkey” in Syria might create a terrorist group like ISIS and an Islamic CALIPHATE.

  As the former DIA head explained:

  It was a willful decision [by Turkey, the West and the Gulf states] to … support an insurgency that had salafists, Al Qaeda and the Muslim Brotherhood ….

  

  

  

  

• This Thanksgiving, Let's Say "No Thanks" To The Tyranny Of The American Police State

  Submitted by John Whitehead via The Rutherford Institute,

  “Hold on, my friends, to the Constitution and to the Republic for which it stands. Miracles do not cluster, and what has happened once in 6000 years, may not happen again. Hold on to the Constitution, for if the American Constitution should fail, there will be anarchy throughout the world.”—Daniel Webster

  Thanksgiving is not what it once was.

  Then again, America is not what she once was.

  Americans have become so enthralled by the “bread and circuses” of our age—tables groaning under the weight of an abundance of rich foods, televisions tuned to sports and entertainments spectacles, stores competing for Black Friday shoppers, and a general devotion to excess and revelry—that we have lost sight of the true purpose of Thanksgiving.

  Indeed, the following is a lesson in how far we have traveled—and how low we have fallen—in the more than 200 years since George Washington issued the first Thanksgiving proclamation, calling upon the nation to give thanks for a government whose purpose was ensuring the safety and happiness of its people and for a Constitution designed to safeguard civil and religious liberty.

  This Thanksgiving finds us saddled with a government that is a far cry from Washington’s vision of a government that would be a blessing to all the people:

  • governed by wise, just and constitutional laws
  • faithfully executed and obeyed by its agents
  • assisting foreign nations with good government, peace, and concord
  • promoting true religion, virtue and science
  • and enabling temporal prosperity.

  Instead, as the following shows, the U.S. government has become a warring empire, governed by laws that are rash, unjust and unconstitutional, policed by government agents who are corrupt, hypocritical and abusive, a menace to its own people, and the antithesis of everything for which Washington hoped.

  George Washington didn’t intend Thanksgiving to be a day for offering up glib platitudes that require no thought, no effort and no sacrifice. He wanted it to be a day of contemplation, in which we frankly assessed our shortcomings, acknowledged our wrongdoings, and resolved to be a better, more peaceable nation in the year to come.

  It is in that true spirit of Thanksgiving that I offer the following list of things for which I’m not thankful about the American police state.

  The U.S. has become a corporate oligarchy. As a Princeton University survey indicates, our elected officials, especially those in the nation’s capital, represent the interests of the rich and powerful rather than the average citizen. We are no longer a representative republic. As such, the citizenry has little if any impact on the policies of government. There are 131 lobbyists to every Senator, reinforcing concerns that the government represents the corporate elite rather than the citizenry.

   

  Americans are being jailed for profit. Imprisoning Americans in private prisons and jails run by mega-corporations has turned into a cash cow for big business, with states agreeing to maintain a 90% occupancy rate in privately run prisons for at least 20 years. And how do you keep the prisons full? By passing laws aimed at increasing the prison population, including the imposition of life sentences on people who commit minor or nonviolent crimes such as siphoning gasoline. Little surprise, then, that the United States has 5% of the world’s population, but 25% of the world’s prisoners. The government’s tendency towards militarization and overcriminalization, in which routine, everyday behaviors become targets of regulation and prohibition, have resulted in Americans getting arrested for making and selling unpasteurized goat cheese, cultivating certain types of orchids, feeding a whale, holding Bible studies in their homes, and picking their kids up from school.

   

  Endless wars have resulted in a battlefield mindset that is infecting the nation.  The Departments of Justice, Homeland Security (DHS) and Defense have passed off billions of dollars worth of military equipment to local police forces. Even EMS crews and fire fighters are being “gifted” with military tanks, Kevlar helmets and ballistic vests. Police agencies have been trained in the fine art of war. It has become second nature for local police to look and act like soldiers. Communities have become acclimated to the presence of militarized police patrolling their streets. Americans have been taught compliance at the end of a police gun or taser. Lower income neighborhoods have been transformed into war zones. Hundreds if not thousands of unarmed Americans have lost their lives at the hands of police who shoot first and ask questions later. And a whole generation of young Americans has learned to march in lockstep with the government’s dictates.

   

  Militarized police, shootings of unarmed citizens, SWAT team raids, misconduct and qualified immunity have transformed the U.S. into a police state.  What we must contend with today is the danger of having a standing army (which is what police forces, increasingly made up of individuals with military backgrounds and/or training, have evolved into) that has been trained to view the citizenry as little more than potential suspects, combatants and insurgents. Despite propaganda to the contrary, it is estimated that U.S. police kill more people in days than other countries do in years. On an average day in America, at least 100 Americans have their homes raided by SWAT teams (although I’ve seen estimates as high as 300 a day), which are increasingly used to deal with routine police matters: angry dogs, domestic disputes, search warrants, etc. Every five days a police officer somewhere in America engages in sexual abuse or misconduct.

   

  The barrier between public and private property has been done away with. Call it what you will—taxes, penalties, fees, fines, regulations, tariffs, tickets, permits, surcharges, tolls, asset forfeitures, foreclosures, etc.—but the only word that truly describes the constant bilking of the American taxpayer by the government and its corporate partners is theft. What Americans don’t seem to comprehend is that if the government can arbitrarily take away your property, without your having much say about it, you have no true rights and no real property. In this way, the police state with all of its trappings—from surveillance cameras, militarized police, SWAT team raids, truancy and zero tolerance policies, asset forfeiture laws, privatized prisons and red light cameras to Sting Ray devices, fusion centers, drones, black boxes, hollow-point bullets, detention centers, speed traps and abundance of laws criminalizing otherwise legitimate conduct—has become little more than a front for a high-dollar covert operation aimed at laundering as much money as possible through government agencies and into the bank accounts of the corporate oligarchy that rule over us.

   

  The technologically-driven surveillance state has become the fourth branch of government. This fourth branch—the NSA, CIA, FBI, DHS, etc.—came into being without any electoral mandate or constitutional referendum, and yet it possesses superpowers, above and beyond those of any other government agency save the military. It is all-knowing, all-seeing and all-powerful. It operates beyond the reach of the president, Congress and the courts, and it marches in lockstep with the corporate elite who really call the shots in Washington, DC. This age of technological tyranny has been made possible by government secrets, government lies, government spies and their corporate ties. Beware of what you say, what you read, what you write, where you go, and with whom you communicate, because it will all be recorded, stored and used against you eventually, at a time and place of the government’s choosing. Privacy, as we have known it, is dead. The police state is about to pass off the baton to the surveillance state.

   

  The schools, modeled after quasi-prisons, are churning out future compliant citizens. Within America’s public schools can be found almost every aspect of the American police state that plagues those of us on the “outside”: metal detectors, surveillance cameras, militarized police, drug-sniffing dogs, tasers, cyber-surveillance, random searches, senseless arrests, jail time, the list goes on. Whether it takes the form of draconian zero tolerance policies, overreaching anti-bullying statutes, police officers charged with tasering and arresting so-called unruly children, standardized testing with its emphasis on rote answers, political correctness, or the extensive surveillance systems cropping up in schools all over the country, young people in America are first in line to be indoctrinated into compliant citizens of the new American police state.

   

  The courts have become courts of order in an age of government-sanctioned tyranny. With every ruling handed down by the courts, it becomes more apparent that we live in an age of hollow justice, with government courts, largely lacking in vision and scope, rendering narrow rulings that have nothing to do with true justice. This is true at all levels of the judiciary, but especially so in the highest court of the land, the U.S. Supreme Court, which is seemingly more concerned with establishing order and protecting government agents than with upholding the rights enshrined in the Constitution. Given the turbulence of our age, with its police overreach, military training drills on American soil, domestic surveillance, SWAT team raids, asset forfeiture, wrongful convictions, and corporate corruption, the need for a guardian of the people’s rights has never been greater. Yet when presented with an opportunity to weigh in on these issues, what does our current Supreme Court usually do? It ducks. Prevaricates. Remains silent. Speaks to the narrowest possible concern. More often than not, it gives the government and its corporate sponsors the benefit of the doubt. Rarely do the concerns of the populace prevail.

  As I point out in my book Battlefield America: The War on the American People, these are abuses that no American should tolerate from its government, and yet not only do we tolerate them, but we help to advance them by supporting meaningless elections, allowing ourselves to be divided by partisan politics, and failing to hold the government accountable to abiding by the rule of law, the U.S. Constitution.

  Mark my words: if we do not push back against the menace of the police state now, if we fail to hold onto the Constitution and our constitutional republic, and if we allow the government to remain the greatest threat to our freedoms, then future Thanksgivings will find us paying the price with tyranny at home and anarchy throughout the world.

  

  

  

  

  

• There is little difference between rich and poor in America

  The further you go towards the tails of the bell curve, the more similar social characteristics.  In a society that has been even more polarized, we increasingly see similarities between the very wealthy, and the very poor.  The declining middle class is more and more a world of it’s own (as the elite used to be). 

  In Summary, the Superclass “Elite” UHNWI and the ultra poor have the following in common:

  • Both have usually a less than superior education, or even are illiterate (and/or extremely out of touch with ‘the real world’)
  • Both have nearly no daily obligations but are ‘busy’ by choice
  • Both have a tendency toward extreme substance abuse (i.e. constant drinking / drug use)
  • Both have extreme freedoms 
  • Both are near handicapped, having many ‘caretakers’ (whether it be in the case of the rich, a staff of servants – in the case of the poor, government / social workers, government support, etc.)
  • Both don’t worry about money!
  • Both have little respect for the laws 
  • Both have a fleet of vehicles, half of which are not working or in the shop
  • Both have little regard for the trend of the time
  • Both may occupy a space, having almost no assets in their own name (of course, for greatly different reasons – the rich don’t want tax obligations and in business ‘conflicts of interest’ for owning certain assets)
  • Both could care less about foreign affairs, unless it impacts their business or daily life
  • Both usually have a lifelong advisor they turn to and speak with constantly (in the case of the poor it is their ‘friend’ or their ‘cousin’ – in the case of the superrich, probably their ‘lawyer’ or ‘advisor’ in some cases their ‘brother’)
  • Both ‘don’t work’ 

  What is the difference between tent cities and the growth of ‘billionaire hubs’ – primarily, it is a difference of infrastructure.  Both are largely anti-social, and live outside the realms of society, on the edge of the law.  The point here is that the destruction of the middle class as it is colloquially referred, is really a breakdown of modern civil society.  Investment funds have shifted away from public development uses, so in parallel to these billionaire hubs we’ve seen a great deterioration of public infrastructure (i.e. bridges, roads, schools, dams, levees around New Orleans, etc.).  Even the poor have their own Web 2.0 startups, such as “Rent a Tent.” 

  But of course – the big difference.  The UHNWI can make choices that could change all that.  But can they?  Are they just as much slaves as anyone?  Through the vast vestiges of the social control paradigm, maybe it is in fact they too – who are the victims – or if not the main victims.  We here at Zero Hedge often have disdain for some of both of these classes (although many UHNWI are our clients, even if through their various proxy entity networks).  So it may be important to take a step back, and realize what’s happened economically speaking since the economic polarization of our modern capitalist society.  

  How did we get here?  How is it that – in the city with explosive real estate value growth (San Francisco), has sewers built more than 150 years ago?  What’s wrong with this picture?  Billionaires drive on bad roads too.  As traders and investors it’s easy to be sucked into our niches of analysis, i.e. technical vs. fundamental, without looking at the system as a whole.  When we can understand the system as a whole better, we can make better investment decisions, and create better markets (with less fraud, less volatility, and less regulation).  The only thing that can save the freefall economy – it’s knowledge and education!  Fractional reserve capitalism is all about hiding and profiting from information.  

  From the very beginning of the modern free-markets system, huge investments have been made in anti-education efforts, counter-propoganda, social and biological control mechanisms, and so on.  The CIA has openly been involved in cultural propoganda and social engineering programs, including but not limited to, the ‘womans rights’ movement, ‘gay rights’ movements, ‘flower power’ (specifically, Timothy Leary and various military experiments released into the youth culture), and generally – promoting a culture of stupidity (where it’s ‘cool’ to be stupid).  We don’t need to mention Beavis and Butthead, Jackass, because this is all low hanging fruit.  What they do now is simple – because a roadmap was laid during the 60’s and 70’s, and now far greater technology has been developed.  That means a child growing up in ‘civil society’ doesn’t stand a chance!  

  All this is designed for one thing – send your money to the power elite.  Spend your time, energy, doing whatever you want, as long as every 20 or 30 years, all your hard work and wealth, will be donated to your local Rothchild branch.

  The billionaire class – as proved with Russia after privatization – is a great tool for controlling the masses.  It gives people false heroes, material gods, someone to look up to; and at the same time appeals to their ego and vanity.  So, for the elite, it is most critical to program and enslave this very special group of people, and if they don’t exist – to create them!  As the Europeans learned more than 1000 years ago – people need Kings and Queens – not to be ‘ruled’ – and to be ‘taxed’ – but to exist!  At the end of the day, most humans are like animals that need to be herded.  For whatever reason, humans haven’t evolved enough to live in a real utopia – which is possible with current technology (free energy and no one works, all are happy).  

  So, when you realize all this, and consider how important it is that UHNWI are the social templates used for the programming on down the genetic chain, it’s no wonder that the billionaire favelas are not much different than the real favelas, in a nation built by tired and poor people:

  “Give me your tired, your poor,
  Your huddled masses yearning to breathe free,
  The wretched refuse of your teeming shore.
  Send these, the homeless, tempest-tost to me,
  I lift my lamp beside the golden door!”

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• 17 Seconds That Changed The World – Leaked Letter Exposes Turkey's Hair-Trigger Reality

  Needless to say, Moscow and Ankara are at odds over precisely what happened on Tuesday when a Russian Su-24 was shot down near the Syrian border. 

  The two pilots ejected and attempted to parachute to safety but Turkmen FSA-allied Alwiya al-Ashar militiamen shot at them as they fell before posting a video purporting to show rebel soldiers celebrating over one of the bodies. It only got worse from there when the FSA’s 1st Coastal Brigade used a US-made TOW to destroy a Russian search and rescue helicopter. 

  Clearly, this was a marked escalation and indeed it was the first time a NATO member had engaged a Russian or Soviet warplane in more than 60 years.

  The Kremlin was not happy as Vladimir Putin – who was meeting with King Abdullah in Jordan – proceeded to brand Erdogan a “backstabber” and an ISIS supporter. Sergei Lavrov subsequently canceled a planned trip to Turkey.

  At issue now, is whether the Russian fighter jet did indeed, as Turkey claims, venture into Turkish airspace or whether the Turks actually engaged Moscow’s warplane in the skies over Syria. 

  Here’s Russia’s version of the story, presented via a video released by the Defense Ministry:

  And here’s Turkey’s account:

   

  Finally, here’s The New York Times with a compare and constrast visual:

  

  In the wake of an emergency NATO meeting this afternoon, new information has come to light. First, there’s Ankara’s letter to UN Secretary-General Ban Ki-moon and the 15 members of the UN Security Council. Here it is: 

  

  The highlighted passage reads: “Disregarding these warnings, both planes, at an altitude of 19,000 feet, violated Turkish national airspace to a depth of 1.36 miles and 1.15 miles in length for 17 seconds from 9:24:05 local time.”

  So, as RT notes, even if we buy Turkey’s story (i.e. if we accept that Russia actually did violate Turkish airspace), then it would appear that Ankara has something of an itchy trigger finger. That is, Turkey was apparently willing to risk sparking a wider conflict between NATO and Russia over a 17 second incursion.

  But something doesn’t sound right.  

  Journalists: Learn to do basic maths. Look at Turkey’s statement to UN: 1.15 miles / 17 seconds x 60 x 60 = 243 miles/hour = 391 km/hour

  — WikiLeaks (@wikileaks) November 24, 2015

  In other words, as Sputnik put it earlier this evening, “according to those numbers, the Su-24 would have had to be flying at stall speed.”

  The Su-24’s max speed is 1,320 km/hour.

  So if we assume the Su-24 was actually going much faster, was 17 seconds more like 5 seconds? Or perhaps even less? 

  It’s important not to forget the context here. Ankara is fiercly anti-Assad and in addition to being generally displeased with Russia’s efforts to support the regime, just four days ago, Turkey summoned Russian ambassador Andrey Karlov over the alleged bombing of Turkish villages near the border. “Turkey has asked Russia to ‘immediately end its operation,'” AFP reported, adding that “Ankara warned bombing villages populated by the Turkmen minority in Syria could lead to ‘serious consequences.'”

  Of course Russia wasn’t just bombing Turkish civilians for the sheer hell of it. It’s likely Moscow was targeting the very same FSA-affiliated Alwiya al-Ashar militiamen who shot and killed the parachuting Russian pilot earlier today. 

  In short, it looks like Ankara saw an opportunity to shoot down a Russian jet in retaliation for strikes on Turkish rebel fighters who are operating alongside anti-Assad forces. Erdogan is essentially gambling that Russia will not retailiate militarily against Turkey because doing so would open the door for a direct confrontation with NATO. 

  Time will tell whether that gamble pays off or whether Moscow decides that the next time a Turkish F-16 gets “lost” over Latakia, a little payback is in order.

   

  

  

  

  

  

• Profound Political Disunity Is Now Pitting Rising Elites Against Fading Elites

  Submitted by Charles Hugh-Smith of OfTwoMinds blog,

  The American Power Elite may yet discover that throw the bums out applies to all existing Establishment parties and Elites.

  As I have often noted, historian Michael Grant identified profound political disunity in the ruling class as a key cause of the dissolution of the Roman Empire. Grant described this dynamic in his excellent account The Fall of the Roman Empire, a book I have been recommending since 2009.

  The chapter titles of the book provide a precis of the other causes Grant identifies:

  The Gulfs Between the Classes

  The Credibility Gap

  The Partnerships That Failed

  The Groups That Opted Out

  The Undermining of Effort

  Today we focus on the rising profound political disunity of the Power Elites of the U.S. As a general observation, the largely theatrical polarization of the two political parties is being replaced by fault lines within each party and American society that no longer respect the ideological lines of Republican and Democrat.

  While conventional media pundits have observed the disorder in Republican ranks with more than a little schadenfreude (pleasure derived by someone from another person’s misfortune), relatively little attention has been paid to the equivalent fractures in the Democratic Party.

  Longtime correspondent Mark G. forwarded an insightful article by Joel Kotkin that explains one of the key fractures: Tech titans want to be masters of all media we survey.

  In effect, the Old Left (currently represented by Bernie Sanders) is splintering from the mainstream Imperial Democrats (my term) of Hillary Clinton, while Kotkin’s Tech Titans are pursuing a Libertarian-flavored dominance.

  Mark G. provides the analytic structure needed to understand why both parties are coming apart at the seams:

  What Kotkin describes here is best characterized as a civil war among Democratic Party Elites. This parallels a similar struggle taking place inside the GOP between the ‘GOP Establishment’ and probably 70% of the GOP’s electoral base.

  (Excerpt from Kotkin:) “The rising tech oligarchy, having disrupted everything from hotels and taxis to banking, music and travel, is also taking over the content side of the media business. In the process, we might see the future decline of traditional media, including both news and entertainment, and a huge shift in media power away from both Hollywood and New York and toward the Bay Area and Seattle.”

  (Mark G.:) I think the most important finding from the present political cycle is the evidence of rapidly rising factionalism and infighting among our 0.01%’ers. Their ships are not “all sailing in the same direction,” as Don Lucchesi said in Godfather III. Their goals are becoming very divergent indeed to the point of directly opposing each other.

  Contrary to received MSM wisdom, this warfare appears to be most pronounced at present inside the Democratic Party. Bernie Sanders is clearly the AFL-CIO’s man in a sense, along with the aged New Left. And he’s drawing crowds to match. Like Bill, Hillary is the creature of Wall Street, NYC-based Mainstream Media, Hollywood and the Government Educational complex. The Tech Oligarchs really don’t have a candidate of their own in the field this cycle.

  Meanwhile the “GOP Establishment” is increasingly at open war with its own electoral base. So is the Democratic Party under the aegis of the digital ‘Tech Oligarchs.’ The older ‘Mainframe’ Democratic elites were far more attentive to middle class interests in their political coalition. The Tech Oligarchs are displaying a streak of Libertarian “My Way Or The Highway” rawness where it comes to political issues and the interests of nominal coalition partners.

  I think The Donald could easily be found possessing support from some surprising quarters when the time comes.

  Thank you, Mark, for the analysis.

  For further evidence of the fault lines shattering the Democratic Party consider Who Turned My Blue State Red? Why poor areas vote for politicians who want to slash the safety net.

  Perhaps we can summarize this as the resentment of the remaining middle class/working class for free-riders who are living as well or better than the heavily burdened workers supporting their guaranteed income.

  Game theory has shown that participants will choose to punish cheaters over skimming rewards, until the cheaters are in the majority. At that point, everyone converts to cheating/free-riding and the system collapses.

  This rising sense of injustice applies to three classes: the super-wealthy skimmers who buy political influence; protected state workers drawing benefits that are distant memories for 99% of private-sector workers, and the free-riders at the bottom buying groceries with SNAP cards and non-food items with wads of cash earned without the burdens of taxes.

  So we have two volatile brews being mixed together: the anger and resentment of what’s left of the middle and working classes against those above and below them, and the widening political disunity of the Elites.

  All those Democratic Party stalwarts whose power base is being disrupted by digital forces beyond their control are not happy campers. Unfortunately for them, history can’t be turned back.

  As for the Republicans, the party’s long reliance on social polarization for its support is wearing thin, as thin as the wallets and purses of traditional Republican audiences.

  What’s upending the existing political Elites is this: there’s no free lunch. As the phantom free lunch of the past seven years is shattered by economic realities, the parties’ fiefdoms are discovering there isn’t enough money for all fiefdoms to expand as they have for 60 years.

  As a result, each fiefdom is forced to battle other Elites for increasingly scarce financial and political oxygen.

  The American Power Elite may yet discover that throw the bums out applies to all existing Establishment parties and Elites.

  

  

  

  

  

• NATO Is Harboring ISIS, And Here's The Evidence

  For the better part of a year, Turkey remained on the sidelines in the “fight” against ISIS.

  Then, on July 20, a powerful explosion ripped through the town of Suruc. 33 people were killed including a number of Socialist Party of the Oppressed (ESP) and Socialist Youth Associations Federation (SGDF) members who planned to assist in the rebuilding of Kobani.

  The attack was promptly attributed to Islamic State who took “credit” for the tragedy the next day.

  To be sure, the attack came at a rather convenient time for President Tayyip Erdogan. A little over a month earlier, the ruling AKP party lost its absolute parliamentary majority in part due to a strong showing at the ballot box for the pro-Kurdish (and PKK-aligned) HDP. What happened in the wake of the Suruc bombing was nothing short of a largely successful attempt on Erdogan’s part to use fear and violence to scare the electorate into restoring AKP’s dominance in snap elections that took place earlier this month. 

  In short, Erdogan used Suruc as an excuse to begin a “war on terror.” Part and parcel of the new campaign was an invite from Ankara for Washington to use Turkey’s Incirlik air base. Subsequently, Erdogan reminded the world that the PKK is also considered a terrorist organization and as such, the anti-ISIS campaign would also include a crackdown on Kurdish militants operating in Turkey. Erdogan proceeded to focus squarely on the PKK, all but ignoring ISIS while simultaneously undercutting the coalition building process on the way to calling for new elections. Unsurprisingly, AKP put on a much better showing in the electoral redo, and with that, Erdogan had succeeded in using ISIS as a smokescreen to start a civil war with the PKK, in the process frightening voters into restoring his party’s grip on power.

  Through it all, the PKK has suggested that Ankara is and always has been in bed with Islamic State. That contention will come as no surprise to those who frequent these pages. It’s common knowledge that Turkey backs the FSA and participates in the US/Saudi-led effort to supply Syrian rebels with weapons, money, and training. Indeed, those weapons were on full display Tuesday when the FSA’s 1st Coastal Brigade used a US-made TOW to destroy a Russian search and rescue helicopter. That came just hours after the Turkmen FSA-allied Alwiya al-Ashar militia posted a video of its fighters celebrating over the body of an ejected Russian pilot. 

  In short, Turkey has made a habit out of supporting anyone and everyone who opposes Assad in Syria and that includes ISIS. In fact, if one were to rank the US, Turkey, Saudi Arabia, and Qatar in order of who is suspected of providing the most assistance to Islamic State, Turkey would likely top the list. Here’s what Vladimir Putin had to say earlier today after Turkey downed the Russian Su-24:

  • PUTIN: OIL FROM ISLAMIC STATE IS BEING SHIPPED TO TURKEY
  • PUTIN SAYS ISLAMIC STATE GETS CASH BY SELLING OIL TO TURKEY
  • PUTIN: ISLAMIC STATE GETS MILITARY SUPPORT FROM MANY STATES

  It’s with all of this in mind that we bring you excerpts from a new piece by Nafeez Ahmed who, you’re reminded, penned a lengthy expose earlier this year explaining how the US views ISIS as a “strategic asset.” In his latest, Ahmed takes a close look at the relationship between Ankara and Islamic State. The evidence is truly damning. 

  *  *  *

  From “NATO is harbouring the Islamic State: Why France’s brave new war on ISIS is a sick joke, and an insult to the victims of the Paris attacks,” by Nafeez Ahmed, originally published in Medium

  “We stand alongside Turkey in its efforts in protecting its national security and fighting against terrorism. France and Turkey are on the same side within the framework of the international coalition against the terrorist group ISIS.” —Statement by French Foreign Ministry, July 2015

  

  The 13th November Paris massacre will be remembered, like 9/11, as a defining moment in world history.

  The murder of 129 people, the injury of 352 more, by ‘Islamic State’ (ISIS) acolytes striking multiple targets simultaneously in the heart of Europe, mark a major sea-change in the terror threat.

  For the first time, a Mumbai-style attack has occurred on Western soil?—?the worst attack on Europe in decades. As such, it has triggered a seemingly commensurate response from France: the declaration of a nationwide state of emergency, the likes of which have not been seen since the 1961 Algerian war.

  ISIS has followed up with threats to attack Washington and New York City.

  Meanwhile, President Hollande wants European Union leaders to suspend the Schengen Agreement on open borders to allow dramatic restrictions on freedom of movement across Europe. He also demands the EU-wide adoption of the Passenger Name Records (PNR) system allowing intelligence services to meticulously track the travel patterns of Europeans, along with an extension of the state of emergency to at least three months.

  Under the extension, French police can now block any website, put people under house arrest without trial, search homes without a warrant, and prevent suspects from meeting others deemed a threat.

  “We know that more attacks are being prepared, not just against France but also against other European countries,” said the French Prime Minister Manuel Valls. “We are going to live with this terrorist threat for a long time.”

  Hollande plans to strengthen the powers of police and security services under new anti-terror legislation, and to pursue amendments to the constitution that would permanently enshrine the state of emergency into French politics. “We need an appropriate tool we can use without having to resort to the state of emergency,” he explained.

  Parallel with martial law at home, Hollande was quick to accelerate military action abroad, launching 30 airstrikes on over a dozen Islamic State targets in its de facto capital, Raqqa.

  […]

  Conspicuously missing from President Hollande’s decisive declaration of war, however, was any mention of the biggest elephant in the room: state-sponsorship.

  Syrian passports discovered near the bodies of two of the suspected Paris attackers, according to police sources, were fake, and likely forged in Turkey.

  Earlier this year, the Turkish daily Meydan reported citing an Uighur source that more than 100,000 fake Turkish passports had been given to ISIS. The figure, according to the US Army’s Foreign Studies Military Office (FSMO), is likely exaggerated, but corroborated “by Uighurs captured with Turkish passports in Thailand and Malaysia.”

  […]

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

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

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

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

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

  In January, authenticated official documents of the Turkish military were leaked online, showing that Turkey’s intelligence services had been caught in Adana by military officers transporting missiles, mortars and anti-aircraft ammunition via truck “to the al-Qaeda terror organisation” in Syria.

  According to other ISIS suspects facing trial in Turkey, the Turkish national military intelligence organization (MIT) had begun smuggling arms, including NATO weapons to jihadist groups in Syria as early as 2011.

  The allegations have been corroborated by a prosecutor and court testimony of Turkish military police officers, who confirmed that Turkish intelligence was delivering arms to Syrian jihadists from 2013 to 2014.

  Documents leaked in September 2014 showed that Saudi Prince Bandar bin Sultan had financed weapons shipments to ISIS through Turkey. A clandestine plane from Germany delivered arms in the Etimesgut airport in Turkey and split into three containers, two of which were dispatched to ISIS.

  A report by the Turkish Statistics Institute confirmed that the government had provided at least $1 million in arms to Syrian rebels within that period, contradicting official denials. Weapons included grenades, heavy artillery, anti-aircraft guns, firearms, ammunition, hunting rifles and other weapons?—?but the Institute declined to identify the specific groups receiving the shipments.

  Information of that nature emerged separately. Just two months ago, Turkish police raided a news outlet that published revelations on how the local customs director had approved weapons shipments from Turkey to ISIS.

  Turkey has also played a key role in facilitating the life-blood of ISIS’ expansion: black market oil sales. Senior political and intelligence sources in Turkey and Iraq confirm that Turkish authorities have actively facilitated ISIS oil sales through the country.

  Last summer, Mehmet Ali Ediboglu, an MP from the main opposition, the Republican People’s Party, estimated the quantity of ISIS oil sales in Turkey at about $800 million?—?that was over a year ago.

  By now, this implies that Turkey has facilitated over $1 billion worth of black market ISIS oil sales to date.

  […]

  The liberal Turkish daily Taraf quoted an AKP founder, Dengir Mir Mehmet F?rat, admitting: “In order to weaken the developments in Rojova [Kurdish province in Syria] the government gave concessions and arms to extreme religious groups…the government was helping the wounded. The Minister of Health said something such as, it’s a human obligation to care for the ISIS wounded.”

  The paper also reported that ISIS militants routinely receive medical treatment in hospitals in southeast Turkey—?including al-Baghdadi’s right-hand man.

  […]

  Meanwhile, NATO leaders feign outrage and learned liberal pundits continue to scratch their heads in bewilderment as to ISIS’ extraordinary resilience and inexorable expansion.

  […]

  As Professor David Graeber of London School of Economics pointed out:

  “Had Turkey placed the same kind of absolute blockade on Isis territories as they did on Kurdish-held parts of Syria… that blood-stained ‘caliphate’ would long since have collapsed?—?and arguably, the Paris attacks may never have happened. And if Turkey were to do the same today, Isis would probably collapse in a matter of months. Yet, has a single western leader called on Erdo?an to do this?”

  […]

  In his testimony before the Senate Armed Services Committee in September 2014, General Martin Dempsey, then chairman of the US Joint Chiefs of Staff, was asked by Senator Lindsay Graham whether he knew of “any major Arab ally that embraces ISIL”?

  General Dempsey replied:

  “I know major Arab allies who fund them.”

  In other words, the most senior US military official at the time had confirmed that ISIS was being funded by the very same “major Arab allies” that had just joined the US-led anti-ISIS coalition.

  These allies include Saudi Arabia, Qatar, the UAE, and Kuwait in particular.

  […]

  Porous links between some Free Syrian Army (FSA) rebels, Islamist militant groups like al-Nusra, Ahrar al-Sham and ISIS, have enabled prolific weapons transfers from ‘moderate’ to Islamist militants.

  The consistent transfers of CIA-Gulf-Turkish arms supplies to ISIS have been documented through analysis of weapons serial numbers by the UK-based Conflict Armament Research (CAR), whose database on the illicit weapons trade is funded by the EU and Swiss Federal Department of Foreign Affairs.

  […]

  ISIS, in other words, is state-sponsored?—?indeed, sponsored by purportedly Western-friendly regimes in the Muslim world, who are integral to the anti-ISIS coalition.

  Which then begs the question as to why Hollande and other Western leaders expressing their determination to “destroy” ISIS using all means necessary, would prefer to avoid the most significant factor of all: the material infrastructure of ISIS’ emergence in the context of ongoing Gulf and Turkish state support for Islamist militancy in the region.

  

  

  

  

  

• Student "Tyrants In Training" Demand Journalists Swear Loyalty Oath Before Reporting On Them

  Submitted by Mike Krieger via Liberty Blitzkrieg blog,

  Students and faculty at Smith College apparently didn’t want a repeat of that ugly episode at the University of Missouri, where a communications professor was filmed calling for the forcible removal of a journalist from an on-campus demonstration earlier this month.

   

  So when they held a sit-in Wednesday to protest racial discrimination, their solution was to not let in members of the media in the first place — unless said media members pledged allegiance to the cause.

   

  – From the Washington Post article: These College Protesters are Demanding the Media Who Cover Them Support Their Cause

  In yesterday’s post, Not a Safe Space – Canadian University Suspends Yoga Class After Students Become Offended, I explained how those most responsible for the almost inconceivable authoritarian idiocy spreading across college campuses are not the students themselves, but their spineless and inept administrators.

  These kids are more or less acting like Wall Street financiers after the bailouts. After the bankers were provided with trillions of dollars in backstops and no one went to jail for destroying the economy, they immediately paid themselves record bonuses a year after the worst of the crisis, and are now once again thieving and pillaging at will.

  Why? Because no one is held accountable, the incentives are in place to steal. Similarly, no adults are holding these out of control child-fascists accountable for their despicable behavior. As such, these tyrants-in-training are getting more out of control every day, and getting away with it. Thank you college administrators.

  In the latest example of the above, I present to you the stupidity of Smith College.

  From the Washington Post:

  Students and faculty at Smith College apparently didn’t want a repeat of that ugly episode at the University of Missouri, where a communications professor was filmed calling for the forcible removal of a journalist from an on-campus demonstration earlier this month.

   

  So when they held a sit-in Wednesday to protest racial discrimination, their solution was to not let in members of the media in the first place — unless said media members pledged allegiance to the cause.

  To be fair, it seems they’ve simply learned a lesson from the U.S. military when it comes to propaganda “reporting” from war zones. This remarkable passage comes from MassLive.com, whose reporter was turned away:

  Alyssa Mata-Flores, a 21-year-old Smith College senior and one of the sit-in’s organizers, explained that the rule was born from “the way that media has historically painted radical black movements as violent and aggressive.”

   

  “We are asking that any journalists or press that cover our story participate and articulate their solidarity with black students and students of color,” she told MassLive in the Student Center Wednesday. “By taking a neutral stance, journalists and media are being complacent in our fight.”

   

  Smith organizers said journalists were welcome to cover the event if they agreed to explicitly state they supported the movement in their articles.

   

  Wait, it gets better/worse:

   

  Stacey Schmeidel, Smith College director of media relations, said the college supports the activists’ ban on media.

   

  “It’s a student event, and we respect their right to do that, although it poses problems for the traditional media,” Shmeidel said.

   

  Schmeidel went on to say that the college reserves the right to remove reporters from the Student Center because it’s a private campus.

   

  Smith is, indeed, a private school — $63,950 per year worth of private school — which is a relevant differentiator from the state-run University of Missouri. And if students and faculty need to discuss sensitive issues behind closed doors, they’re certainly entitled to do so.

   

  But to welcome some reporters and not others — and to make support for the cause the price of admission — is to disregard not only the fundamental principles of journalism but also the school itself (though Smith is the place where the student newspaper censored “crazy” in a published transcript last year, calling it an “ableist slur”).

  Incredibly, the only lesson college students and administrators learned from the Mizzou incident where a faculty member asked for “muscle” to remove a reporter from public space, was to ban neutral reporters altogether.

  Meanwhile, we recently learned that 40% of millennials are in favor of discarding free speech. If these kids represent the future of America, we are in deep, deep trouble.

  

  

  

  

  

• Goldman Finally Looks At The Freight Charts, Raises Alarm About The "Broader Health Of The US Economy"

  In the first days of November, we showed that global trade is in freefall with “China Container Freight At Record Low; Rail Traffic Tumbles, Trucking Slows Down.” Now, Goldman has finally caught up, and writes that “indicators of freight activity—the volume of goods carried by truck, rail, air or ship—have slowed recently, raising concerns about the broader health of the US economy.“

  This is how Goldman finally admits what we have been saying for the past two years: the biggest threat to the US, and global, economy is the gradual and ever faster slowdown in trade, something which central banks are incapable of “printing.”

  Freight transportation data can be a useful gauge of activity in the goods-producing sectors of the economy, for obvious reasons. Products need to move from manufacturers to end consumers, and will be carried along the way by at least one of the four modes of transportation—truck, rail, air or ship—and frequently by multiple types (“intermodal” transport). The economic indicators measuring US transportation activity are also relatively transparent—counting things like the number of containers or rail cars—and in some cases quite timely. They are therefore popular among investors. Recently some of these measures have slowed, raising concerns about the broader health of the US economy.

  And here is Goldman doing its best recap of our charting, using its own words:

  • Railcar traffic, for example, has been notably weak, falling by about 3% from a year earlier based on monthly data (Exhibit 1, left panel).

  

  • Data on trucking activity—which is nearly four times as large as rail activity by the dollar value of gross output—offers a similar message. The American Trucking Association’s truck tonnage index showed an impressive recovery after bottoming in early 2009, but growth slowed over the last year (Exhibit 2). Year-over-year growth was +1.7% as of Q3, down from +4.2% in Q4 2014 and +9.0% in Q4 2013.

  

  • Air freight volumes as well as port traffic have also slowed, and in both cases the data hint that weakness in foreign growth is playing a role. Exhibit 3 shows the cargo “ton-miles” (i.e. 2,000 pounds/907 kilograms of cargo transported one mile) of US air carriers, divided into domestic and international operations. Total cargo ton-miles have declined by about 3% over the last year, with a 6% decline in international shipments but a 1% gain in domestic traffic (albeit from a low base).

  

  • The largest ports in the US report monthly on their volumes of loaded inbound and outbound shipping containers—the ubiquitous symbol of global trade. In the year to October, total loaded container traffic fell 1.2%, reflecting a 0.6% gain in inbound containers and a 4.3% decline in outbound containers (Exhibit 4). A large portion of outbound port activity reflects trade with Asia (70-90% for the largest West Coast ports and about 35% for the Port of New York/New Jersey, the largest on the East Coast), and the observed weakness may therefore reflect tepid demand for US goods from the region.

  

  We dread to imagine what would happen to Goldman’s economists if they were to find out that a third of all containers shipped from Long Beach harbor are empty…

  Finally Goldman’s attempt to put a silver lining on what is clear collapse in global trade:

  • The relative performance of different aspects of freight volumes mirrors what we see in other statistics, with greater weakness in areas closely related to commodities, heavy industry and exports, and somewhat better activity for traffic more associated with consumer goods (e.g. intermodal rail volumes) and imports. The contrast in the airline industry is particularly striking: while cargo ton-miles are down 3% year-over-year, passenger ton-miles are up about 5% over the same period. Sluggish freight volumes are therefore more confirmation that activity in goods-producing sectors of the economy remains soft.

  

   

  In summary, a perfect time for the Fed to hike rates.

  

  

  

  

• Russia Deploys Warship Off Syrian Coast To "Destroy Any Threats To Russian Planes"

  Despite demands from France's Hollande, America's Obama, and NATO's Stoltenberg that this situation not esclate, it appears Putin is not taking the shooting down of a fighter jet lying down. The seemingly cagey confirmation by NATO and Obama of Turkey's claims that Russia invaded its airspace has been rebuked by Russia which claims the Hmeimim airbase radar shows the attacking Turkish plane violating Syrian airspace. In response, Russia is moving a Cruiser 'Moskva' off the coast to strengthen air-defenses – just as French and US carriers are on their way.

  Here is The Turkish version mapping of the flight paths.

  

   

  Russia claims otherwise:

  • HMEIMIM AIRBASE'S RADAR SYSTEM RECORDS VIOLATION OF SYRIAN AIRSPACE BY ATTACKING TURKISH WARPLANE – RUSSIAN DEFENSE MINISTRY

  And is escalating:

  • RUSSIAN 'MOSKVA" CRUISER TO GO TO AREA IN COASTAL LATAKIA TO STRENGTHEN AIR DEFENSE IN SYRIA – RUSSIAN DEFENSE MINISTRY

  The Missile cruiser in question:

  

  The reason for the deployment:

  • RUSSIAN ARMED FORCES GENERAL STAFF: NONE OF OUR PARTNERS, COUNTRIES FIGHTING ISIL HAVE EVER TOLD US THAT SO-CALLED MODERATE OPPOSITION UNITS WERE IN AREA WHERE SU-24 DOWNED
  • NO ATTEMPTS REGISTERED ON PART OF TURKISH PLANE TO GET IN TOUCH OR ESTABLISH VISUAL CONTACT WITH OUR CREW VIA OBJECTVE CONTROL DEVICES – RUSSIAN DEFENSE MINSTRY
  • WARSHIP TO DESTROY ANY THREATS SEEN TO RUSSIAN PLANES: IFX

  Specifically, as RT reports, the steps announced by Russian top brass as the following:Three steps as announced by top brass:

  1. Each and every strike groups’ operation is to be carried out under the guise of fighter jets
  2. Air defense to be boosted with the deployment of Moskva guided missile cruiser off Latakia coast with an aim to destroy any target that may pose danger
  3. Military contacts with Turkey to be suspended

  Just like the downing of flight MH17 over Ukraine, it has quickly become a case of "he said, she said":

  Rudskoy said the Russian warplane did not violate Turkish airspace. Additionally, according to the Hmeymim airfield radar, it was the Turkish fighter jet that actually entered Syrian airspace as it attacked the Russian bomber. The Turkish fighter jet made no attempts to contact Russian pilots before attacking the bomber, Rudskoy added.

  “We assume the strike was carried out with a close range missile with an infra-red seeker,” Rudskoy said. “The Turkish jet made no attempts to communicate or establish visual contact with our crew that our equipment would have registered. The Su-24 was hit by a missile over Syria’s territory."

  Sergey Rudskoy, a top official with the Russian General Staff, condemned the attack on the Russian bomber in Syrian airspace by a Turkish fighter jet as “a severe violation of international law”. He stressed that the Su-24 was downed over the Syrian territory. The crash site was four kilometers away from the Turkish border, he said.

  As a result, Russia now plans to implement new measures aimed at strengthening the security of the country’s air base in Syria and in particular to bolster air defense. Russian guided missile cruiser Moskva, equipped with the ‘Fort’ air defense system, similar to the S-300, will be deployed off Latakia province's coast.

  "We warn that every target posing a potential threat will be destroyed,” lieutenant general Sergey Rudskoy said during the briefing.

  “All military contacts with Turkey will be suspended,” he added.

  Furthermore, as the Russian Ministry of Defense explained, going forward, any Turkish plane that enters Syrian airspace will be fair game.

  #SYRIA #Rudskoy Russian Defence Ministry warns that all the potentially dangerous targets will be destroyed

  — ?????????? ?????? (@mod_russia) November 24, 2015

  And again, all this is happening as both the French carrier de Gaulle and the US carrier CVN-75 USS Harry S. Truman are on their way to a very dangerous rendezvous off the Syrian coast.

  

  So just as we warned in September, the situation has become a complete rerun of the 2013 Syria "Mediterranean" showdown, with full naval engagement by all parties, except this time the tensions are significantly escalated, a Russian fighter jet has just been taken down, US and French aircraft carriers are arriving in weeks, and Putin will not hestitate to go as far as he has to in order to save face.

  

  

  

  

  

• Chicago Mayor Emanuel Urges "Remain Peaceful" As Protests Begin After Video Shows Cop Killing Black Teen

  Latest update…

  Peaceful Protests have begun…

  

  

  

  

   

  Turning Physical…

  Group of protesters trying to cross bridge east of Michigan on Balbo. #LaquanMcDonald pic.twitter.com/cj9UGW8w8B

  — Justin Allen (@Allen_Justin) November 25, 2015

   

  Scene has calmed down now. Several detained. Group yelling "let them go" #LaquanMcDonald pic.twitter.com/uoun5JkbkU

  — Justin Allen (@Allen_Justin) November 25, 2015

   

  

  Video…

   

  Onward down Roosevelt #LaquanMcDonald pic.twitter.com/2DvQTcj9JA

  — Dawn Rhodes (@rhodes_dawn) November 25, 2015

   

  *  *  *

  Just as we warned earlier..

  With the release of this video, we suggest anyone living in and around Chicago 'brace' for potential social unrest. The Chicago Police Department has released video footage of the officer-involved shooting of 17-year-old Laquan McDonald, who was struck 16 times during a confrontation with officers.

  The dashcam video, described by Cook County State’s Attorney Anita Alvarez says that this video is "graphic, violent, and chilling," is expected to provoke a very strong emotional reaction from Chicago’s very large African-American community.

  As John Kass, a columnist for the Chicago Tribune, said, the video "could tear Chicago apart," which is why Mayor Emanuel has already urged Chicagoans, "it is fine to be passionate, but it is essential to remain peaceful."

  The following comes from CNN…

  Laquan McDonald was walking down a Chicago street the night of October 20, 2014, carrying a four-inch knife and behaving erratically, authorities say.

   

  A police officer told him to drop the knife. He didn’t listen, and the officer fired on him out of fear for his life, according to a police union spokesman.

   

  McDonald, 17, died. He was shot 16 times.

  RT @BlueDuPage 16 rounds in 6 seconds. It was an execution. https://t.co/BNlRhi9Bt4 #tcot #p2 pic.twitter.com/TVlWLUId6I

  — Karen (@KarenRegis) November 25, 2015

  Now, more than a year later, the public will be able to see what happened.

  Warning: this video is graphic (the confrontation begins around 5:00)

  *  *  *

  As RT reports, Chicago Mayor Rahm Emanuel urged calm as City Hall got set to release police dash cam footage from the shooting incident, which occurred in October 2014. During the incident, 37-year-old Jason Van Dyke, a white officer, shot and killed McDonald, an African-American teen.

  “I understand people will be upset and want to protest when they see this video,” Emanuel told reporters during a Tuesday afternoon press conference.

   

  Emanuel cited the McDonald family, saying, “They have asked for calm, and for those who do protest to do so peacefully.”

   

  “It is fine to be passionate, but it is essential to remain peaceful,” Emanuel added.

  Earlier in the day, Van Dyke became the first on-duty Chicago officer to be charged with first-degree murder. He was ordered held without bail at a hearing. He has been placed on a "no pay" status by the department. As Michael Snyder adds,

  Over the past few years, Trayvon Martin, Michael Brown and Freddie Gray have all become household names because of the way that they died, and now it looks like Laquan McDonald’s name will be added to that list. But the situation in Chicago is potentially even more volatile what we witnessed in either Ferguson or Baltimore.

   

  More than a million African-Americans live in the Chicago metropolitan area, and the crime rate in the city has already been skyrocketing. In fact, it is being projected that Chicago’s murder rate will increase by 20 percent in 2015. This is a city that is always living on the edge of chaos, and now the case of Laquan McDonald could be the spark that sets Chicago ablaze.

   

  After everything that has happened over the past few years, the last thing that we need is another incident that will make racial tensions in this country even worse. Unfortunately, that appears to be exactly what we are going to get.

  

  

  

  

  

• "What's The Worst That Could Happen?"

  Let them in…

   

  

   

  Source: Townhall.com

  

  

  

  

  

• No End In Sight For Commodity Carnage As Chinese Fear Fed Hike Blowback

  Today's 1.75% rally in copper (ripping vertical at the US open) broke a record 14-day losing-streak after COMEX futures tested towards a '1' handle numerous times for the first time since March 2009 (when the S&P 500 traded around 800). The metals market appears to be increasingly pricing concurrent and/or future weakness in China’s old economy, according to Goldman, as China futures open interest surges, but discussions at the 2015 Shanghai CESCO conference last week exposed the extremely bearish views of Chinese market participants regarding Chinese metals demand in 2016 (notably sentiment was worse than that expressed by investors outside of China) specifically citing a Fed rate hike before year-end as a further bearish factor for metals.

   

  Today's "bounce" broke the losing streak…

  

   

  This was the longest losing streak on record (based on Bloomberg data) and is the worst 14-day loss (down 13.8%) since October 2011…

  

   

  The last time copper traded here, S&P 500 was around 800…

  

   

  And as we previously noted, Goldman Sachs warns that rising SHFE open interest may flag China demand deterioration

  Metals prices have declined by 12%-17% since late October. Over this period, China’s economic data for October has disappointed, the US dollar has strengthened on a trade weighted basis, and the broader commodity complex has moved lower, including most notably, energy prices. 

   

  What has also occurred since late October has been an eye catching rise in Shanghai Futures Exchange open interest across the metals complex – for copper, it has been the largest increase in Shanghai open interest in 12 months – since the 1Q15 collapse in Chinese metals demand.

   

  

   

  In our view, this development raises a red flag regarding ongoing and near term activity in China’s ‘old economy’ and metals demand growth, as measured by our GS China Metals Consumption Index (see chart below).  Indeed, over the past five years, periods of rising SHFE open interest and falling metals prices have been associated with concurrent or imminent weakening in China’s commodity intensive ‘old economy’. 

   

  Meanwhile, though LME and Comex net speculative positioning has also declined over the period, it remains well above its August 2015 lows. 

   

  Overall, the metals market appears to be increasingly pricing concurrent and/or future weakness in China’s old economy, and related metals demand. To the extent that the metals market positioning predicts ongoing and potential future China growth weakness – since mid-2011 SHFE open interest has given a correct bearish signal on four out of five occasions – the latest metal market developments have bearish implications for China’s upcoming activity data releases and asset classes dependent on this data.

  However, it is anything but close to being over. As Goldman notes today, China-led demand concerns point to further downside risk

  Our discussions with market participants at the 2015 Shanghai CESCO Conference last week highlighted the extremely bearish views of Chinese market participants regarding Chinese metals demand in 2016. We continue to see that the risks surrounding our metals demand and price forecasts, in particular our Chinese demand forecasts, are skewed to the downside.

   

  Chinese participants were generally at least as concerned as us, if not more so. Participants generally anticipated no improvement in Chinese activity at least before 2Q2016, with persistent weakness expected in property and manufacturing in particular. Participants saw the potential Federal Reserve rate hike before year-end as a further bearish factor for metals.

   

  Demand weakness saw 2016 annual contract premiums decline

   

  Conference participants are most worried about the Chinese demand outlook. We view the slashed 2016 copper premium by Codelco ($98/t for 2016 term shipments from $133/t in 2015) as further proof of demand weakness from China’s ‘old economy’. There was general belief from Chinese participants that the slowdown of credit growth and currency depreciation (via less financing deals) would place further downside risks on Chinese copper demand growth in 2016 (c.0-1% refined growth was considered realistic vs. our base case of 3%). Were this lower Chinese growth to materialize, our projection for a c.500ktpa copper market surplus through 2019 would rise to a c.700-800ktpa surplus, all else equal.

   

  Sharp depreciation or devaluation present further downside risks

   

  While China’ SDR inclusion was not at the top of discussions, the potential for sharp RMB/USD depreciation or devaluation in 2016 is high according to participants. We believe that the timing and range of deprecation is a significant risk to metals prices in the next 12 months, while placing renewed downside risk to pricing in the LME metals complex, as the overall marginal cost of Chinese base metals production would be lower, in dollar terms, and for aluminium particularly.

   

  Copper-aluminium substitution underestimated

   

  There was some discussion about copper-aluminium substitution in China. From the topend users (large SOEs) we believe the impact is generally limited given copper’s high quality in terms of electricity conduction and those top end-users see the current copper-aluminium price ratio (3x) not significantly economic. However, substitution at lower-end users could be substantial and the actual substituted amount is likely more than generally known (participants believe it could be between c.600kt-1mt in 2015), which would be a potential negative factor for copper pricing and leaves risks surrounding our forecasts as skewed to the downside.

   

  Zinc still the least bearish overall

   

  Given Glencore’s zinc output cuts and 500kt aligned production cuts from Chinese smelters, which is roughly 7% of global supply, the zinc supply and demand balance is set to tighten. However, overhang of the stockpile in the form of both concentrates and refined zinc and ongoing demand weakness left most market participants we spoke with negative on zinc prices.

   

  Chinese aluminium cuts are not significant

   

  The price sell-off of Chinese aluminium prices since late October was driven by the bearish supply dynamic in aluminium and the surge in open interest on the SHFE. Further cost reduction via government subsidies and power tariff cuts is making sufficient Chinese cuts more difficult and shifting burden to ex-China producers. We believe aluminium will stay lower for longer and see the risks surrounding our price forecasts as increasingly skewed to the downside.

   

  Chinese market participants turn bearish on nickel

   

  Given increasing concerns over Chinese stainless production in 2016 and ramp-up of Indonesian ferronickel supply, participants that we talked with expect the nickel market to remain loose in addition to the current overhang of nickel stockpiles. Even if Chinese NPI and refined nickel production continues to decline through 2016, high stocks and pressure on currency depreciation suggest that nickel is a risky long trade with both demand and supply deteriorating.

  *  *  *

  Does this trend look over?

  

  

  

  

  

  

• US Backed "Rebels" Execute Russian Pilots While Parachuting, Caught On Tape

  If Putin was angry when Turkey shot down a Russian plane, which may or may not have crossed Turkish territory – reports on both sides are conflicting – he will be absolutely livid to learn that, according to Turkey’s Dogan News, the Russian pilots who had parachuted in an attempt to save their lives after the plane was shot down, had been executed while parachuting down by local rebels, which considering the video released earlier belonged to the Free Syrian Army, are same “rebels” who are funded directly by the CIA.

  Both Russian pilots shot dead while parachuting down says Dogan News Agency citing Turkmen opposition commander

  — Fercan Yalinkilic (@FercanY) November 24, 2015

  And this:

  DHA Muhabirinin görü?tü?ü Türkmen 2’nci Sahil Tümen Komutan Yard?mc?s? Alpaslan Çelik: Pilotlardan ikisini de para?ütle inerken vurduk

  — Damla Do?an (@dmladogan) November 24, 2015

  As Telegraph points out, the above tweet is from CNN Turk’s Foreign Editor who tweeted that the Turkmen rebels DHA spoke to said: “We hit at the two pilots after they parachuted.”

  This, as many have already pointed out, is a war crime.

  The only question is whether this, together with the provocative action by Turkey which many can see being an act of war, will be deemed as such by Putin.

  The parachuters can be seen in the second half of the clip below:

   

  For those who missed it, here is the video uploaded by the Free Syrian Army of at least one dead parachuter.

   

  And here is the video of rebels opening fire on Russian pilots:

  As one commentator notes, in the video one person shouts over the gun fire, “don’t fire. Let’s take them prisoners. Don’t fire. Prisoners” but it was not meant to be.

  Reuters confirms the pilots’ death: Turkmen forces in Syria shot dead the two pilots of a Russian jet downed by Turkish warplanes near the border with Turkey on Tuesday as they descended with parachutes, a deputy commander of a Turkmen brigade told reporters.

  “Both of the pilots were retrieved dead. Our comrades opened fire into the air and they died in the air,” Alpaslan Celik, a deputy commander in a Syrian Turkmen brigade said near the Syrian village of Yamadi as he held what he said was a piece of a pilot’s parachute.

  “Our units, who received the information that the two pilots were alive, are working to get them from opposition rebels safely,” the official said.

  The Russian General Staff said that, according to preliminary data, one of the Su-24 pilots has died after being fired at from the ground.

  * * *

  According to the Geneva Convention attacks on persons parachuting from an aircraft in distress are stricly banned: if the person in distress is not acting in a hostile manner, he is to be given the chance to surrender after reaching the ground.

  

  

  

  

  

• It's A Fake, Fake, Fake America

  Submitted by The Burning Platform contributor Stucky

  Remember the hilarious 1960s movie, “It’s a Mad Mad Mad World?” Well, we live in a fake fake fake America. Politicians, economists, all MSM talking heads, Big Business, virtually every commercial that has ever aired, preachers, and on and on and on, all have one thing in common. They’re all liars and fake as a three dollar bill.

  

  "Fake", a simple definition: something that is not what it purports to be, a worthless imitation passed off as genuine; an impostor or charlatan. Example: “American society is extraordinarily fake; filled with lies, fraud, facades, mirages, deception, disinformation, misinformation, propaganda and brainwashing.”

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  1)– FAKE BODIES

  

  When was the last time a woman had to wonder if that twelve inch python was real, or a Silicone Imposter? Never! Concerning bodies, women are so darned deceptive! Look at the cosmetics aisle at your supermarket. There are ten thousand items all designed to make a woman look like she’s not … and adding insult to injury, it takes her an hour to look not real. I get out of bed and I’m ready in ten minutes …. on a slow morning. I believe in pre-marital steam baths. You men want a GOOD look at your woman before getting married in order to combat her false advertising. Fake boobies, fake eyelashes, fake eyebrows, fake nails … ya gotta know what you’re signing up for. But, oh yeah baby — she wants a real man!! One last thing, men don’t fake orgasms.

   

  2)– FAKE NEWS

  

  “News” is nothing more than corporate infotainment. CNN even last year stated they were primarily an “entertainment company”. All news is watered-down garbage, revealed in sixty second soundbites, usually read from the same exact script (regardless of channel) by bimbos and mimbos who really aren’t even qualified to serve french fries at McShits. You will NEVER find things of real significance, nor truly unbiased, nor in-depth coverage of anything important. News executives view you as an IDIOT. Really. Six corporations control the vast majority of “news” in America, and they will slice, dice, select, censor, manipulate, faker-ize, every last sound bite — and you WILL like it! Heck, most American morons will even believe they’re being told the truth.

   

  3)– FAKE JOURNALISM

  Naturally, given Fake News, it logically follows that we are inundated with Fake Journalists. There are zero “investigative journalists” on television today. Please watch at least a couple minutes of the above video. There are only three qualifications required to be a teevee news “reporter”; 1) can you read from a teleprompter?, 2) can you make the appropriate faces – sad, happy, puzzled, etc. — as necessary just seconds apart?, and 3) can you ad-lib amazingly dumb-ass comments at the end of a story …”Yes, Wolfdick, that’s just terrible that 503 Christian babies were roasted alive in Saudi Arabia. So sad.”. Accompanied, of course, by a fake sad face.

   

  4)– FAKE CORPORATE ADVERTISING

  

  Every commercial is born in a lie! Did you know that BP loves the Gulf Coast? That Exxon loves pristine Alaskan waters? That GE brings good things to life? That doctors prefer to smoke Camels? That most dentists brush with Crest? That the beautiful and glowing girl joyfully prancing through a field of flowers with her puppy beside her is so damn happy because she found a cream to cure her acne? (Even though the side effects are getting the shits, leprosy, growing an extra boob, or even death.) And if that’s not bad enough, these Soulless Creatures From Hell now have the same rights of a legal person, but with none of the responsibilities.

  Advertising “works” because advertisers, as depicted in the picture above, think you’re retarded. And you just might be … if you watch commercials. George Carlin said it best; — “Quality. Value. Style, Service. Selection. Convenience. Economy. Savings. Performance. Experience. Hospitality. Low rates, friendly service, name brands, easy terms, affordable prices, and a money-back guarantee. Free installation, free admission, free appraisal, free alterations, free delivery, free estimates, free home trial, and free parking. No cash? No problem! No kidding! No fuss, no muss. No risk, no obligation, no red tape, no down payment, no entry fee, no hidden charges, no purchase necessary, no one will call on you, no payments or interest till September. ….. ‘Bend over just a little farther so we can stick this big advertising dick up your ass a little bit deeper, a little bit deeper, a little bit deeper, you miserable no-good dumbass fucking consumer!’”.

   

  5)– FAKE ENTERTAINMENT & AMUSEMENT

  

  The word ‘amuse’ can be broken down into two parts; “a” meaning to negate, or not – and ‘muse’ meaning “to think”. Literally then, ‘amuse’ means ‘to not think’. And there is absolutely nothing in this world which encourages not-thinking than teevee and movies. Hollywood is a literal cesspool of fakery and superficiality. Nothing is real, all is an illusion. What you look like counts for far more than who you are. Being on the “A list” is more important than what you know. Gucci bags make a woman, not her integrity. Big fake tits and big puffy Botox lips count for far more than a big heart. Then these whores sell their souls peddling endless useless products like Reverse Mortgages and anti-aging creams … where making a buck at your expense is the new American Dream.

  No longer do the time-honored institutions of home, church, school, and neighborhood provide the framework for society’s values and civility. The Boob Tube (a perfect description) is the New Reality, and whoever is running the joint (some say it’s the Jews) are more than happy to titillate, stimulate, pontificate, and fornicate your mind into submission.

  And all of this is approved lock, stock, and barrel by your government. It only took the Germans until 1935 before they produced their massively successful propaganda piece “Triumph Of The Will”. The Americans caught on a few years later when Frank Capra produced “Why We Fight” in 1942. Joseph Goebbels and Edward Bernays turned bullshitting and lying into a real science. Our own Liar-In-Chief, as all governments do, have no better liar friend than television and film, especially when it comes to making war … praise the Lord, pass the ammo, and make a Patriotic War Commercial.

  https://en.wikipedia.org/wiki/Triumph_of_the_Will

  https://en.wikipedia.org/wiki/Why_We_Fight

   

  6)– FAKE FOOD

  

  Recipe #1: Whole Wheat Flour, Water, Eggs, Tomatoes, Butter, Wine, Parmesan, Garlic, Onion, Rosemary, Basil, Pepper, Salt.

  Recipe #2: Water, Tomato Paste, Flour, Calcium Phosphate, Niacin, Ferrous Sulfate, Thiamine Mononitrate, Riboflavin, Folic Acid, High Fructose Corn Syrup, Salt, Enzyme Modified Cheddar Cheese, Sugar, Calcium Chloride, Flavorings, Disodium Phosphate, Vegetable Oil, Onion Extract, Thyme Oil, Laurel Leaf Oil, Cottonseed Oil, Vitamin D, Food Colorings, Potassium Chloride.

  Which of the above recipes would you rather eat? Well, you’re not getting #1 because that’s my mom’s basic recipe ingredients for spaghetti and tomato sauce (yes, she makes her own pasta). You’re stuck with crapola recipe #2; Campbell’s Spaghetti-Oh. (I believe the “Oh” part in the name is Campbell’s abbreviation for “Oh My God, we can’t believe mothers will feed this shit to their children!”)

  GMOs, chemical concoctions, carcinogen inducing preservatives, synthetic everything, artificial everything, over-refined, over-processed, over-cooked, sugarized, and denuded of almost all natural vitamins, minerals, and enzymes …. that’s your typical American diet. It produces the Fattest Asses in the history of humanity. And, death. And Americans simply don’t care. Otherwise, companies like Campbell (mm-mm-shit!) and McDonalds (McShits) would go out of business.

   

  7)– FAKE MEDICINE

  

  The fact of the matter is that our entire medical system is based on masking symptoms, “managing” illness, treating us as pin-cushions with all their ineffective shots, and shoving one cure-all pill after pill after pill down our gullets.  Preventing illness is for pussies. This does not constitute true healing. It is fakery, and our bodies are the victim. And don’t even get me started on the billions of psychotropic pills consumed by our depressed asses. When Big Pharma has no idea how or why their make-happy brain pills actually work — then, what you have dear reader, is massive fakery such as the world has never seen.

  Sure, American Medicine does save lives. They gave my mom a new hip, which has made her life immeasurably better. They cured my dad of his colon issues, or he would be dead. Thank you! But, that does change the fact that so very very much of it is Puke Fakery … and, deadly. The statistics are staggeringly depressing; — 106,000 deaths annually from FDA-approved correctly prescribed medicines, 58,000 deaths from unnecessary procedures, 80,000 deaths from infections acquired in hospitals, 98,000 deaths from medical error and on and on. When did going to a hospital become a death sentence?

   

  8)– FAKE SCIENCE

  

  “In the end, science offers us the only way out of politics. And if we allow science to become politicized, then we are lost. We will enter the Internet version of the Dark Ages, an era of shifting fears and wild prejudices transmitted to people who don’t know any better. That’s not a good future for the human race.” ———- Michael Crichton

  It pains me to put science in this list because science ought to be mankind’s refuge for logical reasoning, and even Truth. But, alas, science has been politicized to a point where it is no better than the religions it once replaced as the arbiters of “official” wisdom and knowledge.

  For most of mankind’s recorded history religion dominated all thought. The rare “heretic” aside, pretty much everyone believed what their religious leaders told them to believe. Those who dared to challenge these religious leaders were soon dead …. or, regretted not being dead.   In fact, it was the early scientists who were persecuted as heretics. Earth wasn’t flat. Earth wasn’t the center of the solar system. Earth was vastly ancient. Earth’s landmasses shifted. And these scientists paid a heavy price for telling the Truth. But, eventually mankind made the gradual progression from profound ignorance to a certain degree of enlightenment.

  And then something weird happened. Perhaps it was around 1859 when Darwin published “On The Origin Of Species”. Science, instead of searching for truth, became Truth. Those formerly accused of heresy because Accusers themselves. In the 150 years since Darwin, science has become every bit as entrenched as religion once was, and every bit as belligerent and vindictive against any who dare to question their right to absolute correctness in all that they utter or pronounce.

  And in the forty or so years since the advent of the Internet, while science has not been able to dislodge religion from the masses, it has done everything in its power to silence those voices in whatever manner possible … via ridicule, insults, dismissal, ignoring, and even producing massive instructional seminars to train “skeptics” to ruthlessly “defend the faith” against any and all who challenge them. This cannot go on indefinitely.

  The End Of Science is upon us thanks to the advent of a “person” known as “The Corporation”. Science has been hijacked by corporate junk science, which pretends to be real science but is actually highly fraudulent. Specifically, I’m talking about the near endless amounts of “scientific studies” which are put out by major corporations with a definite agenda in mind – usually establishing a fake scientific basis of “safety” for their products, whether they be vaccines, psychotropic drugs, mobile phones, GMOs, tobacco, fluoride, soda, “sugar is sugar” regardless of its forms, buy a Prius and save the earth from Globull Warming (!!) etc. etc. …. all of it one huge steaming pile of shit. They have a huge arsenal of weaponry including, but not limited to; contaminating tests, alerting treatment plans, misusing statistics, abusing double blind studies, selecting patients or data favorable to their specific agenda, bribing peer-review groups, controlling the publication of results, controlling funding, hiding the funders, and of course, the old stand-by when all else fails, falsifying the data.

  Some of the above may seem obvious. But, wait! There’s more! The most deviously insidious aspect of the decline of science has to do with your children. The brainwashing process that passes for education around the world is controlled by science! Hopefully, you have a plan in place to rescue your children from these un-truth tellers.

   

  9)– FAKE RELIGION

  

  Of course, I’m not talking about your religion! Your religion is … The Truth!

  Now that we have that established, let’s look at this fakeness logically. In terms of monotheistic religions it is abundantly logical (how can it not be?) that only one religion can be correct, and all the other religions are fake. Polytheism isn’t in a better position, as they all have One Big Kahuna. The Greeks have Zeus. The Norse have Odin. The Hindus have Brahma. (Or is it Shiva, or Vishnu?) The point is that they have one god of many which is better than all their other gods, and better than all the gods of other peoples. They can’t all be right. And then of course, you have your animistic religions where god is in everything; in the sky, in the buffalo, in a flower, or in your Fruit Loops cereal. Fruit Loops quickly turn into poop, so is your poop also god?

  Pick whichever religion suits your belief system. I don’t care. Just realize that you become extremely annoying and arrogant when you claim your religion is the right one because your holy book says so. Don’t you realize that every other person in the world with a different belief says the same exact thing?? Aside from circular reasoning – (meaning, ‘my religion is true because my religious book says so’) – I have yet to meet a human being who can give a reasonable answer as to why their religion is true, and all others are false. Not one. Here’s one thing my sixty years of living has convinced me of; that there are billions of people following any of thousands of religions, and logically all but one (if even that) are full of craptastic fakery. I’m sure some of you will set me straight on what is The One True Religion. To which I say, “AAARRRGGHHHH!”.

   

  10)– FAKE EDUCATION

  

  Let’s take a quick look etymologically at the word ‘education’. It is derived from the Latin words “e” or “ex” meaning “out of”, and “ducare” meaning to lead or draw. So the true meaning of “education” is to draw out the talent inside each of us. The opposite of education is “indoctrination”, which is all about putting into someone’s mind dogma, belief systems or doctrines.

  Our fake education of indoctrination is based on something set up the elite in the early 20th century known as the “Prussian Industrial School Model”. (see above pic)

  Horace Mann, credited as the father of the American public school system, studied a wide variety of educational models before implementing the Prussian system designed by Fredrick the Great. King Frederick created a system that was engineered to teach obedience and solidify his control. Focusing on following directions, basic skills, and conformity, he sought to indoctrinate the nation from an early age. Isolating students in rows and teachers in individual classrooms fashioned a strict hierarchy—intentionally fostering fear and loneliness. Mann chose the Prussian model, with its depersonalized learning and strict hierarchy of power, because it was the cheapest and easiest way to teach literacy on a large scale. Its primary purpose was to construct an industrial schooling model designed to produce millions of workers for America?s factories. He wrote in 1917 – “Our schools are, in a sense, factories in which the raw products (children) are to be shaped and fashioned into products to meet the various demands of life.” 

  The belief was that most of America’s students were destined for a life of menial, industrial labor. So, they created a multi-track educational system meant to sort students from an early age. The best and brightest (the elite) were carefully groomed for leadership positions. The rest of the majority were relegated to a monotonous education system of rote learning and task completion. John D. Rockefeller is widely quoted as saying, “I don’t want a nation of thinkers, I want a nation of workers.”

  Our educational system today is still locked into the Prussian-industrial framework of fear, isolation, and monotony. For both students and teachers, procedure is emphasized over innovation, uniformity over individual expression, and control over empowerment.

  The bottom line is this; when the USA ranks 24^th in the world in literacy, 35^th in mathematics, and 27^th in science then it is safe to say whatever the hell we’re teaching these grade school students is fake fake fake.

   

  11)– FAKE MONEY

  

  I’m probably preaching to the choir here. Not to mention that I am not all that astute when it comes to financial topics. Not to mention that most people have better things to do than musing whether or not money is fake. Not to mention that we need money, or at least what it represents. Without money, we cannot put food on the table, or pay the rent, or go to the doctor, or invest in our children’s future, and so on and so on.

  None of that changes a few basic facts. Money is a “fiat” currency. The word fiat means “by government decree”. So, in the most simplistic terms, the dollar gets its value simply because the Government says so. We all know dollars have zero intrinsic value … it is simply cotton and ink. (Today most money isn’t even cotton or paper … it’s just electronic bits and bytes.) Just as every government and empire in human history has failed (as will the American empire), so also do all fiat currencies eventually fail.

  Money must be created by someone, somewhere, because money does not exist in nature–except to the extent that a natural item like gold or salt might be assigned the properties of money. Even the Federal Reserve tells us that — “banks actually create money when they lend it“.  In other words, the fractional reserve system essentially creates money out of thin air. 

  And when banks no longer issue credit and create money from nothing they will resort to looting. Looting is the only way left for the Western financial system to make money. In pursuit of short-term profits western corporations, encouraged and coerced by the financial sector, have moved offshore … certainly manufacturing, but even professional skills such as information technology and software engineering. All that remains for the West are highly leveraged derivative bets and looting. Ultimately, the money system is about the control of humanity.

  This rigged money system is worse than fake … it’s a scam. How this system has survived for as long as it has, and how it seems to not only defy death, but is seemingly thriving beyond all rational explanation …well, that’s above my paygrade. I suspect it has something to do with the fact that literally everyone in this game is playing along. Pretending that it’s all legit. Pretending that it can go on forever.

  It’s almost like a Fairy Tale story where everyone lives happily “forever and ever”. But, as Abraham Lincoln said, you can’t fool all the people all the time forever. Here’s my only prediction in this post; someday, probably soon, this game will stop. Someone will have to tell the Emperor he’s not wearing any clothes, and the Four Horsemen will visit America.

   

  12)– FAKE FREE MARKETS

  

  Everybody (corporations, you, and government) loves the free market! It goes like this. When the government interferes to dictate what market participants can or cannot do, resources cannot flow to their most efficient use. If people cannot do the things that they find most profitable, they lose the incentive to invest and innovate. True competition will reign with corporations battling it out to provide their goods and services to rational, all knowing consumers. Corporations who provided a good or service which was not wanted (due to price, demand, quality, etc.) would simply fail and those who met consumer wants would win. Too bad that’s all a load of crap.

  Corporations HATE free markets! A truly free market is a perfectly competitive market … which means that whatever you have to sell in that market, so does your competition … which means price war … which means your price gets driven down … which means little or no profit. OOPS!

  Corporations, as a “natural” plan of action will flee perfectly competitive markets like the plague. Corporations crave monopoly, and will fight tooth and nail to get it. The corporation has no reason to apply any kind of ethics whatsoever. Adidas employs child and sweatshop labor in the Far East because it is cheaper than employing people on a living wage, with decent terms and condition. The supposed servant of the people, your government, should be the maker and enforcer of rules necessary to restrain these corporations from such egregious behaviors. Unfortunately, corporations use their vast wealth to buy maximum influence in government. The largest fifty corporations spend more in one year on lobbying government than they spend on taxes.

  YOU don’t really believe in free markets either … at least when it comes to your career. Are you paid more than the minimum wage? If so, why? It’s probably because you have some skill that others don’t have, or is in limited supply. Therefore, you don’t have to bid against every unemployed person in your area to hold your job. In a free market with too many just like you, you are nothing but a commodity worthy of minimum wage, or less. Suddenly, you don’t like free markets! On the other hand, you as a buyer, are every seller’s nightmare. You don’t want there to be just one seller of Christmas trees this holiday season. You want dozens of them … buying a tree for five bucks is your goal. Now you love free markets, but the seller hates them. Here’s the bottom line; people believe in free markets when it’s in their interest, but not when it’s the other way around. Here’s why that matters. The political players in America today who claim to support free markets, don’t. They pick winners and losers. Everything pertaining to “the market” is highly politicized, and the highest bidder wins.

  Government today is involved in “crony capitalism” – whereby government and business are in a predatory partnership that extracts wealth to its own benefit. If you take into account companies and other organizations that are directly or indirectly controlled by the government, it becomes crystal clear that almost all of our economy is in the ‘public’ sphere. The most glaring example of this predatory partnership between government and business is the financial collapse of 2008. Massive government subsidies to prop up failing banks and investment houses were required lest the entire economy be destroyed. A few become enormously wealthy, and the rest of us were flushed down the crapper. A more recent example is how the government willingly destroyed free markets around healthcare (thanks, Obamacare) and vaccines to the benefit its Big Pharma masters, while simultaneously refusing to protect the public against the dangers it was created to guard against.

  Government fools the people into believing they are free market champions with their endless “free trade” agreements –NAFTA, CAFTA, TPP, TTIP and TISA – to name just a few of these vomit inducing laws, for Make Benefit Glorious Nation ‘Murika! These agreements are Orwellian doublespeak for restricted trade agreements — restricted to anyone except giant corporations and whores with a lot of money. Meanwhile, you can spread your ass-cheeks and enjoy your BOHICA (Bend Over Here It Comes Again) Agreement as your jobs continue to be outsourced, your wages decrease, more censorship, you go to jail for bizarre copyright infringement laws, and get hauled into private corporate courts which supplant national sovereignty. You people who believe free markets exist, do you also believe in Unicorn farts?

   

  13)– FAKE WAR ON TERROR

  

  Nothing may be more utterly fake than the fake War On Terror. You can’t have a war on something which is a consequence of war. Wars are fought against countries, but you won’t find on a map a country called Terror. Not to mention that America’s other wars against concepts – the war on poverty, war on drugs, etc. – have been abysmal failures of epic proportions.

  I wish they would just be honest and call it the War On American Freedoms. Terrorism is one of the most deceptive and effective tools of the elite warmongering class to trick people into allowing centralization of control, and allowing Government to pass laws, and encroaching upon rights and grabbing power when it otherwise would not have been able to do so. Look no further than the Patriot Act – a horrendous piece of legislation which gutted the Bill of Rights. It was passed by scared politicians who didn’t read it, and was approved by a scared population who preferred security over liberty … even though Benjamin Franklin said people who succumb to such foolishness deserves neither.

  There is no better example that America isn’t serious about waging a War On Terror than the current conflict in the Middle East with ISIS. ISIS has no Navy, no Air Force, no country, no economy (except the oil they steal) to sustain a war, no ability to manufacture weapons, and their “Army” is a bunch of ragtag goat-fornicators dressed in nightgowns and driving Toyotas. America has a trillion dollar military defense budget and has the most formidable weaponry ever invented by mankind yet we can’t defeat them?? Wait! It’s even worse than that! The USA has been bombing ISIS for the past year, and … and … territory gained by ISIS has increased! If you can’t smell the rotting stench of bull-shittery, then you ought to get your nose checked. Meanwhile, Russia in their first week of bombing destroyed more ISIS equipment, facilities, and personnel than the United States did in the entire previous year. This does not mean that the U.S. military is weaker or less competent than Russia’s. What it does mean, unequivocally without question, is that the USA!USA!USA! simply is not serious about fighting this so-called War On Terror.

  On the other hand, there is one positive note about this War on Terror. And that is that it positively causes absolute terror to sovereign nations across the globe. God help those pitiful nations who come into our cross-hairs under the guise of “national security” — which is nothing more justification by the elite to act under the cloak of secrecy, and engaging in unbridled aggression while invading other sovereign nations. But, national security has absolutely nothing to do with making you more secure.

  As just one example, did you feel more secure when we literally destroyed the sovereign nation of Libya? I didn’t think so. What it does is make the elite more secure (by fattening their bank accounts with enormously lucrative military contracts) and you more insecure (because you give up rights and liberties, and because annihilating countries actually does create more terrorists.) Sleep well in your secure bed tonight. Just try to not have nightmares about all the freedoms you willingly surrendered.

   

  14)– FAKE DEMOCRACY

  

  The United States was meant to be a Republic, not a Democracy.  

  A democracy runs on majority opinion. In other words, a majority can vote to impose its rule on the minority. A republic contains protections of individual and minority rights, so that no matter who is in power, these basic rights can never be infringed.

  Aside from the above technical definitions, in a broader sense people use “democracy” ” to mean a system where the common people have a fair say in public affairs. Representation! Voting! Even if it means voting for your particular choice for dictator. All this is pure unadulterated bovine excrement.

  Do you vote for endless wars? Do you vote for ever increasing taxes so other people can have free shit? Do you vote to have your privacy violated at every turn in this surveillance state? Do you vote to have your local police militarized? Do you vote for the dumbing of your children, aka Common Core? Do you vote to have your speech restricted to “free speech zones”? Do you vote for 100,000 Syrian Muslims to invade immigrate to your neighborhood?

  Do you get the general picture yet? Your voice means absolutely nothing. They don’t care about you and your trifling needs or wants. Complain too much and they’ll put you on a terrorist watch list. NO ONE IS LISTENING TO YOU. The US has been deliberately turned from a constitutional republic into a corporate democracy, and unless there’s a full blown revolution there isn’t a damned thing you can do about it. BOHICA.

   

  15)– FAKE RIGHTS

  

  Do you know how to make a cop or politician laugh their fat asses off? Tell them you believe you have certain unalienable, God-given, inherent human rights according to the Constitution. They love that joke. You may be born free, but you’ll die in the land of the fleeced and the home of the slave at the rate we’re going. Almost every liberty guaranteed in the first ten amendments (Bill Of Rights) is being eroded before your very eyes. Let’s just take a quick glance at three of those amendments.

  1– The 1st Amendment protects speech, religion, assembly and the press. I could easily write another 5,000 word post showing how we’re losing this right. However, let’s just focus on one area; the many things you do which indicate you are a terrorist according to the government. Being labeled a terrorist for exercising your First Amendment rights would certainly be a violation of the First Amendment. Right? Each and every one of the following items have appeared in a news article. You might be a terrorist if;

  — you take steps to protect your privacy, look like a hippy, complain about the taste of your tap water, act like a kid, use social media, reporting or doing journalism (and here and here), have “strange odors” or “bright colored stains on clothes”, speak out against government policies, protesting anything (such as participating in the “Occupy” or “Tea Party” movements), question war, criticize the government’s targeting of innocent civilians with drones, ask questions about pollution, pay cash at an Internet café, ask questions about Wall Street shenanigans, holding gold, stocking up on more than 7 days of food, having bumper stickers saying things like “Know Your Rights Or Lose Them”, investigate factory farming, infringing a copyright, taking pictures or videos, talking to police officers, wear a hoodie, drive a van, writing on a piece of paper, being frustrated with “mainstream ideologies” being a libertarian, liking the Founding Fathers, being a Christian, being anti-tax, anti-regulation or for the gold standard, being “reverent of individual liberty”, being anti-nuclear, believing in “conspiracy theories”, believing that one’s personal and/or national “way of life” is under attack, being anti-abortion, being anti-global, being suspicious of centralized federal authority, survivalism, opposing genetically engineered food, opposing surveillance.

  2– The 2^nd Amendment states that “the right of the people to keep and bear Arms, shall not be infringed.” How is it possible that those simple FOURTEEN WORDS can be so misconstrued by the libtard gun haters? It couldn’t be any clearer if the Founding Fathers wrote – “Guns for people? Fuck Yeah!!”.  

  Just hours after the Umpqua Community College shootings last month Obama said this; — “We know that other countries, in response to one mass shooting, have been able to craft laws that almost eliminate mass shootings. Friends of ours, allies of ours — Great Britain, Australia, countries like ours. So we know there are ways to prevent it.” In other words while not coming out and saying “ban guns”, he wants to make it almost impossible for American citizens to exercise their 2^nd Amendment right. There is no need to debate this issue. There are two kinds of people in America; those who support gun ownership, and those who want them taken away. May the latter group be stricken with pus and boils and itchy groins forever.

  3.– The 4th Amendment prevents unlawful search and seizure: — “The right of the people to be secure in their persons, houses, papers, and effects, against unreasonable searches and seizures, shall not be violated,”.  This one is very simple. When the government SPIES ON EVERYTHING YOU DO … then the 4^th Amendment has been effectively nullified.

  “The National Security Agency’s capability at any time could be turned around on the American people, and no American would have any privacy left, such is the capability to monitor everything: telephone conversations, telegrams, it doesn’t matter. There would be no place to hide.  If a dictator ever took over, the N.S.A. he could enable it to impose total tyranny, and there would be no way to fight back.”

  ——- Sen. Frank Church who chaired the Senate Foreign Relations Committee. He said the above about the NSA …….. way back in 1975!

  For further info on how The Bill Of Rights are being eradicated please read the very excellent article titled—“Americans Have Lost virtually all of Our Constitutional Rights”;

  http://www.washingtonsblog.com/2013/10/americans-have-lost-virtually-all-of-our-constitutional-rights.html

   

  16)– REAL FAMILIES

  

  I want to close on a positive note. In a world of turmoil, despair, uncertainty, and fakeness it is more important than ever to make our families the center of our lives and the top of our priorities. Note that I did not include “friends”. Friends come and go … family, for better or worse, is forever.

  We need to make our homes a place of refuge from the storm, which is increasing in intensity all about us. It is the one place in all the world, perhaps the only place, where fakery can be shelved, and total acceptance of who we are put in its place. Love is eternal so, your highest calling in your life ought to be your family.

  To those who don’t have people in their life right now to love … get a dog.

  

   

  In closing, let me say “thank you” for reading this long article. Lastly, let me ask you to reflect on this question; — “Are you being fake with your family, or real?”

  

  

  

  

  

• Tech Dreck

  Via NorthmanTrader.com,

  It has been said that pigs get fat and hogs get slaughtered. Nothing has been more awe inspiring during 2015 than the massive gains that have been observed in several key tech stocks. With seeming daily record highs in stocks such as $AMZN, $FB and others it is easy to get excited about further tech gains. They never go down after all, or the so the impression goes.

  Yet I urge everyone, bullish or bearish inclined, to have a look at several key charts here as the context paints a very different picture. In recent weeks we’ve pointed to the ever increasing negative divergences in the market (see also technical charts). That goes without saying.

  But it’s more than that. Have a look at the daily $NDX chart:

  

  Not only do we have plenty of negative divergences, but we also just saw the recent rally fail at a key broken trend line going back to 2012.

  Now put this in context of the monthly chart:

  

  Here we find a broken wedge pattern going back to 2007 with recent highs having been made on ever lower participation as evidenced by the $BPCOMPQ. It is notable that this lack of follow through is observed at the levels of the 2000 highs.

  This type of narrowing participation is not new of course and it is precisely the 2000 highs that came with similar negative divergences and weakening participation:

  

  If you recall it was a narrow band of hyper valued and extended stocks that brought about the final highs in March of 2000, hence the negative divergences.

  Well what do we have now? Check the following examples in context of their stretch on the charts:

  

  All of them are either massively extended and/or show negative divergences in their own right. And these are the winners!

  Now none of this means that a crash is imminent or that we can’t make new highs even into year end, however it points to a very diminished risk/reward to the long side as even new highs would print further negative divergences. What would change this picture is if new highs were to be made with a broadening participation of component stocks.

  But if all these divergences mean something, and when they do, investors may find that we haven’t really seen a real correction yet. A look at some basic Fib levels could suggest a very rocky 2016:

  

  Bottom line: Bulls need new highs with broadening participation.

  

  

  

  

  

• Apple Accounted For 20% Of All U.S. Margin Expansion Since 2010 – Why This Matters

  Earlier we explained why Goldman believes that in 2016 the market, which is now about 1% higher than where it closed in 2014, will also go exactly nowhere.

  The reason for this pessimism can be summarized in three bullet points:

  i) bifurcated thematic returns. Goldman thinks that due to divergent monetary policies (Fed tightening vs. ECB and BoJ easing) the USD will strengthen and benefit some stocks and harm others. Some of those impacted the most will be multi-nationals and luxury retail companies (see Tiffany earnings today). Overall, the biggest headwind cited by companies in Q3 has been the strong dollar – expect this to continue and to further depress revenues, and thus earnings.

  ii) higher rates. According to Goldman, “when fund managers eventually realize the tightening process will be more sustained than originally anticipated the P/E multiple will contract and offset the otherwise positive impact of 10% earnings growth.”

  iii) margin expansion stories. If companies can’t rely on top line growth, and multiple expansion is not available, there is just one source of growth: margin expansion.

  It is bullet iii) that is the most important, because here the divergence between Wall Street’s hopium-driven margin euphoria is most visible.

  

  According to Goldman, “tech accounted for 50% of the overall S&P 500 expansion during the past five years (Apple is responsible for 20% of rise). Tech sector now has margins (18%) that are twice the overall market.”

  That tremendous tech, but mostly AAPL-driven, margin growth has now ended.

  So can this torrid surge in tech margins continue? Goldman’s answer is a resounding no.

  Many of the drivers of margin expansion during the past few decades appear to be behind us including lower interest rates, outsourcing, and technology. S&P 500 net margins have been essentially flat for five years at just below 9%. We forecast margins will remain flat in 2016 and 2017 at 9.1%. Information Technology has been a notable exception with margins rising in recent years to 18%, or 2x the overall market. However, roughly 40% of the 847 bp leap in Tech margins since 2009 is attributable to Apple (AAPL) alone. Given rising labor and health care costs, firms in most industries will struggle to simply maintain margins. Investors will reward firms able to demonstrate a path to higher sales and margins.

  But perhaps the one chart that confirms that one can’t have their wage rising cake and eat corporate profits too is the following:

  

  In other words, if the Fed is hiking “because it sees something about the economy” that few others do – i.e., rising wages – then by definition that means that profit margins will contract as growing wages take out ever bigger chunks of the corporate bottom line.

  So with sales declines set posied to accelerate due to the soaring dollar, central bank liquidity-driven multiple expansion no longer feasible and corporate margin growth set to resume its contractionary path again, we wonder where will the next leg higher in stocks come from. Unless, of course, the whole “the Fed is hiking because the S&P500 has topped out economy is recovering” was just the latest economist consensus mirage.

  

  

  

  

  

• Stocks, Bonds, & Bullion Bid As Geopolitical Risk Soars Most In 62 years

  Ok – where to start…

  1) GDP met improved expectations thanks to a huge inventory build (which we know from sales since remains at cycle extremes)

   

  2) Richmond Fed weak for 3rd month in a row (signalled last 2 recessions)

   

  3) Consumer Confidence collapsed (worst in 14 months)

   

  4) Americans have given up hope for more employment opportunities

   

  

   

   

  5) Another terrorist attack (this time in Tunisia)

   

  oh yeah and 6) Turkey shot down a bloody Russian fighter jet (in what is the closest we have come to WW3 proxy wars yet – the first NATO nation to fire at a Russian plane since 1953)

  And so… "investors" bought stocks…

   

  As soon as Europe closed… (because when Obama, Hollande, and NATO speak, stocks must rally to confirm the confident good news)…But ended the day below the pre-Doomsday levels…

  

   

  Small Caps once again outperformed amid yet another short squeeze… and trannies were worst despite the ramp in energy stocks and oil…

  

   

  S&P is unch, "Most Shorted" is up 3% this week!!!

  

   

  As energy stocks soared over 2%…

  

   

  Everything happened when Europe closed…

  

   

  And VIX was hammered to get the momo going…

  

   

  Is the squeeze over in KaleBios? Down 50% today…

  

   

   

  FX Carry and Treasuries were not buying it…

  

   

  as stocks ramped to catch up with crude…

  

   

  Credit markets were not bouncing with stocks…

  

   

  Treasury yields tumbled on safety bids after the Russian fighter jet was shot down… then traded in a very narrow range for the rest of the day…

  

   

  The USDollar was notably weaker on the day as EUR and JPY strengthened…

  

   

  Commodities were volatile today with oil backing everything but early jumps in PMs were quickly sold into…

  

   

   

   

  Charts: Bloomberg

  

  

  

  

• The Good Ol' Days: When Tax Rates Were 90 Percent

  Submitted by Andrew Syrios via The Mises Institute,

  It’s quite interesting indeed when both progressives and conservatives seem to be nostalgic for those good ol’ days in the 1950s, for different reasons, of course. Conservatives want to go back to the nuclear Leave It to Beaver family and what not while liberals like to talk about those 90-percent tax rates that we owe our prosperity to. Or something like that. We’ll focus on the latter for the time being.

  Bernie Sanders noted that “When radical, socialist Dwight D. Eisenhower was president, I think the highest marginal tax rate was something like 90 percent.” Paul Krugman said the same thing as did Michael Moore in his film Capitalism: A Love Story and you’ll see this factoid repeated on countless memes floating around the Internet.

  However, what a tax rate is and what is actually paid are two very different things. Indeed, in 1955, the only people paying 90 percent (actually 91 percent) were those making over $3,425,766 when adjusted for inflation. And these are marginal rates, so they only paid that on any earnings above that threshold.

  Tax law has changed a lot over the years. As you can see by looking at the top marginal rate versus the inflation-adjusted top income bracket for those filing jointly from 1950 until 2013:

  

  Source: Tax Foundation.

  Today, there are seven tax brackets. In 1989, there were only two. In 1955, there were an utterly ridiculous twenty-four different tax brackets.

  Regardless, one should ask how much the rich were actually paying. It should be noteworthy that back in the 1950s, the government wasn’t actually collecting any more in tax revenue as a percentage of GDP. There’s something called Hauser’s Law, which basically states there is a maximum threshold on how much the government can tax out of its population. I think this “law” is no such thing. If the government really wanted to expropriate more, it could do so. But Hauser’s Law based on the fact that in pretty much every year since 1950, the government has collected between 17 to 20 percent of GDP in taxes. Here are the government tax receipts compared to the top marginal tax rate:

  

  Sources: Tax Foundation and Tax Policy Center.

  As you can see, no matter what the rate has been, the tax receipts have pretty much been the same. Whether or not you can raise the amount collected is really immaterial here, the only thing that matters is what has happened (particularly when tax rates were over 90 percent) and it’s pretty much always been the same.

  Of course, there are a lot of other taxes than personal income taxes. Still, tax receipts from personal income taxes have consistently been between 7 and 9 percent. In 2014, they were 8.1 percent. Furthermore, as you can see, the chart looks pretty much the same when looking at personal income tax receipts and the top marginal tax rate.

  

  Source: Tax Foundation.

  But who is paying these taxes a liberal might retort? Has the burden fallen more on the middle and lower classes? Well, no. In fact, the percentage of taxes paid by the highest quintile of income earners has steadily gone up since 1980. In 1980, the top 20 percent paid about 55 percent of all income taxes. Today, it’s just shy of 70 percent. The same goes for the top 1 percent, which went from about 15 percent in 1980 to just shy of 30 percent today.

  The first of many reasons that this was the case is that we need to look at the effective tax rate, not the top marginal tax rate. So for example, if I make $20,000, I owe 10 percent under today’s tax code, but only on any income over $18,450 (filing jointly). So I only owe 10 percent of $1550, or $155. Yes, my marginal tax rate may be 10 percent, but my effective tax rate is 0.78 percent.

  A study from the Congressional Research Service concludes that the effective tax rate for the top 0.01 percent of income earners during the period of 91-percent income taxes was actually 45 percent. Given that the top bracket is so much lower today ($3,425,766 in 1955 vs. $413,200 in 2015), the 39.6 percent top marginal rate probably yields something pretty close.

  Some of this was because corporate rates have always been lower than 50 percent. And as Alan Reynolds noted, when the personal income tax rates were reduced, it “… induced thousands of businesses to switch from filing under the corporate tax system to filing under the individual tax system.” In other words, many rich people kept their money in corporate entities when personal tax rates were higher.

  Another major factor was the myriad of deductions and loop holes that used to be available. Many of these were eliminated by the Tax Reform Act of 1986, which by no coincidence coincided with the biggest rate deductions. For one, interest had previously been deductible on all loans. After the act, it has only been deductible on home mortgages.

  But what was probably the biggest lost deduction for wealthy individuals was the elimination of deductions on passive investment losses on real estate. Before 1986, wealthy individuals would often buy real estate with no hopes at all of it cash flowing. That wasn’t the point. The point was that real estate is depreciated every year in the eyes of the IRS. Even though in the long run, properties usually go up in value, the IRS assumes that every twenty-seven-and-a-half years a property’s value will depreciate to zero.

  This “loss” can be written off. So, for example, say a man earning $100,000 a year buys a property worth $275,000. He rents out the property and breaks even on it. The tax code allows that person to write off $10,000 as a loss which he can count against his income for that year. So now he only has to pay taxes on $90,000. If he owned ten such properties, his income would be zero, at least according to the IRS.

  That deduction is now gone for everyone but “active” real estate investors, or those who invest in real estate as a career.

  Indeed, one former tax accountant even made the case that there were so many deductions, loop holes and the like in the pre-1986 tax code that “… there was a massive amount of tax fraud at all income levels under the old code. It was so bad and so common that most people took pride in telling others how they cheated on their taxes.”

  I’ll leave how true that statement is to the reader, but from what I’ve heard, it sounds about right.

  Regardless, the simple fact is that the rich never paid 90 percent of their income in taxes or anything even remotely close to that. Unfortunately though, some memes die hard.

   

  

  

  

  

  

• "Your Debt Bubble Is Here" – The Updated Leverage Cycle Map

  As we head into December and the market anxiously awaits an FOMC decision which, if the Fed were truly “data dependent”, should tell us something about what the PhD economist cabal thinks about the state of the US economy, the market is bracing for a significant monetary policy divergence between the US and the rest of the developed world. 

  According to the standard and oft-repeated narrative, the US is the so-called “cleanest dirty shirt.” Growth is abysmal, especially in a historical context, but at least America didn’t just enter its fifth recession in as many years (like Japan).

  Similarly, inflation expectations may not be where Janet Yellen wants them to be (understated rent inflation and $170 million Modiglianis notwithstanding), but hey, at least the US isn’t sinking into deflation (like Japan and Europe). 

  Of course it’s not just about the US vs. Europe and Japan. The world’s emerging economies are at another point in the cycle entirely and are in many cases (e.g. Brazil and China) facing an outright meltdown. 

  For those looking to make sense of it all, SocGen is out with an updated “leverage clock” which shows where the world’s economies are in the “deleveraging-no bubble-leverage-bubble burst” cycle.

  As you’ll see below, the cycle begins after a burst bubble with asset price stabilization. As the private sector stops deleveraging and confidence comes back, debt growth accelerates anew and monetary policy “fails to curb” excess leverage. Ultimately, the music stops, “asset prices decline triggering balance sheet destruction,” and central planners resort to QE. Once QE bumps up against the law of diminishing returns, governments make the switch to fiscal stimulus and the cycle starts again.

  Obviously this is an oversimplification and one wonders whether, given the myriad idiosyncratic factors at play across individual markets, it’s even possible to categorize all of the world’s economies based on the cycle as described above.

  In any event, here is SocGen’s “leverage clock”:

  

  From SocGen:

  Our SG Leverage Clock summarises our current view on the positioning of each economy in the cycle. As seen, the advanced economies span the full spectrum of recovery. Most advanced is the US entering the more mature phases of the cycle, but with further life left in the current cycle. Turning to the emerging economies, these tend to group at the top half of the clock, with the notable exception of the CEE region which groups closer to the US. China is turning over and we expect the cycle to bottom out soon, but this against the backdrop of a structurally slower economy.

  For brevity’s sake, we’ll save you our country-by-country analysis and simply ask the following: “Why the hell is everyone other than Brazil, Canada, and India parked in one of the three ‘no bubble’ zones when at least 9 countries have debt/GDP above 300%, and a whopping 39% countries have debt-to-GDP of over 100%?”

  

  

  
  

  

  

  

  

  

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• Another Look at the Gold Price Drop of 6 November

  The prevailing view in the gold community is that banks are speculators who bet on a falling price. To begin, they commit the casino faux-pas of betting on Do Not Pass at the craps table. When everyone wants the price to go up, the banks seem to want it to go down. Uncool.

  In contrast to this view, ours is that the banks are arbitrageurs. They aren’t betting on price, they are profiting from the small spreads in between bid and ask, spot and future, future and Exchange Traded Funds.

  We thought we would revisit the crash of Nov 6. Recall that our last look was at spot and futures. The quote on spot did not respond to the drop for 79 long seconds. We believe that this was a simply a delay in updating the quote, as spot quotes displayed by the data providers are indicative only. They are not tradeable.

  This time, let’s look at the futures market and the leading gold exchange traded fund, GLD.

         The Bid and Ask Prices of GLD and the Dec Future
   

  First, notice the time period of the graph. The whole thing occurs in just under a second, at 13:30:01 London time.

  Second, note that this occurred an hour before the NYSE opens, so the bid-ask spread on GLD is much wider than normal.

  Third, it’s fascinating to see the immediate aftermath of the crash. There’s even a brief period when the bid in the future appears to be above the ask. We are inclined to believe that’s an artifact of the quoting process. But perhaps, in the heat of the moment, the ask price fell below the bid. Someone may have had had nine nice long milliseconds to take the bank to the cleaners.

  Fourth, after that period—around the :555ms mark—we see a relatively flat bid on GLD and ask on the future. So how do we explain the slowly but steadily rising bid on the futures? Our read is that once the selling pressure is over, the market returns to normal with the tight bid-ask spread being achieved by the bid rising near to the ask. We don’t have an opinion on the unstable ask on GLD. Perhaps the market makers were moving it around guessing where things would settle. There may have been some intermittent buying too, thus the upward pressure on the ask while the bid is table flat.

  One last thing to note. It does appear as if GLD sold off first. In this data series, the bid and ask prices on GLD drop 24 milliseconds before the future reacts. However, we cannot rule out that this may be an artifact of the quoting process. GLD and futures trade on different exchanges, and it’s possible that the clock on one exchange server could be 25ms ahead of the other.

   

  © 2015 Monetary Metals

  

  

  

  

• "This Is The Most Dangerous Time Ever" Ex-CIA Boss Says US To Blame For "Scourge Without Parallel" ISIS

  "I have never felt more uncomfortable than I do today," warns former CIA Director Jack Devine, saying that, with "frankly uncivilized" ISIS, there is a greater risk of violence worldwide than ever before.

  According to The Hill,

  “I think this is the most dangerous time in terms of sustained violence,” he said on “The Cats Roundtable” in an interview airing Sunday on New York’s AM-970.
   
  “I have never felt more uncomfortable than I do today,” he told host John Catsimatidis. “Some percentage of the world today is always either unbalanced or radicalized. When you have a small group of people who are willing to lose their lives and kill anyone they can, we’re all vulnerable.”

  Devine cited the Islamic State in Iraq and Syria (ISIS) as an unprecedented threat in terms of its wanton disregard for human life…

  “I dealt with terrorists in South America in the 1970s, but they never attacked innocent women and children indiscriminately,” he said.
   
  “You have a group in ISIS today that is frankly uncivilized. These folks could get stronger and stronger. We basically have to destroy ISIS over there,” Devine said.
   
  Devine argued that dismantling ISIS’s command structure is crucial for minimizing the danger it presents, much like al Qaeda before them.
   
  “We killed three-fourths of their leadership,” he said of al Qaeda.  “We have to do the same thing with ISIS. “We have to destroy their refuge over there. When they start to lose, their recruiting numbers start to fall.”

  Devine, who mainly served during the Cold War, said ISIS is a scourge without parallel because it has no concern for self-preservation.

  “There is nothing that can be compared with nuclear weapons and their use,” he said of tensions between the U.S. and the former Soviet Union.

   

  “[But] people felt safe in the sense there was countervailing balance,” he added. “Early in our contest with the Russians, it was clear we had checks and balances.”

  Finally Devine admits…

  “If there’s blame to be put, it’s on our failure to have done that by this point.”

  

  

  

  

  

• 5 Signs Of America's Decaying Society

  Submitted by Paul Buchheit via CommonDreams.org,

  While Edward Snowden and Chelsea Manning and John Kiriakou are vilified for revealing vital information about spying and bombing and torture, a man who conspired with Goldman Sachs to make billions of dollars on the planned failure of subprime mortgages was honored by New York University for his "Outstanding Contributions to Society."

  This is one example of the distorted thinking leading to the demise of a once-vibrant American society. There are other signs of decay:

  1. A House Bill Would View Corporate Crimes as 'Honest Mistakes'

  Wealthy conservatives are pushing a bill that would excuse corporate leaders from financial fraud, environmental pollution, and other crimes that America's greatest criminals deem simply reckless or negligent. The Heritage Foundation attempts to rationalize, saying "someone who simply has an accident by being slightly careless can hardly be said to have acted with a 'guilty mind.'"

  One must wonder, then, what extremes of evil, in the minds of conservatives, led to criminal charges against people apparently aware of their actions: the Ohio woman who took coins from a fountain to buy food; the California man who broke into a church kitchen to find something to eat; and the 90-year-old Florida activist who boldly tried to feed the homeless.

  Of course, even without the explicit protection of Congress, CEOs are rarely charged for their crimes. Not a single Wall Street executive faced prosecution for the fraud-ridden 2008 financial crisis.

  2. Unpaid Taxes of 500 Companies Could Pay for a Job for Every Unemployed American

  For two years. At the nation's median salary of $36,000, for all 8 million unemployed.

  Citizens for Tax Justice reports that Fortune 500 companies are holding over $2 trillion in profits offshore to avoid taxes that would amount to over $600 billion. Our society desperately needs infrastructure repair, but 8 million potential jobs are being held hostage beyond our borders.

  3. Almost 2/3 of American Families Couldn't Afford a Single Pill of a Life-Saving Drug

  62 percent of polled Americans said they couldn't cover a $500 repair bill. If any of these Americans need a hepatitis pill from Gilead Sciences, or an anti-infection pill from Martin Shkreli's company, they will have to do without.

  An AARP study of 115 specialty drugs found that the average cost of a year's worth of prescriptions was over $50,000, three times more than the average Social Security benefit. Although it's true that most people don't pay the full retail cost of medicine, the portion paid by insurance companies is ultimately passed on to consumers through higher premiums.

  Pharmaceutical companies pay competitors to keep generic drugs out of the market, and they have successfully lobbied Congress to keep Medicare from bargaining for lower drug prices. The companies claim they need the high prices to pay for better medicines. But for every $1 they spend on basic research, they invest $19 in promotion and marketing.

  4. Violent Crime Down, Prison Population Doubles

  FBI statistics confirm a dramatic decline in violent crimes since 1991, yet the number of prisoners has doubled over approximately the same period.

  Meanwhile, white-collar prosecutions have been reduced by over a third, and, as noted above, corporate leaders are steadily working toward 100% tolerance for their crimes.

  5. One in Four Americans Suffer Mental Illness, Mental Health Facilities Cut by 90%

  According to the National Alliance on Mental Illness, 25 percent of adults experience mental illness in a given year, with almost half of the homeless population so inflicted. Yet from 1970 to 2002, the per capita number of public mental health hospital beds plummeted from over 200 per 100,000 to 20 per 100,000, and after the recession state cutbacks continued.

  That leaves prison as the only option for many desperate Americans.

  There exists a common theme amidst these signs of societal decay: The super-rich keep taking from the middle class as the middle class becomes a massive lower class. Yet the myth persists that we should all look up with admiration at the "self-made" takers who are ripping our society apart.

  

  

  

  

  

• Is David Brooks Pushing For Another Vietnam?

  Submitted by Chris Rossini via RonPaulLibertyReport.com,

  A few years ago, New York Times columnist David Brooks wanted the U.S. government to wave its magic wand and turn the Syrian civil war into a Vietnam for Iran:

  We should be trying to turn the Syrian civil war into Iran’s Vietnam. We should make them waste money and effort trying to back their client…I’m thinking that maybe it’s time for a more active U.S. role. I have no clue how to do that.

  Brooks was apparently modest enough to admit that he had "no clue" as to how the U.S. should mold Syria to achieve such a nefarious goal.

  Well, a few years have now gone by, and Brooks has experienced his eureka moment! He apparently tuned into a warmongering speech from Hillary Clinton and now (at long last) has a clue:

  Clinton…gestured to the reality that you can’t really deal with ISIS unless you are also willing to deal with Assad. Assad is not some secondary threat who we can deal with after we’ve tamed the ISIS monster. Assad created the failed state and the power vacuum that ISIS was able to fill.

  Some of Clinton’s specific prescriptions were a little too limited and Obamaesque for my taste (she didn’t even call for more American Special Operations forces to improve the bombing campaigns, though she said she would be open to it).

  Aha! Brooks, who wanted to turn Syria into Iran's Vietnam, has changed to turning it into America's Second Vietnam! Brooks wants American troops in there fighting both ISIS and Assad. He's come to the conclusion that it is America that should "waste money and effort"!

  But wait! There's more:

  The grand strategy of American policy in the Middle East, therefore, should be to do what we can to revive and reform Arab nations, to help them become functioning governing units.

  The "grand strategy"?

  America has destroyed Iraq, Afghanistan, and Libya, leaving them in virtual chaos with nothing resembling "functioning governing units." Syria needs to be number four on the lucky list?

  That begins with stepped-up military pressure on ISIS. But it also means going hard on Assad, creating no-fly zones for sanctuaries for Syrian refugees to limit his power, ratcheting up pressure on Iran and Russia to force his departure.

  Brooks no longer wants a Vietnam for Iran, but a second one for the U.S. In addition to American troops, he wants the U.S. to create a no-fly zone in Syria that would put America in a direct confrontation with Russia (a country that has a nuclear arsenal that's just as large as America's). 

  It's safe to say, that despite Brooks' Clintonian awakening, he still has no clue about Syria.

  

  

  

  

  

• Saudi De-Peg Looms As FX Market Signals Loudest "Black Swan Warning" In 13 Years

  As we noted recently, BofAML fears "a depeg of the Saudi riyal is the number one black-swan event for the global oil market in 2016," adding that it is "a highly unlikely but highly impactful risk." Given the recent action in Saudi Riyal forwards – the market's best guess at where the oil-ruch nation's currency will trade in the future – the chance of the black swan 'de-peg' is its highest since 2002. Besides this morning's "whatever it takes" moment, which oil markets quickly shrugged off, amid heavy subsidies to keep the people calm and the costs of wars in Yemen (and more in Syria), weak oil revenues leave The Sauds with few options (outside of the load the nation with ever more debt program): It's either stop it with the whole flooding an oversupplied market strategy, or let the peg fall before reserves runs dry.

   

  SAR Forwards indicate the highest de-peg conviction since 2002…

  

   

  And notably, the de-peg is a lot more palatable than losing face and cutting crude production…

  “It is a lot easier politically to implement a modest supply cut at first than allow for a full-blown currency devaluation."

  As we detailed recently, BofAML calls a Saudi de-peg the "number one black swan event for the oil market in 2016."

  For oil, however, the most crucial point is what happens to Middle East currencies and in particular to the Saudi Riyal. In fact, Saudi Arabia’s FX reserves are still high and point to an ample buffer for now, but they have been falling at a relatively fast rate (Chart 21). However, should China allow for significantly faster FX depreciation than is currently priced in by markets, we believe oil prices could fall further. Naturally, the FX reserve drain on Saudi could accelerate to $18bn per month if Brent crude oil prices average $30/bbl (Chart 22), sharply reducing the Kingdom’s ability to retain its currency peg. 

   

  

   

  Saudi has been forcing prices lower by increasing production into an oversupplied market so far (Chart 23), and it also rushed to issue debt in its local market to fill a soaring budget gap. We have previously argued that Saudi Arabia’s surging output is responsible for almost half of the 520 million barrel global petroleum inventory build in the last 7 quarters. Can the government maintain this strategy of flooding the oil market? In our view, it is unlikely that Saudi leaders would want to exacerbate its ongoing reserve drain by pushing prices below $40/bbl. After all, pressure will quickly build on the riyal’s 30 year peg to the USD (Chart 24) if Brent crude oil prices keep falling. And frankly, it is a lot easier politically to implement a modest supply cut at first than allow for a full-blown currency devaluation. But a CNY meltdown could ultimately force Saudi’s hand.

   

  

   

  In short, a depeg of the Saudi riyal is our number one black-swan event for the global oil market in 2016, a highly unlikely but highly impactful. 

   

  However, if Saudi cannot resist the gravitational forces created by a persistently strong USD and depegs the SAR to follow Russia or Brazil, oil prices could collapse to $25/bbl. Weaker commodity prices would in turn add more downward pressure on EMs (Chart 26). Thus, even if micro supply and demand dynamics are improving, the path for oil prices in 2016 will heavily depend on how the USD moves against the CNY and the SAR. Or on a Saudi supply cut.

  And there you have it. It's either stop it with the whole flooding an oversupplied market strategy, or let the peg fall before SAMA runs dry. Bear in mind that it's not just falling crude, the peg, and generous subsidies that are weighing on the Saudis. There's also the war in Yemen and the prospect of a stepped up role in Syria.

  Time to choose…

  

   

  Charts: Bloomberg

  

  

  

  

  

• The Founding Fathers Warned Of This

  Submitted by Mac Slavo via SHTFPlan.com,

  It seems that the only response to terrorism is more surveillance, security, police presence and, of course, war.

  Ignoring the lessons of blowback and escalation that have played out for many years now, the major powers of the world are broadcasting fears and preparing to clamp down on society in response to renewed threats from ISIS and other terror organizations.

  None of it will stop potential attacks from happening, but it will firmly entrench the authority of police and other officials to suspect anyone and sidestep the law when a threat is felt.

  Take a look at how terror and fear have gripped headlines and taken over the news cycle, and ask yourself who benefits from this:

  

  Although officials have admittedly not stopped any attacks from happening, the system is self-assured in its show of force – with SWAT-style police forces clad in all black hunting down suspects and locking down streets in Paris, Belgium and other parts of Europe.

  The Daily Mail highlighted some of the most recent threats, along with just one of the several suspicious persons found at or near major security concerns, including the Pentagon, and in a separate case, the LAX airport:

  Washington D.C residents were left on edge after an internal police alert about four Middle Eastern-looking men ‘acting suspiciously’ in the Pentagon metro station was leaked just two days after ISIS announced the capital was their next target.

   

  […]

  On Monday, a chilling video emerged of ISIS warning that countries taking part in air strikes against Syria will suffer the same fate as Paris.

   

  They also said they would hit the U.S capital next.

   

  The specific threat against the US capital emerged as CIA director John Brennan warned that more atrocities will be committed against the West by the Islamist terror group.

  With New York and Washington, D.C. once again named as terrorism targets, police are gearing up in the homeland as well. It is a bittersweet reminder that the atmosphere that enveloped America for many years after 9/11 will not fade away, but remain a part of our culture. Unless someone cuts through this madness, the attacks on civil liberties will only deepen, and the national conversation will be all too centered on false promises of liberty-through-security.

  Hillary, for one, who effectively has the Democratic nomination in hand, is using the occasion to vow a hawkish stance on the Middle East, though her previous meddling as Secretary of State did much to stir the violence and chaos that has swept over the region.

  “The United States has been conducting this fight for more than a year; it’s time to be begin a new phase and intensify and broaden our efforts,” Clinton told the Council on Foreign Relations in New York.

   

  “We should have no illusions about how difficult the mission before us really is … but if we press forward on both sides of the border, in the air on the ground and as well as diplomatically, I do believe we can crush Isis’s enclave of terror,” she added.

   

  […] She also said the US should arm Sunni tribes and Kurds in the country if the government in Baghdad refused to.

   

  But Clinton called for further US special forces to be deployed to Syria too, reiterated her call for a no-fly zone and demanded an “intelligence surge” to allow the airstrikes against Isis to be stepped up. “We have a lot of work to do to really decimate Isil in Iraq and Syria,” she said, using an alternate name for Isis.

  The words hold an ominous tone for what may be coming in the next four years of the presidency.

  Yet it is not unique to the ambitious Hillary Clinton – indeed, there are few voices in government calling for restraint, and every sign that more attacks are forthcoming on all sides.

  These developments in terrorism are textbook Hegelian Dialectic, using problem-reaction-solution to justify a greater military presence in Syria and Iraq, despite nearly a decade and a half of fighting jihad, civil war and supporting “frenemies” across the region with arms, training and financial support.

  The founding fathers warned of this, but could scarcely foresee the cynical nature of today’s police state – where the terrorists created by the state have become the population’s worst nightmare.

  In one variation of the statement, Benjamin Franklin wrote: “Any society that would give up a little liberty to gain a little security will deserve neither and lose both.”

  

  

  

  

  

• "Get Out Of Your Trucks And Run Away": US Gives ISIS 45 Minute Warning On Oil Tanker Strikes

  Last week, in the wake of Russian and US airstrikes on ISIS oil convoys, we asked three important questions: 

  1. Who are the commodity trading firms that have been so generously buying millions of smuggled oil barrels procured by the Islamic State at massive discounts to market, and then reselling them to other interested parties? In other words, who are the middlemen?
  2. Can it possibly be true, as officials now claim, that the Obama administration refrained from bombing Islamic State oil trucks because Washington thought the group was “only” making $100 million per year instead of $400 million? 
  3. Is it likely, considering how cavalier the US is about collateral damage from drone strikes, that The Pentagon refused to take out Islamic State’s revenue stream because the military was afraid of killing a few “innocent” truck drivers who by definition knew they were transporting illegal crude for a terrorist organization?

  The first question is, for now anyway, unanswerable. As to the second and third, here’s what we said:

  Perhaps the US overestimated the effect its airstrikes were having on Islamic State’s oil production capabilities and perhaps The Pentagon was concerned with killing innocent truck drivers, but it could also be that, as Sergei Lavrov suggested earlier this month, the US has until now intentionally avoided hitting ISIS where it hurts in order to keep them in the game and ensure they can still be effective at destabilizing Assad. If you cut off the oil trade, they lose the ability to battle the regime.

  Whatever the case, it’s too late now, because just as Russian airstrikes and the Iranian ground presence forced the US to do something – anything – to prove to the world that America is serious about fighting terrorism, Moscow’s targeting of ISIS oil convoys has forced the US to get on board (the Russians are going to hit them anyway, so there’s no point in vacillating).

  American airstrikes reportedly destroyed 116 oil tanker trucks earlier this month and another 280 today in Paris mastermind Abdelhamid Abaaoud’s former fiefdom of Deir ez-Zor. 

  Of course the US would hate to catch ISIS off guard risk killing innocent truck drivers, so prior to the November 16 strike, US planes dropped leaflets warning the drivers to “get out of your trucks now, and run away from them.” Here’s the leaflet (note the stick figures running for their lives):

  

  Here’s some commentary from Colonel Steve Warren from Operation Inherent Resolve (delivered at a press conference earlier this month): 

  Early Sunday morning in Al-Bukamal, which is the southern blue circle number two, you see two blue circles there. They both represent Tidal Wave II operations, but we’re in the southern one — the one further towards the bottom of your screen, there.

   

  In Al-Bukamal, we destroyed 116 tanker trucks, which we believe will reduce ISIL’s ability to transport its stolen oil products.

   

  This is our first strike against tanker trucks, and to minimize risks to civilians, we conducted a leaflet drop prior to the strike. We did a show of force, by — we had aircraft essentially buzz the trucks at low altitude.

   

  So, I do have copy of the leaflet, and I have got some videos, so why don’t you pull the leaflet up. Let me take a look at it so I can talk about it.

   

  As you can see, it’s a fairly simple leaflet, it says, “Get out of your trucks now, and run away from them.” A very simple message.

   

  And then, also, “Warning: airstrikes are coming. Oil trucks will be destroyed. Get away from your oil trucks immediately. Do not risk your life.”

   

  And so, these are the leaflets that we dropped — about 45 minutes before the airstrikes actually began.

  And here’s an amusing bit from the post-presser Q&A: 

  Q: On Bob’s question, too, if — if it’s so important to cut off the oil shipments, the critical revenue source for ISIS, why did it take so long to take out 116 oil tanker trucks?

   

  COL. WARREN: No, that’s a great question, Jim. Thanks for asking it.

   

  So, a little history on Operation Tidal Wave II. Initially, we, you know, we have been striking oil infrastructure targets since the very beginning of this operation.

   

  What we found out was that many of our strikes were only minimally effective. We would strike pieces of the oil infrastructure that were easily repaired.

   

  When we came to that realization, we conducted some more study — I think I talked about this last week, a little bit — we conducted some more study, and determined how to better strike the oil infrastructure itself, different pieces of the system.

   

  During the course of that study, we also determined that part of the illicit oil system, from the oil coming out of the ground at a — at a pump head, to the end of that chain, which is the distribution network.

   

  So, this is a decision that we had to make. We have not struck these trucks before. We assessed that these trucks, while although they are being used for operations that support ISIL, the truck drivers, themselves, probably not members of ISIL; they’re probably just civilians. So we had to figure out a way around that. We’re not in this business to kill civilians, we’re in this business to stop ISIL — to defeat ISIL.

  So basically, it took the US 13 months to figure out that the best way to cripple Islamic State’s oil trade was to bomb – the oil.

  To the extent that occurred to anyone previously, the idea was dismissed because the truck drivers are “probably not members of ISIL.” Well then who are they? Sure, they may not be suiting up in all black and firing RPGs at Toyota Corollas packed with “spies” for a propaganda video, but it’s not like they don’t know who they’re working for.

  Also, as mentioned above, the US hasn’t exactly been shy about engaging targets even when there are women, children, and bedridden hospital patients in the vicinity so it’s hard to imagine that anyone at the Pentagon was worried about Islamic State’s truck drivers.

  Whatever the case, the US is apprently set to give ISIS a 45 minute heads up when The Pentagon plans to bomb an oil convoy which we suppose makes sense.

  It’s the least the CIA can do for an old friend.

  

  

  

  

  

• Volkswagen Admits To Equipping Audis, Porsches With Second Illegal Defeat Device

  When last we checked in on Volkswagen and the widening emissions scandal, we learned that in addition to software installed on some 11 million diesel vehicles designed to game nitrogen oxide tests, Germany’s largest carmaker has also been habitually understating CO2 output on around 800,000 cars sold in Europe. 

  In a nutshell, the company said it found “unexplained inconsistencies” while conducting an internal probe related to carbon-dioxide output.

  For the first time, gasoline engines were said to be affected. 

  “VW is leaving us all speechless,” Evercore ISI’s Arndt Ellinghorst said.

  Well Arndt, prepare to be left speechless-er, because now, the company has admitted that some 85,000 Audi engines contained a second defeat device just weeks after saying (and this is about as explicit as it gets) that “no software has been installed in the three-litre V6 diesel power units to alter emissions characteristics in a forbidden manner”.

  As it turns out, software had been installed in all three-litre V6 diesel power units. As FT reports, “the luxury car brand of the VW group admitted that the software was in all three-litre V6 diesel engines manufactured by Audi and sold from 2009 until this year.”

  So no big deal, just every single three-litre V6 diesel vehicle sold for the past seven years. 

  FT goes on to note that after a meeting between Audi’s chief executive, the company’s engineers, and the US Environmental Protection Agency, the carmaker “sent out a statement saying that it had failed to disclose three auxiliary emissions control devices (AECDs) to regulators. Without disclosure and subsequent approval from regulators, AECDs are not legal.”

  “One of them,” the company added, “is regarded as a defeat device according to applicable US law. Specifically, this is the software for the temperature conditioning of the exhaust-gas cleaning system.”

  Apparently, the company will stop selling 3.0 litre TDI-equipped Audi A6s, A7s, A8s, Q5s and Q7s, VW Touaregs and Porsche Cayennes. 

  According to Bloomberg, Audi “agreed to revise and resubmit data concerning the V6 TDI 3-liter diesel engine to U.S. authorities after negotiations.” The cost affecting Audi, Porsche and VW for a software update is expected to be in the “mid-double-digit millions of euros” range.

  To be sure, the writing was already on the wall here. As Bloomberg noted on Friday, “Thursday’s meeting between company officials, EPA and the California regulators involved technical experts who talked about three pieces of equipment on the 3.0-liter engines that should have been disclosed as auxiliary emissions control devices.” According to the EPA, one of the three devices qualifies as a defeat device.

  And so, it just keeps getting worse and in fact, the bad news is piling up so quick that analysts can’t keep up with it. For instance, earlier today, Deutsche Bank said the following: “…the product offensive Audi is currently rolling should help to sustain a healthy pricing environment going forward. Obviously this weekend’s newflow might change this at least in the US.”

  Yes, “obviously”, especially when one variant of every single model besides the A4 and the TT is now under a stop sale order.

  Additionally, it’s hilarious to note that despite it all, Germany’s manufacturing PMI came in at 52.6 today, a three-month high. 

  In any event, we’ll anxiously await the analyst response on Tuesday to see just how much more “speechless” everyone is and in the meantime, we would note that if you thought “stability in volatile times” was a hilariously ironic tagline for a VW coporate presentation…

  

  … then you’ll love being reminded of Audi’s mantra…

  

  

  

  

  

• It Might Be A "Services Economy" But Manufacturing Drives Recessions

  Submitted by Lance Roberts via STA Wealth Management,

  There has been a bit of chatter going on lately about the divergence of the services sector from the manufacturing sector of the economy. This note from David Rosenberg took note of that divergence. 

  "We are seeing questions come up as to whether a manufacturing recession means that the broader economy is destined to follow suit?"

  His answer is that such an outcome is likely not the case. His belief is that manufacturing is no longer a good bellwether for the overall economy. Currently, manufacturing makes up just 12% of total economic output, down from about 30% in the 1950s.

  

  However, is this really the case?

  There are a couple of problems with discounting the importance of manufacturing from the economic debate.

  First, is the impact on jobs. As Sam Ro wrote this morning:

  "With the unemployment rate having tumbled to a 7-year low of 5.0%, the employment factor is not the concern."

  While the unemployment rate, as measured by the BLS, has fallen to a 7-year low, there is vast difference between now and when it has previously achieved such levels. In order to sidestep all of the arguments about retiring "baby boomers" and "students," let's focus on the 25-54 age groups which are in their prime working years. As shown in the chart below, when the unemployment rate had previously achieved "full employment" levels, more than 80% of the prime working age group was employed. Today, that number is 77%.

  

  The problem is not only the current employment level remaining well below levels normally associated with previous "full employment," but wages also remain suppressed. While the recent uptick in wages was certainly welcome by those receiving it, the problem is that the long-term trend of wages remains in a downward slide.

  The problem, of course, is that service related jobs are primarily lower-skilled and therefore lower wage paying jobs than those found in manufacturing. Secondly, service-related jobs have a very low multiplier effect throughout the economy as opposed to manufacturing jobs which leads to lower rates of employment growth, hence the stubbornly slow rate of job growth witnessed since the end of the last recession.

  Since personal consumption expenditures drives roughly 70% of economic growth, a look at where consumers are spending money gives a bit of different picture as opposed to the breakdown of the ISM surveys above. The chart below shows the annual rate of change in total personal consumption expenditures, manufacturing and services.

  

  As you will note, there are many times historically when service related spending has diverged from manufacturing. However, such divergences have tended not to last long and ultimately it has been spending on manufactured goods that have ultimately dictated economic cycles.

  Again, this makes sense when you think about the effect of each dollar spent by consumers. As noted, a dollar spent on services tends to have a relatively small multiplier effect within the economy as opposed to the impact created by spending on manufactured goods and services.

  As David correctly noted, the economy has changed from a manufacturing-based economy to a service related one. However, as service related spending continues to absorb more of every dollar spent by households, it continues to weigh on wage growth.

  

  This is particularly the case with more service spending heading toward surging healthcare costs. The impact of the Affordable Care Act is now taking root. Unfortunately, for many, that impact is not a positive one as surging premiums absorb more of the discretionary budget of households.

  

  While it is hoped that the economy can continue to expand on the back of the "service" sector alone, history suggests that "manufacturing" continues to play a much more important dynamic that it is given credit for.

  The decline in imports, surging inventories, and weak durable goods all suggest the economy is weaker than headlines, or the financial markets, currently suggest.

  For now, however, that detachment can last a while longer as global Central Banks continue to suppress interest rates and flood the financial system with liquidity. With levels of subprime loans for autos and houses, debt issuance and share buybacks once again sharply on the rise, the "party" rages on. However, it is worth remembering what happened when the bartender previously shouted "last call."

   

  

  

  

  

  

• Russia Bombs 1,000 ISIS Oil Tankers As France Launches First Carrier Strikes Against "Evil Death Cult"

  Two days ago, we noted that both France and the US were rushing aircraft carriers toward the Syrian coast. 

  The French dispatched the nuclear powered, $3.5 billion Charles de Gaulle on Saturday while the US sent the CVN-75 Harry Truman last Monday. The departure of the CVN-71 Theodore Roosevelt from the Persian Gulf a month ago had left the entire 5th Naval Fleet without a US carrier presence for the first time in a decade.

  But not for long.

  At last check, the Truman was already approaching Gibraltar.

  

  

  (the Charles de Gaulle)

  

  (Harry Truman)

  Meanwhile, the Charles de Gaulle has arrived and the carrier’s jets have flown their first combat missions. As RT reports, “the presence of 26 military aircraft aboard the Charles de Gaulle triples French forces in the region, adding to the 12 planes already stationed in the UAE and Jordan: six Rafale and six Mirage 2000 aircraft.” 

  

  “We will intensify our strikes, we will choose targets that will do the most damage possible to the terrorist army,” Francois Hollande proclaimed (a note to the French President: if that’s really your goal, you might want to source your “intelligence” from someone other than Washington). 

  Interestingly, France isn’t confining its strikes to Syria. As AFP reports, French warplanes engaged targets in Ramadi and Mosul on Monday:

  France launched air strikes against Islamic State targets in Iraq on Monday in the first sorties from the Charles de Gaulle aircraft carrier, newly deployed in the eastern Mediterranean.

   

  “We carried out strikes in Ramadi and Mosul in support of ground forces that were pushing against troops of (the Islamic State group),” said army chief of staff General Pierre de Villiers, aboard the carrier.

   

  He said planes from the Charles de Gaulle would launch strikes against IS targets in Syria, including command and recruitment centres as well as oil facilities, in “a matter of hours or days”.

   

  Rafale jets catapulted from the carrier’s flight deck on Monday morning, an AFP reporter saw.

  Meanwhile, the Russians have stepped up strikes on ISIS oil tankers as the debate heats up in the US about why the Obama administration is just now beginning to target Islamic State’s main source of revenue. According to the Russian Defense Ministry, Moscow’s warplanes have destroyed 1,000 tankers carrying “stolen crude” to refineries in the last five days alone. The Kremlin is also targeting depots and refineries near Raqqa, and because we’re talking about the Russians here, you know they took plenty of pictures. 

  Here’s the destruction of “an object at the terrorists’ oil production plant”:

  And here’s a strike on “facilities of oil production, storage, and processing”:

  We wonder whether the Russians, like the Americans, dropped leaflets 45 minutes ahead of time letting ISIS know that airstrikes were imminent.

  

  In any event, both the skies above Syria and the waters off its coast are becoming quite crowded these days, and the “parking lot” in the Mediterranean will only become more cramped once the Truman shows up. And just in case things weren’t complicated enough, David Cameron is now seeking Parliamentary approval to join the air campaign and has given the French permission to use Britain’s RAF base in Cyprus to launch anti-ISIS strikes. On that note, we’ll close with a rather amusingly hyperbolic quote from the British PM: 

  “The United Kingdom will do all in our power to support our friend and ally France to defeat this evil death cult.”

  

  

  

  

• Why "Supply & Demand" Doesn't Work For Oil

  Submitted by Gail Tverberg via Our Finite World blog,

  The traditional understanding of supply and demand works in some limited cases–will a manufacturer make red dresses or blue dresses? The manufacturer’s choice doesn’t make much difference to the economic system as a whole, except perhaps in the amount of red and blue dye sold, so it is easy to accommodate.

  

  Figure 1. From Wikipedia: The price P of a product is determined by a balance between production at each price (supply S) and the desires of those with purchasing power at each price (demand D). The diagram shows a positive shift in demand from D1 to D2, resulting in an increase in price (P) and quantity sold (Q) of the product.

  A gradual switch in consumer preferences from beef to chicken is also fairly easy to accommodate within the system, as more chicken producers are added and the number of beef producers is reduced. The transition is generally helped by the fact that it takes fewer resources to produce a pound of chicken meat than a pound of beef, so that the spendable income of consumers tends to go farther. Thus, while supply and demand are not independent in this example, a rising percentage of chicken consumption tends to be helpful in increasing the “quantity demanded,” because chicken is more affordable than beef. The lack of independence between supply and demand is in the “helpful” direction. It would be different if chicken were a lot more expensive to produce than beef. Then the quantity demanded would tend to decrease as the shift was increasingly made, putting a fairly quick end to the transition to the higher-priced substitute.

  A gradual switch to higher-cost energy products, in a sense, works in the opposite direction to a switch from beef to chicken. Instead of taking fewer resources, it takes more resources, because we extracted the cheapest-to-extract energy products first. It takes more and more humans working in these industries to produce a given number of barrels of oil equivalent, or Btus of energy. The workers are becoming less efficient, but not because of any fault of their own. It is really the processes that are being used that are becoming less efficient–deeper wells, locations in the Arctic and other inhospitable climates, use of new procedures like hydraulic fracturing, use of chemicals for extraction that wouldn’t have been used in the past. The workers may be becoming more efficient at drilling one foot of pipe used for extraction; the problem is that so many more feet need to be drilled for extraction to take place. In addition, so many other steps need to take place that the overall process is becoming less efficient. The return on any kind of investment (human labor, US dollars of investment, steel invested, energy invested) is falling.

  For a time, these increasing inefficiencies can be hidden from the system, and the prices of commodities can rise. At some point, however, the price rise becomes too great, and the system can no longer accommodate it. This is the situation we have been running into, most severely since mid-2014 for oil, but also for other commodities, dating back to 2011.

  

  Figure 2. Bloomberg Commodity Index from Bloomberg, reflecting a combination of 22 ETFs in Energy (35%), Agriculture (29%), Industrial Metal (15%), Precious Metals (16%) and Livestock (5%)

  The higher cost of producing oil and other energy products affects the economy more than a shift from chicken to beef.  

  The economy is in a sense more dependent on energy products than it is on our decision whether to eat chicken or beef. If the cost of producing oil rises, and that higher cost is carried through to prices, it affects the prices of many things. It affects the cost of food production because oil is used in the production and transport of food. The higher cost of oil also affects nearly all transported goods, since oil is our primary transportation fuel.

  Some of the impacts of higher oil prices are clearly adverse for the economy.

  If higher oil costs are passed on to consumers as higher prices, these higher prices make goods less affordable for consumers. As a result, they cut back on purchases, often leading to layoffs in discretionary sectors, and recession.

  The higher cost of oil products (or of other energy products) also tends to reduce profits for businesses, unless they can find workarounds to keep costs down. Otherwise, businesses find themselves in a situation where customers cut back on purchasing their products. As we will discuss in a later section, this tends to lead to reduced wages.

  Some of the impacts of higher oil prices are somewhat positive.

  Rising oil prices clearly encourage rising oil production. With this, more jobs are added, both in the United States and elsewhere. More debt is added to extract this oil, and more equipment is purchased, thus stimulating industries that support oil production. The value of oil leases and oil properties tends to rise.

  As noted previously, the cost of food supply depends on oil prices. The cost of producing metals also depends on oil prices, because oil is used in extracting metal ores. As the prices of metals and foods rise, these industries are stimulated as well. Values of mines rise, as do values of agricultural land. More debt is taken out, and more workers are hired. More equipment is purchased for producing these products, adding yet more stimulation to the economy.

  The higher price of oil also favorably affects the many countries that extract oil. Part of this effect comes from the wages that the workers receive, and the impact these wages have, as they cycle through the economy. For example, workers will often want new homes, and the purchase of these new homes will add jobs as well.  Part of the effect comes through taxes on oil production. Oil production tends to be very highly taxed, especially in parts of the world where oil extraction can be performed cheaply. This tax money can be put to work in public works programs, providing better schools and hospitals, and more jobs for citizens.

  It is inevitable that the price of oil must stop rising at some point because of the adverse impact on spendable income of consumers.

  The adverse impact of higher oil prices on the spendable income of consumers comes in many ways. Perhaps one of the biggest impacts, but the least obvious, is the “push” the higher cost of oil gives to moving manufacturing to locations with lower costs (cheaper fuel, such as coal, and lower wages), because without such a change, higher oil prices tend to lead to lower profits for many makers of goods and services, as mentioned previously.

  The competition with lower-wage areas tends to reduce wages in the US and parts of Europe. This push is especially great for jobs that are easily transferred to other countries, such as jobs in manufacturing, “call-centers,” and computer tech support.

  Another way businesses can maintain their profit levels, despite higher oil costs, is through greater automation. This automation reduces the number of jobs directly. Automation may use some oil, but because the cost of human labor is so high, it still reduces costs overall.

  All of these effects lead to fewer jobs and lower wages, especially in the traditionally higher-wage countries. In a sense, what we are seeing is lower productivity of human labor feeding back as lower wages, if we think of the distribution of wages as being a worldwide wage distribution, including workers in places such as China and India.

  Normally, greater productivity feeds back as higher wages, and higher wages help stimulate higher economic growth. Lower wages unfortunately seem to feed back in the reverse direction–less demand for goods that use energy in their production, such as new homes and cars. Ultimately, this seems to lead to economic contraction, and lower commodity prices. This is especially the case in the countries with the most wage loss.

  The drop in oil prices doesn’t do very much to stop oil production.

  Oil exporting countries typically have relatively low costs of production, but very high taxes. These taxes are necessary, because governments of oil exporters tend to be very dependent on oil companies for tax revenue. If the price of oil drops, the most adverse impact may be on tax revenue. As long as the price is high enough that it leads to the collection of some tax revenue, production will take place–in fact, production may even be increased. The government desperately needs the tax revenue.

  Even oil companies in oil-importing countries have a need for revenue to pay back debt and to continue to pay their trained workers. Thus, these companies will continue to extract oil to the best of their ability. They will aim for the “sweet spots”–places that have better than average prospects for production. In some cases, companies will have derivative contracts that assure them of a high oil price for several months after the price drops, so there is no need to reduce production very quickly.

  The drop in oil prices, and of commodity prices in general, makes debt harder to repay and discourages adding new debt. 

  We earlier noted that a rise in the price of commodities tends to make asset prices rise, making it easier to take out more debt, and thus stimulates the economy. A drop in the price of oil or other commodities does the opposite: it reduces asset prices, such as the price of the property containing the oil, or the farmland now producing less-expensive food. The amount of outstanding debt does not decline. Because of this mismatch, companies quickly find themselves with debt problems, especially if they need to take out additional loans for production to continue.

  Another part of the problem is that on the way up, rising prices of oil and other commodities helped lift inflation rates, making debt easier to repay. On the way down, we get exactly the opposite effect–falling oil and other commodity prices lead to falling inflation rates, making debt more difficult to repay. Commodity prices in general have been falling since early 2011, leading to the situation where interest rates are now negative in some European countries.

  The costs of producing commodities continue to rise, as a result of diminishing returns, so this fall in prices is clearly a problem. Low prices make future production unprofitable; it also leads to an increasing number of debt defaults. There are many examples of companies in financial difficulty; Chesapeake Energy is an example in the oil and gas industry.

  *  *  *

  Where oil supply and demand goes from here

  The traditional view of the impact of low oil prices seems to be, “It is just another cycle.” Or, “The cure for low prices is low prices.”

  I am doubtful that either of these views is right. Falling prices have been a problem for a wide range of commodities since 2011 (Figure 2, above). The Wall Street Journal reported that as early as 2013, when oil prices were still above $100 per barrel, none of the world’s “super major” oil companies covered its dividends with cash flow. Thus, if prices are to be sufficiently high that oil companies don’t need to keep going deeper into debt, a price of well over $100 per barrel is needed. We would need an oil price close to triple its current level. This would be a major challenge, especially if prices of other commodities also need to rise because production costs are higher than current prices.

  We are familiar with illnesses: sometimes people bounce back; sometimes they don’t. Instead of expecting oil prices to bounce back, we should think of the current cycle as being different from past cycles because it relates to diminishing returns–in other words, the rising cost of production, because we extracted the cheapest-to-extract oil first. Trying to substitute oil that is high in cost to produce, for oil that is low in cost to produce, seems to bring on a fatal illness for the economy.

  Because of the differing underlying cause compared to prior low-price cycles, we should expect oil prices to fall, perhaps to $20 per barrel or below, without much of a price recovery. We are now encountering the feared “Peak Oil,” because much of the cheap oil has already been extracted. Peak Oil doesn’t behave the way most people expected, though. The economy is a networked system, with high oil prices adversely affecting both wages and economic growth. Because of this, the symptoms of Peak Oil are the opposite of what most people have imagined: they are falling demand and prices below the cost of production.

  If low prices don’t rise sufficiently, they can cut off oil production quite quickly–more quickly than high prices. The strategy of selling assets at depressed prices to new operators will have limited success, because much higher prices are needed to allow new operators to be successful.

  Perhaps the most serious near-term problem from continued low prices is the likelihood of rising debt defaults. These debt defaults can be expected to have a very adverse impact on banks, pension plans, and insurance companies. Governments would likely have little ability to bail out these organizations because of the widespread nature of the problem and also because of their own high debt levels. As a result, the losses incurred by financial institutions seem likely be passed on to businesses and individual citizens, in one way or another.

  

  

  

  

  

• How To Trade The Fed's Upcoming "Policy Error" In Three Parts

  On Sunday, using an analysis by Deutsche Bank’s Dominic Konstam, we showed why the Fed by miscalculating the equilibrium real rate (which in reality is negative due to the massive debt overhang and the declining nominal growth rate, as well as record deflation exported by every other developed nation and now, China) is about to unleash a major policy error by hiking rates in 3 weeks – a process which will promptly result in a recession and ultimately force the Fed to both cut rates to zero or negative, and proceed with even more QE.

  Here is Konstam’s conclusion:

  This is the important policy error scenario because even a very shallow path of rate hikes might drive the real Funds rate well above the short-term equilibrium real rate, further depressing demand. It is then plausible that the economy would be driven into recession, and the Fed would quickly be forced to abort the hiking cycle. As an aside, such a policy error could reinforce itself by causing structural damage that puts additional downward pressure on the equilibrium real rate. In this case the yield curve would flatten meaningfully, at least until the Fed actually reversed course by cutting rates.

   

  * * *

   

  This scenario is also bullish for rates because the Fed would, at the very least, stop rolling down its SOMA portfolio. More likely it would restart asset purchases in an attempt to stimulate the economy once more, pushing yields further down. We have argued in the past that unconventional forms of monetary accommodation are here to stay. The minutes of the October meeting confirm this view, noting that some policymakers felt it would be “prudent to have additional policy tools” because a lower long-run equilibrium real rate makes it more likely that reductions in the Funds rate alone would not be sufficient to stimulate the economy in the event of a downturn in the future.

  Whether or not Konstam is right that the Fed is about to make what will prove to be a credibility-crushing mistake, remains to be seen. However, for those who, like us, believe that anything the Fed does is one mistake after another and thus a December rate hike will merely be the latest one in a long series of policy errors, the question is: how should one trade ahead of this error.

  The answer comes from another research analyst at Deutsche Bank, Aleksandar Kocic. Here is his complete trade cocktail in three parts for the next 12-18 months that will encapsulate the distinct phases of the upcoming market tailpsin: the bear flattening of the curve, the bear steepening, one which may see the 10Y trade at or below the 2Y, in the process flattening the curve and perhaps even leading to the dreaded inversion.

  From Deutsche Bank:

  The year ahead: Policy mistake in three acts

  In our view, the next 12-18 months will be divided into three periods corresponding to the three distinct regimes of market dynamics. They can be summarized by the following modes of the curve: short-term tactical bear flatteners on the back of a Fed liftoff story, followed by volatile bear steepeners of the “taper-tantrum” type around mid-year, and a bull-flattening finale as structural factors deem rate hikes to be a policy mistake.

  Stage one: Bear flatteners

  In the next 3-4 months Fed liftoff should be the main theme, with tactical bear flattening revolving around its timing and intensity. The Fed is likely to hike in December, and market prices are already reflecting this. However, conviction about a March follow-up is lower, although in our view this is a real possibility. This phase is bullish for USD and, given the expected slow rates rise, rates vol is likely to be relatively low and concentrated in the upper-left corner as the short end of the curve remains sensitive to the data, while the long end continues to be range bound.

  As Fed liftoff represents the moment of decoupling between different economies, currency play will remain the main mode of adjustment to that reality. Therefore, although reversal of monetary policy is transmitted through rates, volatility will migrate from rates to FX and possibly risk assets, depending on how risk reacts to it. To some extent, we have already seen vol market positioning for this transfer of vol. Figs 1 and 2 show the recent history of rates, FX and equity vol.

  

  In general, one should keep in mind that hikes are practically self-defeating as they lead to a stronger USD, which could slow the pace of a rate rise. So, a March hike is considered somewhat of a tail risk. We are buyers of leveraged bearish expressions in the ULC:

  • Buy $100mn 4M2Y 25bp OTM payers subject to KO if 2s exceed ATMF+25bp in the first two months, 5bps offer vs. 13bp for the vanilla (62% discount)

  The discounting is a function of both delta and serial correlations. A vanilla articulation in terms of payer calendar spreads would consist of financing a 4M2Y payer position with 2M2Y. For comparison, we adjust the strikes so that the premium matches the exotic trade:

  • Sell $100mn 2M2Y 20bp OTM payers vs. buy $100mn 4M2Y 25bp OTM payers, offer 5c

  In the vanilla version we have to sell 2M2Y 20bp OTM payers to finance 25bp OTM 4Y2Y payers. The difference between the two trades is their risk profile – while the exotics trade has limited downside (max loss = options premium), the calendar spread is vulnerable to MTM losses in case of transient spikes in gamma. Losses could be theoretically unlimited, although this is an unlikely possibility.

  Stage Two: Bear steepeners

  There have been many attempts to infer the Fed reaction function post-2008. Given the structural changes and breakdown of standard macroeconomic models in recent years, the question remains regarding the metric that captures economic recovery and the exact monetary policy response to it. The most easily understood indication of structural changes is the drop in GDP and the output gap relative to the potential that has opened up since the early days of the crisis. The growth has been so slow that based on the extrapolation of the pre-crisis potential, it was hard to see any point on the horizon when the gap would close. However, accounting for all the changes that took place, the revision of the potential was the key to actual convergence – while growth was increasing at a moderate pace, potential growth was even slower. This is shown in Fig 3.

  According to the most recent data, their intersection is anticipated sometime next year. We believe that, regardless of the Fed reaction function, the market will interpret this as a bullish sign for the economy (and bearish for rates). At that moment, it is likely to challenge the Fed’s gradualism and begin to price the Fed as being behind the curve. This is the bear steepener, taper-tantrum type of mode.

  

  The main mode of repricing is likely to be a selloff in long forwards and revisions of the terminal Fed funds rate, in particular 5Y5Y. 10Y UST yields could reach or even exceed 2.75%. We would position for this phase through quiet bears in mid-curve:

  • Sell 26bp OTM 6M 5Y5Y MC receivers vs. buy 6M 5Y5Y MC ATMF/26bp payer spreads

  The trade has a max upside of 26bp running and is vulnerable to rally 26bp below forward with theoretically unlimited downside.

  An alternative expression of this mode could be through 6M 2s/10s or 5s/30s curve caps, or OTM conditional bear steepeners. However, while these are attractive positive carry trades, given the expectations of short-term bear flatteners and potentially volatile repricing in the belly, we would wait for better entry levels in Q2 next year.

  A better articulation of the bear-steepening trade in the context of the outlined sequence of curve modes would be in terms of curve-cap calendars: Sell shortdated caps vs. buy long-dated OTM caps:

  • Sell $1bn 3M 2s/10s ATMF (105.5bp) curve cap vs. buy $1bn 6M 2s/10s ATMF+15bp (113.5bp), costless

  The trade has a (slight) positive carry (favorable time decay from short gamma partially offset by curve rolldown). MTM risk could be theoretically unlimited in case of transient short-term stepeners.

  This period is bearish for USD and possibly for risk assets. It is likely to be very volatile. Vol should return to rates and migrate from short to the back end of the curve. Equity and/or credit vol could also rise significantly if bear steepeners persist and threaten to cause redemptions and forced an unwind of the bond trade. We would be buyers of forward vol at the back end of the curve along the lines of 6M 3M10Y FVA.

  • Stage three: Bull flatteners

  Despite everything that could happen in the near term, the main long-run story remains lack of demand. With all else equal, the market can decide to interpret rates selloff and Fed liftoff as policy mistakes and price in the adverse impact on growth and position for further rate cuts in the future. This is the third phase, the twist of the curve – the front end remains constrained by the Fed, while the back end rallies. It is a bull flattener, after a continued rise in rates. We anticipate the 10Y UST yield to rally towards 2% after trading as high as 2.75% during the second phase. This is generally bearish for USD and for risk assets, and as such could mean higher equity vol. Given that rates vol should reach high levels during the bear-steepening phase, bull flatteners would bring back vol sellers and return of the carry trade.

  To capture the path from high to low rates, we would be buyers of knock-in receivers:

  • Buy $100mn 1Y10Y ATMF receivers subject to KI if 10s touch 2.65%, offer 80c, a 73% discount to vanilla at 300c

  The trade has limited downside with max loss equal to the options premium.

  In general, one can capture the entire path of the second and third stages through mid-curve vs. vanilla switches. The logic is that of mean reversion: If rates initially do one thing, they should subsequently do the opposite. To capture the yoyo mode in rates, we recommend the vanilla/mid-curve payer switches:

  • Buy $100mn 18M10Y vanilla payers at 365bp vs. sell $100mn 6M 1Y10Y MC payers at 205bp for a net 160bp

  This is a positive carry synthetic forward vol trade (the payer side). It is an articulation of mean reversion. If rates sell off in the first 6M, MC payers are in the money, so the position consists of receiving fixed on 1Y10Y swaps (selling a payer option) and being long 1Y10Y vanilla payers. From put/call parity, the net position is a swaption receiver. The trade is short gamma and is vulnerable to transient spikes in vol in the first 6M with theoretically unlimited MTM losses.

  

  

  

  

  

• Carsonnochio Strikes Again – "Walks Back" Comments He Saw Muslims Cheering On 9/11

  As Donald Trump came under fire for claiming that he saw Muslims in New Jersey cheering on 9/11, admitted-non-total-truth-speaker Ben Carson jumped on the bandwagon claiming he too "saw film of it." Now, in yet another embarrassing u-turn 'oops' for the retired (now it all makes sense) neurosurgeon, the Carson campaign told CBS News Monday evening that Carson is "really not" standing behind his earlier statement and that the GOP presidential candidate was thinking of other footage he saw.

  Caught on tape…

  WATCH: @RealBenCarson tells ABC he saw news footage of Muslims in New Jersey cheering as towers fell on 9/11: https://t.co/DJCSJdZxXS

  — ABC News Politics (@ABCPolitics) November 23, 2015

  As CBS News reports,

  Ben Carson is walking back comments he made earlier Monday in which he claimed that he saw Muslims cheering in New Jersey during television news coverage of the 9/11 terrorist attacks.

   

  The Carson campaign told CBS News Monday evening that Carson is "really not" standing behind his earlier statement and that the GOP presidential candidate was thinking of the "ample" news footage he watched of celebrations from the Middle East after 9/11.

   

  Earlier in the day Monday at a rally in Pahrump, Nevada, Carson was asked if Muslims were cheering on 9/11 when the Twin Towers fell.

   

  "Yes," said Carson, who was then asked to elaborate further. "Well, you know, there are going to be people who respond inappropriately to virtually everything. I think that was an inappropriate response. I don't know if on the basis of that you can say all Muslims are bad people; I really think that would be a stretch."

   

  Asked once more to confirm exactly what footage he saw, Carson said he witnessed Muslims cheering on "newsreels" during coverage of the attacks and confirmed it was shot in New Jersey.

  *  *  *
  One wonders where the red line will stop?

  

  

  

  

  

  

• The Closing Of The Global Economy

  Submitted by Joseph Calhoun via Alhambra Investment Partners,

  I don’t often write about global geopolitics because I think, in general, investors spend too much time worrying about things they can’t control or aren’t going to happen or wouldn’t matter much if they did. The best example is the Middle East which has been a mess my entire life and long before it for that matter. Changing your investments based on the latest threat in or from the Levant is a recipe for constant chaos. The only accurate prediction about the Middle East will always be that the various factions that have been fighting for centuries will continue to fight. And that no matter who is in charge they will have to sell oil to make ends meet. And make no mistake oil is the only economic reason we care about the region.

  The recent Paris attacks, though, have me thinking more about how global geopolitics is affecting the global economy. The terrorist attacks Europe has experienced in Madrid, London, Paris and other locales are raising old barriers across the continent. Borders where goods, people and capital have crossed freely for the last few decades are now manned and monitored again. Capital largely continues to flow freely but people and goods are starting to be restricted; you can’t restrict the flow of people without also obstructing the flow of goods. For now, the people and goods continue to flow, just more slowly. One can’t help but think though that if the borders become literal barriers again it won’t be long before the metaphoric ones – protectionist policies – return as well.

  If one also considers the antipathy toward Germany that permeates most of Europe and the perception – and reality to some degree – that the EU and especially the EMU are much more favorable for the Teutonic members than the Latin ones, then one begins to see how the fragile union might devolve into its former squabbling, fractured self. The feared break up of Europe and the Euro has until now been based on economic considerations but physical security would seem a larger concern at this point. If the EU can’t guarantee physical security and has already failed at providing economic security, it’s raison d’etre is….what exactly? To provide employment for feckless bureaucrats?

  The desire for physical security isn’t confined to Europe obviously; the Paris attacks have amped up the political debate in the US over immigration, with Syrian refugees and physical security now replacing Latin Americans and economic security as the targets. The emergence of  Donald Trump as a right wing populist to challenge the near universally populist Democrats means that both parties are now pandering to the population’s baser instincts of fear and greed. That isn’t to say that their fears aren’t real or legitimate just that the solutions offered by populist politicians are simplistic and unlikely to achieve the intended results. Indeed, history says that walling ourselves off from the world is more likely to create less security, physical and economic, rather than more.

  The demonization of foreigners, this emerging isolationist consensus – a natural response in many ways to the jingoism of the last decade’s Western governments – is not confined to the debate over national defense or immigration. It is also a part of the economic debate. Politicians exploit our economic insecurities, laying blame on foreigners – the Chinese are the most often cited bogeymen – for problems created by our own policies. Donald Trump says he will be a tougher negotiator and get better trade deals but doing so will require threatening consequences – trade restrictions – that would please Smoot and Hawley and potentially repeat the mistakes that led to the Great Depression. Jack Lew decries corporate inversions and announces new rules designed to prevent US companies from doing what our corporate tax code incentivizes them to do. Meanwhile, Pfizer and Allergan look to structure a deal that has Allergan – an Irish corporation with a low tax rate and the smaller of the two companies – playing the role of acquirer to avoid the new rules. Will the current administration or future ones regularly reject takeovers of US corporations unless they are carried out by other US corporations? Will other countries follow suit?

  The inequality debate is rooted too in the discussion over trade policy, globalization and outsourcing. The decline of the American middle class, the rise of the so called creative class and the consequences of the financialization of the US economy are all part of the same populist, isolationist rhetoric. Foreigners are demonized as stealing American manufacturing jobs, polarizing the US between the haves, largely in the coastal cities, who benefit from free trade and the have nots, largely in the interior of the country, who don’t. It mostly isn’t true – productivity has reduced manufacturing employment much more than free trade – but it has enough of a whiff of truth that it works as a political strategy even if it would fail miserably as an economic one. Monetary policy has attempted to assuage the middle class angst with expanded credit but that has exacerbated the divide as financial engineers have been rewarded at the expense of real ones.

  We see this nationalistic impulse in the so called currency wars, the devaluations intended to steal some of what is left of global growth for one’s own country. Rather than pursue domestic policies that would improve growth, politicians are happy to leave it to central banks to try and gain a trade advantage by weakening the national currency, seeking to enrich through impoverishment, a policy doomed to failure. The unintended consequences are reflected in money markets where conditions once thought impossible or at least illogical have become commonplace. In the process of trying to recover from the last crisis we are creating the conditions for the next.

  Meanwhile, global trade is contracting, down for three years in a row and a major reason for the weak recovery from the last recession. The growth and falling inflation of the 90s was, in a lot of ways, driven by the expansion of trade, the liberalization of the global economy as former communist nations adopted more liberal, free market economic policies and joined the world trade order. That expansion appears to now be reversing in a cacophony of nativist rhetoric, a global phenomenon that encompasses, unites and animates the far left and the far right. As I said in my Weekly Snapshot:

  The political left is happy to see people cross borders but would gladly restrict the flow of capital and goods. The political right is happy to see capital and goods cross borders but would gladly build a fence to restrict the flow of people. I’m afraid that the compromise might be to restrict people, capital and goods.

  This political pandering has consequences for our society and economy that are hard to predict. The recent college campus protests would appear to be another manifestation of this growing desire for security over all else. Students want to create “safe spaces” where they are free to extend their childhood, protected from harm both real and imagined. With the random violence and economic upheaval that has marked their lives, from 9/11 to Madrid to London to Paris to the dot com bust to the Great Recession, is it any wonder that our young adults seek to be protected from the real world? The intolerance practiced by our leaders is reflected in the intolerance of the students who shout down anyone who doesn’t toe the politically correct line, a feat that becomes harder by the day. We have lost the ability to take a joke, to distinguish between satire and seriousness. In the process, we divide rather than unite, for fear of offending and being subjected to the modern day pillory of social media.

  As I said at the beginning, I don’t generally spend a lot of time thinking about geopolitics as it relates to investing because it isn’t generally profitable. This closing of the global economy, this emerging trend toward protectionism in the form of currency devaluation and populist politics is already impacting the global economy but in the short term probably shouldn’t impact our investment approach. We don’t know yet how far this will be taken, if the rhetoric will turn into actual economy damaging policies. For now, the most obvious impact has been the rising dollar and falling inflation expectations with, so far, little impact on real growth expectations here in the US. But the direction is disturbing especially with the US coming into an election year when the rhetoric may have more impact on market outcomes.

  As investors we have more immediate concerns. Growth remains stuck at the secular stagnation, new normal pace of 2 to 2.5% growth. The economic data continues to point to weakness even as the Fed prepares to enter a tightening cycle. Inventories are building as sales and investment stagnate. The energy industry, responsible for an historically large proportion of investment since the crisis, is in deep trouble as the dollar rises and oil prices sink. Earnings are falling and margins appear to have peaked. Stock market valuations are extreme and market technicals are unhealthy with a small number of stocks leading the averages higher even as most stocks head south. Investors have plenty to worry about that is real and now without delving into what is speculative and possibly far in the future.

  The closing of the global economy, the reversal to some unknown degree of the globalization process, has negative consequences for the lives to which we’ve become accustomed. Much of the disinflation since the early 90s is a direct result of increased trade and reversing the process will in time mean less choice and higher prices for Americans. And no, it won’t, despite what the protectionist populists would have you believe, bring back high wage manufacturing jobs.  The giant sucking sound Ross Perot warned about isn’t coming from Mexico but rather from Silicon Valley and we should be thankful for it not ruing it. We should be preparing our young adults for the real world and the jobs of this century rather than coddling them and trying to bring back the jobs of the last one. The closing of the global economy is not a fait accompli. But we will have to resist with all our might the siren song of the politicians who tell us what we want rather than need to hear and push back against the monetary policies that are a poor substitute for better fiscal and regulatory policies.

  

  

  

  

  

• "Get Him The Hell Out Of Here": Trump Heckles "Obnoxious" Black Lives Matter Activist Who Interrupted Rally

  A quick check on the circus that is the GOP presidential primary reveals that Donald Trump – who has a commanding lead in New Hampshire – has retaken the top stop in Iowa and we think we might know why. As CBS reports, “large majorities of Republican primary voters in Iowa express tough views toward illegal immigrants including eight in ten who view them as harm to national security [and] more than four in five who say that they have broken the law and should be penalized or deported.”

  Additionally, 43% of Iowa voters say the Paris attacks affected their vote and fully three quarters favor sending troops to Syria. 

  Combine a hardline stance on immigration and an “ass kicking” approach to fighting terror and what do you get? This: 

  

  Anyway, Trump is coming off a week in which he suggested (and yes, we realize he was baited by the reporter) that he would not be opposed to, i) keeping a national database of Muslims, and ii) requiring Muslim Americans to carry ID cards.

  Of course the Teflon Don is, as one analyst put it a few months back, “gaffe proof” which means that when Ben Carson compares Syrian refugees to “rabid dogs“, prospective voters recoil in horror, but when Trump conjures up uncomfortable images out of Europe’s difficult past everyone just kind of chuckles before writing it off as “Trump being Trump”. 

  Well, Trump was out being Trump in Birmingham, Alabama on Sunday when he was interrupted by Mercutio Southall Jr. who The Washington Post describes as “a well-known local activist who has been repeatedly arrested while fighting what he says is unfair treatment of blacks.” 

  

  Here’s what happened after Southall interrupted Trump:

  A black protester at Trump’s rally today in Alabama was shoved, tackled, punched & kicked: https://t.co/Aq0wuaAtax pic.twitter.com/cTRDMtjuBl

  — Jeremy Diamond (@JDiamond1) November 21, 2015

  And here’s a bit of color from WaPo:

  A fight broke out, prompting Trump to briefly halt his remarks and demand the removal of Southall.

   

  “Get him the hell out of here, will you, please?” Trump said on Saturday morning. “Get him out of here. Throw him out!”

   

  At one point, Southall fell to the ground and was surrounded by several white men who appeared to be kicking and punching him, according to video captured by CNN. A Washington Post reporter in the crowd watched as one of the men put his hands on Southall’s neck and heard a female onlooker repeatedly shout: “Don’t choke him!”

   

  As security officers got Southall on his feet and led him out of the building, he was repeatedly pushed and shoved by people in the crowd. The crowd alternated between booing and cheering. There were chants of “All lives matter!”

   

  Southall told the AL.com news site that the commotion started as he began recording himself and other protesters at the rally and saying that he wanted “Donald Trump to know he’s not welcome here.” Southall said someone knocked the phone out of his hand and made a racial slur. Then there was pushing and punches started flying, Southall told the news site.

  Unfazed, Trump proceeded to taunt Mercutio from the podium before launching into a story about a “seriously obese” man who disrupted a previous rally. Take a listen:

  Asked on Monday about the incident, Trump said the following: “maybe he should have been roughed up.”

  *  *  *

  Summed up…

  

  

  

  

  

• State Department Issues Worldwide Travel Alert "Due To Increased Terrorist Threats"

  For the first time since December 2014 – and just in case you were not fearmongered enough (or bullish on US equities enough) – The US State Department just unleashed a worldwide travel alert for the next 3 months. This seems to wreak a little haov at President Obama’s  “ISIS is contained” narrative…

   

  Via The State Department:

  The State Department alerts U.S. citizens to possible risks of travel due to increased terrorist threats. Current information suggests that ISIL (aka Da’esh), al-Qa’ida, Boko Haram, and other terrorist groups continue to plan terrorist attacks in multiple regions.  These attacks may employ a wide variety of tactics, using conventional and non-conventional weapons and targeting both official and private interests.  This Travel Alert expires on February 24, 2016.

  Authorities believe the likelihood of terror attacks will continue as members of ISIL/Da’esh return from Syria and Iraq.  Additionally, there is a continuing threat from unaffiliated persons planning attacks inspired by major terrorist organizations but conducted on an individual basis.  Extremists have targeted large sporting events, theatres, open markets, and aviation services.  In the past year, there have been multiple attacks in France, Nigeria, Denmark, Turkey, and Mali.  ISIL/Da’esh has claimed responsibility for the bombing of a Russian airliner in Egypt.

  U.S. citizens should exercise vigilance when in public places or using transportation.  Be aware of immediate surroundings and avoid large crowds or crowed places.  Exercise particular caution during the holiday season and at holiday festivals or events.  U.S. citizens should monitor media and local information sources and factor updated information into personal travel plans and activities.  Persons with specific safety concerns should contact local law enforcement authorities who are responsible for the safety and security of all visitors to their host country.  U.S. citizens should:

  • Follow the instructions of local authorities.  Monitor media and local information sources and factor updated information into personal travel plans and activities. 
  • Be prepared for additional security screening and unexpected disruptions.
  • Stay in touch with your family members and ensure they know how to reach you in the event of an emergency.
  • Register in our Smart Traveler Enrollment Program (STEP).

  Foreign governments have taken action to guard against terrorist attacks, and some have made official declarations regarding heightened threat conditions.  Authorities continue to conduct raids and disrupt terror plots.  We continue to work closely with our allies on the threat from international terrorism.  Information is routinely shared between the United States and our key partners in order to disrupt terrorist plotting, identify and take action against potential operatives, and strengthen our defenses against potential threats.

  *  *  *

  Scared yet?

  

  

  

  

• Bill Ackman Triples-Down On Valeant: Boosts Stake To 9.9% By Buying Calls, Selling Puts

  In the infamous words of Kenny Rogers, "you gotta know when to fold 'em," but in the case of Bill Ackman and his Pershing Square Fund's massive losing position in Valeant (19.47 million shares at average cost of $183.57 against today's $87.11 lows), he has decided to not just double-down, but triple-down by selling puts to fund calls and increase his stake in the company to 9.9% (or 34.12 million shares).

  As the Press Statement notes,

  Pershing Square Holdings, Ltd. Increases Position In Valeant Pharmaceuticals International

   

  AMSTERDAM — November 23, 2015

   

  Regulatory News:

   

  Pershing Square Capital Management, L.P., the investment manager for Pershing Square Holdings, Ltd. (ticker: PSH:NA) has updated its Schedule 13D with the United States Securities and Exchange Commission, disclosing  that various funds it manages increased their beneficial ownership of Valeant Pharmaceuticals International, Inc. (ticker: NYSE: VRX), to 9.9% of shares outstanding.

   

  The Reporting Persons purchased for the accounts of the Pershing Square Funds a net amount of 2,144,618 shares of Common Stock and over-the-counter American-style call options referencing 12,500,000 shares of Common Stock for aggregate consideration of $475,461,812 (including commissions). In addition, the Reporting Persons sold for the accounts of the Pershing Square Funds over-the-counter European-style call options and over-the-counter European-style put options, each call and put referencing a total of 12,500,000 shares of Common Stock and received aggregate consideration of $168,966,200.

  The actual trades:

  

  Which translated into English means that he spent $475.5MM on calls for 12.5mm in stock, and offset this by selling puts for 12.5MM in stock for $169MM.

  In other words, Ackman buys the collapse in size…

  

  By buying calls, selling puts, Ackman is now syntehtically long 12.5MM Valeant shares at a fraction of the actual price: Ackman's cash cost per share equivalent was $24.5, confirming that he didn't even have the cash to buy the shares and thus had to leave himself considerably more exposed to time decay and, of course, another plunge in the stock which this time will lead to even bigger margin calls.

  Which leaves him 'proxying' 34.12 million shares at an average cost of $113.76…

  

  Although his exposure is dramatically non-linear should things not work out (and note he remains drastically underwater still even on this newly acquired position).

  

  

  

  

  

• Should People Be Allowed To Work For $1 An Hour?

  Submitted by Jonathan Newman via The Mises Institute,

  What is the least you would be willing to be paid to verify business addresses or phone numbers for a database? If you had a large online inventory and wanted simple word tags to describe each one of your products for search engine optimization, how much would you be willing to pay somebody to trudge through your product images and generate tags?

  Tasks like these still require human labor, but a voluntary wage for such tasks is usually very low, especially relative to legislated minimum wages.

  Despite exponential growth in computing power and capabilities over the past few decades, computers still struggle with simple tasks like identifying objects in a picture, making qualitative judgments, and confirming the accuracy of language translations. Amazon embraced this fact and connected those that need these Human Intelligence Tasks (HITs) performed with the humans willing to do them.

  The service is called Amazon Mechanical Turk, after the fake chess-playing machine constructed in 1770. It was just a real, human chess master playing from inside a box. Back then, no such artificial computing capabilities existed, mechanical or otherwise. Like the “machine,” Amazon Mechanical Turk involves humans doing the work, even if the task seems suited for computers.

  A company with a large catalog might want to find and eliminate duplicate listings, but the items’ pictures and descriptions might be a little different, making computers unqualified for the job. “Turkers” may also fill out surveys for marketing information, social science research, or really anything the task creator wants to ask a large number of people. Audio and video transcriptions are common, too.

  Submissions are judged by having multiple people perform the same task. If their submissions are the same or very similar, the task requester can assume that they are really working on the task and not just filling in random text to complete tasks.

  Below is an example of a HIT that asks people to pull information from pictures of receipts. If three people perform this HIT and two of the responses for the business address city are “Lincoln Park,” but one of the responses is “a;sldkfj,” the first two would be paid and not the third. Having more than one submission per HIT is more costly, but the task requesters get more accurate responses this way.

  

   

  Today, there are more than 500,000 workers and around 200,000 HITs listed. Most tasks will earn the worker just a few cents, but some workers have been able to make a living from the service. As a member satisfactorily completes the simpler but lower-paying HITs, they are granted access to the higher-paying ones. A dedicated few make thousands of dollars a month by working full time. Others make a few extra hundred dollars a month by doing HITs after their regular job.

  A recent study found that almost half of the MTurk workers performed tasks while at their primary job: “For example, a cab driver at the airport may answer survey questions while waiting for a fare. A teacher or office worker could MTurk during lunch break.”

  Many enjoy doing the tasks as a form of relaxation and social engagement. Although the tasks seem incredibly boring to me, some find it an escape from boredom. Through turker-only forums, they have built a large, thriving community. They direct their fellow turkers to fun and high-paying HITs and help them steer clear of tasks posted by those who might fraudulently withhold payment for a completed task. Hayek would be impressed.

  Minimum-Wage Activists Strike Again

  The most common hourly rate for working on HITs is about $1. As such, minimum wage proponents have railed against Amazon Mechanical Turk, calling it modern day slavery. They see people having fun and voluntarily exchanging pennies for simple tasks and want it abolished. Bored people should just stay bored.

  What would they say is an appropriate price for asking somebody to select what color a shirt is in a picture? How much should they charge for filling out their age, sex, and favorite ice cream flavor in a survey?

  The correct answer, of course, is whatever the two parties agree on. Workers can scroll through hundreds of thousands of HITs and decide for themselves which ones are worth the payment, which is listed with each HIT. If something looks too long and complicated for the advertised payment, they can simply pass on it. The workers have complete control over which tasks they perform, what hours they work, and, of course, whether they are signed up to be an Amazon Mechanical Turk worker at all!

  In the early days of Amazon Mechanical Turk, Salon ran an article on it that read like an exposé of a cult or a crime ring. They found a man who does HITs for fun and made him out to be an unknowing slave to evil corporate interests:

  Curtis Taylor, 50, a corporate trainer in Clarksville, Ind., who has earned more than $345 on Mturk.com, doesn’t even think of turking as work. To him, it’s a way to kill time. “I’m not in it to make money, I’m in it to goof off,” he says. Taylor travels a lot for business and finds himself sitting around in hotel rooms at night. He doesn’t like to watch TV much, and says that turking beats playing free online poker. To him, it’s “mad money,” which he blows buying gifts on Amazon, like Bill Bennett’s “America, the Last Best Hope,” for his son, a junior in high school. “If I ever stop being entertained, I’ll stop doing it,” he says. “I’ll just quit.”

   

  Yet what’s a happy diversion for Taylor is serious business for the companies on Amazon Mechanical Turk.

  It turns out that there is a market for bored people. Prices emerge to pull them out of their boredom by working on simple tasks.

  There are other ways people with extra time on their hands can provide labor services for low or even no pay. Certainly minimum wage proponents wouldn’t condemn volunteering for charities like homeless shelters, soup kitchens, Habitat for Humanity, disease awareness/cure campaigns, etc. Yet, what non-arbitrary feature distinguishes this sort of work from other lines of work that might offer a wage lower than any proposed minimum wage?

  Not All Value Is Expressed in Dollars

  In all voluntary arrangements, both the worker and the employer agree to a mutually beneficial wage, which sometimes means $0/hour. Even if nothing tangible is trading hands, it doesn’t mean that volunteers get nothing out of their work. Their “payment” is knowing they did something nice for free. It’s not really a wage or a payment in the economic sense, though, because the employer doesn’t lose this good feeling, like they would forgo money wages for paid work. In fact, volunteering labor like this is more appropriately considered a gift, not an exchange of labor for a wage.

  When individuals make a choice, they aren’t just exchanging goods for goods or services for money, but they are making choices over alternative states of the world.

  A potential volunteer isn’t weighing $0 against time working for some charity, they are weighing all the consequences of helping a charity versus not helping, including the subjective feelings they have for the cause and the knowledge that they had a hand in its well-meaning goals.

  Likewise, a turker only agrees to a $0.01 HIT if the task looks easy or fun enough. They weigh the prospect of doing the task and receiving one penny versus missing out on the fun and not receiving the penny. Again, “fun” is also subjective. Most of the tasks look downright boring to me.

  Whether a job requires intense effort and a specialized skill or just having a human brain, market prices are the only way to match people that want to do the job with the people that want the job done. Even $0/hour is sometimes voluntarily chosen by a worker who simply wants to help a certain cause. Mandated minimum wages eliminate these kinds of peaceful and productive arrangements, leaving both parties unsatisfied and society worse off.

   

  

  

  

  

  

• Facebook Knows A Cult When It Sees One

  It appears, like so many of the world's status-quo worshippers, that Facebook thinks The Fed is a 'religious center'…

   

  

   

  h/t @hsiaoleim

  

  

  

  

  

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• America's Great Lie. Europe's Great Shame. Russia's Great Case

  Authored by Eric Zuesse via Strategic-Culture.org,

  The West owes Russia a hell of a lot; but what it owes Russia first is a deep apology, and a welcome into Europe, of which Russia has been and is an extremely important nation, and very unjustly denied its rightful place there. What doesn’t belong in Europe is the U.S., not in any way whatsoever, especially since the U.S. is now a dictatorship. (Anyone who says it’s not a dictatorship and who doesn’t click onto that link to find out that he’s been snookered to think it’s still a democracy, should just stop reading here right now, because this aricle is going to be suitable only for people with open, critical, inquiring minds — not for closed-minded or stupid readers.)

  Why does America’s anti-Russia military club NATO still exist, after the Soviet Union’s equivalent Warsaw Pact disbanded in 1991 when the Soviet Union and its communism voluntarily ended?

  NATO is nothing but America’s anti-Russia military club, against Russia and against any nation (such as Iraq, or Libya, or Syria) that supports Russia.

  We killed Gaddafi in Libya because he supported Russia in international relations. We produced the failed state and jihadist mayhem that now exists there; we destroyed Libya and now the refugees from there are flooding into Europe, along with the refugees from our attacks to bring down Assad in Syria.

  We overthrew (via a bloody coup and no ‘democratic revolution’ such as the West lies to assert) Yanukovych in Ukraine allegedly because he turned down the EU’s offer to Ukraine after learning that the price-tag for Ukrainians would be $160 billion if Ukraine were to comply with the EU’s demands. But the U.S. was already organizing the coup against him starting a year before the coup, and nine months before Yanukovych turned down the EU’s offer.

  We are trying to overthrow Assad in Syria because he supports Russia in international relations.

  This isn’t bullying?

  This is ‘democracy’?

  This is dictatorship: totalitarianism in the West, against Russia and any other nation that isn’t buckling to the U.S. aristocracy and its allied aristocracies in Europe, and (especially with the new bellicose nationalistic Abe government), also in Japan.

  This is ugly.

  

  This can’t be published in Western major ‘news’ media: it is samizdat, in the Western dictatorships, but it is all demonstrably true, nonetheless.

  Here is how it started — the original sin of the post-Cold-War West, which has produced the problems of today and the future:

  Let’s start with the results of a 2009 investigation by Germany’s Spiegel, or Mirror, magazine, which is a mainstream German news site, that’s a bit more honest than America’s equivalents:

  They headlined, very directly: «NATO's Eastward Expansion: Did the West Break Its Promise to Moscow?»

  They identified what that «promise» was, which Russia claims was violated, and which Spiegel  was investigating: «that NATO's expansion into Eastern Europe violated commitments made during the negotiations over German reunification». The next sentence in Spiegel’s  report states unequivocally their conclusion: «Newly discovered documents from Western archives support the Russian position».

  The question Spiegel’s  article discusses isn’t whether NATO’s continued existence is an evil, but instead whether NATO should have extended eastward up to Russia’s own borders — whether, to make this matter quite clear now, if the USSR had won, and its Warsaw Pact and not NATO had continued (though neither should have continued), the Warsaw Pact should have extended itself all the way to including Mexico and/or Canada? 

  How would the American people have felt about that possibility – nuclear missiles aimed against them at their own border?  It’s so obviously disgusting (vile, actually – and what was John F. Kennedy determined to do if the USSR had placed nuclear millies in Cuba?), but do you learn in Western ‘news’ media that this is what the United States has done and is doing to Russia, and to Russia’s allies?

  Here is how even Spiegel  concluded that the West lies about this history, though Spiegel  is itself a Western mainstream medium and so avoids saying it outright that directly, and instead veils the truth so that only the few people with brains and open minds will get the important point:

  Spiegel  makes clear that their investigation of the actual paper record shows that the then merely West German side, which was negotiating reunification of Germany with the then merely Eastern half of Germany, is exactly in accord with what Russia’s allegations have been saying all along, and exactly the opposite of what West Germany’s Foreign Minister then, Hans Dietrich Genscher, has been asserting to have been the case. Here is how we learn this from Spiegel:

  Jack Matlock, the US ambassador in Moscow at the time, has said in the past that Moscow was given a «clear commitment». Hans-Dietrich Genscher, the German foreign minister in 1990, says this was precisely not the case.

   

  After speaking with many of those involved and examining previously classified British and German documents in detail, SPIEGEL has concluded that there was no doubt that the West did everything it could to give the Soviets the impression that NATO membership was out of the question for countries like Poland, Hungary or Czechoslovakia.

   

  On Feb. 10, 1990, between 4 and 6:30 p.m., Genscher spoke with Shevardnadze. According to to the German record of the conversation, which was only recently declassified, Genscher said: «We are aware that NATO membership for a unified Germany raises complicated questions. For us, however, one thing is certain: NATO will not expand to the east». And because the convers[at]ion revolved mainly around East Germany, Genscher added explicitly: «As far as the non-expansion of NATO is concerned, this also applies in general».

  Never does Spiegel  state outright that Genscher was lying; but, an intelligent person recognizes that if «the non-expansion of NATO… applies in general», then the promise made was excluding any eastward expansion of NATO at all. Not only «NATO will not expand to the east», but NATO will not expand. How much clearer can it be than that?

  In other words: Genscher lies when he says that there was no «clear commitment».

  For some reason, Russian officials don’t accuse the West of having «lied». Perhaps they feel that it would only exacerbate relations even further than the West itself has already done by its constant lying. However, wouldn’t it be better for the confrontation to come upon the battlefield of truth, than upon the battlefield of war?

  The U.S. and its allies have been lying through their teeth in order not only to continue NATO, but to extend it up to Russia’s borders — in other words: for conquest.

  For more about this key historical reality, the reader can click here, to see that there’s lots more than just the record disproving Genscher’s lies, but especially the record disproving the lies by U.S. officials.

  Let me then summarize that here: George Herbert Walker Bush and Mikhail Gorbachev were the principals (Bush for the U.S. aristocracy; Gorbachev for the populations of the Soviet Union). Genscher and James Baker and Eduard Shevardnadze, etc. were merely agents; and Bush had his agents lie to Gorbachev’s agents, to say that NATO would not expand at all eastward. But he then, only later, instructed them not to follow through on what they had said, not to behave truthfully — but instead to set things up so as to allow the U.S. military alliance to extend right up to Russia’s borders. Here is how he instructed them to perform in this shameful (and potentially catastrophic) manner in private:

  West German transcripts from the two leaders’ February 24–25 summit at Camp David show [that] Bush made his feelings about compromising with Moscow clear to Kohl: ‘To hell with that!’ he said. ‘We prevailed, they didn’t.’… In April, Bush spelled out this thinking in a confidential telegram to French President François Mitterrand… Bush was making it clear to Mitterrand that the dominant security organization in a post–Cold War Europe had to remain NATO.

  The puppetmaster, Bush, sprung upon Kohl and Mitterrand the instruction for them to just keep up the lie, but that it would be  a lie. They had believed what they had said when they said it, but were now instructed not to fulfill on it. What they had said would be a lie; they were instructed about this, only after they had said what they had believed to be true. From that point on, the anti-Russia thrust of the U.S. aristocracy, which controls the aristocracies (such as Europe’s) that are its allies, was clear; and the only way to disobey would be to become blackballed and trashed. Their careers would have been destroyed if they had disobeyed Bush.

  Both in my own article there, and in the Spiegel  one, the ancillary questions, such as why this promise had never been made in writing (though Gorbachev wanted it to be), are also discussed. However, something should be pointed out here regarding the Spiegel  article, namely that Gorbachev’s Foreign Minister Shevardnadze was also shown there to be lying to Spiegel’s  reporters, and not noted there to have been lying to them. Shevardnadze, «speaking in the Georgian capital Tbilisi, says that there were no such assurances from the West». In other words: he told, to Spiegel, a thing that was contradicting what Spiegel  found in their own examination of Genscher’s papers from the period of the negotiations. Genscher had been negotiating then with Shevardnadze, and according to Genscher’s papers, Shevardnadze had indeed been informed by Genscher that NATO wouldn’t expand, at all. What Shevardnadze’s motive was for this, is not known, and Spiegel’s  reporters didn’t even bring up to Shevardnadze the fact that what he was telling them was in direct contradiction of the written record. (Perhaps Shevardnadze, now retired after having become Georgia’s President, was hoping in 2009 to be favorably viewed by aristocrats in the West. Keeping up the lie would have fit for that purpose. But, even if he had been asked, he wouldn’t have given that explanation.) 

  *  *  *

  George Herbert Walker’s having instructed his agents to lie and to avoid any signed treaty on this crucial historical matter, was the West’s Original Sin.

  Europe’s remaining allied with the U.S. and participating in NATO, especially after having been instructed by America to lie, and to have deceived Gorbachev, who behaved honorably throughout and afterward, is Europe’s great shame.

  And truth is Russia’s great case.

  The U.S. is, in fact, Europe’s enemy – not merely Russia’s enemy. Not merely the truth’s enemy. Not merely democracy’s enemy.

  *  *  *

  Investigative historian Eric Zuesse is the author, most recently, of  They’re Not Even Close: The Democratic vs. Republican Economic Records, 1910-2010, and of CHRIST’S VENTRILOQUISTS: The Event that Created Christianity

  

  

  

  

  

• Spot The Odd Asset Class Out This Year

  Amid the carnage in commodities, frenzy in FX, and breakdowns in bonds, one asset class in one region of the world stands among the majors… The Nasdaq 100 Index.

  (click image for large legible version)

  

  Source: VisualCapitalist

  This chart from Macquarie puts the year in perspective for commodity investors. It covers various asset classes including equities, FX markets, bonds, and commodity prices, and charts them YTD in terms of US dollars and expressed as a percentage.

  For a simple chart, there is a lot of information here to consider.

  For starters, on the far right is the prime culprit in stymying commodity markets: the Dollar Index. The US dollar, which commodities are priced in, has had a big year with close to a 10% return YTD. While the US economy is still suspect at best, it has served as a safe haven for investors this year over markets such as Europe, China, and Japan. As a result, the USD has had the best performance of all of these asset classes listed on the chart.

  The other market on the right worth noting is the Nasdaq, home to many of the tech stocks that have kept the US economy chugging along. While some are skeptical of the true value of some of the companies in Silicon Valley, it cannot be denied that the Googles, Facebooks, and Amazons of the world are the key to keeping US growth intact in any capacity.

  Of course – you should not worry about US equities being expensive or mispriced…

  

  *  *  *

  To the left of the zero mark, things get dire fast.

  Precious metals such as gold and silver are down, but this can be mostly attributed to the strength of the dollar. Energy and industrial metals, on the other hand, have been thoroughly routed due to a combination of dollar strength and slowing Chinese growth. Many agricommodities have struggled as well.

  The biggest losers of the bunch include rhodium, nickel, iron ore, and lean hogs, all which are down more than 30% YTD.

  

  

  

  

• Sitting Ducks In China's Bathtub – An Overture To World War III?

  Submitted by Doug Casey via InternationalMan.com,

  It’s always been true, as Bourne said, that “war is the health of the State.” But it’s especially true when economic times get tough. That’s because governments like to blame their problems on outsiders; even an imagined foreign threat tends to unify opinions around those of the leaders. Since economies around the world are all weakening, and political leaders are all similar in essential mindset, there’s good reason to believe the trend towards World War III is accelerating.

  Many politicians and pundits in the U.S. blame “those damn Chinese” for taking “our jobs” by filling Walmart with tons of cheap goods, and the swarthy ragheads for making the price of oil too high (usually, but now too low).

  The Russians, the Iranians, the Taliban (who will soon reconquer Afghanistan) and ISIS (which is carving out a new nation-state from the ruins of Syria and Iraq) are permanent members on the list of Bad Boys.

  But now, since the Obama regime has decided to “pivot to the East,” you can underline China’s name on that list.

  The “pivot” being the U.S. government’s new focus on meddling in Asia, as opposed to meddling in the Middle East and Europe. U.S. Defense Secretary Ash Carter says the U.S. will be the principal security power in the Pacific “for decades to come.” I’m sure the locals, including the Chinese, were thrilled to hear that.

  It’s said that the U.S. government has combat troops (or advisors, as highly trained special ops guys are usually euphemistically termed) in about 100 countries. It’s hard to keep track of their latest “intervention”…although “interference” is a better word. Note that I said “they,” not “us,” in reference to Washington. The city has a life of its own and its interests are not necessarily those of the country it rules.

  Let’s see…sending arms to a puppet government in Kiev to help put down a secession in Donetsk and Lugansk. Sending jets, and now ground troops, to Syria, which will quite possibly create an incident with the Russians. 150 soldiers to Uganda to fight the Lord’s Resistance Army and 300 to Cameroon to fight Boko Haram. And more troops to Iraq and Afghanistan to help out our “allies.” For the moment, they’re the best allies money can buy.

  It’s hard to keep track of them all, with something new almost every week. But, on the bright side, war is nature’s way of teaching Americans geography.

  So, with that in mind, we now have to learn where the Spratly Islands are. Let’s start with a map.

  

  Map of the South China Sea Region (Photo: John Bretschneider)

  You’ll note the red line. In 2012 China decided that the entire area, right up to the shorelines of Vietnam, Taiwan, the Philippines, Malaysia, and Brunei, was part of its economic zone. The governments of all those countries also have claims to parts of the South China Sea, and the Spratlys in particular. You’ll also note the Paracels, another zone of contention, between China and Vietnam.

  Believe it or not, from 1956 to 1972 (when he was jailed for his efforts) a Filipino businessman, one Tomás Cloma, also attempted to claim part of the Spratlys, and make it an independent country, Freedomland. This caught my attention, in that I was (very marginally) involved in three other island independence movements in the ‘70s: Nagriamel, Abaco, and Minerva. Those, however, are stories (all a mixture of tragedy, comedy, and pathos) for another day.

  Until very recent times, the Spratlys were best known as a hazard to navigation, with about 750 islets, reefs, and sandbars, total land area about 1.5 square miles, spread over about 160,000 square miles of the South China Sea.

  I’ve never been to the Spratlys. But their potential value is clear. It’s said up to 30% of the world’s fish catch comes from the South China Sea. And, almost needless to say, it’s conjectured that the area contains a lot of oil.

  So, you’re probably asking yourself, “What is that to me?” The answer should logically be “Nothing, really, unless it’s a question on a quiz show.”

  But the U.S. government, although it, as usual, has no dog in the fight, has decided to get involved. The catalyst for it acting now is that China is in the process of transforming at least seven reefs into usably large artificial islands, several with long airstrips.

  I’ve looked at the history of who has used, and claimed ownership, of the islands over the centuries. All the adjacent countries have somewhat reasonable-sounding claims. And the Taiwanese, Filipinos, Malaysians and Vietnamese each have a military presence on one or more of the Spratlys. But only the recent Chinese efforts have drawn the U.S. government’s attention. Recently, they sent a guided missile destroyer, the USS Lassen, within the 12-mile limit of Subi Reef, which the Chinese are currently expanding. Reports are conflicting whether the ship was just innocently passing through, or trying to create a precedent.

  I’d like to ask, how do you, I mean you personally, feel about that? I’d like to know. Scores of millions of Asian locals, who’d previously never even heard of the islands, and certainly can’t find them on a map, are getting worked up because their governments told them the islands were “theirs.” And now the U.S. is further complicating the matter. But here’s my take.

  The Chinese seem quite out of line claiming the whole South China Sea as their economic zone. Shame on them. But how is that the problem of the U.S.? It’s the problem of the locals. Should the Chinese be able to build artificial islands? That’s a somewhat different question. I’d say, why not? Disputed or unclaimed land belongs to the person who uses it.

  One thing is for sure: the U.S. government is asking for trouble flying military aircraft off the coast of China and sailing warships into waters they claim. How would the U.S. react if Chinese planes and warships were often seen off the West coast? Or if the Santa Catalina or San Juan islands developed independence movements that the Chinese backed?

  The U.S. government feels pretty bold about its intrusion into the South China Sea, since no other government has a naval force even remotely comparable to its 12 aircraft carrier groups. But that boldness is foolish and unjustified. I’ve said for many years that those carriers are exactly analogous to battleships before World War II, or cavalry before World War I. They’re essentially sitting ducks, highly vulnerable to all manner of cheap, accurate missiles, both cruise and ballistic, that could swarm them en masse.

  It will be a huge embarrassment to Americans (but a treat to divers a couple generations hence) when they’re sunk, and sprouting barnacles like the Japanese fleet in Truk Lagoon.

  The U.S. knows that it’s China’s backyard, and they could sink any U.S. taskforce if they choose to. But they probably won’t. Why start a war when your enemy has a superior military, but you are growing your economy several times faster than he is? It makes more sense to wait…so it’s likely to remain a Mexican standoff, as opposed to an overture to World War III. But these things have a way of escalating unpredictably. In any event, it makes no sense to go to the other side of the globe just to provoke someone.

  In the meantime, the U.S. carrier groups are prestigious, and great for sticking the U.S. government’s nose into far-off places where it’s not welcome. But they’re hugely expensive, at about $6 billion a ship, plus another billion or two per copy for its half-dozen escorts, plus another $200 million for each of the 50 or so F-35 fighters they’ll soon carry. Plus a few billion a year to keep each group operational. Not to worry on that score; the Chinese will surely lend the U.S. government more money to enable that.

  There’s plenty of reason to be concerned about the roughly $1 trillion a year the U.S. spends on the military and “security.” Even though it’s more than the next 28 countries combined, it’s apparently not enough to keep America safe. In fact, it’s actually making the country less safe, by provoking and threatening other powers.

  And if it doesn’t start a war in the short run, it’s going to guarantee a U.S. bankruptcy in the slightly longer run. All the “hawks” running for president this year (which is to say, almost every candidate) seem oblivious to the fact that, in anything but the briefest conflict, economic power completely trumps military hardware.

  In conclusion, whenever you see a mention of the U.S. Navy and the Spratlys in the same paragraph, you’re seeing a reminder of an open vein helping to bleed America dry. And that’s the best case.

  

  

  

  

  

• What The Fed Hath Wrought – Bonds/Stock Positioning Most Extreme Since The End Of QE1

  Having recently explained how "The Fed has done everything it can to avoid surprising the market," vice-chair Stan Fischer better be right about what happens next. With all the double-edged FedSpeak and CONfidence reiteration – in the face of tsunami-like global deflationary forces only made reflexively worse by a soaring US Dollar – speculators are at extremely short bonds and short VIX (bullish stocks). The last time this happened was the end of QE1…

  Aggregating across the entire Treasury future complex, speculators are the most next short since the end of QE1…

  

   

  And now speculators have turned net short VIX once again…

  

   

  The last time the combined levels of short bonds and short VIX were this extreme was as QE1 ended in 2010… This happened next…

  

   

  Charts: Bloomberg

  

  

  

  

  

• "It's All A Lie" – Eric Sprott Slams Massive Monetary Metals Manipulation

  Submitted by Mac Slavo via SHTFPlan.com,

  If the government’s official statistics are to be believed the U.S. economy is moving full steam ahead. Consumer are spending, the job market is expanding, real estate has recovered, stocks are soaring and the U.S. dollar is stronger than it has been in a decade.

  But if you have yet to realize it, it’s all a lie. So says billionaire investor Eric Sprott of Sprott Global, which manages hundreds of millions of dollars in contrarian investment funds for clients all over the world. Well known for his long-term bullishness on the resource sector, specifically precious metals, Sprott joined First Mining Finance chairman Keith Neumeyer in a must-see interview where the pair discuss everything from the state of the global economy and trade to gold market manipulation and the inevitable breakdown of highly leveraged paper trading exchanges.

  Neumeyer recently sent a very public letter to the Commodity Futures Trading Commission highlighting rampant price suppression, noting that neither real producers or real consumers are being represented by the manipulative practices of a small concentration of players. Echoing those concerns Sprott suggests that for every 5 tons of real gold there are some 1500 tons worth of claims. The inevitable outcome should claimants ever want to take delivery of physical inventory will be an unprecedented explosion in price:

  To be brutally honest, I mean, that’s what I dream of… I think we’re almost at that point where we might very well have a shortage of gold and silver by a product of this last raid here, so much so that we’ll take those 5 tons from the COMEX because we have lots of people buying silver and gold.

  The manipulation of precious metals, coupled with the supply and demand fundamentals which Sprott says will lead to shortages over the next few years as mining companies reduce output or close up shop, will leave many investors who think their gold holdings are easily convertible to physical assets with nothing more than depreciating Yellen Bucks at exactly the moment they’ll need precious metals in their possession.

  Everything says to me that the demand for gold is in excess of the supply. And, of course, you wonder why the price would go down, but people look at the COMEX which stays manipulated, which is so obvious to me what’s going on. We have 5 tons of physical gold. We have something like 1500 tons of claims against that 5 tons. So to be quite direct about your question, yes, I kind of wonder any day, is somebody going to snatch those 5 tons of gold, and we end up with some kind of cash settlement. But then you have to think, if we would have a cash settlement, having taken gold from 1900 down to 1100, all under the threat of a rate increase for the last 5 years, which has never happened and may not ever happen, and then all of a sudden they’re like “well, really there is no gold here, we’ll just cash settle it at $1,100.” Meanwhile, we’ve lost $800 on a false claim. And perhaps maybe people in the know know about this, they keep the price of precious metals suppressed because they are the canary in the coal mines.

   A canary in the coal mine, indeed:

  There’s no way we should have a strong dollar here. We haven’t even begun to deal with the issues that are facing the U.S. public, i.e., Social Security, Medicare, everything so far is a lie.

   

  I mean, I can’t believe inflation’s 2% when pretty well every individual in the U.S. just on their healthcare policy, just on that policy alone, their cost went up 2% a year. On everything. Just on healthcare, because it’s probably 20% in healthcare, you get a 10% increase, that’s a 2% increase. So whether or not anything else goes up, there’s a 2% increase. And they don’t throw in grants and education and all those other things that are going up. Inflation numbers are massively understated, everything’s a lie.

   

  I don’t believe the jobs report from last Friday, the ADP number, it’s all a lie. And I sort of ask why do they have to lie about everything? Well, you know why they have to lie about everything… Because we don’t have an economic recovery happening, and they’ve got to pretend there is one. And so when you get these funny numbers that come out that suggest we have strength when deep down you know there’s no strength. Look at the truckloads, the rail car load increase, the cost of chartering a ship, the Baltic rate, they’re all going to new lows here.

  Knowing full well that we’re dealing with a lie so big that its eventual consequence will lead to bewilderment and widespread panic among the general global public once it becomes common knowledge, one should be asking: what do I do now?

  Keith Neumeyer, whose company has been rapidly acquiring distressed assets in the precious metals mining space, provides an insightful and actionable answer given what we know about what’s coming:

  As Eric said, the valuations now are quite laughable. As well as many people know, I’ve been in this market for a while. I’m not sure if Eric has seen these valuations before but in my 32 years of being in it, I don’t recall ever being able to buy a drilled ounce of gold in the ground for less than $10 an ounce.

   

  …

   

  Not one of these transactions could have occurred in a normal market — the costs would have been just much, much higher and just unaffordable.

   

  And then on a personal note, as I’ve said a couple of times to some good friends, I’ve just recently sold my last piece real estate and I’m putting all that money into this sector. I’m going all-in, I think this is “back up the truck” time, this is a once-in-a-decade opportunity, and I’m putting my money where my mouth is.

  Though the market price has yet to reflect it, Eric Sprott and Keith Neumeyer are being joined by scores of billionaires and investment funds that are positioning themselves in the gold and silver markets.

  They know what’s coming. Unfortunately for the majority of the populace, it’ll be too late by the time they realize it too.

  

  

  

  

  

• "Winter Is Coming" – Wall Street Economists At Work

  It’s that time of year again…

  When angry mobs of Americans trample one another for the very last Victoria’s Secret thong, when the world over-indulges, over-consumes, and over-stimulates… And of course…

  It’s the time of year when Wall Street’s best paid and brightest are forced to admit their utter cluelessness…

  

   

  As Reuters shows, the last two years have been extremely embarrassing for the so-called professionals…

   

  

  

   

  Of course, blame-mongery will be rife:

  • Weather was so 2014 (although El Nino is bound to crop up in more than a few memes this year)
  • Port Strikes were “the new black” in 2015

  So, what will the excuse be this year – since there is no way anyone could blame The Fed?

  

   

  Charts: Bloomberg

  

  

  

  

  

• Gold Mini Flash-Crashes At Asian Open

  Someone decided that the exact opening of Gold futures trading on a Sunday night – ahead of a holiday week in the US – was the perfect time to liquidate over $161 million notional of ‘paper’ precious metals contracts… Currencies were unmoved, stocks are leaking higher and bonds lower.

   

  Admittedly the flush was modest in size (around a 0.5% drop and pop) but we are sure whover this gold-seller’s fiduciary duty is owed to will not mind at all…

  1500 or so contracts liquidated instantly… makes perfect sense.

  

  

  

  

  

  

• So Who's Really Sponsoring ISIS?

  Submitted by Mike Krieger via Liberty Blitzkrieg blog,

  Mass surveillance at home and endless military projection abroad are the twin sides of the same coin of national security, which must simply be maximized as much as possible.

   

  Conspicuously missing from President Hollande’s decisive declaration of war however, was any mention of the biggest elephant in the room: state-sponsorship.

   

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

   

  ISIS, in other words, is state-sponsored?—?indeed, sponsored by purportedly Western-friendly regimes in the Muslim world, who are integral to the anti-ISIS coalition. Which then begs the question as to why Hollande and other Western leaders expressing their determination to “destroy” ISIS using all means necessary, would prefer to avoid the most significant factor of all: the material infrastructure of ISIS’ emergence in the context of ongoing Gulf and Turkish state support for Islamist militancy in the region.

  There are many explanations, but one perhaps stands out: the West’s abject dependence on terror-toting Muslim regimes, largely to maintain access to Middle East, Mediterranean and Central Asian oil and gas resources.

   

  – From the excellent Nafeez Ahmed article: NATO is Harbouring the Islamic State

  With the way the French government’s cracking down on the civil liberties of its own citizens, you’d think the general public was supporting and funding ISIS as opposed to the French government allies who actually are.

  As an example, we learn the following from ArsTechica:

  In the wake of last Friday’s attacks in Paris, France is bringing in new legislation extending the country’s temporary state of emergency to three months. The new laws also grant the authorities new powers to carry out searches of seized devices and to block websites.

   

  Under the legislation, police searches of digital equipment are no longer limited to the device itself. Instead, they may also extend to include any data that is “accessible from the initial system or available for the initial system,” as the French digital rights site La Quadrature du Net explains. In practice this means police may use seized devices in order to search for “any type of information on any type of electronic device of any French resident and especially any information available via usernames, passwords collected during a police search, any content stored online.”

   

  Finally, La Quadrature du Net points out a worrying vagueness in a section of the new law dealing with powers to dissolve groups or associations that “take part in committing acts that seriously endanger the public order or whose activities facilitate or encourage committing such acts.” For example, this could include “many associations promoting the use of encryption technologies, which are indeed used by criminals but also mainly by many innocent citizens.”

   

  The fear is that by rushing through this legislation while emotions are understandably running high, the French government will pass measures with unforeseen and harmful consequences.

  Well of course, but that’s the point isn’t it?

  The reality is, Turkey and the West’s “Gulf allies” are the real players behind ISIS, not that you’d ever hear a word about it on the nightly news. So if you want to know the real story, the person I turn to time and time again is Dr. Nafeez Ahmed.

  

   

  Here are some excerpts from his latest, must read piece:

  President Hollande wants European Union leaders to suspend the Schengen Agreement on open borders to allow dramatic restrictions on freedom of movement across Europe. He also demands the EU-wide adoption of the Passenger Name Records (PNR) system allowing intelligence services to meticulously track the travel patterns of Europeans, along with an extension of the state of emergency to at least three months.

   

  Under the extension, French police can now block any website, put people under house arrest without trial, search homes without a warrant, and prevent suspects from meeting others deemed a threat.

   

  Mass surveillance at home and endless military projection abroad are the twin sides of the same coin of national security, which must simply be maximized as much as possible.

   

  Conspicuously missing from President Hollande’s decisive declaration of war however, was any mention of the biggest elephant in the room: state-sponsorship.

   

  Syrian passports discovered near the bodies of two of the suspected Paris attackers, according to police sources, were fake, and likely forged in Turkey.

   

  Earlier this year, the Turkish daily Today’s Zaman reported that “more than 100,000 fake Turkish passports” had been given to ISIS. Erdogan’s government, the newspaper added, “has been accused of supporting the terrorist organization by turning a blind eye to its militants crossing the border and even buying its oil… Based on a 2014 report, Sezgin Tanr?kulu, deputy chairman of the main opposition Republican People’s Party (CHP) said that ISIL terrorists fighting in Syria have also been claimed to have been treated in hospitals in Turkey.”

   

  This barely scratches the surface. A senior Western official familiar with a large cache of intelligence obtained this summer told the Guardian that “direct dealings between Turkish officials and ranking ISIS members was now ‘undeniable.’”

   

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

   

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

   

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

   

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

   

  In January, authenticated official documents of the Turkish military were leaked online, showing that Turkey’s intelligence services had been caught in Adana by military officers transporting missiles, mortars and anti-aircraft ammunition via truck “to the al-Qaeda terror organisation” in Syria.

   

  There is no “self-sustaining economy” for ISIS, contrary to the fantasies of the Washington Post and Financial Times in their recent faux investigations, according to Martin Chulov of the Guardian. As a senior ISIS member recently revealed to him: “They need the Turks. I know of a lot of cooperation and it scares me. I don’t see how Turkey can attack the organization too hard. There are shared interests.”

   

  Meanwhile, NATO leaders feign outrage and learned liberal pundits continue to scratch their heads in bewilderment as to ISIS’ extraordinary resilience and inexorable expansion.

   

  Some officials have spoken up about the paradox, but to no avail. Last year, Claudia Roth, deputy speaker of the German parliament, expressed shock that NATO is allowing Turkey to harbour an ISIS camp in Istanbul, facilitate weapons transfers to Islamist militants through its borders, and tacitly support IS oil sales.

   

  Nothing happened.

   

  Instead, Turkey has been amply rewarded for its alliance with the very same terror-state that wrought the Paris massacre on 13th November 2015. Just a month earlier, German Chancellor Angela Merkel offered to fast-track Turkey’s bid to join the EU, permitting visa-free travel to Europe for Turks.

   

  In his testimony before the Senate Armed Services Committee in September 2014, General Martin Dempsey, then chairman of the US Joint Chiefs of Staff, was asked by Senator Lindsay Graham whether he knew of “any major Arab ally that embraces ISIL”?

   

  General Dempsey replied:

  “I know major Arab allies who fund them.”

  In other words, the most senior US military official at the time had confirmed that ISIS was being funded by the very same “major Arab allies” that had just joined the US-led anti-ISIS coalition.

   

  These allies include Saudi Arabia, Qatar, the UAE, and Kuwait in particular?—?which for the last four years at least have funneled billions of dollars largely to extremist rebels in Syria. No wonder that their anti-ISIS airstrikes, already miniscule, have now reduced almost to zero as they focus instead on bombing Shi’a Houthis in Yemen, which, incidentally, is paving the way for the rise of ISIS there.

   

  ISIS, in other words, is state-sponsored?—?indeed, sponsored by purportedly Western-friendly regimes in the Muslim world, who are integral to the anti-ISIS coalition.

   

  Which then begs the question as to why Hollande and other Western leaders expressing their determination to “destroy” ISIS using all means necessary, would prefer to avoid the most significant factor of all: the material infrastructure of ISIS’ emergence in the context of ongoing Gulf and Turkish state support for Islamist militancy in the region.

   

  There are many explanations, but one perhaps stands out: the West’s abject dependence on terror-toting Muslim regimes, largely to maintain access to Middle East, Mediterranean and Central Asian oil and gas resources.

   

  Much of the strategy currently at play was candidly described in a 2008 US Army-funded RAND report, Unfolding the Future of the Long War (pdf). The report noted that “the economies of the industrialized states will continue to rely heavily on oil, thus making it a strategically important resource.” As most oil will be produced in the Middle East, the US has “motive for maintaining stability in and good relations with Middle Eastern states.” It just so happens that those states support Islamist terrorism…

   

  Assad’s brutality and illegitimacy is beyond question?—?but until he had demonstrated his unwillingness to break with Russia and Iran, especially over their proposed pipeline project, US policy toward Assad had been ambivalent.

  We must not ask unpatriotic questions about Western foreign policy, or NATO for that matter.

   

  We must not wonder about the pointless spectacle of airstrikes and Stazi-like police powers, given our shameless affair with Erdogan’s terror-regime, which funds and arms our very own enemy.

   

  We must not question the motives of our elected leaders, who despite sitting on this information for years, still lie to us, flagrantly, even now, before the blood of 129 French citizens has even dried, pretending that they intend to “destroy” a band of psychopathic murdering scum, armed and funded from within the heart of NATO.

   

  No, no, no. Life goes on. Business-as-usual must continue. Citizens must keep faith in the wisdom of The Security State.

  Very well said.

  

  

  

  

  

• What CNBC Didn't Tell You About The Market's "Best Week Of The Year"

  "Everything is awesome," rang out as anchor after anchor explained how the stock market's "best week of the year" – after mass murder in Paris and as hawkish a Fed as most traders have known was unleashed – was just the start… and Santa Claus was on his way. However, there are a few things they forgot to mention…

   

  The explosive week's gains – no matter what – perfectly roundtripped stocks to the "better-than expected, good news is bad news" cliff-edge of October's payrolls…

  

   

  It was an OPEX week… which has typically been followed by less exuberance…

  

   

  It was an almost perfect echo of the exuberant Bullard Bounce from last October…

  

   

  But there was something very different about this bounce…

  Breadth collapsed as unlike last time, participation in the rip was minimal…

  

   

  And Insiders weren't buying it…

  

   

  So what happens next?

   

  Charts: NorthmanTrader.com and Bloomberg

  

  

  

  

  

• ISIS Explained (For Millennials)

  #BringBackOurIgnorance

   

  

   

  Source: Townhall.com

  

  

  

  

  

• Mike Maloney: The Rollercoaster Crash

  Submitted by Adam Taggart via PeakProsperity.com,

  Precious metals sank to 5-year lows during this past week. The long painful price decline that began at the end of 2011 still continues unabated. Holders of gold & silver are understandably wondering if their faith in precious metals has been misplaced.

  In this week's podcast, we invite Mike Maloney back on the podcast. Mike is the owner of one of the largest bullion dealers in the US, GoldSilver.com, and one of the top minds we know of on monetary history. In this wide-ranging interview — which announces the release of a new educational video, The Rollercoaster Crash, which kicks off Season 2 of GoldSilver's excellent video series Hidden Secrets of Money — Mike lays out the rationale for an approaching global reset of the existing fiat currency regimes, and why asset-backed currencies are highly likely to return in our lifetime:

  History shows that whenever there is a problem with the currency, whether it is big inflation, hyperinflation, or deflation, people go back to safe haven assets. And we should be going into a deflationary episode that is overreacted to that causes big inflation or hyperinflation, which causes a breakdown of the current global monetary system, the global dollar standard that is now the longest-lived of these artificial monetary systems and has developed a bunch of stress cracks and is in the process of imploding right now. There is going to be before the end of this decade, most likely, another emergency meeting of a bunch of finance ministers and economists to try and hash out another world monetary system. It is just history repeating, and it is a natural consequence of a man-made, artificial manipulation of the free market.

   

  But if this debt-based currency system has to evolve, switchover to some sort of asset-based currency system or currency system that is a free market thing, I am fine if the free market selects Bitcoin or if it selects gold or silver again like it has for the past 2500 years — it keeps on selecting gold and silver as the optimum money. I am fine with whatever the free market picks. And I believe it will lead to greater prosperity. But we are in for some short-term pain. The good news is that for somebody that is properly positioned, it can be the best thing that ever happened to you because of this enormous wealth transfer. If currency a fails, its price measured in gold goes to infinity.

   

  Today, there is about $200 worth of gold, investment-grade gold, per person. And there is about $40,000 worth of other liquid financial assets that compete in storing purchasing power. And so those liquid financial assets such as cash, stocks, and bonds, the problem with them is that their purchasing power can evaporate. It is something that is just based on trust. And if just 10% of those liquid financial assets come chasing gold, gold’s purchasing power has to rise 20-fold.

  Click the play button below to listen to Chris' interview with Mike Maloney (78m:22s)

   

   

  

  

  

  

  

• Here Is The Complete Scenario In Which The Fed Hikes Rates, Starts A Recession, And Launches QE4

  Seven years after the Fed unleashed ZIRP and QE to “fix the economy”, it has finally admitted that ZIRP and QE failed to do that (although they certainly succeeded in blowing the biggest asset bubble ever), and for the past 6 months the Fed has engaged in what may be the most ridiculous case of revisionist history, as the narrative has been flipped on its head, and now the all too wise career economists of the Fed (with the help of a few good ex-Goldman bankers) are pitching the first rate hike in nearly a decade as the solution to all the economy’s problems.

  For now the equity market has played along with this grotesque flip-flop in monetary policy, first by rising two months ago on terrible job numbers which made the December rate hike less realistic, and then rising some more in the aftermath of the October “hawkish” Fed announcement and minutes, which in no uncertain terms warned a December rate hike is coming after all, poor economic data be damned.

  To be sure, while stocks as usual remain stuck in their imaginary ivory tower where good news is great, and bad news is even greater, other assets have been far less enthusiastic. In fact, as we have shown repeatedly, the dramatic flattening of the yield curve (via the 2s30s) is now screaming policy error.

  

   

  Yet if bonds foresee a major monetary policy “error” why do stocks remain oblivious? One attempt at an answer was provided by Goldman late last week when the firm suggested that the natural rate of the economy (to which the Fed will hike rates before re-easing) has declined and will remain lower for longer: in other words, the Fed’s experiment has weakened the economy so much, its potential growth rate has been cut in half in the past decade.

  To Goldman this was, as can be expected, bullish for stocks and bearish for bonds (ironically even as another part of Goldman is saying that the “Bernanke put” is now gone and has been replaced with the “Yellen call“, which is why Goldman’s 2016 year end target is an unchanged market).

  Another, far more credible interpretation, comes from Deutsche Bank’s Dominic Konstam.

  According to the DB strategist, what the Fed is likely ignoring is that after decades of bubbles, the monetary excess aftermath of the great financial crisis has still not cleared, and that not only is the equilibrium real rate “lower for longer”, it is in fact negative.

  What this means is that the Fed, in its reflexive attempt to boost confidence in the economy – and the logic goes as follows: “look, we are raising rates, and we wouldn’t be raising rates unless we thought the economy could handle it” (just please ignore the whole “subprime is contained” thing) – is not only engaging in massive policy error, but is about to unleash a recession which will promptly force it to cut rates again (to negative) and start another episode of QE.

  Here is Deutsche, first laying out what the Fed economists think:

  The real case for policy error – equilibrium short real rates may be below zero

   

  There are two interpretations of the macroeconomic data that have vastly different implications for the effect of imminent rate hikes. The first is the “conventional” view, which the Fed subscribes to. This view posits that the short-term real equilibrium rate is around zero. Since the nominal Funds rate is at the zero lower bound, policy is accommodative, and this is why the labor market has improved rapidly. Inflation has not picked up because it as a lagging indicator. However, some form of a Phillips Curve relationship does exist, and so inflation will eventually reach the Fed’s 2 percent target. As per this view, if inflation rises and nominal growth also rises then the equilibrium nominal rate will rise. Even if the equilibrium real rate does not change, the Fed might at least be able to get to the market’s view of the terminal rate – slightly below 2 ½ percent – without inflicting serious damage on the economy. If the equilibrium real rate does rise, all the better – the markets would move to the Fed’s dots, and the terminal rate would be around the Fed’s target of 3 ½ percent.

  How to determine if the equilibrium rate is negative? Just look at the debt, stupid:

  The alternative view is more worrying. In this view, the equilibrium nominal rate is at present much lower than the Fed thinks and the equilibrium real rate is meaningfully negative. Policy at present is not very accommodative, and to the extent that it is, inflation is actually running above its equilibrium level, which is close to 1 percent. One might argue for low “implied” equilibrium short rates via debt ratios. For example, if nominal growth is 3 percent and the debt GDP ratio is 300 percent, the implied equilibrium nominal rates is around 1 percent. This is because at 1% rates, 100% of GDP growth is necessary to service interest costs.

  Which goes back to our fundamental thesis from day 1: there is simply too much debt, and while unconventional policy merely increases the debt, the interest rate shock from a rate hike will crash the economy: hence, the Fed is trapped.

  In this case, real growth would slow in response to rate hikes because productivity would stay weak at full employment and companies would be profit/price constrained around paying higher wages. Moreover, nominal growth would then slow even more than real growth does because inflation would fall to 1 percent or below.

  But… a 25 bps rate hike is tiny: surely the economy can handle it? Actually, if the equilibrium rate is negative, it can’t.

  This is the important policy error scenario because even a very shallow path of rate hikes might drive the real Funds rate well above the short-term equilibrium real rate, further depressing demand. It is then plausible that the economy would be driven into recession, and the Fed would quickly be forced to abort the hiking cycle. As an aside, such a policy error could reinforce itself by causing structural damage that puts additional downward pressure on the equilibrium real rate. In this case the yield curve would flatten meaningfully, at least until the Fed actually reversed course by cutting rates.

  Finally, this is critical because just like Japan in 2000, and all other central banks during the New Normal, who raised rates only to lower them immediately after, the Fed is about to unleash not only a policy mistake, but to do precisely the one thing that will force it to not only cut rates, perhaps to negative, while doing even more QE.

  This scenario is also bullish for rates because the Fed would, at the very least, stop rolling down its SOMA portfolio. More likely it would restart asset purchases in an attempt to stimulate the economy once more, pushing yields further down. We have argued in the past that unconventional forms of monetary accommodation are here to stay. The minutes of the October meeting confirm this view, noting that some policymakers felt it would be “prudent to have additional policy tools” because a lower long-run equilibrium real rate makes it more likely that reductions in the Funds rate alone would not be sufficient to stimulate the economy in the event of a downturn in the future.

  Whether this error will crush what little credibility the Fed has and be its final error, either policy or communication, will be revealed in the very near future.

  Good luck Janet.

  

  

  

  

  

  

• The "Cold Reality" Of The Post-Paris World: The "Freedom-Promotion Agenda" Has Failed

  Einsteinian insanity is a defining characteristic of US foreign policy – and that goes double when we’re talking about the Middle East. 

  You see, America loves democracy so damn much, that the US is fully prepared to impose it upon recalcitrant countries by force. Sure, that may seem oxymoronic, but it’s really just well meaning paternalism. After all, what better way to endear the local population to an occupying force and sow the seeds for the establishment of democratic institutions than to come in shooting after you’ve leveled a couple of cities with cruise missiles and airstrikes? 

  Of course not all autocratic regimes are subject to America’s “democracy at gunpoint”. The Saudis, for instance, get to promote Wahhabism and push the same brand of orthodox Sunni Islam that ISIS and al-Qaeda espouse free from US meddling because, well, because they’re an “ally”, because they’ve got all the oil, and because they’ve helped the US perpetuate decades of dollar dominance. As long as they can afford to provide subsidies to the masses in an effort to effectively bribe the public out of staging a popular uprising, everything will presumably be fine.

  Other countries haven’t been so lucky and the results have been a disaster.

  America’s effort to rid Iraq of Saddam ended up transforming the country into an unstable Iranian colony plagued by sectarian violence.

  

  Libya is a lawless wasteland in the wake of Gaddafi’s death.

  

  Egypt has completely roundtripped and is now run by a former intelligence chief for Hosni Mubarak meaning that i) the entire “democratic” interlude touched off by protests during the Arab Spring was completely pointless, and ii) the loss of life in the countercoup which ousted Mohamed Morsi was entirely avoidable. In other words, if we were just going to end up with a Mubarak disciple, then why did we bother? Morsi has since been sentenced to death.

  

  Now, Washington, Riyadh, Ankara, and Doha have helped turn Syria into what UN Secretary General Ban Ki-moon recently called “the worst circle of hell” and were it not from Russia and Iran’s interevention, Damascus might have already fallen.

  What do all of these things have in common? They all represent failed attempts on the part of Washington to engineer democracies and influence the political future of sovereign states either by coercion or outright military force.

  Put simply: that approach never works. Ever. And this fairy tale you’ll hear (see here for instance) about how things would be fine if the US would just send in 30,000 troops to subdue ISIS and back down the Russians on the way to holding “internationally recognized democratic elections” is the worst kind of nonsense. First, it completely overlooks the fact that the Iranians will fight before they’ll stand aside and let Assad be “voted” out, second, you can’t hold democratic elections in a warzone, and third, it’s not entirely clear that the US has completely thrown in the towel on the idea that if the Saudis and Qatar can just keep the various Sunni extremist groups battling the regime in the fight for long enough, there might still be hope that the Russians get bogged down and eventually lose. 

  Here’s what Congresswoman Tulsi Gabbard – who on Friday tabled legislation designed to force the CIA into giving up the “illegal” effort to overthrow Assad – said last week when asked about whether the US should attempt to intervene when an autocratic government is oppressing its people:

  “People said the very same thing about Saddam (Hussein), the very same thing about (Moammar) Gadhafi, the results of those two failed efforts of regime change and the following nation-building have been absolute, not only have they been failures, but they’ve actually worked to strengthen our enemy.”

  It’s with all of the above in mind that we bring you excerpts from “The Cold Realism of the Post-Paris War on Terror,” an article by Emile Simpson originally published in Foreign Policy. As Simpson convincingly argues, “the time for supporting democratic regime change across the Muslim world is over. It’s accept Assad and his like, or embrace the chaos.”

  *  *  *

  From  “The Cold Realism of the Post-Paris War on Terror”

  While the Paris attack provides a fresh impetus for the West to defeat the scourge of radical Islamic terrorism, it also shows how profoundly the post-9/11 war on terror has failed. After all, haven’t jihadi networks massively proliferated since 2001, leaving Western capitals and cities across the Muslim world perpetually on edge, poised for the next fresh carnage? Post-Paris, the war on terror won’t be part of a neoconservative project to remake the world in our own image, but a Burkean conservative posture that accepts the devils we know.

  The Paris attacks will impose a cold strategic clarity. Whatever the objective threat, the West cannot tolerate the humiliation of terrorist attacks from an enemy that, so far, it has merely sought (and failed) to contain. For all the self-congratulatory talk of “historic” progress at the recent diplomatic talks in Vienna, a “political solution” cannot fix the problem of ISIS and hard-line Islamists — for neither Washington nor Moscow would ever accept a negotiated peace with them. The territory they hold must be cleared and held by infantry. But whose infantry? The Kurds can retake only so much ground, given their limited resources and lack of desire to expand substantially beyond ethnically Kurdish areas. Non-Kurdish rebels are small in number and fragmented. And in many cases their “moderate” credentials are dubious, at best.

  That leaves the West, Russia, or the Assad regime and its Iranian proxies.

  There’s no chance the United States, France, or NATO wants to hold ground on its own, or back Assad. So scratch the first option from that shortlist. Handing the moral and military quagmire over to the Russians — who will, in turn, back the Syrian Army — begins to seem like the only option.

  Assad’s fate is a weathervane for the future of the wider war on terror. Syria has, in three respects, turned into the graveyard of the post-9/11 phase of this conflict.

  For one thing, U.S. policy towards Syria begins to dispel the notion that the war on terror is part of a broader freedom-promotion agenda. In hisaddress to Congress on Sept. 20, 2001, then-President Bush defined the war on terror as a moralizing revolutionary project. The refrain was still alive six years later. “This war is more than a clash of arms — it is a decisive ideological struggle,” Bush said in his 2007 State of the Union address. “The great question of our day is whether America will help men and women in the Middle East to build free societies and share in the rights of all humanity.”

  And what is Washington’s bipartisan answer to this “great question of our day,” from the perspective of 2015? A decisive “no,” unless you think that the Abdel Fattah al-Sisi regime in Cairo, which holds up to 40,000 politicalprisoners in its torture-ridden jails, is allowing Egyptians to share in the “rights of all humanity.” Or, perhaps, that our trusted ally Saudi Arabia doesn’t actually have a rancid human rights record after all.

  Syria makes plain that we don’t, actually, have an alternative to Assad. Yes, the Syrian strongman himself may well ultimately be “transitioned” out of power, but his repressive regime will stay intact. Whatever Assad’s personal fate, dissolving his regime means removing any vestige of state order that remains in Syria, and replacing it with even more chaos. And surely we’ve learned by now that things can always get worse. Syria merely confirms the lesson the West should have learned from Iraq: that the freedom agenda in the Muslim world is dead.

  Second, we now know that the notion that regime change leads to a better democratic or a humanitarian outcome is decidedly false. From Iraq, where the West tried a heavy footprint strategy, to Libya, where it opted for a light one, the idea that Europe or the United States can actually execute democratic change by force has been exposed as a fallacy. In Iraq, $2trillion dollars, over 4,000 dead Americans, and over 200,000 dead Iraqis created a country run by an Iranian puppet who turned out to be a vicious sectarian maniac. In Libya, we simply have chaos, with much of the state run by hard-line Islamists.

  Those who say the United States should have intervened in 2011 to topple Assad are left having to explain either how they could have rallied U.S. public support for an Iraq-like occupation and rebuilding of Syria, or, in the absence of that, how Syria would have avoided Libya’s fate.

  

  

  

  

  

• It's "Red Or Black" For Those Still Foolish Enough To Play

  Authored by Mark St.Cyr,

  There’s an old adage among veteran stock traders that goes something like his, “If I told you the news before it were made public – it’s still a 50/50 bet you would guess the market’s reaction correctly.” That was when the markets had some resemblance of normalcy.

  Today, normalcy has been replaced with sheer lunacy as to the speculation and interpretations for where these markets go from here. And the dangerous nature of just how cutting a blow to one’s financial future was laid bare in the story that went viral showing some wannabe “trader” wiping out his (and subsequently his wife’s and more) retirement savings. Then, opening up some form of a donation (begging) page to help him cover his now 6 figure margin call to his online broker because he was now broke. His story will far from be the last – for the clues are everywhere.

  One of the main points I’ve tried to point out since I first began articulating my thoughts about these “markets” is the inherent dangers contained within where even veterans have found themselves on the wrong side of “would never happen.”

  There’s no better example of this than the MF Global™ debacle just a few years ago. Where veteran traders went home at the end of the day with money in their account only to arrive the next morning to find “it’s gone.” The resulting chaos put many a veteran floor trader out of work, out of money, and for some – out of options. The lingering taste of distrust this one-act caused should not be lost. For it’s one thing when a client gets screwed – it’s quite another when you screw your own. This is today’s Wall Street.

  JBTFD (just buy the dip) Bulls were once again rewarded this past week with: the best weekly rally for the S&P 500™ in all of 2015, rising some 3.3%.

  Reread that last sentence two or three times with only one slight change. As you do add this short sentence: As terrorism struck throughout Paris killing over 130 innocents with open gunfire, explosives, and hostage execution at a restaurant, soccer match, and concert.

  And let me point out for those thinking “Well that was Europe not the U.S.” So too did Europe’s market push higher in the wake. Again, why the need for any market concerns to heinous events when the central bankers of today have made it clear they’ll do “whatever it takes.”

  The initial knee jerk reaction where the markets spiked down on initial reports were met with a horns over hooves buying frenzy. Why? Well, as callous as it may sound the only thing that truly mattered to the markets was this weeks options expiry cycle close. This is the last chance to closeout the books, and/or re-position on a high note before two very important issues: Year end, and, the Fed’s perceived imminent rate hike.

  Market breath (volume and other qualitative analysis) showed the buying of 2015’s “best weekly rally” was anemic at best, and dangerous at worst. There’s no better example as to demonstrate this than what has today come to garner the Wall St. moniker known as “FANG.” (e.g., Facebook™, Amazon™, Netflix™, Google™)

  David Stockman recently published an in-depth breakdown of this latest moniker-ed phenom that’s worth reading as to comprehend just how precarious things truly are. I’ll also add; once Wall St. assigns monikers? That’s when you should become very nervous indeed. Remember when the “BRICS” (e.g., Brazil, Russia, India, China, South Africa) were going to save the global economy?  Now one wonders if they’ll be able to save their own. How’s Brazil doing for one? But I digress.

  So now here we are going into an abbreviated holiday session in the U.S. following an expiry fueled rally. “What could possibly go wrong?” After all, with what we’ve seen transpire within the capital markets over these past few weeks; is the need for concern just more “Chicken Little” cackling? After all: The next in-rotation market Bull, as well as economist to be paraded out across the financial media will stampede over you in getting to the camera, microphone, or keyboard first to spout just how “resilient” these markets have become. And to prove their point (as always) they’ll just point to the current levels as if that tells the whole (or only) story.

  Once again I would like to remind many who are currently following the “financial advice” laid out in many of today’s “best sellers” that caution and safety is paramount above all else. The consequences of assumptions are far too grave.

  JBTFD has worked of late with a near offensive accuracy. (i.e., terrorism supplies a dip) However, the next dip (if there is one) might just not react in the same fashion. Why? Well, the Fed. has now mused in more ways than humanly possible to decipher that they will indeed hike rates at December’s meeting. Unless they don’t. And don’t forget negative interest rates are still a consideration.

  Confused? Don’t be. They could always launch more QE if needed, since they’ve stopped it, stating the markets no longer need it. Sorry, that doesn’t clarify does it? Oh well, that’s what goes for “clarity” by today’s Fed. standards. Think I’m off base? Here, see for yourself. Below is a few lines from the Fed’s vice-chair Stanley Fischer speaking at a recent event in San Francisco:

  While we continue to scrutinize incoming data, and no final decisions have been made, we have done everything we can to avoid surprising the markets and governments when we move, to the extent that several emerging market (and other) central bankers have, for some time, been telling the Fed to “just do it.”

   

  Fed meetings are now ‘getting interesting’ as possible rate hike discussed.

   

  In the relatively near future probably some major central banks will begin gradually moving away from near-zero interest rates.

  Huh?

  Let’s put a little perspective on that first line: “avoid surprising” is used in a passage that holds both “no final decisions” because of continued “incoming data?” Which is exactly what determined the last surprise. (e.g., no rate hike.) All while we’re supposed to infer “emerging markets,” many of which are collapsing due to currency fluctuations are telling the Fed. to “just do it.?” Really?

   

  Second: Fed. meetings are “getting interesting?” Is that the term to fit what must have taken place at September’s policy decision of inaction over action? I think that phrase is an interesting choice from my perspective. Especially since that decision was predicated on the “international developments” of a near China market meltdown precipitated by a reaction of “emerging market” upheaval in margin fueled carry trades funded in relation to today’s zero bound policy. Interesting indeed is all I’ll say.

   

  Third: As “other major central banks” will begin to move away from near-zero policies? This, as Mario Draghi announces near simultaneously another round of “what ever it takes?” You can’t make this nonsensical double speak up. The only thing more preposterous would be if the Fed. Chair herself had recently reiterated that “negative interest rates” were indeed a tool currently contemplated. Oh wait, I forgot, she did just that at her latest testimony before congress. As the late (great) Gilda Radner would say, “Never mind.”

  So with all this in mind what happens next is anyone’s guess. For I’ll contend not only does Wall Street not know – neither does the Fed. itself. For what happens to all this surety of assumptions (yep, that’s how farcical it’s become) if the markets now re-position just like they did in August and sell off their exposure to the increased carry cost exposure they most certainly will have. After all, 25 basis points sounds so minuscule. Unless, you see it as what it really has the potential for in today’s search for yield (any yield no matter how small) market.

  In a margin levered carry trade – a 25 basis point increase could result in a 25% loss of profit, or increased cost. That “minuscule” 25 carries a lot of obligation cost or profit with it. So much so – it could blow up trades that would have trading desks begging to have the problems the a fore-mentioned “day trader” experienced. Small numbers have big impacts, and create inconceivable profits almost nowhere else as they do on Wall Street. After all, HFT (high frequency trading) make Billions upon Billions – a fraction of a cent at a time.

  From my perspective there’s only one conclusion: a guess. Red or Black for those still foolish to play. For that’s what today’s markets have become. Nothing more than a wagered guess as to which way the market will go. Welcome once again to the casino. And as they like to say: “Everybody, please…Place your bets!” What you won’t hear at a casino yet have to contemplate today on Wall Street is – the hope they’ll be someone their to buy your chips when you want to cash out.

  For that also is – a gamble.

  

  

  

  

  

• The Rational Reaction To A 'Government Unable To Protect Its Citizens'

  Following the attacks in Paris, gun sales are booming across the United States, not only from those who were already armed, but first time gun owners as well. “We were busy right out of the box,” Russell Durling, owner of Last Resort Guns in Madison County, Alabama, told local station WAFF. “The truth of it is, when America is scared, America buys guns.”

   

  Source: The Burning Platform

  *  *  *

  We can only imagine what the situation is like in Austria now… after selling out of long-guns even before the Paris attacks!!
  

  

  

  

  

  

• How You Were Tricked Into 'Supporting' The Syrian War

  Submitted by Justin King via The Fifth Column,

  Those who don’t understand history are doomed to repeat it, those that do understand are doomed to watch in horror while everyone else repeats it. The run up to overthrowing President Assad of Syria was occurring before The Fifth Column existed. I covered it when I wrote daily for The Anti-Media, and even before then when I wrote for a Canadian outlet called Digital Journal. It began long before that though.

  It started in 2006 when the US decided it wanted to oust Syrian President Assad and started laying the ground work. This was proven by leaked Saudi Arabian intelligence cables hosted on Wikileaks. Julian Assange said of the leaks:

  “That plan was to use a number of different factors to create paranoia within the Syrian government; to push it to overreact, to make it fear there’s a coup…so in theory it says ‘We have a problem with Islamic extremists crossing over the border with Iraq, and we’re taking actions against them to take this information and make the Syrian government look weak, the fact that it is dealing with Islamic extremists at all.”

  The same year, the Islamic State was just a half-baked insurgent group in Iraq. The group would then migrate to Syria, where it was reinforced by battalions of defecting Free Syrian Army troops who were trained by the United States. Many of those claimed to have ties to the Central Intelligence Agency. The Islamic State truly became a child of the United States.

  In 2009, the United States began secretly funding opposition groups within Syria and even provided $6 million to Barada TV, a UK-based TV channel, to produce propaganda to support “regime change” inside Syria.

  Slowly but surely, the US and its allies put this plan into effect until in March of 2011 spontaneous demonstrations popped up in Syria demanding Assad step down. Of course, Huffington Post UK would later point out that these demonstrations weren’t spontaneous at all. They were orchestrated by the Central Intelligence Agency.

  In October of 2013, the US was bombarded by television pundits who advocated airstrikes in Syria. Viewers were engrossed. The television stations that aired these pundits never told their viewers that the people advocating the airstrikes were employed by the companies that made the missiles that were to be used. This was the straw the broke the camel’s back, and activist began pressuring DC to deescalate.

  In September of 2014, President Obama openly admitted the plan was for regime change. He boldly stated:

  “We are not going to stabilize Syria under the rule of Assad.”

  Throughout this time the West has tried various methods of justifying an invasion. There were claims of chemical weapon attacks perpetrated by Assad, but the only proof offered was the analysis that the weapons might have originated from the Syrian military’s storerooms. The average American was smart enough to realize that it’s a civil war and that the weapons of all sides came from the Syrian military, except of those “accidentally” dropped to Islamic State forces by the United States. The chemical weapons claim disappeared when the Kurds were hit by chemical weapons. The Kurds were fighting the Islamic State, not Assad. There were scores of unsuccessful airstrikes launched by the West. They accomplished nothing, and the Islamic State continued to destabilize Assad. NATO allies openly attacked those fighting the Islamic State.  The plan was working and in June of 2015 the Brookings Institute published its paper on how to reorganize Syria.

  Then suddenly, everything went wrong for the West. Russia announced it was going to begin providing air cover for Assad’s forces, and their airstrikes were just a tad more accurate. The Kurds in Iraq had massive successes against the Islamic State and bottled them up in two major cities. This offensive made thousands of Iraqi Kurds available for the fight against the Islamic State in Syria. Everything looked grim. It seemed that almost a decade of work was going to fly out of the window and Assad would remain in power.

  Then a miracle occurred. Islamic State terrorists murdered more than 150 in Paris. The propaganda machine took over. Facebook asked if you wanted to change your profile photo to show solidarity with Paris. It created a social media frenzy and a propagandist’s dream. Suddenly, everybody wanted to get even with the Islamic State. Where is the Islamic State? Syria. The West now has its pretext to overthrow Assad. It will happen as a result of fighting the Islamic State in Syria. The average American is simply too stupid to understand that the Islamic State is Assad’s enemy. The West has successfully sold people on the idea that removing Assad is somehow benefiting the fight against the Islamic State. And people cheer.

  That sounds crazy? A day after the attack, the US State Department released the statement of the International Syria Support Group. It reads in part:

  “In this respect they affirmed their support for a ceasefire as described above and for a Syrian-led process that will, within a target of six months, establish credible, inclusive and non-sectarian governance, and set a schedule and process for drafting a new constitution. Free and fair elections would be held pursuant to the new constitution within 18 months. These elections must be administered under UN supervision to the satisfaction of the governance and to the highest international standards of transparency and accountability, with all Syrians, including the diaspora, eligible to participate.”

  That’s right. Assad isn’t even out of power yet, but the new US-puppet constitution will be ready within 18 months.

  Recap: The United States planted the seeds of revolt through propaganda, led the demonstrations against Assad, helped arm and train the Islamic State, repeatedly pushed a false narrative to gain a pretext to invade, denied proper air support to those fighting the Islamic State, and will now capitalize on the murders committed by the Islamic State to achieve its goal of ousting Assad. They’re so confident of success this time, there’s a timeline for the new constitution.

  During all of this, over 300,000 people died and 6 million more were displaced. There will be more death and destruction. Unless, of course, Assad voluntarily steps down and allows Syria to become another US colony, which is highly unlikely.

  The horrible part of this is that despite warnings, the American people did nothing. We’ve been had, but we’re the lucky ones. We’re still alive.

  

  

  

  

  

• Inside Vladimir Putin's Multi-Billion Dollar, Triple-Decker War Room

  If you were one of the unlucky moviegoers who spent $15 on a ticket for the latest Steven Spielberg, Tom Hanks extravaganza “Bridge of Spies” (a Cohen brothers-assisted screenplay corrupted by a smorgasbord of Hollywood cliches), you know that the tradition of using American cinema to whip the public into a Russophobic frenzy is alive and well.

  In Spielberg’s East Germany it’s always dark, it’s always snowing, the KGB agents at the Russian embassy in Berlin are laughably cartoonish stereotypes, and the backdrop is gray and monocrhromatic except for bright red Soviet flags. 

  

  But it’s a well placed piece of propaganda designed to convince Americans that Vladimir Putin’s Russia threatens to plunge the world back into Cold War diplomacy on the way to resurrecting the type of nuclear brinksmanship that could make a $17,500,000 nuclear fallout shelter look like a prudent investment. 

  Of course you can count on Kremlin grandstanding to perpetuate the stereotype and in the wake of Moscow’s confirmation that it was indeed a bomb that brought down a Russian passenger jet over the Sinai Peninsula earlier this month, we got a look at Putin’s new multi-billion, National Control Defense Center which is so … how shall we put this… so “Soviet”, that you’d imagine Sean Connery might be creeping around the compound in a suit carrying a silenced pistol.

  

  Here’s The Washington Post: 

  “Gentlemen. You can’t fight in here. This is the war room!”

   

  It could have been a scene straight out of “Dr. Strangelove” when President Vladimir V. Putin stepped into the Russian Ministry of Defense’s brand new, three-tiered, multibillion-dollar control center this week, for a war briefing that had its fair share of movie-like pageantry.

   

  
  

   

  The fortified National Control Defense Center was Putin’s first stop after officials confirmed that the Russian charter jet crash that claimed 224 lives last month was the result of an act of terror.

   

  On movie-theater-size screens, live broadcasts showed long-range strategic bombers taking off from Russian air bases to fly sorties over Syria. Putin instructed commanders in Syria to “make contact with the French and work with them as allies” as Russia seeks a central role in a proposed anti-terrorist coalition.

   

  But the real star of the show may have been the building itself, which is designed to be a new nerve center for the Russian military that will coordinate military action around the world, including ballistic missile launches and strategic nuclear deployments.

  The facility became operation last December, and as Sputnik said at the time, it’s “been designed to satisfy Russia’s defense needs for at least 20 years, synchronizing the decision making process of the military command and the Russian government [and has a] data-processing center calculating capacity that exceeds that of a similar Pentagon facility threefold.” The facility has a helicopter pad for Russia’s Mi-8 transport choppers and, as WaPo goes on to note, “it would be be the country’s premier communications center in case of war, [with] one Russian commander comparing it to the military headquarters of the Soviet Union during World War II.”

  Here are the visuals courtesy of Sputnik, RT, FoxTrotAlpha and WaPo: 

  

  

  

  

  

  

  

  

  Whether you really need all of this in order to conduct a war is probably questionable (it kind of looks like a Soviet edition of The Death Star), but we would say this: it’s no wonder Moscow decided to intervene in Syria – no one could resist taking this place for a test drive.

  

  

  

  

• Trump Tops Clinton As Cruz Crushes Crashing "Clueless" Carson

  The latest poll following the attacks in Paris, by Fox News, shows Donald Trump moving ahead of Democrat-front-runner Hillary Clinton (in a head-to-head match up if the election were held today), but it is the turmoiling below the surface of the GOP nominations that is garnering most headlines. After a week or two of hope for GOP leadership, as Ben Carson appeared to catch up to Trump, the retired neurosurgon's lies and weakness on foreign policy ("he clearly has no idea what he's talking about," as one Iowa GOP insider noted), have sent his poll numbers reeling… and Cruz surging.

   

  Top Trumps…

  

   

  But Cruz catches a bid as Carson collapses… (as The Right Scoop reports)

  NBC News has a new nationwide surveymonkey poll out today, with a very large sample size of over 2400 that are Republican or who lean Republican, that shows Ted Cruz surging 8 points to second place into a tie with Ben Carson with 18%. Trump is of course still in first place with 28%.

   

  The interesting thing about this poll is that we can see the history all the way back to April of this year, and in this new polling Cruz is higher than he’s ever been, especially as of late:

   

   

  

   
  Also Carson was tied with Trump the last time this poll took place in late October, however he has fallen a significant amount to 18%. It looks like Trump has increased in the last 15 days or so a few points.

   

  Rubio has increased, but only by a couple of points since the last poll.

   

  Here are a couple of charts that show how the candidates are doing in a few subcategories:

  

   

  

   

  *  *  *

  The broader tracking index of RealClearPolitics also shows Carson's demise, but Cruz resurgence is less obvious…

   

  

   

  As Politico reports, the emergence of foreign policy as a central issue in the presidential campaign poses the greatest threat to Ben Carson — no other GOP candidate has as much vulnerability on the issue.

  Last week’s terror attacks in Paris — combined with a number of missteps on international issues — imperil Carson’s status as a leading candidate, according to the insiders, who said the retired pediatric neurosurgeon has failed to articulate coherent foreign policy or shown command of the issues. A resounding 71 percent of Republicans said Carson was the most vulnerable among the 14 GOP hopefuls on foreign policy — far more than any other candidate.

   

  “He clearly has no idea what he’s talking about,” said one South Carolina Republican.

   

  “Ben Carson's complete ineptitude makes you long for the days of ‘Uz-beki-beki-stan-stan,’” added an Iowa Republican, referring to a disastrous Herman Cain interview four years ago.

   

  Foreign affairs were never Carson’s strength but the issue took on new resonance after the terror attacks in Paris last week. Since then, Carson has faltered in interviews, and a New York Times story earlier this week quoted an 83-year-old Carson adviser who described the candidate as needing intense coaching “to make him smart.”

   

  “Carson is so clueless,” said an Iowa GOP insider. “He thinks the Kurds are a special kind of Wisconsin cheese.”

  On a lighter note, perhaps, as The Oinion so eloquently noted, despite public outcry against his incendiary comments on women and minorities, Donald Trump is still the leading Republican candidate…

  

   

  Here are some reasons Trump stays so popular with his supporters:

  • Highly relatable lack of qualifications for holding government office
  • Americans’ appreciation for classic underdog story of man who started with only several hundred million dollars and went on to make several billion dollars
  • Only candidate to publicly state willingness to make America great again
  • Exploits other Republican candidates’ weaknesses by allowing them to open their mouths and speak on issues
  • Very, very handsome
  • Voters eager to see presidential library with three infinity pools and rooftop driving range
  • Bolstered by impassioned endorsement from Donald Trump
  • Eccentric, megalomaniac billionaire still more relatable to average American than anyone willing to dedicate life to politics
  • Appeals to widespread desire to see nation implode sooner rather than later

  Source: The Onion

   

  

  

  

  

  

• Equities vs 'Everything Else' – Deutsche Bank Warns "One Of These Sides Has To Be Wrong"

  Deutsche Bank's Oleg Melentyev is worried…

  "This is quite an unprecedented set of circumstances to have a very strong market move tighter that is not led by its higher-beta components. It also gives us a sense of a low level of conviction prevailing among market participants: I don’t want to miss out on the rally and yet I don’t want to touch the high-octane stuff, even ex-energy, as my confidence in issuer fundamentals and persistent lowdefaults is diminished. "

  In fact, three things are on his mind that warrant some very serious attention…

  Figure 1 shows how CCCs are now underperforming BBs on a trailing  12-month total return basis, by 700bps all-in and 460bp ex-Energy. There are only three instances of underperformance this deep, two of them coinciding with developing credit cycles in early 2000 and early 2008, and one false positive in late 2011. We have previously addressed the latter case in our Evolution of the Default Cycle piece a few weeks ago, pointing at its differentiating features such as early cycle stage (only 2 years out of the previous recession) and easing policy stance (the Fed expanding on its QEs, not rolling them back or hiking rates).

   

  

   

  Another interesting and unusual development is taking place on a high-level across asset classes, where US HY is now underperforming all major related markets, Including loans (-1.2%), IG (-0.5%), equities (-2.1%), Treasuries (-6%), EU HY (-3.7%) and even external EM sovereigns (-4.3%). The most intriguing detail here, in our view, is that HY is underperforming both IG and equities at the same time. Think about how unusual this is for a moment. If HY is an asset class that sits somewhere in the middle on a risk scale between high quality bonds and equities, then normally we would expect it to be underperforming one and not the other, as they would normally move in opposite directions. Figure 2 confirms this intuition – plotted here are the trailing 12mo differentials between HY and IG (blue line) and HY and equities (red line), and most of the time these two lines are on the opposite sides of the x-axis. In fact, the only two times we had both of them being negative were, again, early 2000 and late 2007. Even 2011 did not create an exception here. The graph looks indistinguishable if we were to plot all three asset classes ex-energy over the past year.

   

  

   

  Recent disappointing results announced by retailers ranging from Walmart to Macy’s to Nordstrom to Best Buy has also caught our attention as an odd development. Somehow, we were under the impression that these were supposed to be the best of times for the US consumer: employment trends are strong (as evidenced by nonfarm, claims, and unemployment rate), wages are going higher (21 states raised their minimum wages in 2015, as well as some major private employers such as Walmart, McDonalds), gasoline prices are at 10 year lows as are home heating bills, equities are at cyclical highs, and home values have recovered. So if consumers are cutting on their discretionary spending with all these tailwinds in place, there must be something else going on.

   

  

   

  Part of it is the “Amazon” effect, where any retail sector graph is a mirror image of itself whether you include Amazon in the sample or not. But we should also keep in mind that while AMZN growth is impressive, its annualized revenues are at around $90bn compared to almost a $1trln for all other US retailers. And its net income is still basically zero, compared to $30bn earned by its bricks-and-mortar competitors. The graph in Figure 3 is showing the total return relative performance of US consumer staples equities 1 and consumer discretionary stocks2, and it shows the latter underperforming to the tune of 16% from the highs reached in March of this year. Four-fifths of that underperformance materialized in the last two months alone. The only two times have seen this pair moving to similar or greater extents over the past twenty years were in Mar-Nov 2000 and May-Nov 2007.

  These three indicators require our continued monitoring going forward given their track records and present day levels.

  The hardest questions we are trying to reconcile here are how is that possible to see all these signs of weakness under the surface – including weak commodities, tightening credit, retrenching consumer spending – being balanced by very strong equity markets and upbeat employment picture.

   

  One of these sides has to be wrong in its assessment of the current macro environment, and seeing both of them extending well into the future appears unlikely to us.

  

  

  

  

  

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• US, French Aircraft Carriers Rush Toward Syrian Coast To Find Numerous Russian Warships Already There

  Two weeks ago, on November 5, and one week before the Paris terrorist attack, we reported that somewhat unexpectedly, France had dispatched its only aircraft carrier, the Charles de Gaulle, to “the eastern Mediterranean for operations against Isis in both Syria and Iraq.”

  

  It was unclear just what these pre-emptive operations would be and why France is getting so dramatically involved in the campaign against ISIS. Not knowing the dramatic attack that was about to unfold (whose false flag origins have been quickly ignored as nobody has yet explained why a fake Syrian passport was found next to the suicide bomber), we speculated that this move had to do with the departure of the CVN-71 Theodore Roosevelt which had left the Persian Gulf region a month ago, leaving the entire 5th Naval Fleet without a US carrier presence for the first time in a decade.

  One week later, we found out that Paris may have had an advance hint of what was about to unfold when on the night of Friday 13 it all fell into place.

  But with the French aircraft carrier full steam ahead toward the Syrian coast, the US could not afford to leave the airborne defense of the region to the French, so it did what was just a matter of time: it weighed anchor on the CVN-75, Harry Truman which was deployed toward the Middle East where according to the Daily Press it will “fight the Islamic State.”

  USS Harry S. Truman (CVN 75) Deploys from Norfolk, Va. from SldInfo.com on Vimeo.

  According to the Press, “the Truman is expected to reach the Persian Gulf before the year’s end. The U.S. has been launching air strikes into Iraq and Syria from aircraft carriers in the Persian Gulf — at least until last month, when the USS Theodore Roosevelt left the area after an extended deployment. The two-month gap is the first in nearly a decade that the U.S. has had no carrier in the region.”

  While the Truman’s departure date was set more than a year ago, it came about six months earlier than first planned. In October 2014, it was announced that the ship would switch deployment cycles with the Norfolk-based USS Dwight D. Eisenhower, which required an additional 10 months in the shipyard.

  As the Navy Times reports, “there were no immediate changes to deployment orders as a result of Friday’s terror attacks, but there is great resolve among the sailors to support their French allies, said Capt. Ryan Scholl, Truman’s skipper. Scholl said his crew is ready to bring peace or “violent destruction.“

  Something tells us it will be the latter.

  Once again, here is the ETA: Carrier Theodore Roosevelt left 5th Fleet in mid-October, leaving that region without a carrier until the Truman CSG gets there, which should be about six weeks, or just around the New Year.

  Then again, according to the latest Stratfor naval map, the Truman is already approaching Gibraltar. If accurate, it means the carrier will be next to Syria in a couple of weeks tops.

  

  Scholl offered assurance to coalition and U.S. forces still in the fight across Syria and Iraq as part of Operation Inherent Resolve.

  “The Harry S. Truman battle group will be there in due time and execute our mission successfully,” he said. “We hope that brings some peace of mind to the people that are out there, both our coalition partners as well as our troops on the ground, and it brings a hard-to-swallow, deliberate pause in our enemy.”

  Where things get very interesting is what the Navy Times says next:

  ISIS is not the only challenge that awaits the flotilla, which includes the cruiser Anzio, Carrier Wing Air 7, and destroyers Bulkeley, Gravely and Gonzalez. Russian, Chinese and Iranian marines have established their presence in Syria, and Russian warships from the Black Sea have relocated to the eastern Mediterranean to protect fighter jets conducting airstrikes in support of Syria’s Assad regime. In preparation, the strike group’s Composite Training Unit Exercise focused on adversaries that more closely resembled those of the Cold War.

  Russians and Iranians we knew about, but Chinese? Does the US Navy know something that has not been made public previously?

  While we await the answer, what we do know is that suddenly the east Mediterranean is about to become a warship and aircraft carrier parking lot, with the Truman and de Gaulle side by side, just as we predicted it would be a month ago when we said that the summer of 2013 naval scenario is unfolding once again.

  Then there are the Russians. Here’s the latest from Tass:

  Ten ships of the Russian Navy are involved in the anti-terrorism operation in Syria, Russia’s Defense Minister Sergey Shoigu told President Vladimir Putin on Friday.

   

  “The naval group comprises ten ships, six of them are in the Mediterranean,” the minister said.

   

  Shoigu said the Caspian Flotilla warships on Friday launched 18 cruise missiles at terrorist positions in Syria hitting seven targets.

   

  “On November 20, the Caspian Flotilla warships launched 18 cruise missiles at seven targets in the Raqqa, Idlib and Aleppo provinces of Syria. All the targets were hit,” Shoigu said.

  As we said: busy, and it’s only going to get busier.

  But the punchline is Russia is already treating the Syrian coastline as its own playground, and has imposed explicit no fly zones in the eastern Mediterranean as the following tweet reveals:

  ??? ????????? ???? ??-?? “Russian Navy exercise” ????????? 14–23 ??????, 21–23 ?????? ? 24–26 ?????? ??????????????. pic.twitter.com/Pi3qwpw1wB

  — Ilya A. = ???? ?. (@ain92ru) November 20, 2015

  What happens when both the French and the US navies, both packing dozens of airplanes, arrive and convert the Mediterranean off the Syrian coast into one big warship parking lot.

  We can only hope that the sudden confluence of goodwill and best intentions by the superpowers to crush ISIS is genuine instead of merely a ploy to get everyone in the same place and result in the biggest ever Gulf of Tonkin redux and an “accidental” sinking of one or more ships… with or without a fake Syrian passport planted next to it.
  

  

  

  

  

  

• "Barrel Bombs" And Bullshit: The Tangled Threads Of Washington Lies About Syria And Russia

  Submitted by Robert Parry via ConsortiumNews.com,

  One way to view Official Washington is to envision a giant bubble that serves as a hothouse for growing genetically modified “group thinks.” Most inhabitants of the bubble praise these creations as glorious and beyond reproach, but a few dissenters note how strange and dangerous these products are. Those critics, however, are then banished from the bubble, leaving behind an evermore concentrated consensus.

  This process could be almost comical – as the many armchair warriors repeat What Everyone Knows to Be True as self-justifying proof that more and more wars and confrontations are needed – but the United States is the most powerful nation on earth and its fallacious “group thinks” are spreading a widening arc of chaos and death around the globe.

  

  President Barack Obama meets with his national security advisors in the Situation Room of the White House, Aug. 7, 2014. (Official White House Photo by Pete Souza)

  We even have presidential candidates, especially among the Republicans but including former Secretary of State Hillary Clinton, competing to out-bellicose each other, treating an invasion of Syria as the least one can do and some even bragging about how they might like to shoot down a few Russian warplanes.

  Though President Barack Obama has dragged his heels regarding some of the more extreme proposals, he still falls in line with the “group think,” continuing to insist on “regime change” in Syria (President Bashar al-Assad “must go”), permitting the supply of sophisticated weapons to Sunni jihadists (including TOW anti-tank missiles to Ahrar ash-Sham, a jihadist group founded by Al Qaeda veterans and fighting alongside Al Qaeda’s Nusra Front), and allowing his staff to personally insult Russian President Vladimir Putin (having White House spokesman Josh Earnest in September demean Putin’s posture for sitting with his legs apart during a Kremlin meeting with Israeli Prime Minister Benjamin Netanyahu).

  

  Israeli Prime Minister Benjamin Netanyahu meeting with Russian President Vladimir Putin in Moscow on Sept. 21, 2015.

  Not surprisingly, I guess, Earnest’s prissy disapproval of what is commonly called “man spread” didn’t extend to Netanyahu who adopted the same open-leg posture in the meeting with Putin on Sept. 21 and again in last week’s meeting with Obama, who – it should be noted – sat with his legs primly crossed.

  

  Prime Minister Benjamin Netanyahu meets with U.S. President Barack Obama in the White House on Nov. 9, 2015. (Photo credit: Raphael Ahren/Times of Israel)

  This combination of tough talk, crude insults and reckless support of Al Qaeda-connected jihadis (“our guys”) apparently has become de rigueur in Official Washington, which remains dominated by the foreign policy ideology of neoconservatives, who established the goal of “regime change” in Iraq, Syria and Iran as early as 1996 and haven’t changed course since. [See Consortiumnews.com’s “How Neocons Destabilized Europe.”]

  Shaping Narratives

  Despite the catastrophic Iraq War – based on neocon-driven falsehoods about WMD and the complicit unthinking “group think” – the neocons retained their influence largely through an alliance with “liberal interventionists” and their combined domination of major Washington think tanks, from the American Enterprise Institute to the Brookings Institution, and the mainstream U.S. news media, including The Washington Post and The New York Times.

  This power base has allowed the neocons to continue shaping Official Washington’s narratives regardless of what the actual facts are. For instance, a Post editorial on Thursday repeated the claim that Assad’s “atrocities” included use of chemical weapons, an apparent reference to the now largely discredited claim that Assad’s forces were responsible for a sarin gas attack outside Damascus on Aug. 21, 2013.

  After the attack, there was a rush to judgment by the U.S. State Department blaming Assad’s troops and leading Secretary of State John Kerry to threaten retaliatory strikes against the Syrian military. But U.S. intelligence analysts refused to sign on to the hasty conclusions, contributing to President Obama’s last-minute decision to hold off on a bombing campaign and to accept Putin’s help in negotiating Assad’s surrender of all Syrian chemical weapons (though Assad still denied a role in the sarin attack).

  Subsequently, much of the slapdash case for bombing Syria fell apart. As more evidence became available, it increasingly appeared that the sarin attack was a provocation by Sunni jihadists, possibly aided by Turkish intelligence, to trick the United States into destroying Assad’s military and thus clearing the way for a Sunni jihadist victory.

  We now know that the likely beneficiaries of such a U.S. attack would have been Al Qaeda’s Nusra Front and the spinoff known as the Islamic State (also called ISIS, ISIL or Daesh). But the Obama administration never formally retracted its spurious sarin claims, thus allowing irresponsible media outlets, such as The Washington Post, to continue citing the outdated “group think.”

  The same Post editorial denounced Assad for using “barrel bombs” against the Sunni rebels who are seeking to overthrow his secular government, which is viewed as the protector of Syria’s minorities – including Christians, Alawites and Shiites – who could face genocide if the Sunni extremists prevail.

  Though this “barrel bomb” theme has become a favorite talking point of both the neocons and liberal “human rights” groups, it’s never been clear how these homemade explosive devices shoved out of helicopters are any more inhumane than the massive volumes of “shock and awe” ordnance, including 500-pound bombs, deployed by the U.S. military across the Middle East, killing not only targeted fighters but innocent civilians.

  Nevertheless, the refrain “barrel bombs” is accepted across Official Washington as a worthy argument for launching devastating airstrikes against Syrian government targets, even if such attacks clear the way for Al Qaeda’s allies and offshoots gaining control of Damascus and unleashing even a worse humanitarian cataclysm. [See Consortiumnews.com’s “Obama’s Ludicrous ‘Barrel Bomb’ Theme.”]

  False-Narrative Knots

  But it is now almost impossible for Official Washington to disentangle itself from all the false narratives that the neocons and the liberal hawks have spun in support of their various “regime change” strategies. Plus, there are few people left inside the bubble who even recognize how false these narratives are.

  So, the American people are left with the mainstream U.S. news media endlessly repeating storylines that are either completely false or highly exaggerated. For instance, we hear again and again that the Russians intervened in the Syrian conflict promising to strike only ISIS but then broke their word by attacking Al Qaeda’s Nusra Front and “our guys” in Sunni jihadist forces armed by Saudi Arabia, Qatar, Turkey and the CIA.

  Though you hear this narrative everywhere in Official Washington, no one ever actually quotes Putin or another senior Russian official promising to strike only at ISIS. In all the quotes that I’ve seen, the Russians refer to attacking “terrorists,” including but not limited to ISIS.

  Unless Official Washington no longer regards Al Qaeda as a terrorist organization – a trial balloon that some neocons have floated – then the Putin-lied narrative makes no sense, even though every Important Person Knows It to Be True, including Obama’s neocon-leaning Defense Secretary Ashton Carter.

  The U.S. political and media big shots also mock the current Russian-Iranian proposal for first stabilizing Syria and then letting the Syrian people decide their own leadership through internationally observed democratic elections.

  Okay, you might say, what’s wrong with letting the Syrian people go to the polls and pick their own leaders? But that just shows that you’re a Russian-Iranian “apologist” who doesn’t belong inside the bubble. The Right Answer is that “Assad Must Go!” whatever the Syrian people might think.

  Or, as the snarky neocon editors of The Washington Post wrote on Thursday, “Mr. Putin duly dispatched his foreign minister to talks in Vienna last weekend on a Syrian political settlement. But Moscow and Tehran continue to push for terms that would leave Mr. Assad in power for 18 months or longer, while — in theory — a new constitution is drafted and elections organized. Even a U.S. proposal that Mr. Assad be excluded from the eventual elections was rejected, according to Iranian officials.”

  In other words, the U.S. government doesn’t want the Syrian people to decide whether Assad should be kicked out, an odd and contradictory stance since President Obama keeps insisting that the vast majority of Syrians hate Assad. If that’s indeed the case, why not let free-and-fair elections prove the point? Or is Obama so enthralled by the neocon insistence of “regime change” for governments on Israel’s “hit list” that he doesn’t want to take the chance of the Syrian voters getting in the way?

  Reality Tied Down

  But truth and reality have become in Official Washington something like Gulliver being tied down by the Lilliputians. There are so many strands of lies and distortions that it’s impossible for sanity to rise up.

  Another major factor in America’s crisis of false narratives relates to the demonizing of Russia and Putin, a process that dates back in earnest to 2013 when Putin helped Obama sidetrack the neocon dream of bombing Syria and then Putin compounded his offense by assisting Obama in getting Iran to constrain its nuclear program, which derailed another neocon dream to bomb-bomb-bomb Iran.

  It became ominously clear to the neocons that this collaboration between the two presidents might even lead to joint pressure on Israel to finally reach a peace agreement with the Palestinians, a possibility that struck too close to the heart of neocon thinking which, for the past two decades, has favored using “regime change” in nearby countries to isolate and starve Lebanon’s Hezbollah and Palestinian groups, giving Israel a free hand to do whatever it wished.

  So, this Obama-Putin relationship had to be blown up and the point of detonation was Ukraine on Russia’s border. Official Washington’s false narratives around the Ukraine crisis are now also central to neocon/liberal-hawk efforts to prevent meaningful coordination between Obama and Putin in countering ISIS and Al Qaeda in Syria and Iraq.

  Inside Official Washington’s bubble, the crisis in Ukraine is routinely described as a simple case of Russian “aggression” against Ukraine, including an “invasion” of Crimea.

  If you relied on The New York Times or The Washington Post or the major networks that repeat what the big newspapers say, you wouldn’t know there was a U.S.-backed coup in February 2014 that overthrew the elected Ukrainian government of Viktor Yanukovych, even after he agreed to a European compromise in which he surrendered many powers and accepted early elections.

  Instead of letting that agreement go forward, right-wing ultra-nationalists, including neo-Nazis operating inside the Maidan protests, overran government buildings in Kiev on Feb. 22, 2014, causing Yanukovych and other leaders to flee for their lives.

  Behind the scenes, U.S. officials, such as neocon Assistant Secretary of State for European Affairs Victoria Nuland, had collaborated in the coup plans and celebrated the victory by Nuland’s handpicked leaders, including the post-coup Prime Minister Arseniy Yatsenyuk, whom she referred to in an earlier intercepted phone call as “Yats is the guy.”

  

  Assistant Secretary of State for European Affairs Victoria Nuland, who pushed for the Ukraine coup and helped pick the post-coup leaders.

  Nor would you know that the people of Crimea had voted overwhelmingly for President Yanukovych and – after the coup – voted overwhelmingly to get out of the failed Ukrainian state and reunify with Russia.

  The major U.S. news media twists that reality into a Russian “invasion” of Crimea even though it was the strangest “invasion” ever because there were no photos of Russian troops landing on the beaches or parachuting from the skies. What the Post and the Times routinely ignored was that Russian troops were already stationed inside Crimea as part of a basing agreement for the Russian fleet at Sevastopol. They didn’t need to “invade.”

  And Crimea’s referendum showing 96 percent approval for reunification with Russia – though hastily arranged – was not the “sham” that the U.S. mainstream media claimed. Indeed, the outcome has been reinforced by various polls conducted by Western agencies since then.

  

  Russian President Vladimir Putin addresses a crowd on May 9, 2014, celebrating the 69th anniversary of victory over Nazi Germany and the 70th anniversary of the liberation of the Crimean port city of Sevastopol from the Nazis. (Russian government photo)

  The MH-17 Case

  The demonization of Putin reached new heights after the July 17, 2014 shoot-down of Malaysia Airlines Flight 17 over eastern Ukraine killing all 298 people onboard. Although substantial evidence and logic point to elements of the Ukrainian military as responsible, Official Washington’s rush to judgment blamed ethnic Russian rebels for firing the missile and Putin for supposedly giving them a powerful Buk anti-aircraft missile system.

  That twisted narrative often relied on restating the irrelevant point that the Buks are “Russian-made,” which was used to implicate Moscow but was meaningless since the Ukrainian military also possessed Buk missiles. The real question was who fired the missiles, not where they were made.

  But the editors of the Post, the Times and the rest of the mainstream media think you are very stupid, so they keep emphasizing that the Buks are “Russian-made.” The more salient point is that U.S. intelligence with all its satellite and other capabilities was unable – both before and after the shoot-down – to find evidence that the Russians had given Buks to the rebels.

  Since the Buk missiles are 16-feet-long and hauled around by slow-moving trucks, it is hard to believe that U.S. intelligence would not have spotted them given the intense surveillance then in effect over eastern Ukraine.

  A more likely scenario of the MH-17 shoot-down was that Ukraine moved several of its Buk batteries to the frontlines, possibly fearing a Russian airstrike, and the operators were on edge after a Ukrainian warplane was shot down along the border on July 16, 2014, by an air-to-air missile presumably fired by a Russian plane.

  But – after rushing out a white paper five days after the tragedy pointing the finger at Moscow – the U.S. government has refused to provide any evidence or intelligence that might help pinpoint who fired the missile that brought down MH-17.

  Despite this remarkable failure by the U.S. government to cooperate with the investigation, the mainstream U.S. media has found nothing suspicious about this dog not barking and continues to cite the MH-17 case as another reason to despise Putin.

  How upside-down this “Everything Is Putin’s Fault” can be was displayed in a New York Times “news analysis” by Steven Erlanger and Peter Baker on Thursday when all the “fundamental disagreements” between Obama and Putin were blamed on Putin.

  “Dividing them are the Russian annexation of Crimea and its meddling in eastern Ukraine, Moscow’s efforts to demonize Washington and undermine confidence in NATO’s commitment to collective defense, and the Kremlin’s support of President Bashar al-Assad of Syria,” Erlanger and Baker wrote.

  Helping ISIS

  This tangle of false narratives is now tripping up the prospects of a U.S.-French-Russian-Iranian alliance to take on the Islamic State, Al Qaeda and other Sunni jihadist forces seeking to overthrow Syria’s secular government.

  The neocon Washington Post, in particular, has been venomous about this potential collaboration which – while possibly the best chance to finally resolve the horrific Syrian conflict – would torpedo the neocons’ long-held vision of imposed “regime change” in Syria.

  In editorials, the Post’s neocon editors also have displayed a stunning lack of sympathy for the 224 Russian tourists and crew killed in what appears to have been a terrorist bombing of a chartered plane over the Sinai in Egypt.

  On Nov. 7, instead of expressing solidarity, the Post’s editors ridiculed Putin and Egyptian President Abdel Fattah el-Sisi for not rushing to a judgment that it was an act of terrorism, instead insisting on first analyzing the evidence. The Post also mocked the two leaders for failing to vanquish the terrorists.

  Or as the Post’s editors put it: “While Mr. Putin suspended Russian flights on [Nov. 6], his spokesman was still insisting there was no reason to conclude that there had been an act of terrorism. … While Western governments worried about protecting their citizens, the Sissi and Putin regimes were focused on defending themselves. …

  “Both rulers have sold themselves as warriors courageously taking on the Islamic State and its affiliates; both are using that fight as a pretext to accomplish other ends, such as repressing peaceful domestic opponents and distracting attention from declining living standards. On the actual battlefield, both are failing.”

  Given the outpouring of sympathy that the United States received after the 9/11 attacks and the condolences that flooded France over the past week, it is hard to imagine a more graceless reaction to a major terrorist attack against innocent Russians.

  As for the Russian hesitancy to jump to conclusions earlier this month, that may have been partially wishful thinking but it surely is not an evil trait to await solid evidence before reaching a verdict. Even the Post’s editors admitted that U.S. officials noted that as of Nov. 7 there was “no conclusive evidence that the plane was bombed.”

  But the Post couldn’t wait to link the terrorist attack to “Mr. Putin’s Syrian adventure” and hoped that it would inflict on Putin “a potentially grievous political wound.” The Post’s editors also piled on with the gratuitous claim that Russian officials “still deny the overwhelming evidence that a Russian anti-aircraft missile downed a Malaysian airliner over Ukraine last year.” (There it is again, the attempt to dupe Post readers with a reference to “a Russian anti-aircraft missile.”)

  The Post seemed to take particular joy in the role of U.S. weapons killing Syrian and Iranian soldiers. On Thursday, the Post wrote, “Syrian and Iranian troops have lost scores of Russian-supplied tanks and armored vehicles to the rebels’ U.S.-made TOW missiles. Having failed to recapture significant territory, the Russian mission appears doomed to quagmire or even defeat in the absence of a diplomatic bailout.”

  Upping the Ante

  The neocons’ determination to demonize Putin has upped the ante, turning their Mideast obsession with “regime change” into a scheme for destabilizing Russia and forcing “regime change” in Moscow, setting the stage for a potential nuclear showdown that could end all life on the planet.

  To listen to the rhetoric from most Republican candidates and Democratic frontrunner Hillary Clinton, it is not hard to envision how all the tough talk could take on a life of its own and lead to catastrophe. [See, for instance, Philip Giraldi’s review of the “war with Russia” rhetoric free-flowing on the campaign trail and around Official Washington.]

  

  A nuclear test detonation carried out in Nevada on April 18, 1953.

  At this point, it may seem fruitless – even naïve – to suggest ways to pierce the various “group thinks” and the bubble that sustains them. But a counter-argument to the fake narratives is possible if some candidate seized on the principle of an informed electorate as vital to democracy.

  An argument for empowering citizens with facts is one that transcends traditional partisan and ideological boundaries. Whether on the right, on the left or in the center, Americans don’t want to be treated like cattle being herded by propaganda or “strategic communication” or whatever the latest euphemism is for deception and manipulation.

  So, a candidate could do the right thing and the smart thing by demanding the release of as much U.S. intelligence information to cut this Gordian knot of false narratives as possible. For instance, it is way past time to declassify the 28 pages from the congressional 9/11 report addressing alleged Saudi support for the hijackers. There also are surely more recent intelligence estimates on the funding of Al Qaeda’s affiliates and spin-offs, including ISIS.

  If this information embarrasses some “allies” – such as Saudi Arabia, Qatar and Turkey – so be it. If this history makes some past or present U.S. president look bad, so be it. American elections are diminished, if not made meaningless, when there is no informed electorate.

  A presidential candidate also could press President Obama to disclose what U.S. intelligence knows about other key turning points in the establishment of false narratives, such as what did CIA analysts conclude about the Aug. 21, 2013 sarin attack and what do they know about the July 17, 2014 shoot-down of MH-17.

  The pattern of the U.S. government exploiting emotional moments to gain an edge in an “info-war” against some “enemy” and then going silent as more evidence comes in has become a direct threat to American democracy and – in regards to nuclear-armed Russia – possibly the planet.

  Legitimate secrets, such as sources and methods, can be protected without becoming an all-purpose cloak to cover up whatever facts don’t fit with the desired propaganda narrative that is then used to whip the public into some mindless war frenzy.

  However, at this point in the presidential campaign, no candidate is making transparency an issue. Yet, after the deceptions of the Iraq War – and with the prospects of another war based on misleading or selective information in Syria and potentially a nuclear showdown with Russia – it seems to me that the American people would respond positively to someone treating them with the respect deserving of citizens in a democratic Republic.

  

  

  

  

  

• Two Gepolitical Wrongs Do Not Make A Right

  Global geopolitics (and why it won't end well) explained in 57 words…

  The political left is happy to see people cross borders but would happily restrict the flow of capital and goods.

   

  The political right is happy to see capital and goods cross borders but would happily build a fence to restrict the flow of people.

   

  I’m afraid that the compromise might be to restrict people, capital and goods.

  *  *  *

  Source: Joe Calhoun

  

  

  

  

  

• This Is How Far America Has Fallen

  Submitted by Mike Krieger via Liberty Blitzkrieg blog,

  

  Give me liberty, or give me death!

   

  – Partrick Henry, American Founding Father, 1775

   

  They value their civil liberties more than they value life. I disagree with that. You want to be free and dead? I’d rather be not free and alive

   

  – Billionaire Hillary Clinton donor Haim Saban, 2015

  Just in case you’re wondering what the people bankrolling Hillary Clinton’s Presidential campaign think about civil liberties, you now have your answer.

  Here’s what billionaire Haim Saban had to say about civil liberties during an interview with The Wrap:

  What are people in Hollywood saying about the Paris terror attacks?

   

  Many members of the Hollywood community are very liberal and they value their civil liberties more than they value life. I disagree with that. You want to be free and dead? I’d rather be not free and alive. The reality is that certain things that are unacceptable in times of peace — such as profiling, listening in on anyone and everybody who looks suspicious, or interviewing Muslims in a more intense way than interviewing Christian refugees —  is all acceptable [during war]. Why? Because we value life more than our civil liberties and it’s temporary until the problem goes away. But to say this is shameful — I disagree.

   

  [ISIS] said, ‘We’re going to Paris,’ and they went to Paris. They’re saying they’re now going to Washington. Watch out, they might. I’m not suggesting we put Muslims through some kind of a torture room to get them to admit that they are or they’re not terrorists. But I am saying we should have more scrutiny. 

  Yes, because it’s so liberal to push a false Orwellian choice between freedom and safety. The entire concept of civilization and liberty revolves around the belief individuals never have to make such a sacrifice Indeed, America never would have been founded in the first place had the colonists accepted Saban’s infantile logic.

  How does this guy sound any different from George W. Bush or Dick Cheney? The answer is he doesn’t, which makes perfect sense because Hillary Clinton is a dyed in the wool neocon. Always has been always will be. Meanwhile, The Wrap highlighted just how important Haim Saban is to Hillary…

  TheWrap spoke to Saban about his support for the Democratic presidential frontrunner — he and and his wife, Cheryl, gave $2 million to Priorities USA Action, Clinton’s Super PAC, and hosted a fundraiser in May that netted another $2 million.

  In case you forget, I’ve highlighted Saban in the past. Recall the following from the post, Inside the Mind of an Oligarch – Sheldon Adelson Proclaims “I Don’t Like Journalism”:

  At the conference, which also featured top Democratic funder Haim Saban, Adelson also said Israel would not be able to survive as a democracy: “So Israel won’t be a democratic state, so what?” he asked Saban, adding that democracy, after all, is not mentioned in the Torah,and recommended that the country build a “big wall” to protect itself, saying, “I would put up a big wall around my property.”

   

  Saban and Adelson should buy The New York Times together in an effort to bring more “balance” to the newspaper’s coverage of Israel and the Middle East, Adelson suggested to wild applause. Adelson already owns Israel Hayom, a free Israeli newspaper widely seen as reflecting the positions of Prime Minister Benjamin Netanyahu, who is considered close to Adelson, and, more recently, news website NRG and religious newspaper Makor Rishon.

   

  Haim Saban, a media mogul and close Democratic ally of Hillary Rodham Clinton, criticized President Obama’s outreach to Iran, declaring that “we’ve shown too many carrots and a very small stick.”

   

  Still, Saban said that he thinks Clinton would repair the relationship and that he has told her he would spend “whatever it takes” to propel her into the White House. That includes giving millions of dollars to Priorities USA, a super PAC that helped Obama in 2012 and is revving up to aid Clinton in 2016.

  But hey…

  

   

  

  

  

  

  

• Stagflation Ahead: Goldman Is "Unreservedly Disappointed" With Latin America

  As regular readers are no doubt aware, we’ve devoted quite a bit of time to covering Brazil’s unfolding economic meltdown. The latest data out this week showed GDP in “free fall mode” (to quote Barclays), inflation hitting double digits for the first time in over a decade, and unemployment soaring to 7.9% in August, up sharply from just 4.3% a year earlier. 

  In many ways, Brazil is representative of the problems facing EM as a whole. Slumping commodity prices, currency carnage, FX pass through inflation, sensitivity to decelerating Chinese demand and to Beijing’s yuan deval, Brazil has it all – they even have a seemingly intractable political crisis, and as we never tire of pointing out, idiosyncratic political risk factors have become an important part of the EM calculus (see Turkey and Malaysia for instance). 

  Because Brazil tends to dominate the discussion when we talk about Latin America, it’s sometimes easy to forget that the outlook for Brazil’s neighbors matters as well. Latin America is a net commodities exporter and we can learn a lot from observing the interplay between slumping prices for commodities, rising inflation, lackluster economic growth, and central banks forced by the prospect of rising prices to adopt procyclical, rather than counter-cyclical policies despite their weakening economies. 

  When last we checked in on Latin America as a whole, we said the following: 

  “…a plunging currency, FX pass through inflation, and a soft outlook for growth is a pretty terrible place to be in if you’re a central bank, but that’s exactly where things stand for the “LA-5” (believe it or not, that’s not a reference to the Lakers, it’s short for Brazil, Chile, Colombia, Mexico, and Peru), who very shortly will be forced to decide whether the risks associated with further FX weakness outweigh those of hiking rates into a poor economic environment.” 

  We went on to highlight comments from Goldman regarding the likely path for Latin American monetary policy given the factors outlined above.

  Now, Goldman is out with its latest take on the macro outlook for Latin America and unsurprisingly, the forecast is “uninspiring.”

  “Latin America’s growth performance has been eroding since 2010, and has unreservedly disappointed in recent years. Aggregate regional growth peaked in 2010 at above 6%, moderated steadily throughout 2011-13, and downshifted sharply to a significantly below-trend pace during 2014-15,” Goldman begins, adding that “unfortunately, the near future may not be more endearing as we do not envisage a major pickup in growth buoyancy and expect inflation to remain relatively high.” 

  Here’s a more comprehensive assessment:

  Given the shifting external backdrop, the region is unlikely to count on strong balance of payments dynamics to leverage and support a visible economic recovery. The expectation of low-for-longer commodity prices, weak non-commodity export demand, moderating FDI and portfolio inflows, and likely more expensive and selective access to external funding, may well demand additional current account adjustment. This would require further currency depreciation, higher domestic savings and contained investment (i.e., weak domestic absorption). Furthermore, we see virtually no room for additional countercyclical fiscal or monetary stimulus to support a more vigorous recovery.

   

  

   

  And here’s a big picture look at the growth/inflation outlook across the region:

  

  As you can see, the inflation/growth mix doesn’t look particularly favorable. As Goldman goes on to note, “Latin America is forecasted to grow an uninspiring +0.8% in 2016; a very shallow recovery from the -0.3% growth rate forecasted for 2015.” Consider the following graphic, which underscores the extent to which the region is performing well below trend:

   

  Subpar, disappointing growth that’s disastrously below trend and will remain marginally so through 2020. Got it. 

  Of course what you don’t want if you’ve got lackluster growth, is rising inflation because that sets the stage for the “S” word. Unfortunately, that’s where Latin America looks to be headed. Here’s Goldman on the inflation outlook: 

  Despite the weak growth dynamics, inflation is expected to remain high across LatAm. Average inflation ex-Venezuela is expected to reach 8.1% in 2016, down slightly from the forecasted 8.7% average for 2015.

   

  
  

   

  In Brazil, headline inflation is expected to end 2015 in double digits and to moderate gradually throughout 2016, albeit to a still very high 6.5% due to weak policy fiscal and monetary policy credibility, renewed deterioration of inflations expectations, additional BRL depreciation, lingering upward pressure on administered and regulated prices, strong inertial forces, and widespread formal and informal indexation mechanisms which introduce significant downward rigidity (stickiness) in price formation. 

   

  Overall, inflationary pressures across the Andean economies are expected to remain relatively high throughout 1H2016 given the expected lagged pass-through from currency depreciation and the impact from what is expected to be an intense El Niño weather phenomenon. 

  And finally, coming full circle to our original discussion of how high inflation and weak currencies have put regional CBs in a position of having to, at the least, remain on hold and more likely adopt procyclical policies despite the tepid outlook for growth, Goldman suggests that “the scope for monetary accommodation in the region in 2016” is limited at best. “In Brazil, sticky above-target inflation should limit the capacity of the central bank to ease monetary policy in 2016 [and] the central banks across the Andean region have been normalizing monetary policy during 2H2015 given persistent and generalized above-target inflationary pressures,” Alberto Ramos (the Goldman analyst who has a talent for making lists of Brazil’s myriad problems that are so long as to induce riotous laughter) adds.

  Last, but certainly not least, here’s how the FX situation will likely develop in 2016:

  Regional currencies have weakened significantly in 2014-15 and we expect further weakness in 2016. We expect most currencies to depreciate moderately in 2016 given the evolving global backdrop (low commodity prices with additional declines forecasted for copper prices, rising dollar yields, and strengthening USD), the unhappy domestic combination of low growth and high inflation, and a number of idiosyncratic factors.

  So while it’s probably too strong to equate the overall regional outlook with the stagflationary nightmare gripping Brazil, all of the above does indeed suggest that Latin America is stuck with a decidedly unfavorable growth-inflation outcome which is likely to worsen materially going forward. On that note, we’ll close with one last passage from Goldman:

  Despite the undistinguished growth outlook, in our assessment, the spectrum of risks is still tilted to the downside. In fact, the vector of risks is to a large extent not materially different from the risks the region was facing at the beginning of 2015, namely: (1) sharperthan-expected growth deceleration in China; (2) another leg down in commodity prices; (3) potential quasi-sovereign and private corporate sector forced deleveraging or balance sheet distress given heavy borrowing over the last few years and diminished profitability, and, last but not the least, (4) sharper-than-expected deceleration of capital inflows triggered by a strengthening USD, rising Dollar yields, and/or renewed bouts of volatility in international financial markets that could dampen sentiment towards emerging markets. 

  

  

  

  

  

• The Syrian Refugee Situation Summed Up (Using M&Ms)

  Presented with no comment…

   

  

   

  Source: hope@ZeroKelvin via The Burning Platform

  

  

  

  

  

• South Pacific Showdown? Japan May Send Warships To China Islands

  On Tuesday, Chinese Vice Foreign Minister Liu Zhenmin told the press that contrary to the narrative being propagated by Washington and its allies in the South Pacific, Beijing had actually shown “great restraint” in the South China Sea. 

  China, Liu went on to explain, has tolerated the “occupation” of the disputed waters even as Beijing has “both the right and the ability to recover the islands and reefs illegally occupied by neighboring countries.” Essentially, Liu said China would be well within its rights to forcibly expel The Philippines, Malaysia, and Vietnam from the Spratlys. 

  Liu’s comments came ahead of the Asia-Pacific Economic Cooperation summit held in Manila on Thursday and Friday.

  At the close of the Summit, Japanese PM Shinzo Abe met with President Benigno Aquino – who earlier this year compared the Chinese to Nazis – to discuss the possibility that Japan could provide Manila with “large ships” that the Philippines can use to patrol the South China Sea. 

  As Reuters reported on Friday, “the deal will mark the first time Japan has agreed to directly donate military equipment to another country, and is the latest example of Abe’s more muscular security agenda.” 

  “There was a request from President Benigno Aquino regarding the provision of large patrol vessels to the Philippine Coast Guard and Japan would like to consider the specifics,” Abe said in a statement.

  Reuters goes on to note that “rather than challenge Beijing directly by sending warships or planes to patrol the South China Sea, Japan is helping to build the military capacity of friendly nations with claims to parts of the waterway.”

  Well don’t look now, but Abe may soon move beyond the mere provision of ships to Japan’s allies. Here’s Nikkei with more:

  Tokyo will consider dispatching its Self-Defense Forces to the South China Sea, Prime Minister Shinzo Abe told U.S. President Barack Obama here Thursday, suggesting a possible role for Japan in patrolling those tense waters.

   

  Abe said his government is watching how the situation in that body of water affects Japan’s national security. Several nations have competing claims to various islands in the South China Sea.

   

  “The United States-Japanese alliance is one of the lynchpins of our security as well as Japan’s,” Obama told reporters before his roughly 90-minute meeting with Abe, their first since the prime minister visited Washington in April.

   

  In their talk, Abe expressed support for what the U.S. calls “freedom of navigation exercises” in the South China Sea — sailing warships through waters claimed by China around islands it has built. Obama said America will continue to do so routinely.

   

  Japan will support countries with a stake in the situation and reject all unilateral actions that seek to change the status quo or raise tensions, Abe said.

  Bear in mind that in addition to the generally “frosty” relations between Tokyo and Beijing, Japan and China are at odds over Beijing’s construction of oil and gas exploration platforms close to disputed waters in the East China Sea: 

  

  Make no mistake, if Japan starts to conduct the same type of “freedom of navigation” exercises near the Spratlys that the US has now pledged to carry out at least twice per quarter, it will be more than Beijing can bear.

  The US is one thing, Japan is entirely another and if Ash Carter and The Pentagon are really looking to escalate a South Pacific conflict, they can certainly do so by encouraging Abe to send warships near Fiery Cross, Subi, and Mischief.

  

  

  

  

  

• Largest Immigration Wave In Modern History Ends: More Mexicans Are Leaving The US Than Entering

  The 'Great Recession' was evidently so bad for the economy that it stopped the net influx of illegal immigrants from Mexico. For the first time since the 1940s, more Mexicans have been leaving the U.S. to return home than arriving, a reversal that brings down the curtain on the largest immigration wave in modern American history. As WSJ reports, the Pew Research Center figures released Thursday suggest that the surge in legal and illegal Mexican immigration that helped transform America – and remains a contentious issue on the presidential campaign trail – may have peaked for good.

  

  Pew Hispanic found that, according to official numbers, more than 800,000 undocumented workers came to the United States during 2009-2014 while more than 1 million fled the U.S. during the same period. It seems that employment became more difficult after the 2008 economic crisis, while Mexico’s economy actually improved.

  Apparently there are so few good jobs that many Mexican migrants – including both those that are legal and illegal – departed or stop coming in and turned instead to work in their home country where they can also be with family.

  According to Pew Research, best estimates and careful research show a dramatic change in illegal immigration:

  More Mexican immigrants have returned to Mexico from the U.S. than have migrated here since the end of the Great Recession, according to a new Pew Research Center analysis of newly available government data from both countries. The same data sources also show the overall flow of Mexican immigrants between the two countries is at its smallest since the 1990s, mostly due to a drop in the number of Mexican immigrants coming to the U.S.

   

  From 2009 to 2014, 1 million Mexicans and their families (including U.S.-born children) left the U.S. for Mexico, according to data from the 2014 Mexican National Survey of Demographic Dynamics (ENADID). U.S. census data for the same period show an estimated 870,000 Mexican nationals left Mexico to come to the U.S., a smaller number than the flow of families from the U.S. to Mexico.

   

  […]

  Mexico is the largest birth country among the U.S. foreign-born population – 28% of all U.S. immigrants came from there in 2013. Mexico also is the largest source of U.S. unauthorized immigrants.

   

  […]

  A majority of the 1 million who left the U.S. for Mexico between 2009 and 2014 left of their own accord, according to the Mexican government’s ENADID survey data.

  While it is true that many immigrants are not officially counted and many estimates put the number of undocumented workers much higher than 12 or 13 million, that number is declining for the first time since the 1970s.

  This chart below tells a story that words alone cannot describe, and images of border crossings and protests fail to capture.

  

   

  The situation is economic much more than it is political. The Wall Street Journal suggests several factors have undermined the lure of the U.S.

  Mexican families have fewer mouths to feed as the country’s birthrate has declined to near replacement level, similar to that of the U.S., relieving economic pressure that motivated migrants to go north to find higher-paying jobs than are available in Mexico. Meanwhile, Mexico’s economy improved.

   

  "The days of mass immigration from Mexico are over," said Pia Orrenius, senior economist at the Federal Reserve Bank of Dallas who studies migration. "Slower population growth in Mexico along with a stable economy and an expanded public-safety net are developments that have trimmed the 'push factor.'"

  But, as SHTFPlan.com's Mac Slavo writes,  the celebration of a historic turning of the tide for one of the most contentious issues in American politics may also herald the tough times ahead for Americans and everyone else working here, regardless of status.

  The jobs have essentially dried up, and things stand to get even worse if/when the next economic bomb drops. And that could be any day now.

  The writing is on the wall, the system is on edge, and something as simple as a Federal Reserve rate hike could mean financial desperation for millions upon millions of Americans.

  Perhaps surprisingly, many Mexican nationals no longer view life in the United States as a better opportunity, with many seeing it is as on-par with life in Mexico:

  While almost half (48%) of adults in Mexico believe life is better in the U.S., a growing share says it is neither better nor worse than life in Mexico. Today, a third (33%) of adults in Mexico say those who move to the U.S. lead a life that is equivalent to that in Mexico

  But with the receding tide of immigrants from south of the border may come larger and larger numbers of immigrants from China and India, as well as Islamic countries, including many technically skilled workers here on H-1B visas who are replacing American jobs.

  USA Today reports on the shift – not of overall immigration numbers, but of their sources:

  “The nature of immigration itself is beginning to change,” [Mark Hugo Lopez, director of Hispanic research at Pew Research] said. “It looks like Mexican migration is at an end.”

   

  The reversal of Mexican migration doesn’t mean that the United States is seeing fewer immigrants overall, just that their countries of origin are changing.

   

  The United States has seen a record number of Central Americans fleeing violence in the past few years, straining the country’s ability to process their requests for asylum. In addition, Lopez said, immigrants from China, India and other Asian nations are coming as students and high-tech workers. Eventually, Asians will become the dominant share of the immigrant population, he added.

  Though they claim to have now reversed their decision, Disney recently came under fire for decision to layoff all of its American workers – including those with decades of experience – and replace them with cheaper (but equally skilled) IT workers from India.

  The move, cancelled or not, is a sign of the times for a situation that may become more desperate and gloomy with each passing year for native American workers who once assumed relative wealth among the middle class, but are now fighting for survival.

  President Obama, for his part, has over-extended – well, abused really – his executive authority to grant amnesty to millions of illegal immigrants from Mexico, but they too may soon prefer their country of origin – particularly if the coming financial implosion hits worst in the United States.

  

  

  

  

  

• "It Looks Like A Warzone" – Army, APCs, Roadblocks Deployed In Brussels After Explosives, Chemical Weapons Found

  In the aftermath of last night’s warning of an “imminent” terror threat in Brussels when OCAM Crisis Center and the government raised the country’s terror alert to the highest level, today the escalation continues and the Belgian capital looks like not only a ghost town but something out of a Call of Duty warzone after authorities deployed special forces, and APCs, shut the metro, locked down shopping centers, closed sporting events, and warned the public to avoid crowds, train stations, airports and commercial districts because of a “serious and imminent” threat of an attack.

  As Reuters reports, a week after the Paris attacks carried out by Islamic State militants, of whom one suspect from Brussels is at large and said by authorities to be highly dangerous, Brussels was placed on the top level “four” in the government’s threat scale after a meeting of top ministers, police and security services.

  “The advice for the population is to avoid places where a lot of people come together like shopping centers, concerts, events or public transport stations wherever possible,” a spokesman for the government’s crisis center said.

  As AFP reported earlier, the spike in the terror threat is due to a risk of attacks by “weapons and explosives”

  #BREAKING Belgium terror alert linked to a risk of attacks by ‘weapons and explosives’: PM

  — Agence France-Presse (@AFP) November 21, 2015

  The local security forces are taking no chances, and as can be seen on the photos below, APC have been deployed as the city barricades itself with the use of roadblocks at strategic locations.

  

  

  

  

  

  

  Metro closed, all football games cancelled and city center looks like military base. #Brussels 2015 #Bruxelles pic.twitter.com/FP8UoCOFv5

  — Zaprudsky (@ZaprudskyOU) November 21, 2015

  this is brussels right now. It looks like the war. #Bruxelles pic.twitter.com/iOzES4H3Jg

  — harry saw me (@lwtharoId) November 21, 2015

  Belgian Prime Minister Charles Michel declined to give the reason why the authorities raised the alert level but told a news conference the government would review the security situation on Sunday afternoon and that the decision to raise the threat level was taken “based on quite precise information about the risk of an attack like the one that happened in Paris where several individuals with arms and explosives launch actions, perhaps even in several places at the same time.” The metro system would remain closed until then, in line with the recommendation of the crisis center, he said.

  The reason for the dramatic escalation is that chemicals and explosives were among the items found in the during a police raid on Vandepeerboom Street area in the immigrant neighborhood of Molenbeek, a rundown area where Paris attacker Abdelhamid Abaaoud was suspected of operating a terrorist cell.

  L’Echo has more:

  A search was conducted on Friday at the home of a suspect placed under arrest, federal prosecutors said on Saturday. Some weapons have been discovered, but no explosives or explosive belt.

   

  The suspect was arrested Thursday in the series of searches carried out in Brussels. The person concerned is suspected of involvement in terrorist attacks and participation in activities of a terrorist group.

  The find came as Belgium’s capital entered a security lockdown. The government has warned that there could be a repeat of Paris-style attacks in the country’s capital, prompting the closure of subways in Brussels and the deployment of heavily armed police and soldiers.

  Fears that terrorists may use chemical or biological weapons quickly spread to Paris where according to the Guardian, security has been stepped up at key water supply sites in Paris, after the French prime minister warned the country could not rule out attacks from “chemical or biological weapons”.

  The heightened security comes as reports claim that biohazard suits have been stolen from a Paris hospital, the Telegraph reports. Eau de Paris, the municipal water company, yesterday told Le Parisien that access to its sites has been limited to only the necessary service personnel, and that they have been accredited by the defence ministry.

  Furthermore, we learned today that one more suspect from last Friday’s terror attack has been arrested in Brussels which has quickly emerged as the nerve center of last week’s Paris attacks.

  According to Belgian media @RTBFinfo a key suspect in the #ParisAttacks was arrested in the Brussels region last night

  — Michael Horowitz (@michaelh992) November 21, 2015

  As Reuters further adds, the crisis center website said it was calling on local authorities to cancel large events, urge people to avoid crowds, postpone soccer matches, close the Brussels metro for the weekend and stepping up the military and police presence. Suspected militant Salah Abdeslam, 26, returned home to Brussels from Paris after the attacks, when his elder brother Brahim blew himself up at a cafe.

  Fears of the risk he still poses prompted the cancellation last week of an international friendly soccer match in Brussels against Spain. The crisis center said weekend games in the top two professional divisions should now be postponed.

   

  The alert level for the whole country was raised following the Paris attacks to level three out of four, implying a “possible or probable” threat. Previously, only certain sites, such as the U.S. embassy, were at level three.

   

  Belgium, and its capital in particular, have been at the center of investigations into the Paris attacks – which included suicide bombers targeting a France-Germany soccer match – after the links to Brussels emerged. Three people detained in Brussels are facing terrorism charges.

  As a reminder, French authorities have said the attacks were planned in Brussels by a local man, Abdelhamid Abaaoud, 28, who fought for Islamic State in Syria and was killed in the siege of an apartment in the Paris suburb of St. Denis on Wednesday.

  Salah Abdeslam, who was from the same Brussels neighborhood of Molenbeek and is said by officials to have known Abaaoud in prison, was pulled over three times by French police but not arrested as he was driven back to Brussels early last Saturday by two of the men now in custody.

  As well as Abdeslam’s brother, a second man from Molenbeek, Bilal Hadfi, was also among the Paris suicide bombers.

  Belgian Interior Minister Jan Jambon told reporters he wanted a register of everyone living in Molenbeek because it was not clear at present who was there, with authorities conducting door-to-door checks of every house. “The local administration should knock on every door and ask who really lives there,” Jambon said. Curiously when Donald Trump suggests doing something comparable in the US, immediate comparisons with Hitler emerge.

  Meanwhile, as the photos below show, soldiers are already on guard in all key parts of Brussels, including at the institutions of the European Union headquartered in the city. Brussels is also home to the headquarters of NATO.

  

  

  

  

  

  

  

   

  More military and police deploy roadblocks around central #Brussels following terror threat. pic.twitter.com/XpQDmOK9KD

  — M. Cruickshank CN (@MJ_Cruickshank) November 21, 2015

  Finally, Belgium’s interior ministry has released the following list of recommendations what the local population should do while the terror threat is at its highest level.

  Evaluation of the terror threat – level 4 – Recommandations for the Brussels-Capital Region #Brussels #infographic pic.twitter.com/ArvZvMdzG6

  — CrisisCenter Belgium (@CrisiscenterBE) November 21, 2015

  

  

  

  

• These Are The Stocks Most Hated By Hedge Funds (And Why You May Want To Buy Them)

  Back in the summer of 2013 we revealed what the best “alpha-generating” strategy was in a New Normal where hedge fund clustering would ultimately lead to such dramatic hedge fund hotel implosions such as what was seen in the third quarter (described in detail in “What Hedge Fund Panic Looks Like“) and where central banks themselves do their best to crush anyone who dares to short single names courtesy of $13 trillion in excess liquidity.

  But while buying the most shorted names (expecting furious central bank and HFT-catalyzed short squeezes) had been a great way to outperform the market in 2012 thru 2014, in 2015 this strategy took a back seat as suddenly the most hated names revealed that there was a reason why they were most hated, and plunged as the Fed’s determination to push stocks higher no matter the cost was put into question.

  However, now that the Fed et al have made it beyond clear a downtick is unacceptable even as hedge funds are dramatically underperforming the market and are all – absolutely all of them – rushing to buy the same 5 stocks into year-end due to FOMO, even the tiniest deviation from a priced to perfection market will make the Valeant hedge fund hotel collapse of Q3 seem like a dress rehearsal if F, or A, or N, or G or all of them were to be Philidored.

  It would also force a sequential scramble to cover shorts as margin calls are quietly and not so quietly administered on the increasingly underperforming hedge funds (for whom a crowdsourced margin call funding attempt will not be a feasible way out unlike novice E-traders).

  What does all this mean?

  Well, since central banks have made it abundantly clear they will not allow the S&P to drop even a few modest percent, and since going short the most beloved hedge fund names also carries with it the risk of substantial margin calls (not to mention inlimited downside) the best bearish trade into the year end is, paradoxically, to go long the most shorted names with the expectation that hedge fund blow ups will force domino-like, sequential short squeezes.

  In other words, the most bearish trade going into the year end period is to go long a handful of very specific stocks.

  So which are the stocks that have the highest hedge fund short interest as a % of market cap? For the answer we go to the latest hedge fund tracker by Goldman.

  The answer: first, here are the stocks with a sub $1 billion market cap:

  

  And next, the large, $1+ billion companies:

  

  We will equal-weight CIX this basket and see how it performs relative to the market over the next few weeks. We hope to provide periodic updates on how this trade, made possible thanks to the Fed totally breaking the market’s discounting function, is performing.

  

  

  

  

  

• Caught On Tape: Russia Launches Cruise Missiles Against ISIS Targets

  Make no mistake, the Russian campaign against anti-Assad elements operating in Syria was what you might call “relentless” right from the very beginning. 

  From the time a Russian three star general strolled into the US embassy in Baghdad on September 30 and told whoever was there that airstrikes in Syria “start in 1 hour, stay out of the way”, Moscow has bombed militant targets day and night in hundreds upon hundreds of strikes using Su-34s, Su-25s and Su-24Ms to wreak havoc on anything that even looks like a rebel. 

  But as ruthless as the air campaign already was, the downing of a Russian passenger jet over the Sinai Peninsula by Islamic State’s Egyptian affiliate made the situation immeasurably worse (if you’re a militant) and as we noted on Wednesday, The Kremlin has now sent in the strategic bombers. 

  

  Tupolev Tu-95 Bear

  

  Tu-22 Blinder

  

  Tu-160 Blackjack

  In addition to the deployment of the strategic bomber fleet – which Moscow says will allow Russia to double the number of strikes it can launch – The Kremlin is also stepping up sea-based cruise missle attacks from the Caspian fleet. 

  As RT reports, “the Russian military has launched cruise missiles against Islamic State positions in Syria from both the Mediterranean and Caspian seas, one of which killed over 600 terrorists in the Deir Ex-Zor Province, Russian Defense Minister Sergey Shoigu has said.” Here’s more:

  “On November 20, the warships of the Caspian Fleet launched 18 cruise missiles at seven targets in the provinces of Raqqa, Idlib and Aleppo. All targets were hit successfully,” he reported to President Vladimir Putin.

  
  

  Overall, there are 10 warships taking part in the operation, six of which are in the Mediterranean.

  
  

  Over the past four days, Russian air forces have conducted 522 sorties, deploying more than 100 cruise missiles and 1,400 tons of bombs of various types, the minister stated.

  
  

  He added that a strike on a target in Deir ez-Zor utilizing multiple cruise missiles had killed more than 600 militants.

  Note that Paris attack mastermind Abdelhamid Abaaoud was Emir of War in Deir ez-Zor. 

  Having thus set the stage, we bring you a buffet of new footage showing all three strategic bomber variants in action as well as footage of the cruise missile strikes. 

  Bonus: the following clips purport to show the missiles hitting Idlib…

  

  

  

  

• In China, Money Is Power… Literally

  While recent market turmoil in China has meant the government has been burning through its cash reserves at a record pace, for the electric utility plant in Yancheng; money is quite literally power as 3 billion yuan of outdated or damaged bank-notes are incinerated to generate electricity for Jiangsu province each and every year...

   

  Out with the old, in with the new: 3 billion yuan in outdated notes burned to provide electricity

  

  With the long-awaited introduction last week of China's crisp, new 100-yuan notes, you might catch yourself wondering, just where is all that old cash going?

  Some Chinese reporters asked themselves the very same question and it turns out that they are going up in flames.

  

  A photoseries published earlier today shows the steps that it takes to efficiently turn money into power. A truck first arrives at the electric power plant in Yancheng, Jiangsu province, filled with 3 billion yuan ($470 million) in outdated and damaged banknotes. The notes are divided into chunks by denomination. Each chunk is worth around 30,000 yuan.

  

  The chunks are first shredded into confetti and then mixed together with straw. The cash and straw then go together on a conveyor belt toward their doom inside an incinerator.

  

  

  

  An employee of the power company told reporters that each of these trucks carries 30 tons of banknotes and that they usually burn around 1,800 tons each and every year.

  Doing a little math, he said that 30 tons of cash generates 30,000 kWh, which is enough to provide electricity to a household for 300 months. Not like you can take it with you.

  Source: Shanghaiist.com

  

  

  

  

  

• Guest Post: Ending Blowback Terrorism

  Authored by Jeffrey Sachs, originally posted at Project Syndicate,

  Terrorist attacks on civilians, whether the downing over Sinai of a Russian aircraft killing 224 civilian passengers, the horrific Paris massacre claiming 129 innocent lives, or the tragic bombing in Ankara that killed 102 peace activists, are crimes against humanity. Their perpetrators – in this case, the Islamic State (ISIS) – must be stopped. Success will require a clear understanding of the roots of this ruthless network of jihadists.

  Painful as it is to admit, the West, especially the United States, bears significant responsibility for creating the conditions in which ISIS has flourished. Only a change in US and European foreign policy vis-à-vis the Middle East can reduce the risk of further terrorism.

  The recent attacks should be understood as “blowback terrorism”: a dreadful unintended result of repeated US and European covert and overt military actions throughout the Middle East, North Africa, the Horn of Africa, and Central Asia that aimed to overthrow governments and install regimes compliant with Western interests. These operations have not only destabilized the targeted regions, causing great suffering; they have also put populations in the US, the European Union, Russia, and the Middle East at significant risk of terror.

  The public has never really been told the true history of Osama bin Laden, Al Qaeda, or the rise of ISIS in Iraq and Syria. Starting in 1979, the CIA mobilized, recruited, trained, and armed Sunni young men to fight the Soviet Union in Afghanistan. The CIA recruited widely from Muslim populations (including in Europe) to form the Mujahideen, a multinational Sunni fighting force mobilized to oust the Soviet infidel from Afghanistan.

  Bin Laden, from a wealthy Saudi family, was brought in to help lead and co-finance the operation. This was typical of CIA operations: relying on improvised funding through a wealthy Saudi family and proceeds from local smuggling and the narcotics trade.

  By promoting the core vision of a jihad to defend the lands of Islam (Dar al-Islam) from outsiders, the CIA produced a hardened fighting force of thousands of young men displaced from their homes and stoked for battle. It is this initial fighting force – and the ideology that motivated it – that today still forms the basis of the Sunni jihadist insurgencies, including ISIS. While the jihadists’ original target was the Soviet Union, today the “infidel” includes the US, Europe (notably France and the United Kingdom), and Russia.

  At the end of the 1980s, with the Soviet retreat from Afghanistan, some elements of the Mujahideen morphed into Al Qaeda, Arabic for “the base,” which referred to the military facilities and training grounds in Afghanistan built for the Mujahideen by bin Laden and the CIA. After the Soviet withdrawal, the term Al Qaeda shifted meaning from the specific military base to the organizational base of jihadist activities.

  Blowback against the US began in 1990 with the first Gulf War, when the US created and expanded its military bases in the Dar al-Islam, most notably in Saudi Arabia, the home of Islam’s founding and holiest sites. This expanded US military presence was anathema to the core jihadist ideology that the CIA had done so much to foster.

  America’s unprovoked war on Iraq in 2003 unleashed the demons. Not only was the war itself launched on the basis of CIA lies; it also aimed to create a Shia-led regime subservient to the US and anathema to the Sunni jihadists and the many more Sunni Iraqis who were ready to take up arms. More recently, the US, France, and the UK toppled Muammar el-Qaddafi in Libya, and the US worked with the Egyptian generals who ousted the elected Muslim Brotherhood government. In Syria, following President Bashar al-Assad’s violent suppression of peaceful public protests in 2011, the US, Saudi Arabia, Turkey, and other regional allies helped to foment a military insurgency that has pushed the country into a downward spiral of chaos and violence.

  Such operations have failed – repeatedly and frequently disastrously – to produce legitimate governments or even rudimentary stability. On the contrary, by upending established, albeit authoritarian, governments in Iraq, Libya, and Syria, and destabilizing Sudan and other parts of Africa deemed hostile to the West, they have done much to fuel chaos, bloodshed, and civil war. It is this turmoil that has enabled ISIS to capture and defend territory in Syria, Iraq, and parts of North Africa.

  Three steps are needed to defeat ISIS and other violent jihadists.

  First, US President Barack Obama should pull the plug on CIA covert operations. The use of the CIA as a secret army of destabilization has a long, tragic history of failure, all hidden from public view under the agency’s cloak of secrecy. Ending CIA-caused mayhem would go far to staunch the instability, violence, and anti-Western hatred that fuels today’s terrorism.

   

  Second, the US, Russia, and the other permanent members of the United Nations Security Council should immediately stop their infighting and establish a framework for Syrian peace. They have a shared and urgent stake in confronting ISIS; all are victims of the terror. Moreover, military action against ISIS can succeed only with the legitimacy and backing of the UN Security Council.

   

  The UN framework should include an immediate end to the insurgency against Assad that the US, Saudi Arabia, and Turkey have pursued; a Syrian cease-fire; a UN-mandated military force to confront ISIS; and a political transition in Syria dictated not by the US, but by a UN consensus to support a non-violent political reconstruction.

   

  Finally, the long-term solution to regional instability lies in sustainable development. The entire Middle East is beset not only by wars but also by deepening development failures: intensifying fresh water stress, desertification, high youth unemployment, poor educational systems, and other serious blockages.

  More wars – especially CIA-backed, Western-led wars – will solve nothing. By contrast, a surge of investment in education, health, renewable energy, agriculture, and infrastructure, financed both from within the region and globally, is the real key to building a more stable future for the Middle East and the world.
   

  

  

  

  

  

• El-Erian Says "The Market Believes Central Banks Are Our Best Friends Forever", Just Don't Show It "Figure 4"

  A recurring theme we have covered here over the past few weeks and months (most recently here), is that while stocks have soared since the September lows (first on bad payrolls news suggesting no rate hike, then on a Fed hint a rate hike is imminent, go figure), most other asset classes have ignored the furious rally, and none other more so than junk bonds and ETFs.

  This is shown both longer-term:

  

  As well as recently:

  

  And it’s decoupling in the leveraged loan segment too:

  

  And risk is perceived notably “differently” across equity and credit markets:

  

  That is happening even as the yield curve has furiously pancaked, suggesting the Fed is about to commit a major policy error.

  

   

  But that’s the topic of another post.

  For now, we are looking at the one asset class which according to Carl Icahn (who is famously quite short said asset class) remains the canary in the liquidity coalmine, namly junk bonds.

  It is here where according to the latest analysis by Citi’s Stephen Antczak things are going from bad to worse, not only in terms of underlying fundamentals (recall that as we showed a week ago, corporate leverage is at record high just as corporate cash flows are declining), but in terms of underlying market liquidity.

  In fact, for October Citi calculates that the spread between an illiquid and a liquid junk bond portfolio soared to just shy of 100 bps, the highest in this series’ history, and double the average of 48 bps. Presenting the infamous “Figure 4”:

  Liquidity premiums can be meaningful: In the current environment illiquid bonds can offer a sigificant spread premium to more liquid bonds. To illustrate, we created two HY portfolios, one comprised of 100 liquid issues and the other comprised of 100 illiquid bonds. We chose bonds to minimize rating, sector, and maturity differences (and note that we did not include any triple-C, energy, and basic materials CUSIPs, where factors such as potential recovery values may drive valuations more than liquidity).

   

  In Figure 4 we present the spread differences between the two buckets since April, and we see that on average the liquidity premium is 48 bp in HY. We see a significant premium in IG as well (Also noteworthy is that, for both markets, the premium tends to fluctuate dramatically).

  

   

  For those who have a tough time visualizing the real liquidity in the market, think 80/20, or rather 90/10 – 10% of all bonds account for 90% of the trades with an asymptotic distribution.

  Quote Citi: “in Figure 5 we plot the total number of block size trades over the past 3 months by CUSIP in the IG market, sorted from least traded to most traded. We see that the incremental number of trades by CUSIP is quite modest for most issues, but the gap is much, much larger for the most actively traded portion of the market. It’s a small number of bonds that really helps one to behave tactically.“

  

   

  In other words, if one is long any of the names that comprise 90% of the entire bond market CUSIP universe, good luck liquidating if and when you have to, and good luck hoping to “eat” only a 100 bps spread in pricing, especially if and when the market goes bidless.

  But will the junk bond, or any other markets, go bidless as a result of plunging liquidity?

  That was the question posed at the Reuters Global Investment Outlook Summit in New York. Here is what the participants said, courtesy of Reuters:

  “The reason why volatility is going to be higher … you don’t have this huge blanket of liquidity in the world like you had for the last three or four years,” said Rick Rieder, chief investment officer of fundamental fixed income for BlackRock, which manages $4.5 trillion.

   

  Rieder noted that currency reserves in China were declining after several years of a reserve buildup in the world’s second-biggest economy that had resulted in money entering the U.S. financial markets in “huge size.”

   

  Scarce liquidity, partly as a result of curbs on banks’ ability to take risks and an increase in technology-driven trading, has contributed to events such as the Dow Jones industrial average losing more than 1,000 points in the first few minutes of trading on Aug. 24 and the Treasury market “flash crash” on Oct. 15, 2014.“

   

  There is just not as much two-way flow in the markets as we saw pre-crisis, and I don’t think that’s getting better in 2016,” said Erin Browne, portfolio manager at Point72 Asset Management.  “Particularly where the Fed’s going to be raising rates, there is less liquidity in the market, there is the opportunity for more gap risk next year,” she said in reference to the risk of sudden declines in prices, and with it, sharp widening in bid-ask spreads.

  And if SAC, pardon “Point72” is worried about liquidity risk, well… that means that Citi’s “Figure 4” is about to get much worse.

  So what is one to do? According to Mohamed el-Erian, prayer to the Fed works: the same Fed which is about to take away the liquidity…

  Some investors remain under the illusion that the Fed is going to reassure markets during periods of distress, said Mohamed El-Erian, chief economic adviser at Allianz SE.

   

  “The market is comfortable that whenever we hit a hiccup, the Fed is going to come back in,” he said. “It’s very deeply embedded that central banks are our best friends forever.”

   

  He noted that, even though the U.S. central bank “wants to” normalize rates, people have expressed in recent weeks that they still believe that the Fed will engage in another round of quantitative easing. He reiterated, however, that low liquidity remained a risk and that there was a 30 percent probability of a U.S. recession in 2017.

  … just to give it right back when the next rerun of the August 24 market-wide flash crash arrives, only this time there is no subsequent rebound and everyone comes crying to Aunt Janet to make it all well again and unleaseh NIRP or QE4, or both.

  

  

  

  

  

• Current Copper Price Below Cost of Production

  By EconMatters 

  

   

  Long Dollar Trade

   

  One of the common trades in financial markets these days is going long the US Dollar and shorting Commodities, especially the precious and industrial metals. This has been a bad year for commodities, and this trade has picked up steam with large fund flows the last 6 weeks.

   

  Schizophrenic Fed & Employment Reports

  This all turned around after the poor employment report of October 2^nd, followed by some trade unwinding thinking the Federal Reserve may be on hold for the remainder of the year after the dismal October Employment Report. This resulted in about eight days of currency unwinds and around October 14^th, Investors started putting the Long Dollar Trade back on as they realized the Fed still wanted to raise rates, and since China seemed to stabilize from a crashing standpoint, Fed Speak became hawkish to telegraph to financial markets that the December meeting was a potential live meeting for a rate rise. This trade really picked up speed when the November 6^th Employment Report came in much stronger than anticipated with a robust 271,000 new jobs created for the previous month.

   

  

  Trading Algos & Paper Markets

   

  Oil has also been hit along with the metals but it has inventory issues to contend with and is in the midst of a price war for market share. But there is no such price war in the metals industry, and although China`s weakness has no doubt tempered demand, the precious and industrial metals are basically being hammered down in the paper markets by fund flows in this Long Dollar Trade. This trade has become such a reflexive trade, that if the US Dollar is strong, the trading algos just start attacking Gold, Silver, Copper, Aluminum, Platinum and Palladium. These metals by and large trade as a group with slight differences in the charts based upon any unique demand characteristics of the given metal.

   

  

  Soft Demand

   

  Demand hasn`t really fluctuated much for any of these metals the last six weeks, China and the global economy are just sort of trudging along with China`s rebalancing and the global economy growing somewhere in the area of 3.5%. But what has changed the last 6 weeks is the large fund flows into the US Dollar all trying to front run the Federal Reserve, and shorting the Euro, (which makes up the largest component in the US Dollar Index), with traders also front running Mario Draghi who has been telegraphing more future stimulus for the European Union.

   

  

  No Shale Technology for Copper Mining

   

  But at some point every asset has a price, it really comes down to price, markets often over shoot in one direction or the other, but ultimately, what is a ‘fair price’ given the dynamics in the market. Copper is an interesting market because it is being slammed down with Gold and Oil, and the supply side of the Copper market has had its issues in 2015, with supply constraints limiting new supply on the market. Most of the pressures have come from the demand side of the equation with China`s rebalancing. But Copper doesn`t grow on trees, and is actually rather difficult to get out of the ground and process from a cost perspective. The steps involved in actually processing Copper to get it in a marketable form are rather extensive and involve considerable resources. And with six straight weeks of slamming down by traders we have reached the low level of $2 on the Nymex December Futures contract.

   

  

  Marginal versus Production Processing Costs

   

  There are various estimates for what the Marginal Cost of getting Copper out of the ground is before supply is taken offline completely. But it is reasonable to assume that Copper is currently being priced well below the long term Production Cost of Processing the Industrial Metal, and a large component for this trend is strictly fund flows in the Long Dollar Trade.

   

  

  Path Forward for Copper

   

  I am not sure how much this trade has left in it for the near term, who literally knows with asset prices and financial markets these days. But my intuition is that this Long Dollar Trade will probably be pushed into the European Central Bank Decision regarding more stimulus measures and the Fed December Meetings regarding a 25 basis point hike. Also, two other contributing factors are the December 4^th Employment Report and traders wanting to take profits before the actual event in early December.

   

  

  Buy the Rumor, Sell the News

   

  And given the fact that the Federal Reserve is probably going to go out of its way to talk dovish with a 25 basis point rate hike, almost a “One and Done” intended messaging given what the rest of the world is doing in this robust currency devaluation game; it probably means that traders buy the rumor, and sell the US Dollar hard after the actual news of a rate hike, at least in the near term.

   

  

  Short Covering Rally

   

  This is when traders will probably really unwind these Fund Flows with buying Gold hand over fist, covering the substantial shorts in the market, and simultaneously putting new money to work in Gold and the rest of the Industrial and Precious Metals. And if it starts getting cold Oil might even get a bid along with these commodities. We shall see how this all plays out in the market, but $2 Copper could be setting up for an ample short covering rally before 2015 ends!

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• Chicago's John Hancock Building Fire Is Out, Police Report 1 Injured

  A fire burning in a residence on the 50th floor of the John Hancock Center in Chicago has been put out according to the city’s fire department. At least 6 ambulances were on scene responding to the initial situation. One injury has been confirmed by the Chicago Fire Department via Twitter.

   

  The infamous John Hancock building in Chicago is on fire. CNN reports, and the following tweets show, flames visible halfway up and enormous plumes of smoke amid the freezing Illinois air. The fire is in the northeast corner of what appears to be the 50th floor of the building. No details yet on the cause or of any injuries…

  AP reports,

  A fire has broken out high up in the John Hancock Center, one of Chicago's tallest skyscrapers.

   

  Flames could be seen shooting out of a window on the 50th floor Saturday.

   

  Chicago police say they were getting calls reporting the blaze from people inside the building. It has offices and residential units, along with a rooftop observation room popular with tourists.

   

  It's not clear whether anyone is hurt.

   

  The Fire Department's media office tweeted that the fire was under control and firefighters were ventilating the floor. A Fire Department spokesman could not immediately be reached to provide more details.

  *  *  *

  Authorities have shut down Michigan Avenue, which will be holding the Magnificent Mile Festival of Lights Parade Saturday evening.

  Images from the scene…

  CFD on scene of 50th floor blaze at the Hancock. Tune to @WBBMNewsradio for latest. Photo: @TheRealTBlake pic.twitter.com/0uYLcYGJgd

  — Brad Edwards (@tvbrad) November 21, 2015

   

   

  #hancocktower #chicago @ABC7Chicago @SchulteABC7 pic.twitter.com/eubY8eVIPk

  — Chris DosSantos (@cdossantos5) November 21, 2015

  John Hancock on fire pic.twitter.com/jqIuNTH241

  — TheProShow (@NicoThePro) November 21, 2015

  NEW > fire in #Hancock tower #Chicago Pic via @cdossantos5 pic.twitter.com/mhCUGbDK7S

  — John Fricke (@JohnFricke) November 21, 2015

  Casually in Chicago and the Hancock building is on fire pic.twitter.com/IZq5aNrbMo

  — Samantha Wright (@_SamanthaRenee) November 21, 2015

  

  

  

  

  

• Recovery? "We Never Came Close"

  Economics is messy, rarely offering up a clear view of the economy. The chart below shows that Americans have taken on more revolving debt (credit cards basically) since March than they did the previous three years combined.

  

  As Alhambra's Joe Calhoun notes, this could be a positive or a negative and we won’t know until some time in the future.

  • It could be a reflection of confident consumers, readily taking on debt in an improving economy.
  • Or it could be that consumers are using their credit cards because they don’t have cash and this is a precursor to recession.

  That’s what happened in 2000 and 2007 but pointing that out these days gets you labeled a perma-bear. That might be a clue as to how one ought to interpret the data… but maybe not.

  The Fed has many problems with its attempt to convince the world that it has itself fulfilled its recovery mission. That self-reflected “mandate” is meant to include a masterful revisit to prior American infatuation with debt and credit. There was no more visible and visceral demonstration of those terms than the middle 2000’s, and it is the intent of monetary policy to get Americans back there. However, as Jeffrey Snider explains, in 2015, however, in the few areas where that has been found it does not identify monetary success but rather demonstrates even more how the theory never came close.

  Revolving credit has just surged this year, particularly starting in March. The numbers are staggering, as revolving credit balances, estimated and reported by the Federal Reserve itself, have jumped by more than $39 billion in the seven months ending with the update for September. By comparison, from the start of 2012 until February 2015, revolving credit balances expanded by about $44 billion; in just seven months this year consumers have indebted themselves by almost as much as they had in the more than three years before March.

   

  

  Economists are, as you would expect, nearly ecstatic over the impoverishment. To them, it signals the final capitulation of consumers to that which Janet Yellen has been professing since her term began. But there is a huge problem with that view; if consumers are borrowing, what are they doing with the balances?

  For the first time in at least a decade, imports fell in both September and October at each of the three busiest U.S. seaports, according to data from trade researcher Zepol Corp. analyzed by The Wall Street Journal. Combined, imports at the container terminals at the ports of Los Angeles, Long Beach, Calif. and around New York harbor, which handle just over half of the goods entering the country by sea, fell by just over 10% between August and October.

  The declines came during a stretch from late summer to early fall known in the transportation world as peak shipping season, when cargo volumes typically surge through U.S. ports. It is a crucial few months for the U.S. economy as well: High import volumes can signal a confident view on the economy among retailers and manufacturers, while fears of a slowdown grow when ports are quiet.

  The mainstream wishes to belittle the “manufacturing recession” as if it is in and of itself with no major economic connotations. Further, we know retail sales have been among the worst in the entire quarter-century of data, “bested” in consumer atrocity only by the depths of the Great Recession, in exactly this period where revolving, credit card usage has spiked.

  

  It isn’t just importations, either, though that already confounds orthodox understanding as far as what should be happening in trade because of the relative “cheapness” via the dollar exchange. Trucking and shipping companies internally have been vocal in their questioning the dominant, happy rhetoric. In short, if consumers are in full indebted throat upon an orthodox rebirth of the mid-2000’s there isn’t anything out in the real economy to suggest it. There aren’t swelling quantities of goods being moved, fewer in fact, and even less as far as counted spending. There has been a tendency to suggest that consumers, if avoiding goods, have been binging upon services, but they sure aren’t going to be using their credit cards to pay their health insurance premiums or bank fees.

  Instead, this discontinuity can only be consistent where consumers are completely out of options. If there are noticeably fewer goods being shipped here and within here, the US, and borrowing has just exploded at the same exact time then it is rather easy to conclude far more of full recession than recovery.

  That is a point that is further bolstered by the continuing surge in auto loans (as well as student loans via the federal government). In other words, overall manufacturing is, to be blunt, already in the toilet to which even economists recognize despite the fact that auto credit remains at the heart of a relatively robust auto sector; what does that say about the real nastiness in manufacturing apart from autos? What does it suggest about consumers where student loans aren’t being applied toward the labor participation problem?

  

  As it is, economists still can’t make any sense of it since they are convinced (though becoming, significantly enough, less so as you can see below) of Yellen’s forthrightness.

  Economists are divided as to whether the peak season slump signals a short-term hiccup for the U.S. economy, or marks the start of a sustained period of weakness.

   

  Some say the slump is being driven by businesses that have cut back on imports because of a weak economic outlook, which could point to sluggish global growth ahead. Others say it is a side effect of a massive inventory buildup that took place earlier in the year.

  Those are actually two parts of the same process, not competing explanations. If businesses have indeed started to cut back, then inventory is the marginal driving force derived from lower sales that have driven inventory to such heights. Add to that such “sluggish” outlook the indebting nature of consumers just to keep the economy in a bad state rather than something obviously worse and it is no wonder commodities and money markets are speaking to unthinkable contradiction.

  In short, there is no way to reconcile the sudden surge in credit card usage with this magnitude of reduced trade in goods that ends with the US on a surging plane of booming vigor. The “dollar” warned of such behavior and inconsistency starting in the middle of last year, and come to find out the pieces are fitting and corroborating that warning more and more.

  

  

  

  

  

• US Congresswoman Introduces Bill To Stop "Illegal" War On Assad; Says CIA Ops Must Stop

  Last month, US Congresswoman Tulsi Gabbard went on CNN and laid bare Washington’s Syria strategy. 

  In a remarkably candid interview with Wolf Blitzer, Gabbard calls Washington’s effort to oust Assad “counterproductive” and “illegal” before taking it a step further and accusing the CIA of arming the very same terrorists who The White House insists are “sworn enemies.” 

  In short, Gabbard all but tells the American public that the government is lying to them and may end up inadvertently starting “World War III.”

  For those who missed it, here’s the clip:

  That was before Paris. 

  Well, in the wake of the attacks, Gabbard has apparently had just about enough of Washington vacillating in the fight against terror just so the US can ensure that ISIS continues to destabilize Assad and now, with bi-partisan support, the brazen Hawaii Democrat has introduced legislation to end the “illegal war” to overthrow Assad. 

  Gabbard, who fought in Iraq – twice – has partnered with Republican Adam Scott on the bill. Here’s AP: 

  In an unusual alliance, a House Democrat and Republican have teamed up to urge the Obama administration to stop trying to overthrow Syrian President Bashar Assad and focus all its efforts on destroying Islamic State militants.

   

  Reps. Tulsi Gabbard, a Democrat, and Austin Scott, a Republican, introduced legislation on Friday to end what they called an “illegal war” to overthrow Assad, the leader of Syria accused of killing tens of thousands of Syrian citizens in a more than four-year-old civil war entangled in a battle against IS extremists, also known as ISIS.

   

  “The U.S. is waging two wars in Syria,” Gabbard said. “The first is the war against ISIS and other Islamic extremists, which Congress authorized after the terrorist attack on 9/11. The second war is the illegal war to overthrow the Syrian government of Assad.”

   

  Scott said, “Working to remove Assad at this stage is counter-productive to what I believe our primary mission should be.”

   

  Since 2013, the CIA has trained an estimated 10,000 fighters, although the number still fighting with so-called moderate forces is unclear. CIA-backed rebels in Syria, who had begun to put serious pressure on Assad’s forces, are now under Russian bombardment with little prospect of rescue by their American patrons, U.S. officials say.

   

  For years, the CIA effort had foundered — so much so that over the summer, some in Congress proposed cutting its budget. Some CIA-supported rebels had been captured; others had defected to extremist groups.

   

  Gabbard complained that Congress has never authorized the CIA effort, though covert programs do not require congressional approval, and the program has been briefed to the intelligence committees as required by law, according to congressional aides who are not authorized to be quoted discussing the matter.

   

  Gabbard contends the effort to overthrow Assad is counter-productive because it is helping IS topple the Syrian leader and take control of all of Syria. If IS were able to seize the Syrian military’s weaponry, infrastructure and hardware, the group would become even more dangerous than it is now and exacerbate the refugee crisis.

  And make no mistake, Tulsi’s understanding of Washington’s absurd Mid-East policy goes far beyond Syria. That is, Gabbard fully grasps the big picture as well. Here’s what she has to say about the idea that the US should everywhere and always attempt to overthrow regimes when human rights groups claim there’s evidence of oppression:

  “People said the very same thing about Saddam (Hussein), the very same thing about (Moammar) Gadhafi, the results of those two failed efforts of regime change and the following nation-building have been absolute, not only have they been failures, but they’ve actually worked to strengthen our enemy.”

  Somebody get Langley on the phone, this woman must be stopped. 

  Here’s Gabbard speaking to CNN this week about Assad:

  So there’s hope for the US public after all.

  Perhaps if the clueless masses won’t listen to “lunatic” fringe blogs or Sergei Lavrov, they’ll listen to a US Congresswoman who served two tours of duty in Iraq and who is now telling Americans that The White House, The Pentagon, and most especially the CIA are together engaged in an “illegal” effort to overthrow the government of a sovereign country and in the process are arming the very same extremists that are attacking civilians in places like Paris.

  Good luck Tulsi, and thanks for proving that there’s at least one person inside that Beltway that isn’t either dishonest or naive. 

  *  *  *

  From Gabbard

   “Here are 10 reasons the U.S. must end its war to overthrow the Syrian government of Assad:

  1. Because if we succeed in overthrowing the Syrian government of Assad, it will open the door for ISIS, al-Qaeda, and other Islamic extremists to take over all of Syria.  There will be genocide and suffering on a scale beyond our imagination.  These Islamic extremists will take over all the weaponry, infrastructure, and military hardware of the Syrian army and be more dangerous than ever before.
  2. We should not be allying ourselves with these Islamic extremists by helping them achieve their goal because it is against the security interests of the United States and all of civilization.
  3. Because the money and weapons the CIA is providing to overthrow the Syrian government of Assad are going directly or indirectly into the hands of the Islamic extremist groups, including al-Qaeda affiliates, al-Nusra, Ahrar al-Sham, and others who are the actual enemies of the United States.  These groups make up close to 90 percent of the so-called opposition forces, and are the most dominant fighters on the ground.
  4. Because our efforts to overthrow Assad has increased and will continue to increase the strength of ISIS and other Islamic extremists, thus making them a bigger regional and global threat.
  5. Because this war has exacerbated the chaos and carnage in Syria and, along with the terror inflicted by ISIS and other Islamic extremist groups fighting to take over Syria, continues to increase the number of Syrians forced to flee their country.
  6. Because we should learn from our past mistakes in Iraq and Libya that U.S. wars to overthrow secular dictators (Saddam Hussein and Muammar Gaddafi) cause even more chaos and human suffering and open the door for Islamic extremists to take over in those countries.
  7. Because the U.S. has no credible government or government leader ready to bring order, security, and freedom to the people of Syria.
  8. Because even the ‘best case’ scenario—that the U.S. successfully overthrows the Syrian government of Assad—would obligate the United States to spend trillions of dollars and the lives of American service members in the futile effort to create a new Syria.  This is what we have been trying to do in Iraq for twelve years, and we still have not succeeded.  The situation in Syria will be much more difficult than in Iraq.
  9. Because our war against the Syrian government of Assad is interfering with our being one-pointedly focused on the war to defeat ISIS, Al-Qaeda, and the other Islamic extremists who are our actual enemy.
  10. Because our war to overthrow the Assad government puts us in direct conflict with Russia and increases the likelihood of war between the United States and Russia and the possibility of another world war.”

  *  *  *

  Oh, and if you needed another reason to like Tulsi, here’s a bonus 40 second clip for your amusement…

  

  

  

  

  

• Mission Accomplished?

  Success… or?

   

  

   

  Source: Townhall.com

  

  

  

  

  

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• Belgium Warns Of "Imminent" Terror Threat In Brussels: "Avoid Crowded Areas"

  Following the massacre that unfolded last Friday in Paris, Belgium has become a focal point for European authorities’ anti-terror efforts. 

  As we detailed in “Meet The 27-Year Old “Mastermind” Behind The Paris Attacks“, Abdelhamid Abaaoud began to figure prominently in discussions among Western intelligence officials after two of his operatives were killed in a January raid in Verviers.

  Abaaoud was born in Belgium, and partly due to the “fame” he achieved by orchestrating the ISIS operation in Paris, the entire world is now suddenly awake to the role Brussels plays in serving as a kind of terrorist incubator.

  Specifically, all eyes are on Molenbeek, a working class, immigrant neighborhood which Foreign Policy notes is separated from the historical district by a “breezy canal” and is but a 20 minute subway “hop” from Brussels’ European Quarter. 

  

  As The New York Times recounted earlier this week, “the assassination of the Afghan anti-Taliban commander Ahmed Shah Massoud, immediately before the Sept. 11 attacks in 2001; the train bombings in Madrid in 2004; and the killing of four people at the Brussels Jewish Museum in 2014; the foiled shooting on a high-speed train, the anti-terrorist raid in the eastern Belgian town of Verviers, the attack on a Paris kosher supermarket and, finally, the Nov. 13 attacks on the French capital — all had some connection to Molenbeek.“

  In short, Molenbeek is to European terrorists what Charlestown is to bank robbers, although residents are understandably distressed about that rather unflattering characterization. 

  In any event, Belgium is now on high alert – literally. As AFP reports, Belgium has raised its terror alert level to the highest level for Brussels on Saturday. An attack, officials say, could be “imminent”:

  “Following our latest evaluation… the centre has raised its terror alert to level 4, signifying a very serious threat, for the Brussels region,” said a statement from OCAM, which comes a week after the Paris attacks left 130 dead.

   

  “The analysis shows a serious and imminent threat requiring specific security measures as well as detailed recommendations to the population,” OCAM, which is part of the Belgian Interior Ministry, said in the statement.

  Here’s the whole statement (Google translated):

  Following a new assessment of the OCAM performed this Friday, 20/11 at night, the terror alert level rose to a level 4, very serious, for the Brussels Region. Level 3 continue to apply to the rest of the country.

   

  The analysis shows indeed a serious and imminent threat that requires taking specific security measures as well as specific recommendations for the population.

   

  Advice to the population:

   

  Avoid places with high concentrations of people in the Brussels region (concerts, major events, train stations and airports, public transport, places of high commercial concentration).

   

  Facilitate follow the safety controls

  
  

  Do not post rumors: follow the official information from the authorities and police services

  
  

  In order to enable judicial inquiries to track their progress, no further details will be given. A communication from the Government will follow tomorrow morning.

  

  Yes, “no further details will be given.” Until a raid turns up a couple of Syrian passports that is.

  

  

  

  

  

• Congress Wants To Seize Your Passport For Unpaid Taxes

  Submitted by Simon Black via SovereignMan.com,

  Sometimes you just have to stand in awe at the level of corruption and incompetence in government.

  Case in point, the new highway bill in the Land of the Free. And, trust me, you’ll love this.

  The latest version of the highway bill is called the “Developing a Reliable and Innovative Vision for the Economy Act.”

  And yes, they abbreviate it as the DRIVE Act.

  I cannot even begin to imagine how large the team of monkeys is that works on these silly acronyms. And as is typical for legislation, the more high sounding the name of the law, the more destructive its consequences.

  On the surface, the DRIVE Act aims to fund the federal transportation network and investments in highway infrastructure for the next several years, as well as recapitalize the Highway Trust Fund.

  Federal trust funds are supposed to responsibly and conservatively manage money that has been set aside for a specific purpose to benefit taxpayers.

  There are so many of these trust funds. There are the big ones like Social Security’s “Old Age Survivor’s Insurance” and “Disability Insurance” (which is literally days away from running out of money).

  And there are many more you’ve probably never heard about, like the “Black Lung” trust fund and the “Leaking Underground Storage Tank” trust fund.

  Most of these funds are insolvent, or at least pitifully undercapitalized, clearly proving the government to be one of the worst asset managers in history.

  The Highway Trust Fund is no exception: it has completely run out of money, and at this point literally has a ZERO account balance. The DRIVE Act intends to fix that.

  And even though it has nothing to do with funding highways, the bill also aims to re-authorize the Export-Import Bank.

  The Ex-Im Bank was created during the Great Depression and is designed to facilitate trade. That’s code for ‘boost the profits of Boeing and General Electric.’

  Even the government’s own Congressional Research Service found that “more than 60% of Ex-Im Bank’s loan guarantees, by dollar value, supported the sale of Boeing airplanes in foreign countries”.

  Ex-Im is essentially a gift on a golden platter from the taxpayers of the United States to a handful of mega-companies.

  The Bank’s charter lapsed earlier this year. But rather than let it die, they’re jumpstarting Ex-Im with even more taxpayer money.

  Clearly the government needs cash. They need to fund Ex-Im, the Highway Trust Fund, and all the improvements for America’s dilapidated infrastructure.

  And their solutions to address this cash crunch are nothing short of remarkable.

  For example, they plan to steal $300 million from the Leaking Underground Storage Tank trust fund (LUST… yes, that’s really what they call it), and transfer that money to the Highway Fund.

  The only problem is that LUST is insolvent. So they’re stealing from one insolvent trust to fund another insolvent trust. It’s genius!

  One of my favorite sections in the bill is a directive to sell off 100+ million barrels of oil from the Strategic Petroleum Reserve.

  Only a politician could think to sell off oil supplies at a time when oil price is at multi-year lows.

  (It also really gives you a sense of how broke the government really is that they’re driven raise cash by selling off strategic assets.)

  Another gem buried in the 864 pages of the bill is a provision that allows the government to revoke your passport if they believe that you owe more than $50,000 in federal tax.

  There will be no judicial review, and no due process. You don’t get to go in front of a judge first to have a fair and impartial hearing over whether or not the government’s tax allegations are accurate.

  The language in the law is very clear: they can simply revoke your passport if you owe them money in their sole discretion.

  Once the law is passed, this would go into effect on January 1, 2016, and they claim it will generate $40 million per year in tax revenue.

  There was one more provision that proposed raising revenue from the biggest banks in America by reducing the dividend they receive from the Federal Reserve.

  Curiously, though, this specific provision was defeated yesterday after a heated committee meeting in Congress.

  So while the banks’ profits are off-limits, and the government will spend billions of taxpayer dollars to boost profits at Boeing, American citizens are threatened with having their passports revoked in order to raise money.

  It couldn’t be any more obvious how much the system is stacked against the little guy.

  They treat you like a dairy cow that exists only to be milked dry… like a medieval serf tied to the land and forced to serve his overlords.

  It’s revolting. But it doesn’t have to be this way.

  You can take sensible, rational steps to divorce yourself from this madness, or at least have a Plan B to protect yourself from it.

  If the government is threatening to take away your passport, for example, there are countless ways you can obtain another one from a country that will roll out the red carpet for you.

  If you’re sick and tired of having your income confiscated so that you can bail out big companies, there are completely legal steps you can take to reduce what you owe.

  It’s hard to imagine you’ll be worse off being more free and having more control over your life and finances.

  

  

  

  

  

• For Sale: Apocalypse Bunker, Can Withstand 20 Kiloton Nuclear Blast; Furnished: Asking $17,500,000

  Earlier this week we presented the Oppidium: a concept doomsday shelter which would be located in the Czech Republic, catering exclusively to billionaires who could watch mushroom clouds wrap the earth in a radioactive glow just the way they like it: in posh opulence, as the following proposed images suggested:

  

  Interior bedroom of bunker

  

  Bunker swimming pool and garden using artificial lighting

  

  Underground bunker wine cellar

  And the bottom line:

  

   

  Upon some further recollection three things emerged: the Oppidium bunker is completely useless because i) it was all style over substance; ii) it was a marketing gimmick for its designer/seller, and iii) it doesn’t even exist yet and furthermore its completion cost further billions.

  But perhaps most importantly, the bunker was located in Europe, somewhere in the Czech heartland, and as such would be largely useless to the targeted customer base: uber-wealthy Americans with a penchant for if not immortality then outliving everyone else, and who would hardly have the time to reach it as the “Apocalypse-level” event unfolded.

  Addressing all of these concerns is an underground facility and bunker dubbed “The Facility” in Southeast Georgia, located two hours from Savannah, which just hit the market for a far more modest $17.5 million, and which most importantly, is in “move-in ready” shape.

  As BizJournals reports, the property (which is exclusively listed by Sister Hood of Harry Norman, Realtors Buckhead Office), was built in 1969 and fully renovated to government standards in 2012. Its address is undisclosed.

  According to Harry Norman, it is the only hardened and privately owned underground bunker of its kind in the United States. The property features a commercial 3-Phase power plant, in addition to its own 8Kw new solar backup system. The facility is also equipped with a $100,000 CCTV security system.

  “Above ground, The Facility offers 2,000 square feet of commercial space, a renovated 1,000-square-foot caretaker’s home and below ground the facility offers 14,000-square-feet of living and working space,” the company reported. “The Facility is 45 feet underground and certified to withstand a 20K ton nuclear blast.”

  The Facility stands on 32 acres and has two levels of underground living space.

  Level two has four luxury apartments that are about 600-square-feet. The apartments are totally self-contained and have two full bedrooms, a kitchen and dining area, a living room with TV and internet and a large bathroom in addition to its own security, a HVAC system and environmental monitoring sensors. Level one of the underground facility has common areas similar to a luxury hotel, the company said.

  “Guests can enjoy the large home theater with seating for 15, a commercial grade kitchen, a recreation area, library and TV room,” Harry Norman reported. “The Facility is equipped with a full workshop, a separate business and conference center and fully equipped medical room.”

  In other words, unlike the Czech pipe dream, the Atlanta bunker can not only withstand a direct nuclear blast, but is move in ready right now – a key selling point which no other “concept” apocalypse shelters have as of this moment.

  Here is the full listing:

  

   

  And here is what $17,500,000 (price is negotiable) gets you.

  

  

  

  

  

  

  

  

  

  

  

  

  

  More images available here

  

  

  

  

• Fed To Hold An "Expedited, Closed" Meeting On Monday

  Given how awesome everything appears to be, judging by stocks and the tidal wave of FedSpeak of the last week confirming that rates are rising in December, we found it at least marginally ‘odd’ that out of the blue,  The Fed would announce an ‘expedited, closed’ meeting on Monday…

   

  

   

  As we are sure to be told: “it’s probably nothing!”

  

  

  

  

  

• No Joke! The Onion Predicted All Of This Back In 2003

  Submitted by Carey Wedler via TheAntiMedia.org,

  “George W. Bush may think that a war against Iraq is the solution to our problems, but the reality is, it will only serve to create far more,” read a 2003 article on The Onion a week after then-President George Bush launched the Iraq War. While a wide variety of organizations and individuals also rebuked that invasion, the satirical newspaper offered one of the most accurate assessments to date. So accurate, in fact, it all but predicted the rise of the Islamic State.

  In the mock-debate piece, entitled, “This War Will Destabilize The Entire Mideast Region And Set Off A Global Shockwave Of Anti-Americanism vs. No It Won’t,” The Onion highlighted the very real risks of war.

  As fictional debater Nathan Eckert warned:

  “This war will not put an end to anti-Americanism; it will fan the flames of hatred even higher. It will not end the threat of weapons of mass destruction; it will make possible their further proliferation. And it will not lay the groundwork for the flourishing of democracy throughout the Mideast; it will harden the resolve of Arab states to drive out all Western (i.e. U.S.) influence.”

  He continued:

  “If you thought Osama bin Laden was bad, just wait until the countless children who become orphaned by U.S. bombs in the coming weeks are all grown up. Do you think they will forget what country dropped the bombs that killed their parents? In 10 or 15 years, we will look back fondly on the days when there were only a few thousand Middle Easterners dedicated to destroying the U.S. and willing to die for the fundamentalist cause. From this war, a million bin Ladens will bloom.”

  More than a decade into the chronic conflict, the Onion’s projects are eerily—albeit predictably—accurate. By 2006, national security experts were warning the war was inspiring further radicalism. One of the Boston Marathon bombers was radicalized by the Iraq War. The Charlie Hebdo shooters were also radicalized by Western intervention in the Middle East.

  As the Guardian pointed out earlier this year, “there was no al-Qaida in Iraq until the US and Britain invaded. And the US has certainly exploited the existence of Isis against other forces in the region as part of a wider drive to maintain Western control.”

  The Onion article poked fun at empty rebuttals many proponents of war offered at the time.

  “Why do you keep saying these things? I can tell when there’s trouble looming, and I really don’t sense that right now. We’re in control of this situation, and we know what we’re doing. So stop being so pessimistic,” wrote the fictional opposing debater, Bob Sheffer.

  But the United States was not in control—and the pessimism (read: realism) was warranted. The Islamic State has thrived not only because of radical Islam, but because of resentment sparked by American intervention. A recent report by The Nation details interviews the author conducted with imprisoned Islamic State fighters. Journalist Lydia Wilson explained that while most people in the West believe the Islamic State is rooted solely in religion, it has attracted fighters for other reasons:

  “They are children of the occupation, many with missing fathers at crucial periods (through jail, death from execution, or fighting in the insurgency), filled with rage against America and their own government. They are not fueled by the idea of an Islamic caliphate without borders; rather, ISIS is the first group since the crushed Al Qaeda to offer these humiliated and enraged young men a way to defend their dignity, family, and tribe,” she wrote.

  As Eckert  opined in The Onion over 12 years ago:

  “Is our arrogance and hubris so great that we actually believe that a U.S. provisional military regime will be welcomed with open arms by the Iraqi people? Democracy cannot possibly thrive under coercion. To take over a country and impose one’s own system of government without regard for the people of that country is the very antithesis of democracy. And it is doomed to fail.”

  Just as proponents of war today dismiss long-term risks of continued intervention, the fictional Sheffer downplayed any negative consequences:

  “No it won’t. It just won’t. None of that will happen,” he replied to Eckert.

   

  “You’re getting worked up over nothing. Everything is going to be fine. So just relax okay? You’re really overreacting.”

  This is not the first Onion piece to foreshadow real world events. Earlier this year, a satirical article published on the site predicted the United States would offer weapons to Israeli Prime Minister Benjamin Netanyahu to placate him following Obama’s progress on the United States’ nuclear deal with Iran.

  

  

  

  

  

• Why Only Free Speech Gives Safe Space To The Oppressed

  Submitted by Dan Sanchez via TheAntiMedia.org,

  Social justice protests have been roiling American universities, even causing administrative heads to roll. To a significant degree, these campus uprisings have been characterized by an impulse to restrict speech and expression for the sake of creating “safe spaces” for marginalized groups. However, speech restriction is a double-edged sword that can just as easily injure the very people campus activists seek to help.

  The turmoil at the University of Missouri (Mizzou) in particular was sparked by racial incidents. And the protesters are closely aligned with the Black Lives Matter movement, which combats police brutality against black Americans.

  However, cops themselves have recently sought to restrict speech and expression in order to insulate that very brutality from criticism.

  As William N. Grigg wrote last year:

  “The NYPD has now added its name to the roster of Officially Protected Victims by filing ‘hate crimes’ charges against 36-year-old Rosella Best, who had tagged police vehicles and a public school with anti-NYPD graffiti. Among the entirely defensible sentiments inscribed by Best are ‘NYPD pick on the harmless,’ ‘NYPD pick on the innocent,’ and?—?in a display of familiar but increasingly justified hyperbole?—?‘NAZIS=NYPD.’ (Assuming that Ms. Best used only ‘public’ property as her canvas, it’s difficult to identify an actual victim in this case.)”

  And earlier this year, the Fraternal Order of Police demanded that Congress extend such special protection to the federal level.

  Many critics of the police have been arrested and charged over Facebook posts. Matthew Townsend of Meridien, Idaho was prosecuted as a felon for a Facebook post warning of a “non-violent and legal shame campaign,” which was treated by the authorities as a “terroristic threat.” Thomas Smith of Arena, Wisconsin was arrested and charged with “unlawful use of a computerized communication system” for throwing nothing more than F-bombs and accusations of racism at local cops on Facebook. And there was a whole wave of arrests last year over fierce anti-cop online rhetoric following the police killings of Michael Brown and Eric Garner and subsequent murders of police officers.

  In addition to arrests and prosecutions, cops have been orchestrating campaigns to have their social media critics shunned and fired. See the cases of restaurant workers Ashley Warden and Shawn Peterson.

  High profile cops from Wisconsin to Georgia have characterized Black Lives Matter as a “hate group,” and called for a crackdown on its “incitement.”

  Police (including the U.S. top cop, FBI Director James Comey) are also blaming the increase in violent crime in some cities on “the YouTube effect,” claiming officers are holding back from “proactive” (aggressive) policing for fear of having recordings of their violence go viral.

  Thus, ostensibly for the sake of “officer safety” (the blue brotherhood’s version of “safe space”), legislation has been proposed to make it a crime for ordinary people to point cameras at cops.

  Given these assaults by cops on the rights of individuals to combat police brutality through speech and the use of media, it is deeply troubling that allies of Black Lives Matter at Mizzou should have reacted to journalists trying to photograph their rally with threats of violence, and even police violence.

  While a crowd of protesters was physically forcing student photographer Tim Tai out of a public space on campus, one of the activists warned him, “They can call the police on you.”

  After Tai was driven away, the journalist who video recorded the incident remained. Faculty member Melissa Click demanded that he leave, too. When the journalist refused, Click tried to enlist fellow activists to physically remove him, saying:

  “Who wants to help me get this reporter out of here? I need some muscle over here!”

  This was a “progressive” assistant professor of mass media calling for “muscle” to be deployed against a journalist in a public space!

  In addition to Black Lives Matter, the Palestine solidarity movement is yet another just cause championed by the campus left that is imperiled by threats to speech. Moreover, these threats are emerging on university campuses and are being justified on “social justice” grounds. Like the cops, defenders of the Israeli occupation of Palestine are seeking to restrict speech on an “anti-hate” basis in order to insulate the occupation’s brutality and atrocities from criticism. As Nora Barrows-Friedman recently reported:

  “A member of the University of California’s governing body has called for the expulsion or suspension of students for expressing their views about Israel, under the guise of combating anti-Jewish bigotry.

   

  “This comes as Israel lobby groups, flush with huge new injections of cash, are stepping up their efforts to silence the Palestine solidarity movement on campuses nationwide.

   

  “During a 17 September meeting of the University of California (UC) Regents to discuss a ‘statement of principles against intolerance,’ Richard Blum also threatened to have his wife, US Senator Dianne Feinstein, publicly criticize the university if it did not enforce penalties against perceived bigotry.

   

  “Feinstein’s criticism could put the university system under federal scrutiny.

   

  “Another regent, Hadi Makarechian, agreed, according to The San Francisco Chronicle, saying that without punishment, ‘we’re just stating a lot of stuff on paper.’

   

  “Blum and other regents, backed by Israel lobby groups, are pushing the university to adopt policies that free speech advocates warn could violate the First Amendment.

   

  “The Board of Regents had been due to vote on whether to adopt the US State Department’s definition of anti-Semitism as university policy at its meeting in July.

   

  “That definition is based on a ‘working definition’ of anti-Semitism once considered by a European Union body but later dropped.

   

  “Palestine solidarity and free speech advocates point out that the government definition conflates criticism of Israel with anti-Jewish bigotry. A key strategy of Israel advocates, they say, has been to urge university administrators to treat criticism of Israel and anti-Semitism as one and the same.”

  Just as the cops are blaming Black Lives Matter and viral videos for “inciting” violence against police, the hard-right Israeli government and its champions throughout the world have similarly been accusing the Boycott, Divestment and Sanctions (BDS) movement, and the online dissemination of documented Israeli brutality, of being “incitement” for terrorism against Israel. They are pushing to have such “incitement” restricted.

  And they are succeeding. In October, France’s highest court ruled that advocacy of BDS is illegal “incitement” and “hate speech.” And as Glenn Greenwald wrote in The Intercept:

  “In May, CBC reported that Canadian officials threatened to prosecute BDS activists there under ‘hate speech’ laws, and after those officials denied doing so, we obtained and published the emails proving they did just that. The February Haaretz article described this troubling event in the U.K.: ‘In 2007, the British University and College Union said it would drop plans to boycott Israeli institutions after legal advisers said doing so would violate anti-discrimination laws.’ In 2013, New York City officials joined an (ultimately failed) Alan Dershowitz-led campaign to threaten the funding of Brooklyn College for the crime of hosting pro-BDS speakers.”

  Again, restricting speech is a double-edged sword. As the American Civil Liberties Union (ACLU) warned:

  “Free speech rights are indivisible.

   

  “Restricting the speech of one group or individual jeopardizes everyone’s rights because the same laws or regulations used to silence bigots can be used to silence you. Conversely, laws that defend free speech for bigots can be used to defend the rights of civil rights workers, anti-war protesters, lesbian and gay activists and others fighting for justice.”

  Many campus activists have lashed out in frustration at “free speech purism,” which they regard as misplaced in the context of institutionalized oppression. But it is extremely short-sighted to sacrifice universal principle on the altar of identity politics for the sake of marginalized groups.

  Once you accept the infringement of universal rights as an acceptable political weapon, it will be wielded more effectively by oppressors against the oppressed (cops against blacks, Israeli occupiers against Palestinians, etc.), and not the other way around. Authoritarian restriction is a game much better suited for the mighty than for the marginalized.

  If you replace the power of principle with the principle of power, it is the relatively powerless who will get the worst of it.

  

  

  

  

  

• Friday Humor: Meet Phuc Dat Bich – The Aussie Man Who Is "Irritated" At Facebook Ban

  A 23-year-old from Melbourne had to upload a picture of his passport and vented his frustration on Facebook after they banned his account three times on the grounds his name was “false and misleading.”

  We can perhaps understand why…

  

  “I find it highly irritating the fact that nobody seems to believe me when I say that my full legal name is how you see it,” the post reads.

   

  “I’ve been accused of using a false and misleading name of which I find very offensive. Is it because I’m Asian? Is it?”

   

  “Having my Facebook shut down multiple times and forced to change my name to my ‘real’ name, so just to put it out there. My name.”

  The name, which is pronounced ‘Phoop Dook Bic’, is reportedly a common in Vietnam, despite the spectacular response it has received in Australia.

  * * *

  Of course, the more important question for Facebook is – is he a terrorist?

  

  

  

  

• Even The 1% Is Hurting: Swiss Watch Exports Plunge Most Since Financial Crisis

  As the poor get poorer, so the saying goes, the rich get richer; and until recently that was not just true, but apparently mandated so by The Fed. However, the last few months have seen the so-called "1%" appearing to struggle a little in their largesse. As we noted previously, not only are luxury jet values dropping for the first time since 2009, London mansion prices plunging, San Francisco home sales collapsing, and Sotheby's laying people off, but now, as Bloomberg reports, Swiss watches – the ultimate in luxury extravagance – have seen exports crash by the most since the financial crisis.

   

  Swiss watch exports collapsed 12.3% YoY in October… the worst since the financial crisis and not seen outside of a US recession…

  

   

  “2015 has been one to forget for the watchmakers,” said Jon Cox, an analyst at Kepler Cheuvreux in Zurich. As Bloomberg reports,

  Swiss watch exports had their biggest decline in six years in October, led by a 39 percent slump in shipments to Hong Kong, the industry’s largest market.

   

  Shipments declined 12 percent to 2 billion Swiss francs ($2 billion), the Swiss customs office said in a statement Thursday.

   

  Exports to the U.S. dropped 12 percent.

  But aside from that, it appears only one thing has really benefited from The Fed's largesse (as demand for Diamonds and Fine Wine has crashed)…

  

   

  The rich appear to be cinching up the purse strings, and as we concluded previously, that is not a good sign…

  So the rich are becoming less rich? To an extent, yes. Recent declines in commodity prices and emerging market debt have no doubt taken a bite out of some big portfolios. Meanwhile hedge funds, the preferred investment management vehicle of the uber-wealthy, have done badly for the past couple of years, with some high-profile implosions generating headlines.

   

  These disappointments have lowered the net worth of some big players and made others more cautious. Hence the lessened demand for the most pretentious assets.

   

  The impact on the global economy? Almost certainly bad, since the 1% are the marginal buyers of so many reference assets like blue-chip stocks and government bonds. To the extent that they grow cautious, the bid for a lot of things will be lower, cutting corporate profits, equity valuations and high-end asset prices.

  Put another way, when the only healthy part of an already-impaired system turns negative, everyone will feel the resulting pain.

  Charts: Bloomberg

  

  

  

  

  

• Paris Attacks: Another False Flag? Sifting Through The Evidence

  Submitted by Joachim Hagopian via Global Research,

  What do the globalists do when they want to create, reignite and keep their war on terror fought indefinitely? They simply carry out a series of false flag attacks using Muslim terrorist stooges as their hired guns to do their damage. That’s what 9/11 was all about in the US, 7/7 in UK, the 3/11 train attack in Spain, the Hebdo Paris attack last January, and now this latest Paris encore reenactment part two.

   

  In any unsolved crime the first question asked is who benefits by motive with an actual means to execute the crime?

   

  In all of these tragic false flag events the global elite benefits in multiple ways. And it most definitely has the means by issuing marching orders to its owned and operated national governments, its favorite being the militaristic, brutal American Empire.

   

  The elite’s agenda to polarize and destabilize the world politically and militarily manifests through the US foreign policy of regime change, nonstop war through divide and conquer methodology (i.e., Shiites vs. Sunnis, Euro-nationals vs. foreign migrants, Christians vs. Muslims, light skins vs. dark skins) and economic austerity through unpayable high interest from predatory IMF bank loans to debtor nations from both the developing and developed world.  Through global theft and destruction, the ruling elite reigns supreme in absolute power.

  For decades after World War II US-NATO-Western European allies conspired and perpetrated state sponsored terrorism murdering their own citizens through a protracted series of Gladio operations originally designed to falsely accuse Communist groups in Italy. Spanning over thirty years with violent incidents throughout Europe and Turkey, Gladio-like false flag operations never stopped. Gladio at home took the form of the US Joint Chiefs of Staff’s Operation Northwoods that JFK abruptly halted, partially resulting in his own self-undoing, killing the diabolical military plot of murdering innocent US citizens in Miami and Washington DC in order to blame and start a war against Cuba. The US especially but numerous governments have regularly engaged in false flag operations killing their own to trigger wars, shape public opinion, conceal and divert attention away from citizens ever catching on to the dirty lowdown truth.

  The Friday the 13^th Paris massacres were highly organized, committed by heavily armed, closely monitored terrorist professionals unleashed onto an unsuspecting, culturally diverse group of young Paris victims. The coordinated attacks seem to carry all the earmarks as state of the art false flag terrorism having had lots of previous practice, most notably the Paris Charlie Hebdo edition. But the growing anomalies stacking up once again turn out to be no different from its predecessors.

  All have promoted the same globalist agenda toward unlimited invasive authoritarian surveillance used to bring about increasing draconian measures in order to gain absolute tyrannical control over the populace. At the same time it exploits xenophobia and islamophobia amongst its citizenry that in turn increase hatred and tensions laying the groundwork for potential civil war. Today the elite is skillfully working its proven divide and conquer formula perfectly. In one fell swoop it creates the unstable conditions fomenting civil unrest and violent backlash that then increasingly justify oppressive, over-the-top counterterrorism and police state tactics that obliterate human rights.

  Finally, false flag terrorism launches a militarized backed by a globally legislative crackdown targeting all dissidence and activism exposing the governments’ false narrative of lies and propaganda, labeling and criminalizing the dissenting truth as homegrown terrorism.

  The surreptitiously obtained Syrian passport found so quickly after the fact in Paris has become a false flag trademark used in both Charlie Hebdo and 9/11. Because this pattern proved a serious liability for establishing any credibility, it was later disclosed that the passport actually came off the body of “a Syrian refugee,” as if that made MSM any more believable.

  Even before the passport fiasco, the alleged terrorist’s quote from a supposed witness “this is for Syria” was obviously disclosed by mainstream media to shape and manipulate public opinion into quickly blaming Syria, ISIS and Syria’s targeted leader Assad. And then long before any of this alleged (dis)info began surfacing, barely an hour into the attacks while still actively underway, President Hollande kept repeating three times in the next several hours what appeared to be his scripted lines already declaring that France was at war against already identified terrorist attackers from Syria before any investigation had even begun. This rapid sequence of events smacked of false flag.

  Furthermore, like the Hebdo attack earlier this year, reports immediately commenced disclosing that French intelligence had long been tracking the perpetrators prior to the attacks. Former antiterrorist judge Marc Trevidic in a Sunday interview claimed that French authorities knew of an impending terrorist attack being planned by Islamic State jihadists “at a French rock concert” as early as August.

  The judge had cross-examined militants three months earlier who revealed this rather critically important piece of information. This strongly suggests French intelligence had prior knowledge of the Friday night massacres. Turkey also warned the authorities in France twice about one of the three alleged suicide bombers but The Guardian reported that France only contacted Turkey for information after the Paris attacks. Again, it seems more than plausible that French security forces knew about the planned attacks but purposely failed to stop them or may have even played a sinister role in allowing them to occur.

  A couple of other striking parallels with 9/11, when the BBC reporter announced that Building 7 went down 20 minutes prior to the event, the Paris attack was described on twitter dated a full two days in advance of the November 13^th killings. Also Wikipedia within two hours from the very onset of the attacks already had posted a fully detailed account complete with footnotes specifying “Syria” being mentioned by a witness, “5 or 6 terrorists”, and “3 suicide bombers” all from the get-go pointing to the big bad Muslim villains yet again. The clinching evidence was Wikipedia running an early story version at 23:06 specifying:

       In a televised statement at approximately 23:58 (local time), French President François Hollande declared

       a state of emergency and closing of borders for the whole of France.

  For that announcement on Wikipedia to be made nearly an hour prior to Hollande’s actual statement could suggest that Wikipedia was in fact being used by the French authorities as an information disseminator of a preplanned event, right away establishing an official narrative from the outset that Arab terrorists from Syria were the guilty murderers behind the attacks far in advance of the start of even a preliminary investigation.

  It’s also been recently learned like in several previous false flags that security forces in Paris were simultaneously undergoing another live action emergency drill earlier that same day (as in Charleston, Baltimore, Boston, 9/11). Patrick Pelloux, an emergency medical services specialist and one of the first responders to the attacks, confirmed in a radio interview that a live drill had been conducted that morning of the 13^th. These co-occurring government events timed perfectly to overlap so called acts of terrorism cannot be considered purely co-incidental.

  Adding more weight to the false flag suspicion is the fact that just two weeks prior to Friday’s attack on October 29^th CIA Director John Brennan met with his French counterpart along with UK’s MI6 former chief and former Israeli national security advisor. Additionally on Monday Brennan admitted that the international intelligence community expected a terrorist attack in Europe. Just as the Islamic terrorist mercenaries always “accidentally on purpose” leave their calling cards behind, so are the dirty CIA-Mossad fingerprints left indelibly written all over virtually every state sponsored terrorism on this planet. For years it’s been repeatedly demonstrated that US and Israeli intelligence forces have been covertly working directly with the Islamic State jihadists. NSA documents show that ISIS leader El Baghdadi was trained by Mossad. A recently captured IDF colonel was caught leading Islamic State forces. Overwhelming evidence has proven the US-Israeli-Saudi-Turkish-Gulf State connection to ISIS terrorists, documenting this intimate partnership in the manufactured war on terror.

  In late September after Putin outed Obama’s fake war against ISIS at the UN, then throughout October actually destroying ISIS where Obama only pretended, the lost face of a humiliated Emperor’s new clothes turned US war policy in the Middle East completely topsy-turvy. Obama’s dubious leadership sank to an international all-time low when Putin exposed America’s deliberately failed MENA policy. Allied nations were cutting their losses and announcing plans to pull out of Syria. US Empire of Chaos and Destruction was fast losing its global control, its coercive power to subjugate its Euro-puppets into blind submission seriously and overtly eroding.  On top of that, while Europe is still reeling from the refugee mass migration crisis directly caused by the US imperial aggression, they were marveling over grandmaster Putin’s bold stroke of finally kicking some Islamic State ass. Stalwart US Euro-ally Germany was already shifting gears warming its relations with Russia, unwilling to follow Washington’s disastrous lead down doomsday road.

  So what do the neocon goons in full damage control mode come up with?

  While US-Israel are holding joint military exercises in the Sinai desert, did they coordinate with ISIS to make sure it shoots down the Russian airliner as immediate Putin payback?  Then came Defense Secretary Carter’s Russia bashing threats from the Ronald Reagan Library followed just hours later a few miles away with the Trident missile’s Saturday night LA bright light show seen around the world as an exclamation threat to Russia and China to back off from challenging US Empire’s global hegemony.

  The DC warmongers are growing increasingly desperate, afraid of losing both their full spectrum dominance in the world as well as their precious proxy terrorist ally while Putin’s aid to Assad is putting the final kibosh on their fanatical OCD regime change operation.

  So Brennan meets up with French and Israeli intelligence to conjure up the next Paris false flag. And since Hollande’s been Washington’s loyal go-to lackey with Hebdo already under his belt, heading up France’s active role in the imperialistic assault on both Libya and Syria, with Paris terrorism #2 France now becomes US Empire’s key catalyst to pull off another massive 9/11-like attack, in fact the biggest in France since WWII and be the justified driving force behind this newest “coalition of the willing” stepping up its next phase of war in Syria against both Assad and Putin. US bombs being dropped over Syria are now being joined by bombs from French jets as well as Israeli and Saudi warplanes. Timed purposely on the heels of the Paris tragedy, the ongoing G-20 meeting with the world’s most powerful nations in Turkey has turned into a war council to drum up intensified world war effort against nemesis Assad and Putin.

  But the Western bombs are making sure that they do not destroy ISIS nor ISIS-controlled oil refineries selling black market oil to NATO member Turkey. Nor are they attacking the critical ISIS supply line in northern Syria that extends back into Turkey. It’s all too obvious that a renewed, heavily fortified allied offensive aggressively going head-to-head with Syrian and Russian forces clearly risks igniting a broader War.

  

  

  

  

  

• Most Americans Hit "Peak Income" More Than 15 Years Ago

  After adjusting for inflation, the majority of Americans are worse off today than they were decades ago. The map below shows that median household income actually peaked at least 15 years ago in 81% of U.S. counties.

   

  

  Courtesy of: Visual Capitalist

   

  This visualization of household incomes is from an interactive map created by the Washington Post that allows users to zoom in on individual counties to see how income has changed over the years.

  Some of the more interesting revelations include:

  • Income peaked one year ago for many of the counties that are a part of the shale boom. This includes much of North and South Dakota, as well as parts of Texas, Nebraska, and Oklahoma. Income in Washington, D.C. and neighboring Arlington County also peaked then.
  • In 1999, a total of 1,623 counties had their households reach peak income. The majority of these counties are in the Midwest and Southeast.
  • The most southern part of California and parts of New England both peaked around 25 years ago.
  • Many states along the Rocky Mountains such as Wyoming and Montana had counties that peaked roughly 35 years ago.
  • Household income peaked in upstate New York, the northern tip of California, and southern Nevada at the same time that humans were first landing on the moon in 1969.

  But we have one simple question…After reading all of the above, what is it exactly The Fed does?

   

  

  

  

  

  

  

• Saudi Arabia Is An ISIS That "Made It": "The West Wages War On One, And Shakes Hands With The Other"

  One interesting thing about Washington’s strategy in the Middle East is the extent to which the US persists in its support of Saudi Arabia and steadfastly refuses to make meaningful strides towards reconciliation with Iran. 

  It’s not so much that anyone realistically expects Tehran to turn a corner on things like expanding press freedom or implementing judicial reform and everyone knows that regardless of how friendly Rouhani tries to be, the Ayatollah casts a long shadow. But at the risk of coming across as crass and/or short on nuance, Saudi Arabia still executes people in the streets with swords and promotes the same hardline ideology as that espoused by ISIS, al-Qaeda, and other Sunni extremists. Tehran and its Shiite crescent are the regional counterbalance to this and yet The House of Saud is welcomed with open arms at The White House, while Iran is forever branded a pariah state even as Riyadh and Doha funnel money to the very same militants who carry out attacks on Western targets. 

  With that in mind, we present the following Op-Ed by Kamel Daoud, a columnist for Quotidien d’Oran, and the author of “The Meursault Investigation.” 

  Originally published in The New York Times

  Saudi Arabia, an ISIS That Has Made It

  Black Daesh, white Daesh. The former slits throats, kills, stones, cuts off hands, destroys humanity’s common heritage and despises archaeology, women and non-Muslims. The latter is better dressed and neater but does the same things. The Islamic State; Saudi Arabia. In its struggle against terrorism, the West wages war on one, but shakes hands with the other. This is a mechanism of denial, and denial has a price: preserving the famous strategic alliance with Saudi Arabia at the risk of forgetting that the kingdom also relies on an alliance with a religious clergy that produces, legitimizes, spreads, preaches and defends Wahhabism, the ultra-puritanical form of Islam that Daesh feeds on.

  Wahhabism, a messianic radicalism that arose in the 18th century, hopes to restore a fantasized caliphate centered on a desert, a sacred book, and two holy sites, Mecca and Medina. Born in massacre and blood, it manifests itself in a surreal relationship with women, a prohibition against non-Muslims treading on sacred territory, and ferocious religious laws. That translates into an obsessive hatred of imagery and representation and therefore art, but also of the body, nakedness and freedom. Saudi Arabia is a Daesh that has made it.

  The West’s denial regarding Saudi Arabia is striking: It salutes the theocracy as its ally but pretends not to notice that it is the world’s chief ideological sponsor of Islamist culture. The younger generations of radicals in the so-called Arab world were not born jihadists. They were suckled in the bosom of Fatwa Valley, a kind of Islamist Vatican with a vast industry that produces theologians, religious laws, books, and aggressive editorial policies and media campaigns.

  One might counter: Isn’t Saudi Arabia itself a possible target of Daesh? Yes, but to focus on that would be to overlook the strength of the ties between the reigning family and the clergy that accounts for its stability — and also, increasingly, for its precariousness. The Saudi royals are caught in a perfect trap: Weakened by succession laws that encourage turnover, they cling to ancestral ties between king and preacher. The Saudi clergy produces Islamism, which both threatens the country and gives legitimacy to the regime.

  One has to live in the Muslim world to understand the immense transformative influence of religious television channels on society by accessing its weak links: households, women, rural areas. Islamist culture is widespread in many countries — Algeria, Morocco, Tunisia, Libya, Egypt, Mali, Mauritania. There are thousands of Islamist newspapers and clergies that impose a unitary vision of the world, tradition and clothing on the public space, on the wording of the government’s laws and on the rituals of a society they deem to be contaminated.

  It is worth reading certain Islamist newspapers to see their reactions to the attacks in Paris. The West is cast as a land of “infidels.” The attacks were the result of the onslaught against Islam. Muslims and Arabs have become the enemies of the secular and the Jews. The Palestinian question is invoked along with the rape of Iraq and the memory of colonial trauma, and packaged into a messianic discourse meant to seduce the masses. Such talk spreads in the social spaces below, while up above, political leaders send their condolences to France and denounce a crime against humanity. This totally schizophrenic situation parallels the West’s denial regarding Saudi Arabia.

  All of which leaves one skeptical of Western democracies’ thunderous declarations regarding the necessity of fighting terrorism. Their war can only be myopic, for it targets the effect rather than the cause. Since ISIS is first and foremost a culture, not a militia, how do you prevent future generations from turning to jihadism when the influence of Fatwa Valley and its clerics and its culture and its immense editorial industry remains intact?

  Is curing the disease therefore a simple matter? Hardly. Saudi Arabia remains an ally of the West in the many chess games playing out in the Middle East. It is preferred to Iran, that gray Daesh. And there’s the trap. Denial creates the illusion of equilibrium. Jihadism is denounced as the scourge of the century but no consideration is given to what created it or supports it. This may allow saving face, but not saving lives.

  Daesh has a mother: the invasion of Iraq. But it also has a father: Saudi Arabia and its religious-industrial complex. Until that point is understood, battles may be won, but the war will be lost. Jihadists will be killed, only to be reborn again in future generations and raised on the same books.

  The attacks in Paris have exposed this contradiction again, but as happened after 9/11, it risks being erased from our analyses and our consciences.

  

  

  

  

  

• Japan To Unleash Inflation… By Fabricating Data

  The great thing about statistics is that you can make them say pretty much whatever you want them to say. 

  Although good statisticians generally try to build in all kinds of safeguards to ensure that when they’re trying to draw conclusions based on data analysis, those conclusions are free of biases, that’s no good if you’re a government agency hell bent on conveying a very specific message to the general public (or to the market). 

  You see, goalseeked data is a key tool in the fight to “prove” that seven years of unconventional monetary policy hasn’t been for naught. After all, both Europe and Japan recently slipped back into deflation despite printing trillions in fiat money…

  

  

  …and earlier this week, Tokyo was forced to admit that despite all of the “Abenomics is working” rhetoric, the country has just entered its fifth recession in five years. 

  

  Clearly, some statistical “massaging” is in order. 

  China has long been the undisputed king of manipulated economic data and earlier this year, the BEA decided it was time to take a page out of the NBS playbook. With the help of Janet Yellen’s old friends at the San Francisco Fed and after an on air assist from Steve Liesman, the US government introduced the market to “residual seasonality” or, double adjusted GDP data.

  In simpler terms, after seeing it work so well for years in China, the US Department of Commerce’s Bureau of Economic Statistics simply replaced all of its Excel models with just one function. The following:

  

  And visually:

  

  The moral of the story is that sometimes, when it’s a choice between everyone realizing that the emperor has no clothes and just making up the numbers, you should just make up the numbers because if you don’t, well, people may start to wonder what the point of printing trillions in fiat currency was other than to inflate the assets of the rich and exacerbate the gap between the haves and the have nots. 

  Sure enough, it now looks like Japan is set to follow in the footsteps of the BEA because as Reuters reports, when you’re stuck in deflation, sometimes the best thing to do is simply omit all the things for which prices are falling from your calculations. Here’s more:

  The Bank of Japan will release a new set of price indicators this month that reconfigures the way price trends are measured as the central bank seeks to show the country’s below-target inflation rate is due to volatile items such as energy.

  
  

  Importantly, a new consumer price index (CPI) will exclude energy costs, which have been falling, but include the costs of items such as processed and imported foods, which have been rising.

  See there? Eliminating Japan’s dreaded “deflationary mindset” is as simple as only including those items in the CPI that are getting more expensive. Back to Reuters: 

  The BOJ currently uses the government’s core CPI, which excludes fresh food but includes energy costs, as its key price measurement in guiding monetary policy.

  
  

  With core CPI now slipping due largely to slumping oil prices, the central bank began internally calculating a new index that conveniently shows inflation exceeding 1 percent in the past few months. That index strips away volatile fresh food and energy costs, but includes processed and imported food prices, which are rising.

   

  The BOJ said on Friday it will start publishing this month the new CPI, as well as other indicators such as one showing the ratio of goods seeing prices rise versus those that are falling, on a regular basis each month.

  Obviously, this is completely ridiculous and speaks to just how desperate Japan truly is now that the time clock on failed state status is about to tick under two years. 

  Of course you can manipulate the numbers all you like, but you can’t manipulate the underlying reality and eventually, papering over the problem with artifically inflated data will cease to be a viable option once things get bad enough and Excel simply crashes under the sheer ridiculousness of what it’s being asked to do.

  

  

  

  

  

• Over-Reaching Government "Enables" Culture Warriors

  Submitted by Roger Barris via Acting-Man.com,

  Dispensing More “Free Stuff”

  I  have just finished reading an opinion entitled “A Birth-Control Morality Play Comes to Supreme Court” by Megan McArdle, the lonely voice of libertarianism over at Bloomberg View.

  The thrust of the article is to use philosophical hypotheticals to explain the violent reaction of some religious groups to the seemingly minor certifications required to escape the contraception mandate in the Affordable Care Act.  But the article makes another point, albeit in an oblique manner, which is more important.   In the “culture wars,” an overreaching government often fires the first shot.

   

  

  Cradle-to-grave nannying by the State has certain small drawbacks, but you’ll get used to them, serf.

   

  As McArdle says “My own intuition is that the Obama administration chose this fight….For one thing, contraception is an inexpensive routine purchase that is exactly the sort of thing that insurance shouldn’t cover (for the same reason your car insurance doesn’t cover routine service: you’d just end up pre-paying the service in the form of higher insurance premiums.)”  Here, McArdle is making the same point and in fact using the same example – great minds thinking alike, and all that – I used in my 2012 blog entitled “Contraceptive ‘Coverage.’”

  As I pointed out earlier, contraception fails any reasonable definition of an insurable risk, being a “random undesirable event, usually of significant consequences.”  Since having sex is neither random nor (typically) undesirable, nor are the costs of contraception that significant, it cannot be “insured.”

  Frankly, using the language of insurance in this context is a transparent attempt to hide the political belief that the government should be dispensing, or forcing others to dispense, more “free stuff” behind a smokescreen of science and health care.  But as the old saying goes, in war, cultural or otherwise, truth is the first casualty.

   

  

  But there is! Gimme!

   

  The Road to Serfdom

  In addition to being economic and linguistic nonsense, contraceptive “coverage” also perfectly illustrates why libertarians like McArdle and me do not want the government engaging in these kinds of activities.  It is a reason advanced at length by Friedrich von Hayek, the Nobel Prize winning economist and social thinker, in his book The Road to Serfdom.  This was written a long time ago, but in today’s environment of heated partisanship, the argument is well worth repeating.

   

  

  In the early 1940s, Hayek became disenchanted with the direction economics had taken after Keynes. As a result, he never penned the definitive book on capital theory he had planned as a follow-up to his initial effort, the “Pure Theory of Capital”. This is a pity, but on the other hand, Hayek then focused on political theory and questions of knowledge, bequeathing us a great many influential and interesting works, inter alia “The Road to Serfdom”, an eloquent attack on the tyranny of the socialist welfare state, social engineering and central planning.

   

  Hayek argues that it is relatively easy to reach societal consensus on the basic functions of government.  A legal system and the police to enforce it.  A national defense.  Roads and other services that can be provided most efficiently by a monopoly.  Even, more controversially (at least among libertarians), support for basic education and some form of social “safety net” for the small portion of society that is truly unable to help itself.  And a relatively modest level of taxation to support all of this.

  However, there is no reason to believe that this consensus can be maintained when government pushes well beyond these bounds.  And this is precisely what we are observing with the contraception mandate, the funding of Planned Parenthood, and many other facets of the “culture wars.”

  Now I personally have no problem with contraception and abortion, but I have to recognize that there are other people who do.  In a libertarian world, people with these differing opinions and values can live side by side in reasonable harmony, each side following the famous Voltairian advice to disapprove of what someone says (or does), but defend to the death his right to say (or do) it.

  But this harmony breaks down when one group or the other seeks to put the heavy finger of government on their side of the scales.  In addition to all the utilitarian arguments for why the government should avoid this type of micro-managed social engineering, we libertarians believe that this is an independent reason for setting a high bar for these practices.

  Those who advocate for policies such as contraception mandates and the funding of Planned Parenthood, which almost certainly don’t belong in the government sphere on purely economic grounds, should also be required to justify the “culture wars” they will inevitably unleash.

   

  

  Home from the war …

   

  This is particularly true when, as in all wars, “tit for tat” quickly becomes the standard.  The left shoves Planned Parenthood and a contraception mandate down the throat of the right.  Then the right feels doubly justified in trying to impose their views on abortion and “intelligent design.”  The end result is a reduced sphere of freedom for everyone, including us innocent bystanders caught in the crossfires of their battles.

  For Hayek, the attempt to expand the sphere of government action, with the inevitable discord it produced, was a major factor behind the rise of anti-democratic politics in Weimar Germany.

   

  

  July 1931: Thousands are queuing at the branch offices of the Post Office Bank in Berlin to withdraw their savings. The Weimar Republic had long ceased to be fun, and both communist and nationalist groups were actively working to bring about its downfall and replace it with a dictatorship. Hitler’s party won this particular contest two years after this photograph was made.

   

  It was a major factor in The Road to Serfdom that led, in the case of Germany, to fascism.  However, we don’t have to go this far.  We only have to look at the gridlock in Washington and the rise of anti-Washington political candidates to realize that the same dynamic is at work in modern-day America.  Although thankfully for now in a less virulent form.

  

  

  

  

  

• Average Annual Cost Of Specialty Drugs Now Exceeds US Median Household Income

  Earlier this month, we reported that Senators Susan Collins (R-Maine) and Claire McCaskill (D-Mo.), who together lead the Senate Special Committee on Aging, have opened a bipartisan investigation into pharmaceutical drug pricing. 

  In the crosshairs are Valeant, Turing, Retrophin, and Rodelis. 

  News of the investigation came after Turing CEO Martin Shkreli (who also founded Retrophin) decided to boost the price of a toxoplasmosis drug he bought by some 5000%. Valeant – also known for jacking up prices on acquired drugs – was thrust into the spotlight after a series of reports prompted scrutiny of the company’s apparently less-than-“limited” relationship with pharmacy Philidor.

  Whether Shkreli – who, you might have noticed, made a few moves this week in KaloBios that cost the E-trading Joe Campbells of the world a small fortune – realized it or not, his decision to raise the price of Daraprim from $13.50 to $750/pill may have been the tipping point for a market that has until now borne the rising cost of prescription drugs.

  “THEY SEE ME ROLLING…” pic.twitter.com/D1mDBEeZMq

  — Martin Shkreli (@MartinShkreli) September 16, 2015

  Of course patients with insurance don’t foot the whole bill, but insurance companies aren’t running charity operations so ultimately, higher costs are passed on to consumers in the form of steeper premiums. 

  It’s against this backdrop that AARP has released a new study which shows that incredibly, the average annual cost of specialty drugs now exceeds the median US household income. As The Washington Post notes, “the study of 115 specialty drugs found that a year’s worth of prescriptions for a single drug retailed at $53,384 per year, on average, in 2013 — more than the median U.S. household income, double the median income of Medicare beneficiaries, and more than three times as much as the average Social Security benefit in the same year.”

  From the report:

  • The average cost of therapy was more than $53,000 per drug per year for specialty prescription drugs at the end-payer (retail) level in 2013. — This average annual cost ($53,384) is more than double the average annual cost ($25,857) for a specialty drug in 2006, the year Medicare implemented Part D
  • The average annual cost of therapy for one specialty drug in 2013 ($53,384) was greater than the median US household income ($52,250), more than twice the median income for a Medicare beneficiary ($23,500), and over 40 times higher than the average Social Security retirement benefit ($1,294) over the same time period.

  

  The report also notes that “retail prices for widely used specialty prescription drugs increased substantially faster than general inflation in every year from 2006 to 2013.” For instance, AARP points out that “in 2013, retail prices for 115 specialty prescription drugs widely used by older Americans, including Medicare beneficiaries, increased by an average of 10.6 percent. In contrast, the general inflation rate was 1.5 percent over the same period.”

  

  Holly Campbell, a spokeswoman for PhRMA, the trade group that represents the pharmaceutical industry, isn’t buying it. Campbell “called the report misleading and inaccurate because it fails to take into account the discounts and rebates that are applied to drugs through the negotiations between drug manufacturers, insurers and pharmacy benefit companies,” WaPo notes, adding that “she also critiqued the study’s methodology and pointed out that specialty medicines are used by a small number of people and account for a small share of total healthcare spending.”

  But that’s about to change, and Campbell probably knows it. Here’s AARP again: 

  Until recently, relatively few patients used specialty drugs. However, the US population is steadily aging and older adults typically use more specialty medications than younger populations. In addition, specialty drugs are increasingly being used to treat common chronic conditions that affect millions of Americans. Drug manufacturers are also developing more specialty drugs, which now represent 42 percent of the late stage research and development pipeline. Overall, these trends indicate that a much larger share of the population will use specialty prescription drugs in the future

   

   Experts have projected that specialty drug spending will increase by more than 16 percent annually between 2015 and 2018, and will comprise more than 50 percent ($235 billion) of total drug spending by 2018.

  And here’s a look at price increases in 2013 for widely used specialty drugs by company:

   

  Of course the industry will continue to insist that prices are generally indicative of how much has been invested during development, but what seems clear from the above and from stepped up lawmaker scrutiny, is that in many cases patients are simply being gouged which leads directly to, as AARP puts it, “increased health care premiums, deductibles, and other forms of cost sharing.” On top of that, “prescription drug price growth also increases spending for taxpayer-funded health programs like Medicare and Medicaid, which will eventually affect all Americans in the form of higher taxes.”

  Yes, “increased health care premiums, deductibles, and higher taxes,” but that’s fine because we’re all happy to subsidize the luxurious lifestyles of the world’s Martin Shkrelis, right?

  

  Meanwhile, the Manhattan U.S. Attorney’s office announced a $390 million civil fraud settlement with Novartis on Friday and just to drive home how underhanded this industry has truly become, we’ll leave you with a few passages from the press release announcing the settlement: 

  Preet Bharara, the United States Attorney for the Southern District of New York,announced a $390 million settlement against NOVARTIS Pharmaceuticals Corp. (“NOVARTIS”) in a civil fraud lawsuit based on claims that NOVARTIS gave kickbacks to specialty pharmacies in return for recommending two of its drugs, Exjade and Myfortic. 

   

  Starting in early 2007, NOVARTIS saw Exjade sales were far below internal targets because of low refill rates due, in significant part, to side effects that were more frequent and more severe than initially expected.  To increase Exjade refills and hit its sales targets, NOVARTIS leveraged its control over patient referrals to pressure BioScrip, Accredo, and US Bioservices to hire or assign nurses to call Exjade patients and, under the guise of education or clinical counseling, encourage patients to order more refills. 

   

  More specifically, as the Government contended, NOVARTIS knew that, when the pharmacies called patients, they emphasized the benefits of taking Exjade – for example, by telling patients that not taking Exjade would cause damage to their organs or lead to infertility – while understating the serious, potentially life-threatening risks of taking Exjade – for example, by not mentioning potential side effects like kidney and liver failure.  Indeed, NOVARTIS encouraged the pharmacies to promote Exjade refills in these ways even though FDA had characterized claims about Exjade preventing organ damage as “unsubstantiated.”

   

  In addition, the Government contended that, to incentivize the pharmacies to intensify their efforts to promote Exjade refills, NOVARTIS devised a scheme under which it allocated more patient referrals and gave higher rebates to pharmacies that obtained higher refill rates.  Indeed, NOVARTIS went forward with this scheme – which operated from 2008 to 2012 – even though it knew that the scheme presented risks of violating the Anti-Kickback Statute.

  Incidentally, WSJ reported this evening that Turing is now set to generously cut the price of Daraprim in half for hospitals, which we suppose means it will “only” cost $325 now as opposed to $13.50 before.

  *  *  *

  Full AARP report

  Price Watch Trends in Retail Prices of Specialty Prescription Drugs 2006 to 2013 Nov

  

  

  

  

• Guest Post: The End Of Obamaworld

  Submitted by Patrick Buchanan via Buchanan.org,

  In denouncing Republicans as “scared of widows and orphans,” and castigating those who prefer Christian refugees to Muslims coming to America, Barack Obama has come off as petulant and unpresidential.

  Clearly, he is upset. And with good reason.

  He grossly, transparently underestimated the ability of ISIS, the “JV” team, to strike outside the caliphate into the heart of the West, and has egg all over his face. More critically, the liberal world order he has been preaching and predicting is receding before our eyes.

  Suddenly, his rhetoric is discordantly out of touch with reality. And, for his time on the global stage, the phrase “failed president” comes to mind.

  What happened in Paris, said President Obama, “was an attack on all of humanity and the universal values that we share.”

  And just what might those “universal values” be?

  At a soccer game between Turkey and Greece in Istanbul, Turks booed during the moment of silence for the Paris dead and chanted “Allahu Akbar.” Among 1.6 billion Muslims, hundreds of millions do not share our values regarding women’s rights, abortion, homosexuality, free speech, or the equality of all religious faiths.

  Set aside the fanatics of ISIS. Does Saudi Arabia share Obama’s views and values regarding sexual freedom and the equality of Christianity, Judaism and Islam? Is anything like the First Amendment operative across the Sunni or Shiite world, or in China?

  In their belief in the innate superiority of their Islamic faith and the culture and civilization it created, Muslims have more in common with our confident Christian ancestors who conquered them than with gauzy global egalitarians like Barack Obama.

  “Liberté, egalité, fraternité” the values of secular France, are no more shared by the Islamic world than is France’s affection for Charlie Hebdo.

  Across both Europe and the United States, the lurch away from liberalism, on immigration, borders and security, fairly astonishes.

  But again, understandably so.

  Many of the Muslim immigrants in Britain, France and Germany have never assimilated. Within these countries are huge enclaves of the alienated and their militant offspring.

  Consider the Belgium capital of Brussels. Belgium’s home affairs minister Jan Jambon said his government does not “have control of the situation in Molenbeek.”

  Brice De Ruyver, a security adviser to a former Belgian prime minister says, “We don’t officially have no-go zones in Brussels, but in reality, there are, and they are in Molenbeek.”

  According to The Wall Street Journal, after the Paris attacks, “French security forces … conducted hundreds of antiterror raids and placed more than 100 suspects under arrest. … France has some 11,500 names on government watch lists.”

  How many of those 11,500 are of Arab descent or the Muslim faith?

  The nations of the EU are beginning to look again at their borders, and who is crossing them, who is coming in, and who is already there.

  And the world is reawakening to truths long suppressed. Race and religion matter. To some they are life-and-death matters. Not all creeds, cultures and tribes are equally or easily assimilated into a Western nation. And First World nations have a right to preserve their own unique identity and character.

  When Obama says that to prefer Christian to Muslim refugees is “un-American,” he is saying that all the U.S. immigration laws enacted before 1965 were un-American. And, so, too, were presidents like Calvin Coolidge who signed laws that virtually restricted immigration to Europeans.

  Barack Obama may be our president, but who is this man of the left to dictate to us what is “un-American”?

  Were presidents Harry Truman and Woodrow Wilson, who called ours a “Christian nation,” un-American? Did the Supreme Court uphold our “universal values” with Roe v. Wade in 1973 and the Obergefell decision on same-sex marriage last June?

  The race issue, too, has returned to divide us.

  Half a century after Selma bridge, we have “Black Lives Matter!” on college campuses claiming that universities like Missouri, Princeton, Yale and Dartmouth are riddled with institutional racism.

  Attention must be paid, and reparations made, by white America. And a new generation of academic appeasers advances to grovel and ask how the university might make amends.

  In Europe, tribalism and nationalism are on the march. Peoples and nations wish to preserve who they are. Some have begun to establish checkpoints and ignore the Schengen Agreement mandating open borders. Eastern Europeans have had all the diversity they can stand.

  With Syrian passports missing, with ISIS besieged in its Syria-Iraq laager and urging suicide attacks in New York and Washington, we may be witness to more terrorist massacres and murders in the States.

  The time may be at hand for a moratorium on all immigration, and a rewriting of the immigration laws to reflect the views and values of Middle Americans, rather than those of a morally arrogant multicultural elite.

  Obamaworld is gone. We live again in an us-versus-them country in an us-versus-them world. And we shall likely never know another.

  

  

  

  

  

• Stocks Soar Most In 13 Months After Worst European Terrorist Attack In Over A Decade

  Quite a week eh? "I don't care… I want to trade size and be a big swinging dick… I'm gonna make it rain!!"

   

  A quick summary of the week…

  • Paris Population Down 130 people  – worst European terrorist attack since Madrid (190 people) in 2004
  • S&P Up 3.3% – best week since Bullard Bounce Oct 2014
  • EM Stocks Up 4.5% – best week in 2 months
  • Gold Down 0.4% – 5th weekly drop in a row, lowest since Oct 09
  • Silver Down 0.7% – 5th weekly drop in a row, lowest since July 09
  • Crude Down 0.5% – 5th drop in last 6 weeks, lowest since August
  • Copper Down 5.3% – worst week sicne Dec 2014, down 6 weeks in a row to lowest since April 2009

  *  *  *

  Let's start with stocks… From worst week of the year last week to best week since October 2014's Bullard Bounce…

  

   

  Futures show the real exuberance though… Sunday night's open marked the low after 100-plus people had been killed, and Paris was under martial law…Nasdaq +5% off Sunday night lows!!

  

   

  Which roundtripped stocks perfectly to the October Payrolls print…

  

   

  *  *  *

  The Devil's in the Divergences…

  Bonds and stocks…

  

   

  Credit and stocks…

  

  Trannies and oil…

  

   

  Credit and equity risk… (note the roll)

  

   

  Credit (cash) and equity risk…

  

   

  Stocks and the yield curve…

  

   

  And finally FX carry and stocks…

  

   

  A few individual stocks mattered today…

  Chipotle poisoned some folks…

  

   

  Hope is high that Valeant is fixed (thanks to a Citi debt upgrade)

  

   

  And then there's Netflix!!! Up almost 20% this week!!!! An $8.6bn rise in market cap in one week… the most ever.

  

   

  Tresury yields were extremely mixed – following FOMC Minutes – with 2Y up 8bps and 30Y -3bps on the week… 2Y highest weekly close since April 2010, 30Y yields lower for 2 straight weeks first time since August…

  

   

  For the biggest flattening in 4 months – 2s30s fell 12bps this week – almost to 7 month flats…

  

   

  Credit markets have now fallen 14 days in a row…

  

   

  The USDollar gained on the week – Draghi's whatever it takes today trumping odd post-FOMC weakness yesterday in the USD – AUD shot up this week…

  

   

  Commodities were all lower this week – as The USD gained – but copper was really ugly…

  

   

  Copper Carnage…

  

   

   

  Charts: Bloomberg

  Bonus Chart: Retail Deja Vu…

  

   

  Bonus Bonus Chart: Ponzinormous…

  

  

  

  

  

• Weekend Reading: Differing Diatribes

  Submitted by Lance Roberts via STA Wealth Management,

  As expected, the market rallied from short-term support levels as the year-end rush to chase returns has started in full swing. To wit:

  "With the markets NOW oversold, it will be critically important that support at 2020 is not broken. The next critical level of support is the short-term moving average (dashed blue line) at 2010, and then 1990 at previous support levels from early this year. It will be important for the market to hold these current levels of support without violating it over the next few trading days to set up a more tradeable short-term rally.

   

  As shown in the chart below, the markets did not disappoint. Even with Japan slipping into its fifth recession in the last 5-years, despite massive infusions of capital, and the devastating attacks in Paris over the weekend, the market rallied strongly off of support as expected."

  

  "As we progress through the last two months of the year, historical tendencies suggest a bias to the upside. This is particularly the case given the weakness this past summer which has left many mutual and hedge funds trailing their benchmarks. The need to play "catch-up" will likely create a push into larger capitalization stocks as portfolios are "window dressed" for year-end reporting.

   

  This traditional "Santa Claus" rally, however, does not guarantee the resumption of the ongoing "bull market" into 2016."

  Importantly, while the "bias" of the market is to the upside, primarily due to the psychological momentum that "stocks are the only game in town," the mounting risks are clearly evident. From economic to earnings-related weakness, the "bullish underpinnings" are slowly being chipped away.

  While the Federal Reserve (Fed)'s most recent statement acknowledged continuing concerns around international developments, it left the door open to a December rate hike. With a renewed prospect for monetary policy divergence between the Fed and other central banks is once again pushing the dollar higher.

  Should the trend continue, a stronger dollar would represent a headwind for U.S. inflation, precious metals, and U.S. earnings growth, as discussed yesterday. Furthermore, a stronger dollar combined with a tightening of monetary policy will further impede earnings growth. The problem is that investors are overlooking this fact to their own peril

  But, that is just my opinion. This weekend's reading list is a compilation of interesting diatribes, both bullish and bearish, on the markets, Fed and the economy. 

  ---

  ON THE FED

  Don't Fear Rate Hikes Or Rising Dollar by Anatole Kaletsky via Project Syndicate

  “The US Federal Reserve is almost certain to start raising interest rates when the policy-setting Federal Open Markets Committee next meets, on December 16.

   

  Under these conditions, the direct economic effects of the Fed's move should be minimal. It is hard to imagine many businesses, consumers, or homeowners changing their behavior because of a quarter-point change in short-term interest rates, especially if long-term rates hardly move."

  Easy In, Hard Out  David Merkel via Aleph Blog 

  "Ugh. The conclusions of my last two pieces were nuanced. This one is not. My main point is this: even with the great powers that a central bank has, the next tightening cycle has ample reason for large negative surprises, leading to a premature end of the tightening cycle, and more muddling thereafter, or possibly, some scenario that the Treasury and Fed can't control. Be ready, and take some risk off the table."

  Did Goldman Sachs Find The Smoking Gun by Tyler Durden via ZeroHedge

  "The staff attributed the lower long-run equilibrium rate to a slower rate of potential growth, a consequence of slower population growth and weak productivity growth. These comments might foreshadow another reduction in the median "longer-run" funds rate projection in the Summary of Economic Projections (SEP) in December.

   

  Participants also noted that the lower long-run equilibrium rate implies that the near-zero effective lower bound could become binding more frequently. As a result, "several" participants indicated that it would be "prudent" to consider "options for providing additional monetary policy accommodation" should the economic recovery falter."

  Gundlach – The Psychology Of A Rate Hike by Robert Huebscher via Advisor Perspectives

  Gundlach – Fed Hike "No Go" A Real Possibility by Jennifer Ablan via Reuters

  "'Certainly No-Go more likely than most people think. These markets are falling apart.' Los Angeles-based DoubleLine oversees $80 billion in assets under management.

   

  Gundlach cited a number of asset classes that are signaling deteriorating conditions: The S&P Leveraged Loan Index, which is at a four-year low, the SPDR Barclays High Yield Bond Exchange-Traded Fund "very near a four-year low" and the CRB Commodity Index at a 13-year low. 'You also have the Eurozone doubling down on stimulus. Fed raising rates? Really?'"

   

  

  (Chart courtesy of ZeroHedge)

   

  ON THE MARKETS

  Something Strange Is Happening With Rates by Daniel Kruger, Liz McCormick via Bloomberg

   

  Market Timing Is Back In The Hunt by Cliff Asness via Institutional Investor

  "Market timing, considered by many an investing sin, can be a virtue if employed modestly, using a combination of contrarian and trend-following strategies."

  A Pair Of Popular Stock Market Analogs? by Jesse Felder via The Felder Report

  An Earnings Inflection Point by Sam Ro via Business Insider

  "In a new note to clients, Morgan Stanley's Andrew Sheets writes that the trend in earnings growth is a 'key inflection' that he is watching.

   

  'Are earnings rolling over? We don't think so. Earnings growth has been weak in the US, EM and Europe. Yet on our forecasts, 3Q15 should be the nadir in EPS trends, as the drag from the commodity sector subsides.'"

  

  Without Buy Backs There Has Been NO EPS Growth by Bob Bryan via Business Insider

  The Stock Market Enters Its Final Bull-Market Stage by Simon Maierhofer via MarketWatch

   

  ON THE ECONOMY

  Models, Hemlines & Hamburgers As Economic Indicators by Sue Chang via MarketWatch

  “Since ancient times when Babylonians monitored monthly commodities prices as an economic barometer, mankind has sought to divine the health of the economy from an array of sources. Today, swimsuit models, hemlines, and even Twitter all have something to say about the economy — if we know what to look for.

   

  Some, like the coupon redemption rate, are intuitive. Others are more entertainment than economics: During recessions, for instance, Playboy centerfolds tend to be heavier, taller and older. And something as mundane as a new pair of underwear — particularly if you are a man — could indicate that good times are here."

  If The Economy Is Fine, Why Are So Many Imploding by Michael Snyder via Economic Collapse Blog

  Is The 1% Rolling Over? by John Rubino via DollarCollapse.com

   

  VIDEOS

  The Total Cluelessness Of Student Protesters via Neil Cavuto via Fox News

  EY: Global Economy Uncertain, Fragile & Fragmented via CNBC

   

  ---

  OTHER READING

  • 2016 Outlook & Forecast by Fortune Editors via Fortune
  • Crowdfunding Or Crowdphishing by Robert Shiller via Project Syndicate
  • The Decline Of The West Revisited by Robert Skidelsky via Project Syndicate
  • 15 Books That Will Make Great Xmas Gifts by Fortune Editors via Fortune
  • Impressive Markets Aren't More Unglued by Joe Calhoun via Alhambra Partners
  • MollyCoddled by Tim Knight via Slope of Hope
  • 2015 Tax Year Tax Dodges by William Baldwin via Forbes
  • Expecting A 40-55% Correction by John Hussman via Hussman Funds

  ---

  “If you have large cap, mid cap, and small cap, and the market declines – you are going to have less cap.” – Martin Traux 

  Have a great weekend.

  

  

  

  

  

• Artist's Impression Of Obama's Syrian Resettlement Plan

  “Refugee Roulette…”

   

  

   

  Source: Investors.com
  

  

  

  

  

  

• Is This How The Next Global Financial Meltdown Will Unfold?

  Submitted by Charles Hugh-Smith of OfTwoMinds blog,

  In effect, a currency crisis is simply the abrupt revaluation of the currency to reflect new realities.

  I have long maintained that the structural imbalances of debt and risk that triggered the Global Financial Meltdown of 2008-2009 have effectively been transferred to the foreign exchange (FX) markets.

  This creates a problem for the central banks that have orchestrated the "recovery" by goosing asset bubbles in stocks, real estate and bonds: unlike these markets, the currency-FX market is too big for even the Federal Reserve to manipulate for long.

  The FX market trades roughly the entire Fed balance sheet of $4.5 trillion every day or two.

  Currencies are in the midst of multi-year revaluations that will destabilize the tottering towers of debt, leverage and risk that have propped up global growth since 2009.

  Though the relative value of currencies is discovered in the global FX market, there are four fundamental factors that influence the value of any currency:

  1. Capital flows into and out of the currency (and the nation that issues the currency).

  2. Perceived risk, specifically, will this currency preserve my global purchasing power (i.e. capital) or erode it?

  3. The yield or interest rate paid on bonds denominated in this currency.

  4. The scarcity or over-abundance of the currency.

  If we dig even deeper, we find that currencies reflect the income streams and assets of the issuing nation. Consider the currency of an oil exporting nation that has seen both its income from selling oil and the underlying value of its oil in the ground fall by more than 50%.

  Why shouldn't that nation's currency decline in parallel with the erosion of income and asset valuation? As a nation's income and asset base decline, there is less national income to pay interest on sovereign bonds, less private income to tax, and a reduced asset base for additional borrowing.

  This is especially true if the nation issued debt and/or currency profligately in good times. Recall that debt and currency are one in the same: if someone trades euros for a U.S. Treasury bond, they don't just own a bit of sovereign debt–they own the currency of the nation that issued the bond (in this case, the U.S. dollar).

  This is equally true of corporate bonds–all the debt is denominated in a specific currency, and owners of the bonds are not just betting that the interest will be paid and the bond redeemed at maturity, but that the underlying currency will not lose much of its global purchasing power.

  One proxy for the absolute destruction of commodity-based income streams and assets is the CRB Index. No wonder emerging economies that depend heavily on the export of commodities are cratering, along with the currencies they issue.

  

  Once participants become aware of the rising risk of holding a depreciating currency, the trickle out of a currency quickly becomes a torrent of fleeing capital.

  Once the perceived risk switches from risk-on to risk-off, the only way to prop up the currency is to raise the interest rates that bonds denominated in that currency yield.

  But raising interest rates has a brutally negative effect on the domestic economy, as higher rates choke off domestic lending, which then pushes the economy into recession.

  It's a no-win double bind, though, for doing nothing and letting one's currency implode drains the nation of capital and makes imports unaffordable. That matters when the imports are energy and/or food.

  When those become scarce and unaffordable, social disorder soon follows.

  The currency that has benefited from this reversal of capital flows is the U.S. dollar (USD):

  

  Debt/currency crises tend to trigger defaults and weakness in other currencies. We have a recent example of such a crisis: the Asian Contagion of 1997-98:

  

  Though that crisis was linked to Thailand's failed bid to support its currency's peg to the U.S. dollar, the current situation is actually far more fragile as the destruction of commodity income and valuation raises the risk of sovereign defaults, corporate bond defaults, and capital flight that deepens already severe emerging-market recessions.

  The bone-dry half-dead forest awaiting an igniting lightning strike is the global mountain of debt–debt which is no longer supported by current valuations of commodities and risk.

  In effect, a currency crisis is simply the abrupt revaluation of the currency to reflect new realities. That revaluation then raises the risk premium on debt denominated in that currency or owed in other currencies.

  As emerging market currencies decline, the income streams needed to service all the debt denominated in U.S. dollars declines, a self-reinforcing dynamic: as income and valuations fall, capital flees, pushing the relative value of the currency down even more, which further raises the risk premium that then triggers even more capital flight.

  The sums in play are so staggering (an estimated $11 trillion in emerging market debts denominated in other currencies) that even the Fed won't be able to stop the meltdown.