• Taxation As A Severe Insult

  Submitted by Tibor Machan via Acting-Man.com,

  Who is Best Qualified to Decide how How Your Wealth Should be Used?

  I have noted before that my fellow citizens and I are the best wealth redistributors one can find. We know quite well, with only rare exceptions, where the wealth we obtained should go – how we should spend or invest or save our earnings, etc.

  But vast numbers of political thinkers and players disagree.  They hold that our resources must be taken from us and they, not we, should be the ones who decide what to do with them.  Why?  Who are these folks to butt in and remove us from the driver’s seat and place themselves and their chosen few in there instead?

   

  

  Spooner had the right idea. As Joseph Schumpeter remarks in Capitalism, Socialism and Democracy: “… the state has been living on a revenue which was being produced in the private sphere for private purposes and had to be deflected from these purposes by political force. The theory which construes taxes on the analogy of club dues or of the purchase of the services of, say, a doctor only proves how far removed this part of the social sciences is from scientific habits of mind.”

  Consider how insulting it is! Why is the president of the country better qualified than we are to determine where our resources will do the most good?  Why are members of Congress or local politicians? Who on earth do these folks think they are?

  In the past it used to be thought that certain folks in society had special qualifications to allocate the wealth that has been produced as well as to make most of the important decisions in need of being made.  Kings, lords, barons, and such knew better than the paeans – you and I – as to what our labors ought to fund.  Ergo, taxation and other takings!

   

  

  Government – enforced compassion

   

  Don’t you see how nasty this is, how it impugns our capabilities to be prudent, careful, sensible, wise and so forth?

  Advocates of government wealth redistribution blatantly insult the rest of us by denying us the good sense it takes to spend our wealth.  Wealth redistribution means exactly that.  Somehow we need to be coerced – or nudged or intimidated – into doing what these bullies have decided needs to be supported with our wealth.

  Why?  Who are these people?

  In the past there was an excuse – by sheer birth certain folks, coming from certain families or classes or whatever – had the qualification to manage our wealth and indeed us as well.

   

  

  That has certainly happened – from the moment the State has come into being (i.e., shortly after the violent conquest phase).

   

  But that is sheer prejudice!  They really have no more clue than you or I about where to spend the funds we have come by!  Indeed, as the tragedy of the commons demonstrates, the more folks are involved in spreading the wealth, the less well the wealth is likely to be spent. Most will be wasted instead of well spent, even when the intention is to do the right thing with it.

  We ought to regard wealth redistribution and it’s source, taxation, not only forced taking but a serious insult toward the citizenry and reject it wherever possible.

   

  

  A well-worn ritual…

  *  *  *

  Addendum: Bernie Sanders Has Already Won

  Senator Bernie Sanders is aiming to become the democratic party’s nominee for the presidency of the United States of America.  He considers himself a democratic socialist.  But his mission is actually superfluous.

  In fact, Senator Sanders has already succeeded.  America has for a long time been governed according to the principles of democratic socialism, as have many other Western countries.

  This became clear to me as I was attempting to “go solar”. In order to install solar power at my home in Silverado, CA, I needed to submit the plan to the county planning commission.  Their approval was necessary to go forward with the plan.

   

  

  Solar permit application process for businesses – click to enlarge.

   

  Any other substantial alteration of one’s property — the addition of a garage or new section — must be approved by such commissions. Indeed, throughout the country to undertake an installation such as I was contemplating, proprietors must obtain permission from various commissions, all of which are supposed to have been established by democratic means!

  As I see it, this means that the country is being governed by the principles of democratic socialism.

   

  

  There are now even “studies on the solar permitting process”, as absurd as this seems.

  

  

  

  

  

• "On The Cusp Of A Staggering Default Wave": Energy Intelligence Issues Apocalyptic Warning For The Energy Sector

  The Energy Intelligence news and analysis creator and aggregator is not one to haphazradly throw around hyperbolic claims and forecasts. So when it gets downright apocalyptic, as it did this week in a report titled “Is Debt Bomb About to Blow Up US Shale?”, people listen… and if they are still long energy junk bonds, they panic.

  The summary:

  “The US E&P sector could be on the cusp of massive defaults and bankruptcies so staggering they pose a serious threat to the US economy. Without higher oil and gas prices — which few experts foresee in the near future — an over-leveraged, under-hedged US E&P industry faces a truly grim 2016. How bad could things get?”

  The full report by Paul Merolli, a senior editor and correspondent at Energy Intelligence:

  Debt Bomb Ticking for US Shale

  The US E&P sector could be on the cusp of massive defaults and bankruptcies so staggering they pose a serious threat to the US economy. Without higher oil and gas prices — which few experts foresee in the near future — an over-leveraged, under-hedged US E&P industry faces a truly grim 2016. How bad could things get and when? It increasingly looks like a number of the weakest companies will run out of financial stamina in the first half of next year, and with every dollar of income going to service debt at many heavily leveraged independents, there are waves of others that also face serious trouble if the lower-for-longer oil price scenario extends further.

  “I could see a wave of defaults and bankruptcies on the scale of the telecoms, which triggered the 2001 recession,” Timothy Smith, president of consultancy Petro Lucrum, told a Platts energy conference in Houston last week. Much has been made about the resiliency of US oil production in the face of low prices, but the truth is that many producers are maximizing their output — even unprofitable volumes — because they need the cash flow to service their debt (related). “As an industry, we’re at the point where every dollar of free cash flow now goes to paying back debt,” Angle Capital’s Steve Ilkay told the same conference. Ilkay, who advises North American producers on asset management, said during the boom years of 2012-14 about 55% of the sector’s free cash flow, which is calculated by subtracting capital expenditures from operating cash flow, was allocated toward debt repayment.

  With West Texas Intermediate (WTI) stuck below $50 per barrel since August — and closer to $40 recently — the industry has responded with deeper cuts to capex and a greater focus on efficiency (EIF Nov.4’15). However, experts say this won’t be enough to avoid a bloody reckoning with persistent low oil and gas prices, as the sector grapples with some $200 billion-plus in high-yield debt, which it absorbed to finance the shale oil boom. Credit quality has been steadily deteriorating since June 2014, when WTI peaked at $108/bbl. Standard and Poor’s says there have been 19 defaults so far in 2015 across the US oil and gas industry, while another 15 companies have filed for bankruptcy. Besides those that have missed interest or principal payments, the default category also includes companies that have entered into “distressed exchanges” with their creditors, including Halcon, SandRidge, Midstates, Goodrich, Warren, Exco, Venoco and Energy XXI (EIF Jul.8’15).

  Of the 153 oil and gas companies that S&P applies credit ratings to, roughly two-thirds are E&P firms. Among these E&Ps, 77% now have high-yield or “junk” ratings of BB+ or lower. 63% are rated B+ or worse, and 31% — or 51 companies — are rated below B-. What does this all mean in layman’s terms? “Quite frankly it’s a lot of gloom and doom,” says Thomas Watters, managing director of S&P’s oil and gas ratings. “I lose sleep over what could unfold.” He says companies with ratings of B- or below are “on life support,” while those further down the ratings scale at C+ or lower are “maybe looking at a year, year-and-a-half before they default or file for bankruptcy.” While capital markets were still open to struggling E&P firms in the first half of the year, they are closing fast as investors accept a “lower-for-longer” oil price scenario. High-yield E&P firms raised $29 billion from 44 issuances of public debt in 2014. So far in 2015, $13 billion in junk-rated debt been raised from 23 issuances — but only two have come after June (EIF Jul.29’15).

  After posting negative free cash flow of $24 billion in 2015, capex cuts and efficiency measures should help the industry post positive free cash flow of $8 billion in 2016, S&P reckons. However, the high-yield E&Ps are expected to see negative free cash flow of $10 billion, so the group that can least afford a cash crunch will get just that. Better hedging could have helped, but data from IHS Energy shows a woefully under-hedged E&P sector in 2016. Small producers have 27% of their oil production hedged at an average price of $77/bbl; midsized firms have 26% hedged at $69; and large producers have just 4% hedged at $63. That is much less protection than E&P firms had in place for 2015 (EIF Aug.19’15).

  Small and midsized producers, which rely heavily on revolving lines of credit with banks, have not yet seen these liquidity lifelines cut off. Some analysts were shocked after banks reduced lines to credit to E&Ps by just 10% on average during October redetermination negotiations (EIF Oct.14’15). Banks appear to be putting off the inevitable in hopes of a price rebound. Many have been using price forecasts above the average 12-month forward strip — suggesting the pain could extend to energy lenders if markets don’t recover as they expect. Heading into October redeterminations, Macquerie Tristone’s energy lending survey showed banks using an average 2016 WTI price outlook of $54. That has since dropped to around $47 this quarter — closer to the $46 indicated by the Nymex strip.

  Yet another source of concern for E&Ps and their lenders are price-related impairments and asset write-downs (EIF Nov.11’15). Year-to-date, there has been $70.1 billion in asset write-downs in 2015, approaching the $94.3 billion total for the previous 10-year period of 2005-14, according to Stuart Glickman, head of S&P Capital’s oil equities research. And he expects even more write-downs and impairments to emerge at year-end. “Companies are putting this off for a long as they can. You don’t want to be negotiating in capital markets with a weakened hand,” says Glickman. This will be a problem up and down the E&P sector, not just for the little guys. Chesapeake Energy, one of the largest US independent producers, shocked earlier this month by indicating a $13 billion reduction in the so-called PV-10, or “present value,” of its oil and gas reserves to $7 billion. Had Chesapeake used 12-month futures strip prices — instead of Securities and Exchange Commission-mandated trailing 12-month prices for PV values — the value would’ve fallen to $4 billion. “That’s staggering, just alarming to me,” said Watters, noting that E&P firms’ borrowing capacity is contingent on such measures (EIF Jul.22’15).

  Many believe all of these issues will come to a head in first-half 2016, as the effect of fewer hedges is felt and banks once again reassess credit lines in April. Pitifully low natural gas prices could also play a big factor, especially if the US experiences a mild winter. The confluence of these factors could be the catalyst that finally spurs a long-awaited tidal wave of mergers and acquisitions throughout the sector (EIF Oct.28’15). News of rampant defaults, bankruptcies and write-downs, combined with closed capital markets, might be enough to lower upstream asset valuations to the point where buyers and sellers can more easily agree to deals. Watters describes an “M&A playland” for strong companies with investment-grade credit ratings, noting that the six largest integrated majors together hold a war chest of some $500 billion. Smith says it could be a great opportunity for majors to improve their positions in US shale, where they were famously late in the game. “Some of the best shale acreage is held by companies with poor balance sheets. It seems like a natural fit,” he says.

  But there’s also some $100 billion in private equity sitting on the sidelines, meaning majors and large independents may face stiff competition (EIF Oct.28’15). Anadarko has openly complained about being outbid for assets by management teams backed by private equity. “Does that mean we’re overpaying? No,” insists one private equity executive. “It means we’re willing to pay a bit more because we think our guys can run the assets better than some larger outfits, who can struggle with cost structures.”

  

  

  

  

  

• And The 'Fakest' Country In The World Is…

  If America is so ‘exceptional’ why is it the world’s leader in needing to ‘change’…

  When it comes to plastic surgery, the United States is still the country with the most procedures worldwide.

  
  You will find more statistics at Statista

  In 2014, there were a total of 4.1 million procedures, 20 percent of the world’s total, according to data compiled by The International Society of Aesthetic Plastic Surgery (ISAPS).

  Business is also booming in Brazil and Japan where there were 2.1 and 1.3 million procedures last year respectively.

   

  Source: The Burning Platform

  

  

  

  

  

• Mark Dice Confronts America's Zombie Shoppers

  Unlike on previous occasions when Mark Dice either mocks the stupidity of Americans for having zero clue about the true worth of precious metals, or mocks the stupidity of Americans for having absolutely no understanding of politics (yet supporting Hillary Clinton among others), in his latest clip, the notorious lampooner takes a stroll at 4:30 pm on Thanksgiving night in front of the Best Buy in San Diego where he finds a massive line.

  What follows is Mark, armed with just a bullhorn, taking on several hundred consumption zombies waiting in line at Best Buy, armed with just their overdrawn credit cards, or as he calls them “enemies of America. A symptom of this failed country. When this country is bankrupt, and it will be soon, you look in the mirror and that’s who you blame.”

  Number of zombies impacted by his preaching? Zero. Why, because there is a TV for $99.95 to be bought proving the hedonically-adjusted deflationary wave sweeping the world is “all too real” and only much more QE and far more negative rates, making the merely billionaires into trillionaires, can save the global economy.

  

  

  

  

  

• The Videos Are In: US Shoppers Go Wild, Beat Each Other Up To Celebrate Black Friday Sales

  It’s Black Friday which means the US is flooded with videos of its favorite pastime: mauls in the malls, as vicious brawls and fights break out among total strangers across across America’s countless retail outlets.

  The first videos trickle in:

   

  And yet, this year there may be a shift.

  Moments ago IBM Watson Trend released the latest Thanksgiving online sales which rose 26% from 2014, with mobile traffic reaching nearly 60% of all online traffic, an increase of 14.8% over 2014. According to IBM, consumers spent $123.45/order with 40% of all online sales came from mobile devices, an increase of 24% over Thanksgiving 2014.

  Some other notable findings:

  • Smartphones accounted for 47% of all Thanksgiving online traffic vs tablets at 13.7%; smartphones also surpassed tablets in sales, driving 24% of online sales vs tablets at 16%
  • IBM Watson predicts Black Friday online sales up more than 14.5% y/y
  • Consumers indicate top products incl. Apple Watch, Samsung, Sony, LG TVs, Microsoft Surface Pro 4

  And while this is good news for the Amazons of the world as consumers continue to migrate to online shopping platforms, this is bad news for traditional brick-and-mortar retailers for whom today was supposed to be the one day when sales are solidly in the “black.”

  As Bloomberg summarizes, the online rush comes as Wal-Mart Stores Inc., Macy’s Inc. and other chains roll out their Black Friday specials, aiming to get more shoppers into stores. About 135.8 million Americans are expected to shop in stores or online over the four-day weekend, according to the National Retail Federation, the largest U.S. retail trade organization. The amount they’ve spent has declined over the past two years, dropping 11 percent to $50.9 billion in 2014.

  Though consumers are benefiting from lower fuel prices and unemployment rates, retailers have their challenges. Mall traffic is in the midst of a long-term slowdown, and shoppers are spending more on experiences and less on stuff. More recently, a warm autumn has curtailed sales of seasonal merchandise, leaving stores with excess inventory. All those factors point to a need for heavy discounting — good for consumers, but not so great for retailers’ profits.

   

  “From the perspective of the amount of discounting that’s going on, the over-inventory situation, it seems like there are going to be a lot of great deals in the next 45 days,” said Bob Drbul, a retail analyst at Nomura Securities International.

  The NRF’s traffic forecast represents a 1.6 percent increase from last year although in a zero-sum market, “there’s a risk that fewer shoppers than expected may show up.” Last year, the NRF had forecast 140.1 million consumers would hit stores and e-commerce sites, 4.8 percent more than actually turned out, according to its post-weekend shopping survey. Expect more of the same as the transition to online shopping accelerates.

  Furthermore increasingly more stores are pulling back on their Thanksgiving weekend hours this year and electing to spread more of their specials throughout the month. Wal-Mart said it expects record crowds on Friday, even though it’s putting most of its discounts online first.

  So videos of the occasional brawl the best evidence of the demise of traditional retailer comes from in person “channel checks” such as what  TheStreet’s correspondent Brian Sozzi has been doing all night. Here are some of his “ghost town” findings.

  Even the #StarWars plush dolls and bedding not selling @JeffMacke pic.twitter.com/qqbx0Feurj

  — Brian Sozzi (@BrianSozzi) November 27, 2015

  Star Wars toys not flying off shelves today, lots of stuff bought on “Force Friday” in September #BlackFriday $HAS pic.twitter.com/zljAoyGM6r

  — Brian Sozzi (@BrianSozzi) November 27, 2015

  1 thing very clear being up over 24 hours in stores:

  Star Wars fatigue has set in. Stuff not selling #BlackFriday pic.twitter.com/3XlTphQXNC

  — Brian Sozzi (@BrianSozzi) November 27, 2015

  It’s a quiet morning so far here at Target in jersey city! @MorganLBrennan has more 6am @SquawkCNBC pic.twitter.com/37XVksdOWX

  — Amanda Weindel (@AmandaWeindel) November 27, 2015

  To unload its weak fall styles, Gap offers people free totes with a purchase on #BlackFriday pic.twitter.com/3Gr1Xboxfs

  — Brian Sozzi (@BrianSozzi) November 27, 2015

  Good job on #BlackFriday Sears friends… pic.twitter.com/5a35Vv0o0D

  — Brian Sozzi (@BrianSozzi) November 27, 2015

  Kohl’s lines looking weak, unsurprising given how strong JC Penney has started #BlackFriday $JCP $KSS pic.twitter.com/uNe5WdNC2K

  — Brian Sozzi (@BrianSozzi) November 27, 2015

  I did not do this JC Penney #BlackFriday pic.twitter.com/MZPYx4DVzH

  — Brian Sozzi (@BrianSozzi) November 27, 2015

  Best Buy store manager: “We still have both sizes of the Apple Watch in stock.”

  Store opened 6 hours ago…

  $AAPL #BlackFriday

  — Brian Sozzi (@BrianSozzi) November 27, 2015

  New store, more GoPro stuff collecting dust $GPRO #BlackFriday pic.twitter.com/bhXsZQhaxC

  — Brian Sozzi (@BrianSozzi) November 27, 2015

  JC Penney women’s shoe department

  #Thanksgiving vs. #BlackFriday pic.twitter.com/ECZaN7oVwr

  — Brian Sozzi (@BrianSozzi) November 27, 2015

  

  

  

  

• He Lived Through Hyperinflation, Devaluation And Confiscation: This Is His Advice

  Nearly four months ago, when bitcoin was still languishing in the low $200s, we explained why in the post-Yuan devaluation regime, where all Chinese capital outflows are now scrutizined through a microscope, bitcoin will inevitably see substantial appreciation as the local population scrambles to transfer funds out of China and into more traditional end markets, such as the US, Canada and western Europe, using such still largely unregulated mediums as bitcoin and other digital currencies.

  Why not gold?

  This is what we said in the beginning of September: “China’s propensity for gold is well-known. We would not be surprised to see a surge of gold imports into China, only instead of going to the traditional Commodity Financing Deals we have written extensively about before, where gold is merely a commodity used to fund domestic carry trades, it ends up in domestic households. However, while gold has historically been the best store of value in history and has outlasted every currency known to man, it is problematic when it comes to transferring funds in and out of a nation – it tends to show up quite distinctly on X-rays.“

  Which is why we would not be surprised to see another push higher in the value of bitcoin: it was earlier this summer when the digital currency, which can bypass capital controls and national borders with the click of a button, surged on Grexit concerns and fears a Drachma return would crush the savings of an entire nation. Since then, BTC has dropped (in no small part as a result of the previously documented “forking” with Bitcoin XT), however if a few hundred million Chinese decide that the time has come to use bitcoin as the capital controls bypassing currency of choice, and decide to invest even a tiny fraction of the $22 trillion in Chinese deposits.

  Two months after we wrote this, bitcoin more than doubled to $500 before retracing some of its recent gains, and has resumed its rise again.

  Why? This time the answer is Argentina, where as we reported two days ago, the new president admitted that “there are no more dollars in rhe central bank” which means that the days of the country’s capital controls are numbered, and because as Citi said president-elect Macri wants to unify the official and parallel exchange rates (~9.60 and 15.50 ARS/USD, respectively) that will entail a substantial devaluation. Just how overvalued is the peso, you ask? “Grossly.”

  In other words, another major currency collapse is in store for Argentina, its fourth major one in recent decades.

  It also means that as yet another country is about to take currency warfare to the next level, bitcoin is posed for another sharp move higher (even as Chinese demand for the fiat alternative continues to grow).

  And since the topic is Argentina’s upcoming latest currency collapse, courtesy of Raoul Pal’s RealVision, here is an interview by Dan Morehead, Ex-Head of Macro Trading at Tiger Management and now CEO of Bitcoin investment firm Pantera with Wences Casares, an Argentinian Founder of Xapo and one of the pioneers of bitcoin.

  Wences, an Argentinian, has seen his family’s wealth evaporate not once, not twice but three times due to hyperinflation, devalulation and confiscation and that has led him to bitcoin. His driving philosophy: “There are more people in the world who need a currency they can trust, than there are people in the world who can trust their currency.”

  More from the person who knows all about currency destruction in the excerpt below…

  … and as usual, the full interview can be seen on the RealVision website (which boasts dozens of other interviews with financial luminaries) and where a bitcoin subscription discount is available.

  

  

  

  

  

• Diversification Is For Dummies – The Nifty Nine Never Mattered More

  From the 4-horsemen of the dotcom exuberance (and apocalypse), to today's so-called FANG and NOSH stocks, and now 'Nifty Nine', investors could be forgiven for ignoring the benefits of stock market diversification that every commission-taking, fee-gathering asset-collector promotes and going all-in on a few 'easy to select' stocks to make the quick buck that everyone believes is their right as an American taxpayer. While the S&P languishes unchanged in 2015, these small groups of overwhelmingly propagandized stocks are up on average over 60%, but with a collective P/E of 45, they are not cheap (and perhaps should remember that when buying this momo, we are all Thanksgiving turkeys).

  

  As The FT reports,

  The long bull market in US stocks now in its seventh year, has grown much narrower. Previously dominated by smaller companies (which tend also to do better in the longer run), it is now being led by a handful of large stocks that are beginning to earn their own acronyms.

   

  Some talk about the Fang stocks — Facebook, Amazon, Netflix and Google — while Ned Davis Research refers to the Nifty Nine, which adds Priceline, Ebay, Starbucks, Microsoft and Salesforce. (Note that Apple appears on neither list.) If made into indices, research by the FT statistics group shows that either of these groupings would have gained about 60 per cent for this year, while the S&P 500 is up about 1 per cent.

   

  …

   

  What are the implications? The success of the Fangs is a symptom of the rise of a new model for the economy that revolves around services rather than manufacturing.

   

  But it is best not to get carried away. All these companies are richly valued (Ned Davis puts the Nifty Nine’s collective price/earnings ratio at 45, double that of the S&P 500). They also look expensive when compared with their sales.

   

  Hype and excitement around a few big companies, and eclipse for riskier small companies, are classic symptoms of the top of a bull market. For comparison, look at the “Nifty Fifty” companies of the early 1970s, or the first wave of web companies during the dotcom boom of the late 1990s — when it was fashionable to talk of a “new economic paradigm”.

  *  *  *

  Of course, the exuberant upside of the FANGs or Nifty Nines is always obvious after the matter…

  

   

  But why let that worry you – you are all smarter than the average investor, right? Just don't forget the lesson from The Thanksgiving Day Turkey… (via SHTFPlan.com),

  The Black Swan Theory is used by Nassim Nicholas Taleb to explain the existence and occurrence of high-impact, hard-to-predict, and rare events that are beyond the realm of normal expectations. One example often put forth by Taleb is the life and times of the Thanksgiving Turkey.

   

  

   

  The turkey spends the majority of its life enjoying daily feedings from a caring farmer. Weeks go by, and it’s the same thing day-in-day-out for the Turkey. Free food. Open range grazing. Good times all around.

   

  The thinking turkey may even surmise that the farmer has a vested interest in keeping the turkey alive. For the turkey, it is a symbiotic relationship. “The farmer feeds me and keeps me happy, and I keep the farmer happy,” says the turkey. “The farmer needs me, otherwise, why would he be taking care of me?”

   

  This goes on for a 1,000 days.

   

  Then, two days before Thanksgiving on Day 1,001, the farmer shows up again.

   

  But this time he doesn’t come bearing food, but rather, he’s wielding an ax.

   

  This is a black swan event — for the turkey.

   

  By definition, it is a high-impact, hard-to-predict, and rare event for the turkey, who not only never saw it coming, but never even contemplated the possibility that it could occur.

   

  For the farmer, on the other hand, this was not a black swan event. The farmer knew all along why he was feeding the turkey, and what the end result would be.

  The very nature of black swan events make them almost impossible to predict. The point of this parable is to put forth the idea that sometimes we are the Thanksgiving turkey and understanding this may make it easier to begin to, at the very least, contemplate the possibility of far-from-equilibrium events.

  

  

  

  

  

• "Mysterious" Fire Hits Argentine Ministry Of Finance, Destroys Years Of Prior Regime's Files

  "If you play with fire, you get burned," apart from if you are an official in the Argentine government it would appear. Just days after Argentina threw out the Peronists, who have ruled almost non-stop in the three decades since the end of military rule, The Ministry of Finance suffered a mysterious fire in its computer center, catastrophically (and coincidentally) destroying the prior-regime's files.

   

  

  As Perfil reports (via Google Translate)

  The weekend came a mysterious fire at the Ministry of Economy , in the area of data center located on the fourth floor of the Economy Ministry.

   

  The fire began on Sunday afternoon at the site containing the computers on which cost control files of the ministry.

   

  The fire, reported Clarín , led to a police report .

   

  On the fourth floor lies the entire operational area of Juan Carlos Pezoa, the head of the Ministry of Finance. It was in a small office on this floor, although far from the clerk's office, located in the Directorate General Information Systems Financial Management to the entrance of Balcarce 186, where the incident occurred.

   

  According to the official version, which led to the fire was a short circuit in one of the air conditioners that refrigerate the room.

   

  However, he noticed that the complaint was filed at the police station second day after the loss occurred by the head of the area, Maria Eva Sanchez. 

   

  According to ministry employees, all computers that burned were in the room where it is kept cost control portfolio dependent commands Pezoa the secretariat.

   

  This runs counter to the official version which speaks of "the ignition of the fire in the live-testing are of software developments."

  This is not the first time a fire has destroyed government records – or second, or third, or even fourth…

  With this new fire, and this year there are four key areas in the state.

   

  In February, there were fires in the Pink House and Senate and last month in the Libertador Building.

  And then there was last February's deadly fire which destroyed the central bank's records just days after a planned crackdown on the banking system.

  While we are sure it is a very sad coincidence, on the day when Argentina decrees limits on the FX positions banks can hold and the Argentine Central Bank's reserves accounting is questioned publically, a massive fire – killing 9 people – has destroyed a warehouse archiving banking system documents.

   

   

  

   

  As The Washington Post reports, the fire at the Iron Mountain warehouse (which purportedly had multiple protections against fire, including advanced systems that can detect and quench flames without damaging important documents) took hours to control and the sprawling building appeared to be ruined. The cause of the fire wasn’t immediately clear – though we suggest smelling Kirchner's hands…

  *  *  *
  The bottom line is simple – where there's 5 fires in government offices in 18 months, there is smoke and mirrors and the lies and corruption of Kirchner and her operatives will hopefully one day be exposed.

  

  

  

  

  

• Chief Of Russian Air Force Accuses Turkey Of Coordinated Ambush On Downed Jet

  By now everyone is aware of the Turkish side of the story of how a Russian Su-24 was downed by a Turkish F-16 on Tuesday morning, when it allegedly crossed into Turkish airspace for a grand total of 17 seconds, with Turkey supposedly warning the Russian bomber which had been targeting alleged jihadists in the region no less than “ten times.” Turkey even produced an alleged recording of said warning, which Russia implied was faked as the surviving pilot made it very clear no actual warning had been received by the Russian warplane.

  So now that Russia has had three days to go through the evidence and assemble the pieces of what it thinks happened, here is the summary as presented earlier today by the Commander in Chief of the Russian air force, Viktor Bondarev, which however presents a very gloomy picture with dire consequences for the peaceful geopolitics of the middle east.

  

  In summary, what Col. Gen. Bondarev said is that Turkey actively sought to ambush and bring down the Russian jet starting long before the actual missile was fired, which can be confirmed by the flight patterns of Turkish warplanes which had taken off well in advance, otherwise they would not have had enough time to reach the battlezone.

  The Russian ministry of defense made this grave accusation quite explicit on Twitter an hour ago, when it said that Turkey had engaged in a choreographed ambush.

  #SYRIA #Bondarev: Two F-16’s were in the duty zone for 1 h 15 min (from 9:11 till 10:26) ready to attack from the air ambush

  — ?????????? ?????? (@mod_russia) November 27, 2015

  Here are the details of the Su-24’s final hour as recounted by RT which notes that a pair of tactical bombers took off from Khmeimim airbase in Latakia at 06:15 GMT, with an assignment to carry out airstrikes in the vicinity of the settlements of Kepir, Mortlu and Zahia, all in the north of Syria. Each bomber was carrying four OFAB-250 high-explosive fragmentation bombs.

  Ten minutes later, the bombers entered the range of Turkish radars and took positions in the target area, patrolling airspace at predetermined heights of 5,800 meters and 5,650 meters respectively. Both aircraft remained in the area for 34 minutes. During this time there was no contact between the crews of the Russian bombers and the Turkish military authorities or warplanes.

  Some 20 minutes after arriving at the designated area, the crews received the coordinates of groups of terrorists in the region. After making a first run, the bombers performed a maneuver and then delivered a second strike.

  Immediately after that, the bomber crewed by Lieutenant-Colonel Oleg Peshkov and Captain Konstantin Murakhtin was attacked by a Turkish F-16 fighter jet operating from the Diyarbak?r airfield in Turkey. The time needed to get the aircraft ready at the Diyarbak?r airfield and travel to the attack zone is an estimated 46 minutes.

  ?

  “The radar surveillance data confirms that two F-16 fighter jets were patrolling the flight zone for an hour an 45 minutes at an altitude of 2,400 meters [some 7,800 feet], which speaks of a deliberate action and their readiness to attack from an ambush over the Turkish territory,” Bondarev told reporter.

  In order to attack the Russian Su-24 with a close-range air-to-air missile, Bondarev said that the Turkish fighter jet had to enter Syrian airspace, where it remained for about 40 seconds. “According to radar tracking data, it was the Turkish warplane that crossed into the Syrian airspace for about 40 seconds to a depth of 2 kilometers [6,560 feet], while the Russian fighter-bomber never violated the Turkish border“, he said.
  

  #SYRIA #Bondarev: Objective monitoring data proves that Turkish jet was in Syrian airspace for 40 sec and dived 2 km into Syrian territory

  — ?????????? ?????? (@mod_russia) November 27, 2015

  Having launched its missile from a distance of 5-7 kilometers, the F-16 immediately turned towards the Turkish border, simultaneously dropping its altitude sharply and disappearing from the range of Russian radars at the Khmeimim airbase.

  #SYRIA #Bondarev: Turkish fighter performed missile strike from 5-7 km, which proves that the F-16 was in the Syrian air space

  — ?????????? ?????? (@mod_russia) November 27, 2015

  The Russian general again reiterated that at no point preceding the attack did the Russian bomber violated Turkish airspace.

  One of Turkish F-16Cs stopped its maneuvers and began to approach the Su-24M bomber about 100 seconds before the Russian aircraft came closest to the Turkish border, which also confirms the attack was pre-planned, said Bondarev.

  

  “At 10.24 Moscow time the crew carried out bombing and after it the plane was shot down by an air-to-air missile launched by a Turkish Air Force F-16 that had taken off from the 8th Diyarbakir airbase on the Turkish territory.”

  The launch of a missile was confirmed by the crew of the second Russian Su-24. “[The crew] observed a plume of a white smoke and reported it.”

  And this is where the narrative gets even more convoluted because according to Bondarev the Turkish F-16 was guided to its intended target from the ground and launched an air-to-air missile while the Russian warplane was readying to carry out a second attack on terrorist positions.

  “The method of guidance of F-16 aircraft into effective engagement zone directly, but not along the pursuit course curve shows that the fighter jet was directed from a ground control station,” Bondarev told reporters.

  The fighter jet stopped maneuvers in the area of patrolling and commenced missile launching a minute and 40 seconds before the Su-24 maximum proximity to the Syrian-Turkish border, Bondarev added.

  #SYRIA #Bondarev: F-16 fighter started leaving duty zone for offset point in 1 minute 40 sec before max approach of #Su24M to the border

  — ?????????? ?????? (@mod_russia) November 27, 2015

  Furthermore, it appears that the jihadist groups on the ground were anticipating an event of this kind playing out above them.

  Bondarev called attention to the readiness of the Turkish media, which released a professionally-made video of the incident recorded from an area controlled by extremists a mere 1.5 hours after the Su-24 was downed.

  Furthermore, the operation to rescue the surviving navigator took several hours and eventually recovered Konstantin Murakhtin, although one Russian Marine in the team was killed when the rescue helicopter was destroyed by a US-made tank missile launched by the extremists – an incident they filmed and published online within hours of the attack.

  He also mentioned the memorandum of understanding regarding the campaign in Syria, signed by Moscow and Washington on October 26. In accordance with this agreement, the Russian side informed its American counterparts about the mission of the two bombers in the north of Syria on November 24, including the zones and heights of operation.

  “Taking this into account, the Turkish authorities’ statement on not knowing which aircraft were operating in the area raises eyebrows.“

  #SYRIA Statements of Turkish party that they hadn’t ID’d Rus aircraft are confusing: US AF received data about Su-24M from #Hmeymim airbase

  — ?????????? ?????? (@mod_russia) November 27, 2015

   

  Finally, Bondarev also mentioned the memorandum of understanding regarding the campaign in Syria, signed by Moscow and Washington on October 26. In accordance with this agreement, the Russian side informed its American counterparts about the mission of the two bombers in the north of Syria on November 24, including the zones and heights of operation.

  This is perhaps the most important accusation, as it ties in with the incendiary remark lobbed by Putin at US “protocols” yesterday:

  We told our US partners in advance where, when at what altitudes our pilots were going to operate. The US-led coalition, which includes Turkey, was aware of the time and place where our planes would operate. And this is exactly where and when we were attacked. Why did we share this information with the Americans? Either they don’t control their allies, or they just pass this information left and right without realizing what the consequences of such actions might be. We will have to have a serious talk with our US partners.

  To summarize, here is what Russia has implied: the US shared the flight path details of the Russian Su-24 with Turkey in advance of the flight, which then Turkey used to ambush and take down the Russian bomber, with the implicit blessing of the Pentagon. Turkey may have further shared data with “Syria Free Army” US-armed jihadists on the ground, who not only recorded the downing of the bomber and the execution of its parachuting pilot, but also were prepared to attack a Russian rescue helicopter (with US weapons) which led to a second casualty – an attack which was also captured on clip and promptly uploaded!

  * * *

  If Putin is in indeed onboard with this version, he will deem – perhaps not diplomatically, but certainly in internal circles – Turkey’s aggression to be an act of war, and not only by Turkey but by NATO and the US, which provided Turkey with the data it needed to lead to a Russian loss of life.

  What Russia’s next steps will be is unclear, however as we reported previously, we expect far more aggressive provocations on the Syria-Turkey border by both sides, especially now that every Russian bombers will have air support, and now that Russian S-400 missiles can reach any provoking Turkish jet in minutes, in effect Russia establishing a “No Fly Zone” above Syria.

  

  

  

  

• China's Plunge Protection Team Now Owns 6% Of The Entire Chinese Stock Market

  Two weeks ago, in “The Cost Of China’s ‘Manipulated Market Stability’ May Be Too High, BofAML Warns,” we revisited Beijing’s plunge protection national team, which during Q3 bought an astounding CNY1.5 trillion in stocks. 

  For those who might have forgotten exactly how this worked, the PBoC effectively transformed CSF into a giant, state-run, margin lending, prop desk and before you knew it, the government was stepping in just prior to the close on a near daily basis to keep the bottom from falling out. Every time CSRC attempted to step out of the market, chaos ensued. Indeed, even rumors that the government was preparing to scale back the plunge protection were enough to spook investors as we saw in late July when futures sank after a Caijing reporter suggested that the national team was set to rein in its purchases (that reporter was later arrested and charged with causing “panic and disorder”). 

  As August wore on, the cost of propping up the market (which desperately wanted to fall further as legions of semi-literate Chinese day traders who three months earlier had been willing to buy any and all dips suddenly had a mind to sell any and all rips in a frantic attempt to salvage their severely depleted life savings) simply became unbearable and so, Beijing decided to just start arresting anyone who was suspected of being a “malicious” seller. The crackdown – named “kill the chicken to scare the monkey” after a Chinese proverb – was designed to essentially make market participants believe that selling or worse, shorting, could land you in jail. 

  Subsequently, the market stabilized but by the time the waters calmed, China was left with an enormous stock portfolio, nearly a quarter of which was purchased at multiples above 40X. 

  

  Here’s a look at the paper losses the government had incurred by the end of September (note that most of the CNY224 billion hit had been recouped as of mid-November):

  

  BofAML’s conclusion was that given concerns about what incessant stock buying might convey about both the future course of the yuan and about China’s commitment to liberalizing capital markets, the PBoC may not be inclined to remain active in the market going forward. 

  Indeed, when the SHCOMP plunged on Friday in the aftermath of a new round of broker probes, a poor read on industrial profits, and the revelation that two more companies are set to default, the national team appeared to have stayed on the sidelines and maybe that’s a good thing because as FT reports, the government now owns 6% of the entire mainland stock market. 

  “China’s ‘national team’ owns at least 6 per cent of the mainland stock market as a result of the massive state-sponsored rescue effort this year to prop up share prices following the summer equity market crash,” FT wrote on Thursday, adding that “China Securities Finance Corp, the main conduit for the injection of government funds, owned 742 different stocks at the end of September, up from only two at the end of June.” Here’s more:

  The figures are compiled from quarterly financial statements of listed companies, which are required to disclose their 10 largest shareholders. The actual size of national team holdings is probably larger, given that some likely hold stakes that are too small to rank among the top 10.

   

  The estimate of the shareholdings of the national team covers positions held by CSF, which is the state-owned margin lender, and by Central Huijin Investment, the holding company for shares in state-owned financial institutions and a subsidiary of China’s sovereign wealth fund.

   

  The market value of CSF’s holdings increased from only Rmb692m ($108m) at the end of June to Rmb616bn three months later. However, the market value of Huijin’s holdings fell by Rmb167bn in the third quarter to Rmb2tn, mostly reflecting mark-to-market losses on shares it previously held. This fall came despite Huijin’s additional share purchases in the period.

   

  
  

   

  The significant role of the national team in propping up the market has raised concerns about the sustainability of the recent share rally, and about what would happen if the government unwound its holdings.

  Yes, “what would happen if the government unwound its holdings?” That’s difficult to say, but it might very well be that the psychological effect national team selling would have on market participants would end up doing more damage than the selling itself.

  As we discussed earlier today, it looks like China may be trying to offset a rollback of the draconian measures imposed on markets over the summer by throwing more people in jail. That is, in an effort to dispel the idea that the Politburo controls what goes on in markets, Beijing is lifting some restrictions. But that means losing control and so, officials hope a renewal of the “malicious” market manipulator witch hunt will be able to keep things in check. Here’s an example of what we mean: just days ago, Beijing lifted selling restrictions on brokerages’ prop desks, but simultaneously, authorities launched investigations into at least three brokerage houses for alleged “rules violations.” As we put it earlier: so you can technically be a net seller again, it’s just that you might end up being arrested for it if the Party thinks your selling was particularly malicious or otherwise ill-timed. 

  This all comes as the country is facing its “Minsky Moment” wherein heavily indebted corporates will no longer be able to borrow money to pay interest on money they borrowed in the past. Once that threshold is crossed, the defaults begin. 

  Throw in rapidly decelerating growth and an acute over capacity problem and there’s the very real potential for concurrent crashes in stocks, bonds, and the overall economy. 

  So time will tell whether Beijing will ultimately be satisfied with 6% of the equity market if things start to go south again as they did today and whether, when missed principal and interest payments are happening six times per week instead of six times per year, Xi will be able to keep his cool and refrain from bailing out the entire commodities and industrial complex at the expense of China’s international reputation.  

  

  

  

  

  

• How The Scots Welcome 'Visitors'

  William Wallace would be proud…

  Larkhall is a town in South Lanarkshire, Scotland and is around 14 miles southeast of Glasgow. Traditionally a mining, weaving and textile area, most of Larkhall’s traditional industries have now shut, including the Lanarkshire iron and steel works… and now they have a message for the new invaders…

  

  

  

  

  

• The Death Of Damascus: Images From Syria's War-Torn Capital

  Last month, as the IRGC and Hezbollah rallied their ground troops to prepare for an assault on Aleppo, we brought you a series of stark images from a city deciminated by years of  war. A week later, we highlighted new, high-def drone footage of Syria’s eerily desolate urban landscapes rendered barren by mortar fire, barrel bombs, and airstrikes. 

  If you follow the war closely, it’s easy to get swept up in the World War III, global conflict hysteria. After all, what’s more intriguing from a geopolitical perspective than the distinct possibility that Moscow and NATO may be headed for an armed conflict after Turkey became the first alliance member to engage a Russian or Soviet aircraft in some six decades. Throw in the fact that at the center of it all is a wealthy, brazen terrorist organization funded by Saudi Arabia and Qatar, whose mission is to rid the Arabian Peninsula of Iranian influence and you have the recipe not only for a renewal of Cold War hostilities, but also for an explosive sectarian conflict. 

  Lost in all of this is the human toll that five years of civil war has exerted upon Syria’s beleaguered populace. To be sure, the mass exodus from the Mid-East and subsequent flow of migrants into Germany, France, Sweden, and Austria (to name but a few) is representative of the struggle, but in the minds of many Europeans, the Paris attacks have served to turn a humanitarian crisis into a symbol of a dangerous and imminent Islamization of Western Europe. That, in turn, has to a certain extent dehumanized Syrian refugees. That’s not to say that terror groups have not sought to take advantage of the discord by embedding militants in the crowds of asylum seekers flooding into Europe. It’s just to say that thanks to the massacre in France, Syrian refugees have become more a symbol of terror than they have a symbol of suffering. 

  It’s with that in mind that we bring you the following images (via Reuters) from the Syrian capital and excerpts from “The Slow Death of Damascus”, by Thanassis Cambanis as originally published in Foreign Policy.

  

  

  Few supporters of the government are switching sides to the opposition these days, but many are simply exhausted by the immense toll exacted by the war. Half the country’s people have been pushed from their original homes. The infrastructure is creaking. Even some supporters of Assad say they feel that government-held Syria is hollowing out, running on fumes.

  

  

  Over the course of a recent 10-day visit, Damascus residents said they feel less embattled than they did a year ago, but the war is still an inescapable reality of everyday life. Every night, dozens of mortars still land in the city center, sending wounded and sometimes dead civilians to Damascus General Hospital. From the city’s still-busy cafés, clients can hear the thuds of outgoing government guns and the rolling explosions of the barrel bombs dropped on the rebel-held suburb of Daraya.

  

  

  Army and militia checkpoints litter the city. In some central areas, cars are stopped and searched every two blocks. Still, rebels manage to smuggle car bombs into the city center. According to residents, explosions occur every two or three weeks, but are rarely reported in the state media.

   

  

  

  “The government doesn’t care if people leave. It can’t stop them,” one middle-class Syrian, who has chosen so far to remain in Damascus, said of the exodus. “The war seems like it will go on forever. People see no future for their children. The only people who are staying are the ones who have it really good here or the ones who aren’t able to leave.”

  

  

  The fight has become an integral part of daily life, directly affecting almost every family from every type of background. Throughout the coast, photographs of the war’s casualties adorn every block. Each neighborhood has a wall of martyrs, some of them featuring hundreds of dead — part of an effort to build a martyrdom culture not unlike that which sustains loyalists of Iran’s ayatollahs and Lebanon’s Hezbollah, both of which provide key support to the Syrian government.

  

  

  “This is our destiny,” said Ahmed Bilal, an Alawite cleric who was circulating in a shiny white robe and chatting with the assembled families. A long line of fighters predating the establishment of modern Syria had resisted foreign invaders, he said, and gave inspiration to today’s soldiers.

  
  

  “Even if we lose one-third of our young men, we will still have the rest to live,” Bilal said. “They died so that the others should have life.”

  

  
  

  

  

  

  

• Dirty Connecticut Mayor (Sentenced To Prison For Corruption) Reelected In Landslide

  After East Chicago re-elected an accused drug dealer and murderer as councilman, we thought the bar had dropped as low as it gets for the ignorance of an electorate. But, no! Bridgeport, Connecticut residents just took the proverbial biscuit by re-electing Mayor Joseph P. Ganim – who during his last 'reign' was convicted of 16 felonies including racketeering, extortion, and bribery.

  

  As TheAntiMedia.org's Lou Colagiovanni details, Ganim spent seven years of his life in federal prison as a result of the convictions.

  Political pundits originally saw Ganim’s candidacy as a sideshow with no hope of electability, but the joke was on them. In September, Ganim defeated Bridgeport’s incumbent mayor, Bill Finch, by 400 votes during the Democratic primary.

   

  Mary-Jane Foster, the Vice President of the University of Bridgeport, was Ganim’s closest opponent and lost the election by a landslide margin of almost 2 to 1. Imagine that—the voters prefered a convicted felon known for making backroom deals over an illustrious member of the community who has dedicated her life to education.

   

  Foster was stunned by Ganim’s victory. “I couldn’t be more surprised. I expected that I would be elected the next mayor of Bridgeport. Voters were clearly willing to give Joe Ganim a second chance,” she commented.

   

  Connecticut Governor Dannel P. Malloy acknowledged Ganim’s triumph. “The voters have spoken, and I want to congratulate Joe Ganim on his victory. I am committed to moving Bridgeport forward, and, as I have said, I will continue to put the best interests of the community first,” he said.

   

  Though unusual, a mayor being convicted of a felony does not automatically mean the candidate cannot win reelection. Marion S. Barry Jr., the former Mayor of Washington, D.C., was convicted of smoking crack cocaine in 1990 and sentenced to six months in prison. Barry’s arrest meant he could not run for reelection, but the voters brought him back to the mayoralty from 1995 to 1999.

   

  In a showing of sheer political gamesmanship, Ganim was able to convince one of the FBI agents who originally arrested him in 2003 to endorse his campaign. Ganim was also endorsed by the local police union.

   

  Ganim was gracious in victory. “We not only made history, we’ve defined a new course for this great city. Some will call this a comeback story, but for me, this is a city I feel I never left. I never stopped caring,” he said.

  Time will tell if Ganim will go back to his old tricks, but for now, it seems the voters of Bridgeport prefer a man who admits to twisting arms over a more politically correct, docile candidate.

  

  

  

  

  

• Goldman's Meteoronomists Have A Dire Forecast: "Winter Is Coming"

  What little credibility the shamanistic voodoo religion that is economics had, it lost over the past 2 years when even the most modest downtick in economic activity was blamed on the “weather.” It appears that as part of their conversion from “economist” to pure-play weathermen, nobody advised Wall Street’s if not best and brightest, then certainly dumbest Keynesians, that adjusting for the seasons, is precisely what seasonal adjustments are for, and why they spend hundreds of hours goalseeking every data point with Arima-X-13 models until they get the result they want.

  It was not enough, and in the winter of 2013 and 2014, the farce was indeed complete, when none other than the Bureau of Weather Economic “Analysis” incorporated double seasonal adjustments, to smoothe away what to most was an “inexplicable” slowdown in the US economy, and which was simply a function of two consecutive credit crises hitting China in the latter part of 2013 and 2014.

  However, instead of modeling how two consecutive years of China’s slowing credit impulse slammed US growth, the economisseds instead decided to blame it all on the unprecedented events of cold and snow in the winter as they relied on their favorite forecasting tool…

  

   

  So with the winter of 2015 so far shaping up to be what some have dubbed “abnormally hot”, we thought that at least this year the weatherconomists would keep their mouth shut: after all, if you blame cold weather for an underperforming economy, you better say nothing at all if the weather is warmer than usual as it has been in October and November.

  Alas, it was not meant to be, and so, without further ado, here are everyone favorite economweathermen from Goldman Sachs, warning everyone that, drumroll, yes, Winter Is Coming.

  No really, that’s the title.
  

  Here is the full 2000-word “explanation” from Goldman’s team of merry weathermen:

  Winter is Coming

  • Growth decelerated sharply in Q1 in 2014 and 2015, and we suspect that unusually harsh winter weather contributed. With the winter season now upon us, we revisit old lessons learned and develop new rules of thumb for estimating the economic impact of weather fluctuations.
  • We focus on two weather indicators that measure temperature and snowfall. The first is the deviation of “heating degree days” (HDD), a measure of cold temperatures, from seasonal norms. The second is the Regional Snowfall Index, a measure of the societal impact of snowfall that includes scores for hundreds of major snowstorms.
  • We draw three sets of conclusions about the impact of weather on the economy. First, we find that both temperatures and snowfall matter for growth. In particular, we estimate that a 1 standard deviation (SD) increase in HDD is associated with a 0.4 percentage point (pp) reduction in GDP growth and a 0.1pp reduction in our current activity indicator (CAI), while a 1SD snowstorm is associated with about a 0.3pp reduction in both. Admittedly, there is considerable uncertainty around our estimates due to both collinearity between temperatures and snowstorms and the limited sample size at the aggregate level.
  • Second, we find that weather effects have a “tell” in the form of an uneven pattern of impact across the economy. Comparing the effect of weather variables across top-tier indicators, across sectors in the Gross State Product data, and across industries in the payrolls report, we find that weather typically has the largest impact on construction, retail trade, leisure and hospitality, foreign trade, and manufacturing.
  • Third, we find that weather variables have an important but somewhat more nuanced effect on the payrolls report during the winter months. Using state-level data, we find that the intra-month pattern of weather conditions is important, with conditions during the reference week carrying the greatest weight. We estimate that a 1SD colder month and 1SD of snowfall during the reference week are each associated with a roughly 35k reduction in payroll growth.

  The sharp deceleration of Q1 GDP growth in both 2014 and 2015 has provoked some anxiety about what to expect this winter. At the time, both we and Fed officials pointed to unusually severe winter weather as one contributor to the first-quarter slowdowns. To some skeptical investors, economists who attributed weak Q1 growth to weather effects sounded a bit like Peter Sellers’ Chance the Gardener promising that “there will be growth in the spring.” But in both years, growth did rebound strongly in Q2, suggesting that weather effects had in fact contributed to the weak Q1 performance. While we certainly do not claim to be able to predict this winter’s weather, we can estimate the impact of weather deviations from seasonal norms once they occur. In this week’s Analyst, we revisit some old lessons learned and develop some new rules of thumb for assessing the impact of weather conditions on growth and employment.

  

  Why Weather Matters

  Most economic data are seasonally adjusted to account for weather patterns as well as other calendar effects such as holidays. But weather can still affect economic data when it departs significantly from seasonal norms. For indicators such as housing starts normal seasonal fluctuations are very large and mostly weather-driven, meaning that even moderate deviations from normal seasonal weather patterns can have large effects not captured by seasonal adjustment.

  We focus on two weather variables that capture temperature and snowfall. We measure temperature effects using the deviation of the number of heating degree days from a trailing 10-year average. Heating degree days (HDD) are a measure of cold temperatures that we have found in past research help to predict a range of economic data. We use both state-level and national population-weighted series constructed by the National Oceanic and Atmosphere Administration (NOAA). We measure snowstorms using the Regional Snowfall Index (RSI), a measure designed to capture the societal impact of major snowstorms. The RSI provides dates and scores for over 600 storms since 1900 across six regions of the US, and we construct a monthly national index—shown in Exhibit 2—by aggregating the regional indices using relative population weights. We also convert the regional series into state series by assuming that the impact of a given storm is equal across all states in a region.

  

  Weather and Growth

  We start by estimating the growth effects of weather deviations. Exhibit 3 shows suggestive evidence that at least in the most severe deviations from normal weather patterns—in this case, the 25 months with the greatest snowfall since 1972—our current activity indicator (CAI) has dipped by a bit more than 0.5pp during the month of the storm before rebounding the next month. The average dip in the 25 coldest months as measured by HDD (nine of which also had top-25 snowfall) is more modest at about 0.25pp.

  

  We next use simple models to estimate the impact of the weather variables on both quarterly GDP growth and the CAI. Using data since 1985, we regress each growth variable on its own lag as well as both contemporaneous and lagged weather variables. We impose on the models the constraint that the coefficients on the several HDD and snowfall variables, respectively, must sum to zero, so that there is no permanent effect of weather fluctuations on the level of output. Exhibit 4 shows the resulting estimates.

  The models imply that a 1 standard deviation increase in HDD relative to the trailing 10-year average (calculated as the standard deviation among only cold-weather months, equal to roughly 150 in a quarter in the case of GDP or 70 in a month in the case of the CAI) is associated with a 0.4pp reduction in GDP growth and a 0.1pp reduction in the CAI. The models also imply that 1 standard deviation of additional snowfall subtracts about 0.3pp from both the CAI and GDP growth. Our top-down finding of a smaller impact on the CAI is in line with our previous bottom-up analysis of weather effects on the CAI and is also consistent with the more modest deceleration of the CAI seen over the last two winters.

  

  We caution that that there is considerable uncertainty around our estimates. In particular, collinearity between temperatures and snowstorms and the limited sample size at the aggregate level, especially for GDP, mean that the results are sensitive to model specification. That said, the models imply that snow and temperature deviations combined subtracted about 0.8pp from GDP growth in both 2014Q1 and 2015Q1, and we think they provide reasonable rules of thumb for the growth impact of weather fluctuations.

  The Weather “Tell”

  Investors are sometimes skeptical of alleged weather effects on the economy, viewing them as simply excuses to explain away weak data. How can we be confident that we are seeing the effect of weather conditions as opposed to weak growth caused by other factors?

  While it is impossible to be certain, weather effects have a “tell” in the form of an uneven pattern of impact across sectors of the economy. Exhibit 5 shows our estimates of the impact of temperatures and snowfall on a number of top-tier indicators. We find that weather tends to have the largest impact on economic data related to housing and construction, retail spending, and trade. We also assess the relative impact on different sectors of the economy using state-level panel data on Gross State Product by sector, available quarterly since 2005. We find that the most weather-sensitive sectors include construction, mining, manufacturing, retail trade, and accommodation.

  

  Finally, we can also look at the cross-sectional or category-level data within a particular report for typical weather patterns. For example, we have shown in past research that the impact of harsh winter weather differs across categories of retail sales, with the largest effects on building materials, vehicle sales, and furniture, and a positive impact on non-store sales, which include online purchases.

  Weather and the Payrolls Report

  We conclude by assessing the impact of weather conditions on payrolls. The impact of weather on the employment report is more nuanced because the precise timing of the payrolls reference week is important. We construct a state panel that includes payrolls and weekly HDD, recording for each month the degree days deviation during the reference week and the three previous weeks. We include all weekly variables for both the current and prior month in an initial regression in order to estimate the optimal relative weighting of the weekly weather observations. We find that the reference week is about twice as important as any other week, and we use the regression coefficients—shown in Exhibit 6—to calculate optimally-weighted HDD summary variables for the current and prior months.

  

  We next add other weather data to our panel to see if those series are important too. We find that while the snowfall variable again has an economically and statistically significant impact, a parallel temperature measure called cooling degree days does not. We also find that the effect of precipitation is statistically significant, but quite small.

  The richness of the state-level payrolls data enables us to address several more subtle questions that are difficult to answer convincingly with aggregate national time series:

  1. Do weather effects matter year-round? We find that the effect of HDD deviations is not statistically significant in single-month samples from June to October.
  2. Is the impact asymmetric between warmer-than-usual and colder-than-usual months? By splitting the sample, we find that the per-degree day impact of colder deviations is about double that of warmer deviations.
  3. Is the effect linear? We find that a quadratic degree days term is not statistically significant. While there are an endless number of ways one could specify thresholds, we think that assuming linear effects is reasonable.
  4. Do weather effects reverse? In unconstrained regressions, the coefficients on the contemporaneous and two lagged weather terms usually sum to roughly zero, suggesting that a nearly full rebound usually occurs within a couple of months.

  While these conclusions do not necessarily apply to all economic indicators, we think they offer valuable broader lessons. Based on these findings, we construct both aggregate and industry-level models using the optimally-weighted HDD deviation and a version of the snowstorm index adjusted for the timing of the payrolls reference week. Exhibit 7 summarizes the model estimates.

  

  In aggregating industry effects to produce a bottom-up estimate of the total impact, we only include industries whose temperature or snowstorm effects are statistically significant. We find that a 1 standard deviation colder month (about 70 HDD) is associated with a roughly 35k reduction in payroll growth, while 1 standard deviation of snowfall during the reference week is associated with a reduction of 25-45k. Once again, the weather impact leaves a familiar pattern, weighing primarily on employment in construction, leisure & hospitality, and retail & wholesale trade.

  Slightly more favorable temperatures in the weeks leading into the November reference period should make a small positive contribution to payrolls this month. The employment components of business surveys have been mixed so far, and the labor differential included in the consumer confidence report declined. We therefore expect a gain of 200k in November, a bit softer than the 215k average gain over the last six months.

  * * *

  Yes, Goldman really spent a few days writing this.

  And after that nearly 2000 words of worthless drivel, here is the punchline: if poor Q1 in 2014 and 2015 was blamed on the cold weather, then how many points of GDP in Q1 2016 (and Q4 2015) will be the result of abnormally warm weather (just don’t ask the retailers who blame both hot and cold weather when their sales keep on declining) and will this be the first case in monetary policy history when a Fed hiked rates because it thought the economy was improving only to realize after the fact that it was merely ignoring the weather effect it had dissected so extensively in the prior two years, simply because this time it was in reverse and had been “boosting” the economy?

  

  

  

  

  

  

• Why China Hit The Panic Button On Metals Traders (In 1 Simple Copper Chart)

  Within the last week China appears to have hit the panic button with regards the seemingly unstoppable collapse of commodity prices. First, desperate Chinese producers began to demand a QE-for-commodities bailout; then, following the well-trodden (and failing) path of China's equity market maipulation, authorities began to crackdown on "malicious" commodity short-sellers. So why now? Why focus attention on the commodity markets? Perhaps this chart holds the key…

  Having suddenly lost control of the stock market again…

  

   

  Maybe commodities are a renewed focus as, we showed earlier in the week, there is "No End In Sight For Commodity Carnage As Chinese Fear Fed Hike Blowback", a post which can be summarized with the following chart showing that at least for nickel, copper, zinc, iron ore and aluminum it will be a very unhappy holiday season:

  

   

  The one-word reason for this condition, as we explained here: China, which as documented extensively in the past, has clammed down on its unprecedented credit creation now that its debt/GDP is well over 300% and as a result conventional industries are dying a fast and violent death. In fact, months ago we, jokingly, suggested that what China should do, now that it has scared sellers and shorters to death, is to launch QE where it matters – the commodity space.

  Which led to demands for a bailout…

  That joke has become a reality according to Reuters, which reports that China's aluminum and nickel producers have asked Beijing to buy up surplus metal, sources said, the first coordinated effort since 2009 to revive prices suffering their worst rout since the global financial crisis.

  And a crackdown on speculators (the selling ones, not the buying ones)…

  So as a plan B, the same metals industry group that is reeling and understands it is one foot in the grave unless commodity prices pick up and which earlier this week demanded a government bailout, or "QEmmodity" soaking up all excess production, has doubled down and according to Bloomberg the China Nonferrous Metals Industry Association has submitted a request to Chinese regulators to probe "malicious" short-selling in domestic metal contracts amid recent price declines.

  What is even more insane, is that China will do just that, in the process breaking what little is left of a domestic commodity market next.

  Regulators have begun to collect some records of trading activity following a request from the China Nonferrous Metals Industry Association, according to the people, who asked not to be identified because they aren’t authorized to speak publicly on the matter. Nobody answered calls to the industry association’s general office.

  Remember: it is always the "malicious" sellers who are the cause of all the world's problems, never the "malicious" buyers, especially when said buyers are the central banks themselves.

  *  *  *

  So why now? Why all of a sudden pay attention to what until now has been a never-ending collapse across all commodities…

  

   

  Well perhaps we have the answer… For thre first time since the commodity super-cycle began (read credit-fueled malinvestment mania), copper prices are set to close below the critical 200-month moving average.

  The last time copper prices crossed this historical level was in 2008/9 and QE was immediately unleashed to reflate that bubble back to some state of debt-supporting fallacy…

  

   

  On that occasion, the metal rallied hard at month-end to close above.

  As Bloomberg notes, LME copper 3-mo rolling forward, currently trading at 4626, needs to rally 9% by Nov. 30 close to finish above 200-MMA, at ~5055, to avoid bearish technical signal.

   

  However, some analysts say it is the 233-MMA, linked to the Fibonacci number 233 and currently at ~4610, that may be the more important support to watch, and which looks likely to hold.

   

  And as if to runb more salt in the wounds, very recent Chinese data has not been bullish for copper as demand for use in appliances falls 4.6% y/y in October.

  *  *  *

  So are the momentum-chasing Chinese hitting the panic button on copper (and other metals) because the last level of price support is about to break exposing an entire nation's growth fallacy to the world? Who knows… but it will certainly indicate yet again just how omnipotent central planners are (or are not).

  

  

  

  

  

• How Turkey Exports ISIS Oil To The World: The Scientific Evidence

  Over the course of the last four or so weeks, the media has paid quite a bit of attention to Islamic State’s lucrative trade in “stolen” crude. 

  On November 16, in a highly publicized effort, US warplanes destroyed 116 ISIS oil trucks in Syria. 45 minutes prior, leaflets were dropped advising drivers (who Washington is absolutely sure are not ISIS members themselves) to “get out of [their] trucks and run away.” 

  

  The peculiar thing about the US strikes is that it took The Pentagon nearly 14 months to figure out that the most effective way to cripple Islamic State’s oil trade is to bomb… the oil.

  Prior to November, the US “strategy” revolved around bombing the group’s oil infrastructure. As it turns out, that strategy was minimally effective at best and it’s not entirely clear that an effort was made to inform The White House, Congress, and/or the public about just how little damage the airstrikes were actually inflicting. There are two possible explanations as to why Centcom may have sought to make it sound as though the campaign was going better than it actually was, i) national intelligence director James Clapper pulled a Dick Cheney and pressured Maj. Gen. Steven Grove into delivering upbeat assessments, or ii) The Pentagon and the CIA were content with ineffectual bombing runs because intelligence officials were keen on keeping Islamic State’s oil revenue flowing so the group could continue to operate as a major destabilizing element vis-a-vis the Assad regime. 

  Ultimately, Russia cried foul at the perceived ease with which ISIS transported its illegal oil and once it became clear that Moscow was set to hit the group’s oil convoys, the US was left with virtually no choice but to go along for the ride. Washington’s warplanes destroyed another 280 trucks earlier this week. Russia claims to have vaporized more than 1,000 transport vehicles in November. 

  Of course the most intriguing questions when it comes to Islamic State’s $400 million+ per year oil business, are: where does this oil end up and who is facilitating delivery? In an effort to begin answering those questions we wrote: 

  • The Most Important Question About ISIS That Nobody Is Asking
  • Meet The Man Who Funds ISIS: Bilal Erdogan, The Son Of Turkey’s President

  Turkey’s role in facilitating the sale of Islamic State oil has been the subject of some debate for quite a while. 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:

  “Turkey has 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.”

  Here’s what former CHP lawmaker Ali Ediboglu said last year: 

  “$800 million worth of oil that ISIS obtained from regions it occupied this year [the Rumeilan oil fields in northern Syria — and most recently Mosul] is being sold in Turkey. They have laid pipes from villages near the Turkish border at Hatay. Similar pipes exist also at [the Turkish border regions of] Kilis, Urfa and Gaziantep. They transfer the oil to Turkey and parlay it into cash. They take the oil from the refineries at zero cost. Using primitive means, they refine the oil in areas close to the Turkish border and then sell it via Turkey. This is worth $800 million.”

  Earlier this month, Ediboglu told Russian media that “ISIL holds the key to these deposits and together with a certain group of persons, consisting of those close to Barzani and some Turkish businessmen, they are engaged in selling this oil” (“Barzani” is a reference to Masoud Barzani, President of the Iraqi Kurdistan Region). 

  But even as Turkey’s ties to the ISIS oil trade have been hiding in plain sight for the better part of two years, the Western media largely ignores the issue (or at least the scope of it and the possible complicity of the Erdogan government) because after all, Turkey is a NATO member. 

  Unfortunately for Ankara, Erdogan’s move to shoot down a Russian Su-24 near the Syrian border on Tuesday prompted an angry Vladimir Putin to throw Turkey under the ISIS oil bus for the entire world to see. Here’s what Putin said yesterday after a meeting in Moscow with French President Francois Hollande: 

  “Vehicles, carrying oil, lined up in a chain going beyond the horizon. The views resemble a living oil pipe stretched from ISIS and rebel controlled areas of Syria into Turkey. Day and night they are going to Turkey. Trucks always go there loaded, and back from there – empty. We are talking about a commercial-scale supply of oil from the occupied Syrian territories seized by terrorists. It is from these areas [that oil comes from], and not with any others. And we can see it from the air, where these vehicles are going.”

  “We assume that the top political leadership of Turkey might not know anything about this [illegal oil trade although that’s] hard to believe,” Putin continued, adding that “if the top political leadership doesn’t know anything about this, let them find out.”

  

  Obviously, Putin is being sarcastic. He very clearly believes that the Erdogan government is heavily involved in the transport and sale of ISIS crude. In the immediate aftermath of the Su-24 incident, Putin said the following about Ankara:

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

  As part of our continuing effort to track and document the ISIS oil trade, we present the following excerpts from a study by George Kiourktsoglou, Visiting Lecturer, University of Greenwich, London and Dr Alec D Coutroubis, Principal Lecturer, University of Greenwich, London. The paper, entitled “ISIS Gateway To Global Crude Oil Markets,” looks at tanker charter rates from the port of Ceyhan in an effort to determine if Islamic State crude is being shipped from Southeast Turkey. 

  *  *  *

  From “ISIS Gateway To Global Crude Oil Markets“

  The tradesmen/smugglers responsible for the transportation and sale of the black gold send convoys of up to thirty trucks to the extraction sites of the commodity. They settle their trades with ISIS on site, encouraged by customer friendly discounts and deferred payment schemes.  In this way, crude leaves Islamic State-run wells promptly and travels through insurgent-held parts of Syria, Iraq and Turkey. 

  Since allied U.S. air-raids do not target the truck lorries out of fear of provoking a backlash from locals, the transport operations are being run efficiently, taking place most of times in broad daylight. Traders lured by high profits are active in Syria (even in government-held territories), Iraq and south-east Turkey.

  The supply chain comprises the following localities: Sanliura, Urfa, Hakkari, Siirt, Batman, Osmaniya, Gaziantep, Sirnak, Adana, Kahramarmaras, Adiyaman and Mardin. The string of trading hubs ends up in Adana, home to the major tanker shipping port of Ceyhan. 

  
  

  Ceyhan is a city in south-eastern Turkey, with a population of 110,000 inhabitants, of whom 105,000 live in the major metropolitan area. It is the second most developed and most populous city of Adana Province, after the capital Adana with a population of 1,700,000. It is situated on the Ceyhan River which runs through the city and it is located 43 km east of Adana. Ceyhan is the transportation hub for Middle Eastern, Central Asian and Russian oil and natural gas (Municipality of Ceyhan 2015).

  

  The port of Ceyhan plays host to a marine oil terminal that is situated in the Turkish Mediterranean and has been operating since 2006. It receives hydrocarbons for further loading in tankers, which carry the commodity to world markets.

  Additionally, the port features a cargo pier and an oil-terminal, both of 23.2m depth that can load tankers of more than 500 feet in length (Ports.com 2015). The annual export capacity of the terminal runs as high as 50 million tonnes of oil. The terminal is operated by Botas International Limited (BIL), a Turkish state company that also operates the Baku-Tbilisi-Ceyhan pipeline on the territory of Turkey. 

  The quantities of crude oil that are being exported to the terminal in Ceyhan, exceed the mark of one million barrels per day. Putting this number into context and given that ISIS has never been able to trade daily more than 45,000 barrels of oil (see Section 2, ‘The Upstream Oil Business of ISIS’, page 2), it becomes evident that the detection of similar quantities of smuggled crude cannot take place through stock-accounting methods. However, the authors of the present paper believe that there is another proxy-indicator, far more sensitive to quantities of ultracheap smuggled crude. This is the charter rates for tankers loading at Ceyhan.

  The Baltic Exchange (2015 a) tracks the charter rates on major seaborne trading routes of crude oil. To render its service more efficient and easily understood, it uses the system of Baltic Dirty Tanker Indices (Baltic Exchange 2015 b). One of these indices used to be the BDTI TD 11, 80,000 Cross Mediterranean from Baniyas, Syria to Laveras, France (see Map VI). Route 11 was discontinued in September 2011, due to Syria’s civil war and soon thereafter, it was replaced by BDTI TD 19 (TD19-TCE_Calculation 2015), of exactly the same technical specifications as BDTI TD 11, with the exception of the loading port of Ceyhan instead of Baniyas.

  From July 2014 until February 2015, the curve of TD 19 features three unusual spikes that do not match the trends featured by the rest of the Middle East trade-routes (see Graph IV): 

  1. The first spike develops from the 10th of July 2014 until the 21st, lasting approximately ten days. It coincides with the fall of Syria’s largest oil field, the AlOmar, in the hands of ISIS (Reuters 2014); 
  2. The second spike takes place from the end of October until the end of November 2014, lasting one month. It happens at the same time with fierce fighting between fundamentalists and the Syrian army over the control of the Jhar and Mahr gas fields, as well as the Hayyan gas company in the east of Homs province (International Business Times 2014; Albawada News 214); 
  3. The third spike lasts from the end of January 2015 until the 10th of February, stretching roughly ten days. It happens simultaneously with a sustained US-led campaign of airstrikes pounding ISIS strongholds in and around the town of Hawija east of the oil-rich Kirkuk (Rudaw 2015);

  

   

  The authors of this paper would like to make it clear from the very beginning that this has not been the case of a ‘smoking gun’. The evidence has been inconclusive. But even if volumes of ISIS crude found their way, beyond any reasonable doubt, to the international crude oil markets via the Ceyhan terminal, this fact would not conclusively point to collusion between the Turkish authorities and the shadow network of smugglers, let alone ISIS operatives.

  However, having clarified such a politically sensitive issue, the authors believe that there are strong hints to an illicit supply chain that ships ISIS crude from Ceyhan. Primary research points to a considerably active shadow network of crude oil smugglers and traders (see section 2.1, page 3), who channel ISIS crude to southeast Turkey from northeast Syria and northwest Iraq. Given the existence of Route E 90, the corresponding transportation of oil poses no unsurmountable geographic and topological challenges.

  An additional manifestation of the invisible nexus between Ceyhan and ISIS became evident through the concurrent study of the tanker charter rates from the port and the timeline of the terrorists’ military engagements (see section 3.4 on this page). It seems that whenever the Islamic State is fighting in the vicinity of an area hosting oil assets, the 13 exports from Ceyhan promptly spike. This may be attributed to an extra boost given to crude oil smuggling with the aim of immediately generating additional funds, badly needed for the supply of ammunition and military equipment. Unfortunately, in this case too, the authors cannot be categorical.

  *  *  *

  No, it can’t be categorical and frankly, if the authors claimed to have discovered indisputable proof, we would be immediately skeptical. What they have done however, is identify a statistical anomaly and develop a plausible theory to explain it.

  The key thing to note, is that this is a state-run terminal and it certainly seems as though charter rates spike around significant oil-related events involving Islamic State. Indeed, the fact that the authors mention collusion between Turkish authorities and ISIS operatives (even if they do so on the way to hedging their conclusions) indicates that the researchers think such a partnership is possible. 

  

  Finally, note that Ceyhan is less than two hours by car from Incirlik air base from which the US is flying anti-ISIS sorties. In other words, ISIS oil is being shipped to the world right down the road from Washington’s preferred Mid-East forward operating base.

  Now that we can add what looks like quantitative evidence that ISIS oil is shipped from Turkey to the voluminous qualitative evidence supplied by ex-Turkish lawmakers, investigative reporters, and the Russian government (to name just a few sources), we can now proceed to consider one final question: where does the crude that helps to fund Bakr al-Baghdadi’s caliphate ultimately end up? More on that over the weekend.

  

  

  

  

• US Ally Saudi Arabia's New King Likes Beheading People More Than His Predecessor

  Saudi Arabia is planning to execute dozens of people in a single day, according to Amnesty International who warn that "it is clear that the Saudi Arabian authorities are using the guise of counter-terrorism to settle political scores." As The BBC reports, 55 people were awaiting execution for "terrorist crimes", while a now-deleted report by al-Riyadh said 52 would die soon; which is on top of the "at least 151 people" who have been put to death since Saudi Arabia's current King Salman rose to power after the death of King Abdullah in January 2015, dramatically higher than the total of 90 in 2014.

  As Vice News reports Amnesty International criticized the wave of executions, calling it "a grim new milestone in the Saudi Arabian authorities" use of the death penalty.

  "The Saudi Arabian authorities appear intent on continuing a bloody execution spree which has seen at least 151 people put to death so far this year — an average of one person every two days," said James Lynch, deputy Middle East and North Africa director at Amnesty International. "The use of the death penalty is abhorrent in any circumstance but it is especially alarming that the Saudi Arabian authorities continue to use it in violation of international human rights law and standards, on such a wide scale, and after trials which are grossly unfair and sometimes politically motivated."

   

  The last time Saudi Arabia executed more than 150 people in a single year was when 192 executions were recorded in 1995. No one at Saudi Arabia's Justice Ministry was immediately available to comment on the surge in the numbers of executions.  But diplomats have speculated it may be because more judges have been appointed, allowing a backlog of appeals cases to be heard.

   

  Saudi Arabia's current King Salman rose to power after the death of King Abdullah in January 2015, and has moved to consolidate authority among his own branch of the royal family. Upon assuming power, he shook up the cabinet, appointed a new minister of justice, and placed functionaries loyal to him in positions of power throughout the state bureaucracy.

  Saudi Arabia has long been ranked among the top five countries to use capital punishment. It ranked number three in 2014, after China and Iran, and ahead of Iraq and the United States, according to figures from Amnesty International. The same five countries executed the most prisoners in the first six months of 2015.

  However, things are about to get even crazier, as The BBC reports, Amnesty International has expressed alarm at reports that the authorities in Saudi Arabia are planning to execute dozens of people in a single day.

  The newspaper Okaz said 55 people were awaiting execution for "terrorist crimes", while a now-deleted report by al-Riyadh said 52 would die soon.

   

  They are thought to include Shia who took part in anti-government protests.

   

  Amnesty said that given the spike in executions this year, it had no option but to take the reports very seriously.

   

  The Saudi newspaper reports said those facing execution in the coming days included "al-Qaeda terrorists" and people from the Awamiya area.

   

  The alleged al-Qaeda militants were accused of attempting to overthrow the government and carry out attacks using small arms, explosives and surface-to-air missiles, Okaz reported.

   

  The Awamiya residents were meanwhile convicted of sedition, attacks on security personnel and interference in neighbouring Bahrain, it said.

   

  Awamiya is a town in the Qatif region of oil-rich Eastern Province. Since 2011, it has been the centre of protests by Saudi Arabia's Shia minority, which has long complained of marginalisation at the hands of the Sunni monarchy.

  Among those at imminent risk of execution were six Shia activists from Awamiya "who were clearly convicted in unfair trials", according to Amnesty.

  "It is clear that the Saudi Arabian authorities are using the guise of counter-terrorism to settle political scores," said James Lynch, Amnesty's Middle East and North Africa deputy director.

   

  "Three of those six activists were sentenced for 'crimes' committed while they were children and have said that they were tortured to confess."

  US ally Saudi Arabia argues that death sentences are carried out in line with Sharia and with the strictest fair trial standards and safeguards in place. Here are 10 sobering facts from Amnesty International’s research:

  1. CRUEL, INHUMAN AND DEGRADING PUNISHMENT

  Saudi Arabia’s courts continue to impose sentences of flogging as punishment for many offences, often following unfair trials. Besides Raif Badawi, in the past two years the human rights defenders Mikhlif bin Daham al-Shammari and Omar al-Sa’id were sentenced to 200 and 300 lashes, respectively, and Filipino domestic worker Ruth Cosrojas was sentenced to 300. Amputations and cross-amputations are also carried out as punishment for some crimes.

  2. SPIKE IN EXECUTIONS

  Saudi Arabia is among the world’s top executioners, with dozens of people being put to death annually, many in public beheadings. So far this year 40 people have been executed– almost four times the equivalent number for this time last year.

  3. CRACKDOWN ON ACTIVISTS

  Besides Raif Badawi, dozens more outspoken activists remain behind bars, simply for exercising their rights to freedom of expression, association and assembly. The authorities have targeted the small but vocal community of human rights defenders, including by using anti-terrorism laws to suppress their peaceful actions to expose and address human rights violations.

  4. NO SPACE FOR DISSENT

  All public gatherings, including demonstrations, remain prohibited under an order issued by the Interior Ministry in 2011. Those who defy the ban face arrest, prosecution and imprisonment on charges such as “inciting people against the authorities”.

  5. SYSTEMATIC DISCRIMINATION AGAINST WOMEN

  Women and girls remain subject to discrimination in law and practice, with laws that subordinate their status to men, particularly in relation to family matters such as marriage, divorce, child custody and inheritance. Women who supported a campaign against a de facto ban on women drivers face the threat of arrest and other harassment and intimidation.

  6. ROUTINE TORTURE IN CUSTODY

  Former detainees, trial defendants and others have told Amnesty International that the security forces’ use of torture and other ill-treatment remains common and widespread, and that those responsible are never brought to justice.

  7. ARBITRARY ARREST AND DETENTIONS

  Scores of people have been arrested and detained in pre-trial detention for six months or more, which breaches the Kingdom’s own criminal codes. Detainees are frequently held incommunicado during their interrogation and denied access to their lawyers. Some human rights activists have been detained without charge or trial for more than two years.

  8. ENTRENCHED RELIGIOUS DISCRIMINATION

  Members of the Kingdom’s Shi’a minority, most of whom live in the oil-rich Eastern Province, continue to face entrenched discrimination that limits their access to government services and employment. Shi’a activists have received death sentences or long prison terms for their alleged participation in protests in 2011 and 2012.

  9. MASS DEPORTATION OF MIGRANT WORKERS

  According to the Interior Ministry, a crackdown on irregular foreign migrant workers in November 2013 led to the deportation of more than 370,000 people. Some 18,000 were still being detained last March. Thousands of people were summarily returned to Somalia, Yemen or other states where they were at risk of human rights abuses.

  10. WHAT HAPPENS IN THE KINGDOM, STAYS IN THE KINGDOM

  The Saudi Arabian authorities continue to deny access to independent human rights organizations like Amnesty International, and they have been known to take punitive action, including through the courts, against activists and family members of victims who contact us.

  

  

  

  

  

• Active Shooter Barricaded At Colorado Springs Planned Parenthood, Multiple People Shot

  If there are two things that could unleash progressive hell across the nation, it is the combination of “active shooter” and “Planned Parenthood” in the same sentence, which is exactly what happened moments ago.

  Moments ago the Colorado Springs police responded to a call of an active shooter in the parking lot of a Planned Parenthood clinic, adding that the area has not been secured, the department said, warning the media not to stage in the area.

  The Colorado Springs Fire Department said fire crews were called in to assist for reports of a possible active shooter and fire at the Planned Parenthood address at 3480 Centennial Boulevard.

  According to Twitter reports, the shooter has shot one officer shot and is currently “barricaded in planned parenthood & multiple victims.”

  The Gazette adds that according to the police scanner, at least 4 are injured in the ongoing active shooting situation and that multiple people have been shot.

  The shooter has been described as a white male, 40 yrs. of age, with a black coat, wearing a hat with flaps.

  Live webcast:

  

  

  

  CSPD PIO responding to call if active shooter in Centennial Bl. The area is NOT secure. Media do not stage in area!

  — Springs Police (@CSPDPIO) November 27, 2015

  MORE: Via scanner, at least 4 injured in active shooter situation near @PPFA in #COSprings https://t.co/0320n6zTUt

  — The Gazette (@csgazette) November 27, 2015

  BREAKING Colorado Springs active shooter one officer shot – reports coming in. Shooter barricaded in planned parenthood & multiple victims

  — Mike Violette (@fopviolette) November 27, 2015

  #BREAKING: 11 News confirmed there is an active shooter situation at the Planned Parenthood near Centennial in COS. pic.twitter.com/FIWukJlKbP

  — KKTV 11 News (@kktv11news) November 27, 2015

  BREAKING: Colorado Springs responding to report of active shooter situation: Police on Twitter. https://t.co/8M1ZGNjEtW

  — Reuters Top News (@Reuters) November 27, 2015

  Centennial Blvd is blocked off near GOD rd because #activeshooter near @PPact @FOX21News pic.twitter.com/zBg9Zbsaua

  — Kody Fisher (@KodyFisherFOX21) November 27, 2015

  MORE: Reports of multiple people shot in active shooter situation near Planned Parenthood in #COSprings https://t.co/C8Z2D4bWS9 @PPFA

  — The Gazette (@csgazette) November 27, 2015

  Just saw someone being put into an ambulance. @FOX21News Not sure who. pic.twitter.com/HrrKrvCdPI

  — Kody Fisher (@KodyFisherFOX21) November 27, 2015

  BREAKING NEWS..ACTIVE SHOOTER, COLORADO SPRINGS.
  Shooter described as a White Male, 40 yrs. of age, Black coat, wearing a hat with flaps….

  — Mike Brooks (@tvdetective) November 27, 2015

  

  

  

  

  

• 2015: The Year Of The American Identity Crisis

  Via SeanKerrigan.com,

  Race and sexual identity now make up a good portion of all media distractions. According to political activists, “symbols of oppression” now include Halloween costumes, the Confederate flag, and the color of Starbucks coffee cups. So shallow is our collective identity, that this now defines our most passionate debate. While the global economy deteriorates and our government pursues endless conflict across the planet, this is what Americans are most concerned about.

  Identity issues make the perfect media story. For the 24-hour TV and internet rage business, these symbolic, but mostly linguistic fights generate strong emotional responses while being non-threatening to advertisers or to the government.

  These relatively innocuous symbols have become lightning rods for attention, while real issues go ignored. We wrote in a previous article back in June: “[R]eal problems like mass incarceration, torture, endless war, the end of privacy, and widespread poverty are ignored. This is more than just a corrupt media distracting us with meaningless trivia. Americans literally cannot tell the difference between symbols and reality.”

  I have long maintained that these sham fights are a symptom of a society that collectively no longer has any sense of identity. What makes life worth living? Family? That hardly seems true for many Americans. Family cohesion has been disintegrating for some time. A few of us try to define ourselves by hard work and material gain. Maybe that works for some, but how far does that go in an economy with 46 million people on food stamps and a shrinking middle class?

  Of course, many of us do cling to the material aspects of life we hope will fill the void in our lives. Consider Black Friday, now practically a national holiday of consumer excess. Where employees once took off of work to spend time with family, they now schedule time to stand in lines and acquire larger — and “smarter” — television sets.

  I remember when I was growing up, the terrible Jingle All The Way movie starring Arnold Schwarzenegger parodied toy crazed shoppers willing to step over one another to get a popular toy in time for Christmas. Watching it today, the scenes of barbarity in the toy stores seems more like a subdued documentary than parody.

  Still, despite the increasing depravity of Americans who are willing to pummel, stab, shoot and pepper spray fellow shoppers, Black Friday sales still seem to disappoint retailers every year. It seems many of us can no longer afford to define our lives solely by electronic gadgets and other pieces of useless shit. For a while, naked consumerism was our god; now we don’t even have that.

  In the past, Americans have had a strong sense of what sociologists call “negative identity” — we define ourselves by what we are not. For example, “We are not Nazis” or “We are not Communists.” The advantage of this kind of thinking is that it fortifies the national psyche against external enemies. Ultimately, it’s an unsatisfying way to live. When those enemies disappear, we seek out new villains to hate and destroy, the only meaning in life being found in death.

  Historian and social critic Morris Berman writes that a negative identity “can never tell you who you actually are, in the affirmative sense. It leaves an emptiness at the center, such that you always have to be in opposition to something, or even at war with someone or something, in order to feel real.”

  And, if our enemies are not sufficiently threatening, what’s left? As Chuck Palahniuk once wrote, “When we don’t know who to hate, we hate ourselves.”

  The terrorist attack in Paris which killed 128 people prompted a tense reaction across the western world. If there is a similar attack in the United States with hundreds dead, we will pounce on whatever new scapegoat is offered. It will be tremendously frightening.

  The government will easily rally a bloodthirsty and directionless public into supporting changes to the law that practically eliminate free speech, privacy, trial by jury and the few other protections the Constitution still provides. The security state is salivating at the potential to eliminate the last vestiges of civil liberties and envelope the nation in constant surveillance and eventually total tyranny. The key to their success is not that they promise security from terrorists, but rather they offer struggling Americans a reason to be alive — a fight against the “other.”

  Usually, an identity crisis is temporary. Eventually, people discover a healthy identity for themselves and a sense of stability returns to their lives. But, under such constant political mismanagement and widespread criminality, what chance is there for a stable future? Very little it seems.

  

  

  

  

  

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• They Sow The Cyclone – We Reap The Blowback

  Submitted by Dan Sanchez via AntiWar.com,

  “For they have sown the wind, and they shall reap the whirlwind”?—?Hosea 8:7

  It may be surprising to hear, but it is a plain historical fact that modern international jihad originated as an instrument of US foreign policy. The “great menace of our era” was built up by the CIA to wage a proxy war against the Soviets.

  A 1973 coup in Afghanistan installed a new secular government that, while not fully communist, was Soviet-leaning. That was a capital offense from the perspective of America’s Cold War national security state, at the time headed by Henry Kissinger.

  Conveniently for Kissinger, the dirt poor country was sandwiched between two US client states: Pakistan to the east and Iran (then still ruled by the CIA-installed Shah) to the west. Immediately after the coup, the CIA and the clandestine security agencies of Pakistan (ISI) and Iran (SAVAK) began regime change operations in Afghanistan, orchestrating and sponsoring Islamic fundamentalist insurrections and coup attempts.

  Due to these efforts, as well as the government’s own oppressiveness, a widespread rebellion broke out in Afghanistan in 1978. In July 1979, US President Jimmy Carter, on the advice of National Security Adviser Zbigniew Brzezinski, officially authorized aid to the puritanical Mujahideen rebels, to be delivered through the CIA’s “Operation Cyclone.” This was on top of the unofficial aid that the CIA had already been funneling to Afghan Islamist insurgents for years through Pakistan and Iran.

  In a 1998 interview, Brzezinski openly admitted that he and Carter thus “knowingly increased the probability” that the Soviets would militarily intervene. And indeed Russia did invade in December 1979, beginning the decade-long Soviet-Afghan War. In the same 1998 interview, Brzezinski boasted:

  “The day that the Soviets officially crossed the border, I wrote to President Carter: We now have the opportunity of giving to the USSR its Vietnam war.”

  Shortly thereafter, the highest cleric of Saudi Arabia (another US client) endorsed a fatwa proclaiming jihad against the atheist Soviets in Afghanistan as an obligation for all Muslims throughout the world. It should be noted that the Saudis have a narrow definition of a true “Muslim,” as they follow Wahhabism, one of the most extreme and intolerant strands of Islam, highly similar to ISIS’s own. Throughout the 1980s, Saudi Arabia also provided the Afghan Jihad with hundreds of millions of petrodollars in aid and tens of thousands of madrassa-indoctrinated volunteer fighters.

  The CIA also heavily participated in recruitment for the increasingly international jihad. And this is where Osama bin Laden enters the picture. As political scientist and terrorism expert Eqbal Ahmad said in a 1998 speech:

  “Money started pouring in. CIA agents starting going all over the Muslim world recruiting people to fight in the great jihad. Bin Laden was one of the early prize recruits. He was not only an Arab. He was also a Saudi. He was not only a Saudi. He was also a multimillionaire, willing to put his own money into the matter. Bin Laden went around recruiting people for the jihad against communism.

  I first met him in 1986. He was recommended to me by an American official of whom I do not know whether he was or was not an agent. I was talking to him and said, ‘Who are the Arabs here who would be very interesting?’ By here I meant in Afghanistan and Pakistan. He said, ‘You must meet Osama.’ I went to see Osama. There he was, rich, bringing in recruits from Algeria, from Sudan, from Egypt, just like Sheikh Abdul Rahman.”

  The US publicly lionized the anti-Soviet jihadis. In 1983, President Ronald Reagan, who continued Carter’s Afghan policy, met with Mujahideen leaders in the Oval Office for a photo op, and released a statement which said:

  “To watch the courageous Afghan freedom fighters battle modern arsenals with simple hand-held weapons is an inspiration to those who love freedom.”

  

  

   

  The glorification even extended to popular culture. In the climactic battle scene of 1988’s Rambo III, the heroic John Rambo is about to be overrun by Soviet forces when he is saved by a Mujahideen cavalry charge. The movie closed with onscreen text that read, “THIS FILM IS DEDICATED TO THE BRAVE MUJAHIDEEN FIGHTERS OF AFGHANISTAN.” After the US went to war with the Mujahideen’s successors in 2001, the dedication was changed to, “THE GALLANT PEOPLE OF AFGHANISTAN.”

   

  

   

  The film even has Rambo’s mentor echoing Brzezinski when he screams at his Russian captor, “We already had our Vietnam! Now you’re gonna have yours!”

  After a decade of bloody war, the Soviets withdrew from Afghanistan in February 1989. Later that year, the Berlin Wall fell and Romania left the Soviet-led Warsaw Pact. The year after, Poland and East Germany followed. And in 1991, the Warsaw Pact and then the Soviet Union itself both dissolved completely.

  Brzezinski arrogantly took credit for this, claiming that his strategy of giving the USSR “its own Vietnam” brought about the Soviet “collapse.”

  But it was not really a collapse. The Soviet Empire did not descend into failed-state chaos, the way Afghanistan, Iraq, Libya, Syria, Yemen, and Somalia recently have thanks to the American War on Terror. That is what a true “collapse” looks like.

  In contrast, what happened throughout the Soviet Empire was not a violent collapse, but a relinquishing of power and a generally peaceful dissolution. Such an outcome rarely results from war. To the contrary, war is the health of the State, as Randolph Bourne taught. War tends not to loosen, but to tighten a regime’s grip on power. It is not war, but peace and detente that can lead to peaceful dissolution. It is when people no longer feel so besieged by enemies abroad that they feel secure enough to demand greater freedom (even to the extent of full secession) from their “protectors” and rulers.

  It was the Reagan-Thatcher-Gorbachev thaw of Reagan’s second term that created the necessary climate for ending the proxy war in Afghanistan. And it was the subsequent combination of far-abroad detente and near-abroad peace that created the necessary climate for the Soviet dissolution.

  Brzezinski’s jihad did not win the Cold War. It only sowed the seeds for the Terror War.

   

  

   

  In 1990, the US seized the emerging post-Berlin “unipolar moment” of peerless preeminence by launching its first globocop “police action”: the Persian Gulf War (Operation Desert Storm) against Saddam Hussein’s regime in Iraq.

  Desert Storm was preceded by Operation Desert Shield, in which the US built up a military presence in Saudi Arabia (troops, arms, and bases) for use in staging attacks on Iraq in the upcoming war.

  

  F-15Es parked during Operation Desert Shield.

  Contrary to US promises, the military occupation of Saudi Arabia persisted after the war, as the bases were used to enforce a blockade on Iraq throughout the 90s (which starved over a half a million children). This had a twofold impact on Islamic radicalization.

  As Lawrence Wright wrote in The New Yorker :

  “The presence of American troops in Saudi Arabia was a shattering event in the country’s history, calling into question the ancient bargain between the royal family and the Wahhabi clerics, whose blessing allows the Saud family to rule. In 1992, a group of the country’s most prominent religious leaders issued the Memorandum of Advice, which implicitly threatened a clerical coup. The royal family, shaken by the threat to its rule, accommodated most of the clerics’ demands, giving them more control over Saudi society. One of their directives called for the creation of a Ministry of Islamic Affairs, which would be given offices in Saudi embassies and consulates. As the journalist Philip Shenon writes, citing John Lehman, the former Secretary of the Navy and a 9/11 commissioner, “it was well-known in intelligence circles that the Islamic affairs office functioned as the Saudis’ ‘fifth column’ in support of Muslim extremists.”

  The occupation of the Arabian Peninsula also began Bin Laden’s vendetta against his former patrons. As Eqbal Ahmad told it:

  “He turns at a particular moment. In 1990, the U.S. goes into Saudi Arabia with forces. Saudi Arabia is the holy place of Muslims, Mecca, and Medina. There had never been foreign troops there. In 1990, during the Gulf War, they went in, in the name of helping Saudi Arabia defeat Saddam Hussein. Osama Bin Laden remained quiet.

  “Saddam was defeated, but the American troops stayed on in the land of the Ka’aba [the most sacred site of Islam, in Mecca], foreign troops. He wrote letter after letter saying, ‘Why are you here? Get out! You came to help but you have stayed on.’ Finally he started a jihad against the other occupiers. His mission is to get American troops out of Saudi Arabia. His earlier mission was to get Russian troops out of Afghanistan.”

  

   

  Even after this turn, the western lionization of the the Soviet-Afghan War’s Mujahideen veterans, and of Bin Laden in particular, continued into the 90s. As late as December 1993, The Independent (a major British newspaper) even published a puff piece on Bin Laden, plastered with a huge photo of the smiling sheik, titled “ Anti-Soviet warrior puts his army on the road to peace.” The article lauded Bin Laden as a humanitarian, gushing over how the “Saudi businessman who recruited mujahedin now uses them for large-scale building projects in Sudan.”

   

  

   

  As it turned out, his largest-scale project was to build up the international militia that the CIA helped him recruit into Al Qaeda, which he would then lead in a terror jihad against the West throughout the 90s. With that wave of attacks in mind, Brzezinski’s 1998 interviewers asked if he had any regrets over blowback from Operation Cyclone. The statesman was totally dismissive.

  Q: And neither do you regret having supported the Islamic fundamentalism, having given arms and advice to future terrorists?

  Brzezinski: What is most important to the history of the world? The Taliban or the collapse of the Soviet empire? Some stirred-up Moslems or the liberation of Central Europe and the end of the cold war?

  Q: Some stirred-up Moslems? But it has been said and repeated: Islamic fundamentalism represents a world menace today.

  Brzezinski: Nonsense!

  Later in 1998, mere months after Brzezinski’s interview, Eqbal Ahmad delivered the exact opposite assessment of Bin Laden and Al Qaeda, warning his American audience:

  “They’re going to go for you. They’re going to do a lot more. These are the chickens of the Afghanistan war coming home to roost.”

  

   

  Three years later, Brzezinski was proven spectacularly wrong, and Ahmad tragically right, when the terror jihad of Bin Laden’s Mujahideen-descended band of “stirred-up Moslems” culminated in the attacks of September 11, 2001.

  During the planning of those attacks, Bin Laden and his inner circle were hosted by the Taliban, yet another band of Mujahideen-descended “stirred-up Moslems,” then ruling Afghanistan.

  As Ahmad foretold, the chickens of the CIA’s Afghan Jihad (and of the Gulf War) had indeed come home to roost.

  True to their names, Operations Cyclone and Desert Storm sowed the wind. Years later, it was 3,000 American civilians who reaped the whirlwind.

  Incredibly, that whirlwind harvest was then reseeded, ensuring that still more civilians would later reap an even bigger whirlwind. Apparently cultivating chaos is the only trade that empires know. The regime and its kept news media sowed the whirlwind by exploiting America’s post-9/11 fear and anger to garner acquiescence for even larger and more frequent foreign misadventures: for a globe-spanning Long War that continues to this day.

  First came the Afghanistan War against the Taliban and in pursuit of Al Qaeda. Almost inexplicably, Bin Laden escaped into hiding in US-alliedPakistan after being pinned down in the caves of Tora Bora. It is somewhat less inexplicable in light of the fact that the neocon-led Bush administration was trying to fear-monger the public into countenancing another war in Iraq, and that this involved pushing bogus intelligence connecting Saddam Hussein with Al Qaeda. At least until the regime got its post-9/11 bonus war, it was convenient to still have Dread Pirate Osama at large to keep America’s war fever up. Better dread than dead.

   

  

   

  Similarly, in 2002, the Bush administration denied the military’s request for permission to kill another figurehead terrorist: Abu Musab al-Zarqawi, who had in the 80s been yet another recruit for the CIA’s Afghan Jihad. That too was likely about the administration getting its war in Iraq. At the UN, Secretary of State Colin Powell falsely identified Zarqawi as a link between Saddam and Al Qaeda (he was allied with neither, and an enemy of the former), in order to paint the planned invasion of Iraq as a necessary front in the War on Terror.

  As it turned out it was the Iraq War itself that unleashed Zarqawi in 2003, freeing him to emerge from autonomous Kurdistan, where he had been hiding from Saddam’s security forces under the protective aegis of an American no-fly zone. His formerly obscure terrorist gang rapidly ascended amid the chaos of the Iraq War, becoming Al Qaeda in Iraq or AQI (after Zarqawi swore allegiance to Bin Laden), and then the Islamic State in Iraq or ISI (after Zarqawi was finally killed).

  After suffering severe setbacks in Iraq, in 2011 the Zarqawiites began infiltrating neighboring Syria to take part in the insurgency against Bashar al-Assad’s regime. Thereafter renaming itself ISIS (Islamic State in Iraq and Syria), the group, along with its offshoot the Al Nusra Front and other Mujahideen militias, came to dominate that insurgency.

  The growth of ISIS and Nusra in Syria was fed by the United States (the State Department, the Pentagon, and the CIA) and its Western and regional allies (the UK, France, Turkey, Saudi Arabia, the Gulf States, etc.). By at least 2012, these powers had launched a veritable Operation Cyclone 2.0: recruiting, training, financing, and arming Mujahideen fighters for the purpose of overthrowing the secular ruler Assad (who, like the post-1973 secular Afghan regime, is an ally of Russia).

  Just as in Afghanistan decades ago, young men, radicalized by the call to jihad and militarized by the promise of weapons and money, have poured in from countries throughout the Muslim world, and from Europe too. This has not only led to the death of hundreds of thousands of Syrians and the displacement of millions, but has turbo-boosted ISIS and Nusra in myriad ways.

   

  

  US Senator John McCain with mujahideen from the Northern Storm Brigade.

  The Syrian Jihad, like the Afghan Jihad, was preceded by less direct and lower grade subversion using militant Islamists. In the Afghan prelude, America’s dirty work was done by Pakistan and Iran. In the Syrian prelude, it was done by the Saudis and lesser Gulf Sheikdoms, who with US approval, began sponsoring anti-Assad Salafist militias in neighboring Lebanon as early as 2006.

  There were voices even among the Saudis who, like Eqbal Ahmad, darkly forebode blowback from dealing with such devils. One former Saudi diplomat warned:

  “Salafis are sick and hateful, and I’m very much against the idea of flirting with them. They hate the Shiites, but they hate Americans more. If you try to outsmart them, they will outsmart us. It will be ugly.”

  Yet they were drowned out by voices who, like Brzezinski, shrugged off such concerns over “stirred-up Salafis.” A US government consultant related to the great journalist Seymour Hersh that:

  “This time… Bandar and other Saudis have assured the White House that ‘they will keep a very close eye on the religious fundamentalists. Their message to us was ‘We’ve created this movement, and we can control it.’ It’s not that we don’t want the Salafis to throw bombs; it’s who they throw them at…”

  In other words: “Thanks for paying for our jihad in the 80s. And sorry about your towers. But this time around it’ll be totally different, trust us. Sincerely, the Wahhabis.”

  

   

  Yet, regarding Syria, the American deep state has been just as much sinister as it has been gullible and hubristic, if not more. As a recently disclosed Pentagon intelligence report reveals, US planners knew full well that they were once again “sowing the cyclone,” and that others would soon “reap the blowback.” The report from 2012 predicted that supporting the Syrian insurgency would create “the ideal atmosphere” for ISIS “to return to its old pockets” in Sunni Iraq and also create “the possibility of establishing a declared or undeclared Salafist Principality” in the region.

  And that is precisely what happened. In 2014, strengthened by the US-backed Syrian Jihad, ISIS burst back into “its old pockets” in Iraq, conquered the northwest of the country down to the gates of Baghdad, and declared a Caliphate (a Salafist Principality).

   

  

  The wind sown by Operation Cyclone took two decades to fully germinate into the blowback that blew the Twin Towers down. Yet it only took two years for us to reap the whirlwind from the Syrian Jihad. Scott Horton proposes the term “backdraft” for blowback that is so prompt and predictable: like the firestorm that immediately erupts in your face upon opening the door of a burning hot room.

  The US and its allies have opened the door to Hell in Syria. And the ensuing ISIS backdraft has lately spread far beyond Syria and Iraq, consuming 44 lives in the bombing of a Beirut marketplace, 224 lives with the bombing of a Russian airliner, and 130 lives with the recent attacks in Paris.

   

  

   

  It took longer than it did in 1979, but America’s current proxy jihad has drawn in Russia once again. The chief difference is that this time, the US and its allies are not limiting themselves to covert ops, but are involving their air forces as well. This is ostensibly to “destroy” ISIS. However, the US-led coalition also wants the Assad regime gone, while the Russian-led coalition is trying to save it and to fight the US-supported non-ISIS Mujahideen as well (including Syrian Al Qaeda). So the countless warplanes buzzing over and bombing Syria are flying at cross purposes. This has turned the Levant into a nuclear powder keg.

  And now, unthinkably, a US ally may have just lit a match. Just this week, Turkey shot down a Russian warplane. Two pilots were reportedly executed by anti-Assad insurgents in mid-air. A video has emerged on the internet of insurgents standing over one of the dead Russians saying “Allahu Akbar” and apparently calling themselves “Mujahideen.”

  Remember, Turkey is a NATO member, who can drag the entire West into a thermonuclear war if it picks a big enough fight. The backdraft we reap from this latest American jihad may consume us all.

  Even if we survive this near-term global existential crisis, our warlords have more in store for us. The Paris attacks especially have yielded yet another crop of fear and loathing in the West, which the tillers of terror are keen to plow right back into still more proxy warfare and mayhem.

  But they cannot do so if we, their tax cattle, refuse to pull the plow or let them drive us like beasts of burden that are so easily spooked and prodded. We the people must convey that if they do not stop cultivating the storms of chaos, then we will cast off their yoke once and for all.

   

  

  

  

  

  

• Government Historians Admit Statue Of Liberty Was Originally A Muslim Woman

  This is likely to be a little tough to swallow for some Americans but The Statue of Liberty – symbolically welcoming the world's tired, poor, and huddled masses – was originally conceived as a Muslim peasant woman.

   

  

   

  As The Hill reports, The Statue of Liberty was originally designed to be a Muslim woman, the Smithsonian Institution's magazine says.
   
  An article on the government-administered museum’s blog, Smart News, claims one of the designers of Lady Liberty drew inspiration from monuments in Egypt and originally intended to construct a veiled female peasant on the Suez Canal.

  The Statue of Liberty was originally conceived as a Muslim peasant woman and was to have stood at the approach to the Suez Canal, a lantern in her upraised hand serving as both lighthouse and a symbol of progress.

   

  But the sculptor, Frederic Auguste Bartholdi of France, proved unable to sell the idea to the khedive of Egypt, Ishma’il Pasha. Bartholdi remained determined to erect a colossus on the scale of the one in ancient Rhodes. He sailed to America with drawings of the Muslim woman transformed to the personification of Liberty.

   

  At first, Bartholdi considered the tip of Manhattan and Central Park as possible sites. He was on a ferry to Staten Island when he decided that Bedloe’s Island would be just the spot.

  And there she now stands, the Muslim woman turned to Lady Liberty, the light in her upraised hand symbolizing so much more than simple progress, the inscription at the base words from the poet Emma Lazarus that are familiar to us all:

  “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-tossed to me,
  I lift my lamp beside the golden door!”

  As The Daily Beast concludes,

  To truly be Lady Liberty, the figure built with kids’ coins and originally conceived as a Muslim must remain a Muslim as well as a Christian and a Jew and a Hindu and a Buddhist and every other faith, even no faith at all.

  

  

  

  

  

• Caught On Tape: China Builds A Bridge In Just 43 Hours

  When you have a billion people willing to work instead of expecting free “stuff”, anything’s possible… Earlier this year, a Chinese construction company had erected a 57-story skyscraper in just 19 days. This time the Chinese have built an overpass in mere 43 hours!

  
  

   

  Workers took apart the old structure of Beijing’s Sanyuan Bridge in a few hours. Then they brought an entire piece of concrete to bridge the gap and paved it over, reports Citylab.com.

  To build the bridge, over 1300 tonnes of new surfacing material was used which save months of commotion and traffic woes. For the first time in Chinese workers tried out a new ‘integrated replacement method.’

  

  

  

  

  

• Russia Releases Video Of S-400 SAM Deployment In Syria, As Putin Issues Warning To Obama

  As reported two days ago, one of the first decisions a very angry Russia took in the aftermath of the shooting down of its Su-24 by a Turkish F-16 was to dispatch a Moskva guided-missile cruiser off the coast of Syria to provide air cover for its jets operating near Latakia, as well as send an unknown number of ultramodern S-400 (or SA-21 Growler in NATO designation) SAM batteries to Latakia to make sure that the tragic incident from Tuesday never repeats itself by sending Turkey a very clear message that the next time a Turkish warplane engages a Russian jet, Russia will immediate retaliate using ground forces.

  Earlier today, Russia made a very explicit demonstration of the deployment of at least two S-400 batteries at Syria’s Khmeimim airbase, with the Russian Ministry of Defense promptly publicizing the arrival with the following clip.

   

  With a range of 250 miles, the S-400 could easily strike Turkish targets, and as the map below shows, Russia could even take down targets over northern Israel. As cited by the Independent, Nick de Larrinaga, Europe editor of the defense magazine IHS Jane’s Defense Weekly, said it would be “a significant increase” in the reach of Russian air-defense capacities. “The message that the Russians are trying to send is that they’re capable of defending themselves in Syria, should the situation escalate.”

  

   

  Needless to say, the US was not enthused and earlier today the US embassy in Moscow said that the “Russian deployment of the S-400 air-defense system to Syria won’t aid the fight against the Islamic State, with the US diplomat adding that the US is hopeful Russia won’t use the system to target planes flown by international coalition since Islamic State doesn’t have air force.” Clearly a warning to Putin not to dare use the rockets against Turkish (or other coalition) jets.

  So what is Putin’s intention by escalating the military deployment of Russian weapons in Syria? Conveniently he explained his thinking just a few hours ago during his press conference with Francois Hollande. In answering a question by a reporter from French Le Monde, Putin said the following:

  “The S-400 is an air defense system. The reason we didn’t have the system in Syria is because we thought our planes were flying at high enough altitudes where a terrorist could not reach them; they don’t have weapons capable of downing our planes at the altitude of over 3 or 4 thousand meters. And We could never think that we could be stabbed in the back by a country we regarded as our ally. Our planes operated at altitudes of 5-6,000 meters and were completely unprotected against potential attacks from fighter jets – we could never imagine that that could be possible otherwise we would deploy such systems in the area protecting our bombers  against possible attacks.”

   

  …

   

  “We never did it because we regarded Turkey as our friend, we never expected an attack from that side. This is why we regard this attack as that of a traitor. But now we that this is possible, and we have to protect our planes. This is why we deployed a modern system, the S-400, it has a pretty long range and it’s one of the most effective systems of this kind in the world. We will not stop there: if we have to we will also deploy our fighter jets in the area.”

  Bottom line: another direct engagement by a Turkish fighter will be its last, and in fact now that Russia is prepared we would not be at all surprised to see Russia cross into Turkish airspace on purpose just to provoke Erdogan to repeat the events from last week, only this time with the Russian ready and prepared to retaliate to any engagement. In fact, the odds of Russia doing just that in the next few days are especially high.

  But while the reason behind the S-400 deployment was largely known to most, where Putin’s press conference took an unexpected detour was what he said just around 20:30 in, when in not so many words, Putin effectively accused the US of leaking the coordinates of the Russian plane to Turkey, which was merely a hitman acting with the blessing of the Pentagon.

  This is what Putin said:

  “We told our US partners in advance where, when at what altitudes our pilots were going to operate. The US-led coalition, which includes Turkey, was aware of the time and place where our planes would operate. And this is exactly where and when we were attacked. Why did we share this information with the Americans? Either they don’t control their allies, or they just pass this information left and right without realizing what the consequences of such actions might be. We will have to have a serious talk with our US partners.

  In other words, just like in the tragic bombing of the Kunduz hospital by US forces (which has now been attributed to human error), so this time the target was a Russian plane which the US knew about well in advance, was targeted however not by the US itself, but by a NATO and US-alliance member, Turkey.

  And while the deployment of the Russian SAM missiles was already known, the real message from today’s presser, the one that will be the topic of a private and “serious talk with Russia’s US partners”, is that Putin indirectly blames Obama for what happened on Tuesday realizing that Erdogan was merely the “executor”, one who is simply motivated to protect his (and his son’s) Islamic State oil routes.

  Full press conference below; the discussion of Russia’s S-400 deployment begins 17:30 in:

  

  

  

  

  

• Martin Shkreli Sets Out To Crush KaloBios Shorts: Will Stop Lending Out Shares

  The brutal tragedy of at least one KaloBios short seller was first documented a week ago when we noted the margin call massacre that befell “novice” trader Joe Campbell, who went to bed with a $35K short on Wednesday and woke up with a $106 margin call the next morning after it was revealed that a “consortium” led by Martin Shkreli had taken an unknown stake in heretofore insolvent KBIO.

  However, the story did not end there because the very next day we got new information that Shkreli had not bought just any amount of KBIO shares but a whopping 70%, which got us thinking: is the “most hated man in America” contemplating to unleash a Volkswagen scenario, in which he has acquired enough shares to leave more shorts outstanding than there is actual float, and then one day to simply pull all the borrow by no longer lending out shares to potential shorters.

  This is what we said last Friday:

  In other words, Shkreli’s consortium had acquired 70% of the company, and should they decide to pull the borrow, on the odd chance that the short interest had soared to above 30%, KBIO – which until a few days ago – suddenly has the potential to become the next Volkswagen: a company which has more shares short than there is float available to cover them.

  We added:

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

   

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

  And then two days ago, when it was still unclear just what Shkreli’s intentions are, but when the stock had already soared well into the $40-range, we again warned that “if [Shkreli and friends] pull the borrow and demand delivery, there will simply not be enough shares outstanding to satisfy all shorts, leading to, drumroll, the next Volkswagen.”

  Oddly enough, there was a radio silence from Shkreli who supposedly had mentioned he had no intention of demanding share delivery, which made us wonder if he was merely waiting for the right moment to strike.

  Then something caught our attention: last night Bloomberg reported that according to Markit, the short interest in KBIO had soared to 49% of the free float from just 5.6% on Nov. 16.

  Surely, if there was any trigger to push Shkreli to demand delivery, this would be it.

  And, not unexpectedly, this is precisely what he did earlier today.

  I spoke with my counsel & advisers and decided to stop lending my $KBIO shares out until I better understand the advantages of doing so. 1/2

  — Martin Shkreli (@MartinShkreli) November 26, 2015

  I apologize for any inconvenience this may create in lending markets and I will probably resume lending at some point. Happy Thanksgiving!

  — Martin Shkreli (@MartinShkreli) November 26, 2015

  And now the squeeze really begins, as all those 49% who are short KBIO, according to Markit, rush for the nearest exit, while those who are currently long the stock refuse to sell at any price knowing they have all the leverage.

  Whether this will translate into a Volkswagen circa 2008-type scenario, which incidentally looked as follows…

  

  … and where a company which is for all intents and purposes bankrupt suddenly trades with a market cap in the hundreds of millions or even billions as desperate shorts pay any price just to get out…. tune in tomorrow to find out during tomorrow’s abbreviated session, because the KaloBios comedy is nowhere near concluded.

  As for Shkreli… well he is already the “most hated man in America” – might as well double down.

  

  

  

  

• Meet The Man Who Funds ISIS: Bilal Erdogan, The Son Of Turkey's President

  Russia’s Sergey Lavrov is not one foreign minister known to mince his words. Just earlier today, 24 hours after a Russian plane was brought down by the country whose president three years ago said “a short-term border violation can never be a pretext for an attack”, had this to say: “We have serious doubts this was an unintended incident and believe this is a planned provocation” by Turkey.

  But even that was tame compared to what Lavrov said to his Turkish counterparty Mevlut Cavusoglu earlier today during a phone call between the two (Lavrov who was supposed to travel to Turkey has since canceled such plans).

  As Sputnik transcribes, according to a press release from Russia’s Ministry of Foreign Affairs, Lavrov pointed out that, “by shooting down a Russian plane on a counter-terrorist mission of the Russian Aerospace Force in Syria, and one that did not violate Turkey’s airspace, the Turkish government has in effect sided with ISIS.“

  It was in this context when Lavrov added that “Turkey’s actions appear premeditated, planned, and undertaken with a specific objective.“

  More importantly, Lavrov pointed to Turkey’s role in the propping up the terror network through the oil trade. Per the Russian statement:

  “The Russian Minister reminded his counterpart about Turkey’s involvement in the ISIS’ illegal trade in oil, which is transported via the area where the Russian plane was shot down, and about the terrorist infrastructure, arms and munitions depots and control centers that are also located there.”

  Others reaffirmed Lavrov’s stance, such as retired French General Dominique Trinquand, who said that “Turkey is either not fighting ISIL at all or very little, and does not interfere with different types of smuggling that takes place on its border, be it oil, phosphate, cotton or people,” he said.

  The reason we find this line of questioning fascinating is that just last week in the aftermath of the French terror attack but long before the Turkish downing of the Russian jet, we wrote about “The Most Important Question About ISIS That Nobody Is Asking” in which we asked who is the one “breaching every known law of funding terrorism when buying ISIS crude, almost certainly with the tacit approval by various “western alliance” governments, and why is it that these governments have allowed said middleman to continue funding ISIS for as long as it has?“

  Precisely one week later, in even more tragic circumstances, suddenly everyone is asking this question.

  And while we patiently dig to find who the on and offshore “commodity trading” middleman are, who cart away ISIS oil to European and other international markets in exchange for hundreds of millions of dollars, one name keeps popping up as the primary culprit of regional demand for the Islamic State’s “terrorist oil” – that of Turkish president Recep Erdogan’s son: Bilal Erdogan.

  His very brief bio:

  Necmettin Bilal Erdogan, commonly known as Bilal Erdogan (born 23 April 1980) is the third child of Recep Tayyip Erdo?an, the current President of Turkey.

   

  After graduating from Kartal Imam Hatip High School in 1999, Bilal Erdogan moved to the US for undergraduate education. He also earned a Masters Degree in John F. Kennedy School of Government at Harvard University in 2004. After graduation, he served in the World Bank as intern for a while. He returned Turkey in 2006 and started to his business life. Bilal Erdogan is one of the three equal shareholders of “BMZ Group Denizcilik “, a marine transportation corporation.

  Here is a recent picture of Bilal, shown in a photo from a Turkish 2014 article, which “asked why his ships are now in Syria”:

  

  In the next few days, we will present a full breakdown of Bilal’s various business ventures, starting with his BMZ Group which is the name implicated most often in the smuggling of illegal Iraqi and Islamic State through to the western supply chain, but for now here is a brief, if very disturbing snapshot, of both father and son Erdogan by F. William Engdahl, one which should make everyone ask whether the son of Turkey’s president (and thus, the father) is the silent mastermind who has been responsible for converting millions of barrels of Syrian Oil into hundreds of millions of dollars of Islamic State revenue.

  By F. William Engdahl, posted originally in New Eastern Outlook:

  Erdogan’s Dirth Dangerous ISIS Games

  More and more details are coming to light revealing that the Islamic State in Iraq and Syria, variously known as ISIS, IS or Daesh, is being fed and kept alive by Recep Tayyip Erdogan, the Turkish President and by his Turkish intelligence service, including MIT, the Turkish CIA. Turkey, as a result of Erdogan’s pursuit of what some call a Neo-Ottoman Empire fantasies that stretch all the way to China, Syria and Iraq, threatens not only to destroy Turkey but much of the Middle East if he continues on his present path.

  In October 2014 US Vice President Joe Biden told a Harvard gathering that Erdogan’s regime was backing ISIS with “hundreds of millions of dollars and thousands of tons of weapons…” Biden later apologized clearly for tactical reasons to get Erdo?an’s permission to use Turkey’s Incirlik Air Base for airstrikes against ISIS in Syria, but the dimensions of Erdogan’s backing for ISIS since revealed is far, far more than Biden hinted.

  ISIS militants were trained by US, Israeli and now it emerges, by Turkish special forces at secret bases in Konya Province inside the Turkish border to Syria, over the past three years. Erdo?an’s involvement in ISIS goes much deeper. At a time when Washington, Saudi Arabia and even Qatar appear to have cut off their support for ISIS, they remaining amazingly durable. The reason appears to be the scale of the backing from Erdo?an and his fellow neo-Ottoman Sunni Islam Prime Minister, Ahmet Davuto?lu.

  Nice Family Business

  The prime source of money feeding ISIS these days is sale of Iraqi oil from the Mosul region oilfields where they maintain a stronghold. The son of Erdogan it seems is the man who makes the export sales of ISIS-controlled oil possible.

  Bilal Erdo?an owns several maritime companies. He has allegedly signed contracts with European operating companies to carry Iraqi stolen oil to different Asian countries. The Turkish government buys Iraqi plundered oil which is being produced from the Iraqi seized oil wells. Bilal Erdogan’s maritime companies own special wharfs in Beirut and Ceyhan ports that are transporting ISIS’ smuggled crude oil in Japan-bound oil tankers.

  Gürsel Tekin vice-president of the Turkish Republican Peoples’ Party, CHP, declared in a recent Turkish media interview, “President Erdogan claims that according to international transportation conventions there is no legal infraction concerning Bilal’s illicit activities and his son is doing an ordinary business with the registered Japanese companies, but in fact Bilal Erdo?an is up to his neck in complicity with terrorism, but as long as his father holds office he will be immune from any judicial prosecution.” Tekin adds that Bilal’s maritime company doing the oil trades for ISIS, BMZ Ltd, is “a family business and president Erdogan’s close relatives hold shares in BMZ and they misused public funds and took illicit loans from Turkish banks.”

  In addition to son Bilal’s illegal and lucrative oil trading for ISIS, Sümeyye Erdogan, the daughter of the Turkish President apparently runs a secret hospital camp inside Turkey just over the Syrian border where Turkish army trucks daily being in scores of wounded ISIS Jihadists to be patched up and sent back to wage the bloody Jihad in Syria, according to the testimony of a nurse who was recruited to work there until it was discovered she was a member of the Alawite branch of Islam, the same as Syrian President Bashar al-Assad who Erdogan seems hell-bent on toppling.

  Turkish citizen Ramazan Bagol, captured this month by Kurdish People’s Defence Units,YPG, as he attempted to join ISIS from Konya province, told his captors that said he was sent to ISIS by the ‘Ismailia Sect,’ a strict Turkish Islam sect reported to be tied to Recep Erdogan. Baol said the sect recruits members and provides logistic support to the radical Islamist organization. He added that the Sect gives jihad training in neighborhoods of Konya and sends those trained here to join ISIS gangs in Syria.

  According to French geopolitical analyst, Thierry Meyssan, Recep Erdogan “organised the pillage of Syria, dismantled all the factories in Aleppo, the economic capital, and stole the machine-tools. Similarly, he organised the theft of archeological treasures and set up an international market in Antioch…with the help of General Benoît Puga, Chief of Staff for the Elysée, he organised a false-flag operation intended to provoke the launching of a war by the Atlantic Alliance – the chemical bombing of la Ghoutta in Damascus, in August 2013. “

  Meyssan claims that the Syria strategy of Erdo?an was initially secretly developed in coordination with former French Foreign Minister Alain Juppé and Erdogan’s then Foreign Minister Ahmet Davuto?lu, in 2011, after Juppe won a hesitant Erdogan to the idea of supporting the attack on traditional Turkish ally Syria in return for a promise of French support for Turkish membership in the EU. France later backed out, leaving Erdogan to continue the Syrian bloodbath largely on his own using ISIS.

  Gen. John R. Allen, an opponent of Obama’s Iran peace strategy, now US diplomatic envoy coordinating the coalition against the Islamic State, exceeded his authorized role after meeting with Erdogan and “promised to create a “no-fly zone” ninety miles wide, over Syrian territory, along the whole border with Turkey, supposedly intended to help Syrian refugees fleeing from their government, but in reality to apply the “Juppé-Wright plan”. The Turkish Prime Minister, Ahmet Davutoglu, revealed US support for the project on the TV channel A Haber by launching a bombing raid against the PKK.” Meyssan adds.

  There are never winners in war and Erdogan’s war against Syria’s Assad demonstrates that in bold. Turkey and the world deserve better. Ahmet Davutoglu’s famous “Zero Problems With Neighbors” foreign policy has been turned into massive problems with all neighbors due to the foolish ambitions of Erdogan and his gang. 

  

  

  

  

  

• A Heatmap Of Global CapEx 'Shrinkage'

  Hot on the heels of the biggest collapse in Australian Capex ever, and just as we predicted back in 2012, we thought it about time to once again re-visit – Godot-like – the never-ending wait for 'recovery' (or ongoing crash) in Capital Expenditure around the world.

  Back in 2012 we accurately predicted that in the Brave New Normal World, where zero cost debt-issuance is used to immediately fund stock buybacks instead of being reinvested in growth and expansion, in the process boosting management pay through equity-performance linked option payout structures, that with every passing year CapEx spending would decline first in relative then in absolute terms, even as free cash flow use of funds is spent on other "here-and-now" shareholder-friendly activities such as buybacks and dividends would grow exponentially.

  And yet companies which have no choice but to continue their existence, even if they are forced to pay out all incremental cash to their loud-mouthed shareholders simply because there really is no global economic growth which can soak up the incremental growth spending, they still spend money on (mostly) maintenance and (to a tiny extent) growth capital spending.

  

   

  So for those curious where this spending ends up (because everyone knows where dividends and buybacks go), here is a global heatmap of all capex spending broken down by region and segment:

  

   

  As Goldman so succinctly explains, this is not about to turn around anytime soon…

  Our long-held bearish view on capex hinges on several overlapping factors:

  • the aftermath of China’s huge investment phase and the resultant overcapacity;
  • global growth becoming less capital-intensive;
  • the ubiquity of technology (substituting hardware capex for software opex, digitisation of widgets, optimising utilising and rousing dormant capacity); and
  • persistent uncertainty (around regulation, obsolescence risk and new competitors, both cross-border and cross-sector).

  

  

  

  

  

• Busted: Hillary Caught Coordinating With CNN To Smear Rand Paul

  Submitted by SM Gibson via TheAntiMedia.org,

  State Department emails published by Gawker on Tuesday show that a CNN journalist colluded with a top Hillary Clinton State Department aide in an attempt to smear Kentucky Senator Rand Paul during the former secretary of state’s 2013 testimony on the Benghazi attacks.

  Elise Labott, a foreign affairs reporter for CNN, is now serving a two-week suspension from the Atlanta-based global news network for posting a critical tweet of Senator Paul during the hearing. She apparently did so at the directive of Clinton aide Philippe Reines. The social media post chided Senator Paul for asking Clinton difficult questions throughout the Senate Foreign Relations Committee hearing. Labott also coordinated with Reines to tweet a favorable quote from Clinton’s testimony.

  In what appeared to be a follow-up question to a prior conversation, the CNN reporter asked Reines via email, “are you sure rand paul wasn’t at any hearings?”

  Just minutes after hitting send, Labott fired back with another message informing the aide of what she had just posted to her official Twitter account:

  Sen Paul most critical on committee of Clinton, but a little late to the #Benghazi game.Not sure he was at many of the 30 previous briefings

  — Elise Labott (@eliselabottcnn) January 23, 2013

  “She was great. well done. I hope you are going to have a big drink tonight,” the CNN employee wrote to Reines hours later in reference to Hillary’s performance earlier that day.

  Reines responded by typing to Labott that he had “suggested a good Tweet.”

  Labott messaged back that she had not received his suggestion for an additional tweet. Reines replied back with the word “Pin,” a reference to a private messaging system.

  Labott responded, “will get back to you.” Less than 15 minutes later, she sent an email that read, “done.” She had just posted a Tweet that quoted Clinton:

  A reporter who Tweets on request! pic.twitter.com/vdFGrYisgU

  — Phil Kerpen (@kerpen) November 25, 2015

   “The liberal media has taken their Clinton sycophancy to a new low. CNN needs to address this bias and lack of journalistic integrity,”  Paul’s chief campaign strategist Doug Stafford, said in a statement. “This email revelation should give Republicans pause as to their coverage and possibility of fair treatment towards Sen. Paul during the next debate. All eyes will be on CNN’s response to their employee colluding with Hillary Clinton in order to attack a prominent U.S. senator on their dime.”

   

  

  

  

  

  

• Obama Put Taiwan on ISIS Radar

   

  

   

  By EconMatters

  One big news widely reported in Taiwan right now is that the national flag of the Republic of China (R.O.C. Taiwan) appears on ISIS web site video. Above is a screenshot of the video with Taiwan’s flag prominently displayed along side that of the U.S. and U.K. The flags are supposedly in alphabetical order by country name. The video was posted on ISIS web site on Wednesday, Nov. 25, 2015.

  According to a partial video on a Taiwan TV news show, ISIS also sends this errie message:

  Our number only increases with faith. And we are counting your banners, which our prophet says when it reaches 80, then the Blaze of War will find you.

   

  You might wonder how ISIS came as far as seeing Taiwan as an equal threat as the U.S.? Taiwan’s news media linked ISIS’s sudden recognition of Taiwan to a statement made by U.S. President Obama at an Association of Southeast Asian Nations (ASEAN) summit in Malaysia last week. Obama said that Taiwan was one of the Asia-Pacific countries in a coalition against ISIS.

  It is true that Taiwan’s military and Special Forces have heavy American military DNA. Due to the constant threat from China across a narrow strait, Taiwan has relatively heavy military defense (for a small island). A lot of Taiwan’s defense miliary technology is supplied by the U.S. companies. Taiwan regularly sends military personnel to train in the U.S. while Taiwan’s media reports U.S. Navy SEAL also sends trainers every so often to train one of the island’s elite special forces units.

  Read: Taiwan, The Democratic China

  
  

  In response to Obama’s latest ‘recognition’, Taiwan governmnet simply said its current focus is on providing humanitarian assistance (i.e., We are NOT involved with Obama’s ‘Coalition’). Indeed, Taiwan’s involvement with the chaos in the Middle East has been humanitarian aid to the region such as donating 300 prefabricated houses and nearly US$10 million in medical supplies to the refugees.

  This stance is understandable as Taiwan had an ISIS panic attack when in February 2015, ISIS official Twitter channel twitted a picture of what looks like Taipei 101 Building (never confirmed) under atack. This out-of-nowhere recognition by ISIS has prompted the Taiwan government to step up security measures, while President Ma Ying-jeou urged the public not to panic (Good luck with that).

  

  Ever since the Chinese Nationalists Party (KMT) retreated to Taiwan in 1949, it goes without saying that China has always viewed Taiwan as a renegade province that may be reclaimed by force if necessary. In the 60+ years since then, the tiny island country has transformed itself quite successfully thanks to a series of financial and economic reforms by the Nationalist Party (KMT), while millions were killed by Mao’s Cultural Revolution and the Great Leap Forward. (On a side note, I’m not sure how the UK shadow chancellor thought it was funny to quote Mao in the Spending Review meeting.)

  Read: China, Taiwan, Japan and The U.S. In the West Pacific

   

  On the diplomatic front, Taiwan has sufferred many losses and betrayals. Despite the fact that the Republic of China (Taiwan) was one of the the five founding and PERMANENT members of the United Nation (U.N.), Taiwan was ousted by the U.N. on Oct. 25, 1971 when U.N voted to recongnize Mainland China and to expel the R.O.C Taiwan. Today, people in Taiwan still remember it as the day when the world sold R.O.C. out.  Since then, U.N. only recognizes the Communist China as the only lawful representative of China and has rejected calls to make Taiwan a member. And Taiwan has almost always been excluded in any international economic pac (such as the TPP or AIIB) due to China’s influence.

  Taiwan instead strives to maintain extensive unofficial ties with countries that do not recognise it, focusing on trade, investment, culture and cooperation in non-political areas. Today, Taiwan has more than 100 representative offices in over 70 countries, including four offices in Australia (hense this detailed Taiwan brief on Australian Government site).

   

  Read: China, Vietnam, Russia and U.S. in The South China Sea

   

  The sad fact remains that currently only 22 states (most of them you have never heard of) in the entire world recognize Taiwan as the Republic of China (ROC). I guess the number should be 23 now, adding ISIS?

  Citizens in Taiwan actually do not appreciate Obama’s sudden ‘warm and fuzzy’ officially putting the island on ISIS radar. After all, the U.S. does not even recognize Taiwan nor has helped Taiwan in anything of real economic or polical benefits. And now Taiwan is suddenly ‘an ally’ of the U.S. in a ‘coalition’ against ISIS? But of course.

  ISIS already angered China after executing a Chinese captive last week. Then, there’s rising tension between China and U.S. over disputes in the South China Sea and The East Pacific. So when Obama opens his mouth ‘recognizing’ Taiwan, ISIS jumps on it just to provoke China even more.

  This is a chess match between ISIS, China and the U.S. using Taiwan as a game piece. If ISIS strikes Taiwan (think the casuaties at Paris in the much larger and stronger France), on whose hands will the blood be?

  

  

  

  

• A Look At The Coming Collapse Of The European Union

  Submitted by Jeff Thomas via InternationalMan.com,

  When I was a boy, a carnival would come through town annually, with a Ferris wheel, a merry-go-round and, of course, a midway: rows of makeshift stalls where fairgoers might win a prize by throwing a ball at weighted milk bottles, shooting a rifle at metal ducks, or pitching pennies at small glass bowls.

  If you were to succeed in any of the above, the standard prize was a small stuffed bear (Although many large bears were displayed, generally, the few actual penny-pitch winners only succeeded in winning one of the smaller bears). Still, to a child’s mind, even this was cause for celebration, as you went home a winner.

  I was one of the lucky ones. I actually did take home a prize on one occasion. I had been going to the fair faithfully every year and would save up my pennies for weeks in advance, so I’d have plenty to invest in bear futures on the midway.

  It was only a day or two after I brought home my prize that I realised that I had spent several dollars in pennies winning a stuffed bear that probably (back then, in the 1950’s) only cost fifty cents to produce and, after I possessed it, actually had zero value to me…I had no use for a cheap stuffed bear.

  So, here’s the penny-pitch progression:

  1. Promise of significant benefits for what seems a minimal initial investment.

  1. Excitement builds with continued investment.

  1. Elation when a prize is actually won.

  1. Realisation that the prize is of less actual value than anticipated.

  1. Realisation that the aggregate cost of the prize was so high that the money would have been better spent on something else.

  In 1993, Europeans were invited to the new EU Carnival. In addition to the rides, there would be a midway: a variety of benefits such as open borders, a common currency and the opportunity to work in other countries more easily than before. Most European countries joined, even though, in most cases, only a minority of registered voters actually declared their desire for membership. The midway organisers (the political leaders) were all in favour and virtually everyone joined.

  Like any midway game, all those who signed on were required to pony up, but the amount of money being invested seemed relatively small at the time. But like any midway game, it’s not the first pitch of the penny that gets you…it’s the subsequent, seemingly unending ones. It adds up.

  Still, there have been those who have actually benefitted: those who actually moved to another EU country and got a good job; those who conduct multi-national business, etc., but, in the main, the conveniences have not been that great and the negatives, more and more, are eclipsing the benefits.

  The non-elected oligarchy of the EU passes new laws at will. Moreover, at this point, so much money has been thrown at non-productive members that entire countries are, in effect, welfare states, living off the teat of the more productive countries. And feeding them has required unending and massive borrowing, which those who are pitching the pennies will, presumably, eventually have to pay. And each time it seems as though the situation couldn’t get any worse, Brussels creates a new diktat, such as the demand that all EU countries take in millions of refugees, whom they claim to be Syrians fleeing the civil war, but who are more likely to be from Afghanistan or North Africa and are people who demand benefits, but clearly have no desire to assimilate.

  The people of Europe have been the patsies in this grand scheme and are, at this point, experiencing decided buyer’s remorse.

  So, here’s the EU progression:

  1. Promise of significant benefits for what seems a minimal initial investment.

  1. Excitement builds with continued investment.

  1. Elation when a benefit is actually received.

  1. Realisation that the benefit is less actual value than anticipated.

  1. Realisation that the aggregate cost of the benefit was so high that the money would have been better spent on something else.

  Returning to the penny-pitch, I recall that, by my early teens, I had realised that this was far from being a worthwhile investment. Once I realised that the prizes were of so little actual value to me and that I would have been better off spending my pennies in some other way, I ceased to enjoy the excitement of the midway and learned to invest money in a better way. I later prospered.

  However, many, many people never lose the thrill of the promise of easily-won prizes. As they mature, the prizes that they seek may be more sophisticated than a stuffed bear, but the lure of easy benefits remains difficult to refuse and, in the case of governments, voters return to the polls periodically, each time believing the empty promises of politicians, saying to themselves, “This time it will be different.”

  For so many people, the promise of a quick, easy solution to complex problems is impossible to resist and, more to the point, the more exaggerated the claim, the more likely that voters seem to buy into it. As Adolf Hitler said, “Make the lie big, make it simple, keep saying it, and eventually, they will believe it.”

  And so we witness in virtually every “democracy” that conservatives such as David Cameron and Donald Trump offer outrageously simplified and impossible promises and otherwise-intelligent voters march off to the voting booth to vote for them. Similarly, Hillary Clinton and Justin Trudeau leave liberal voters starry-eyed with equally outrageously simplified and impossible promises. The only difference between liberal and conservative is that the rhetoric takes a slightly different slant. The method of deception is the same, and the effect on voters is the same.

  And, of course, the outcome is the same. Trouble is, if we’re wise enough to figure out that the penny-pitch is a mistaken pursuit, we can simply walk away and never come back. However, if an entire country gets suckered into a construct as implausible as the EU, it’s not so easy to walk away. Brussels has no intention of folding its tent. Nor are the political leaders of Europe going to back off on the EU idea.

  So, will the EU simply carry on? It’s doubtful. At some point, the debt will cripple even the net-payer countries to the degree that the people will rebel. In addition, the social dictates, such as the acceptance of refugees, have been so dramatically damaging on the street level that the people of many countries are reaching the boiling point. Eventually this will travel upward, as we see in Poland where, in an election year, the government itself is saying no to Brussels, no matter how Brussels threatens to penalise them for not doing as they are told.

  The EU was never intended to serve the people of Europe, it was meant to empower the rulers of the countries of Europe and to subjugate the European people. Its days are numbered, but the cost of its demise will be borne by the people of Europe. Certainly, increasing numbers of them might wish that it could be as easy as throwing the stuffed bear in the dustbin, but it will not be so simple or so painless.

  Editor’s Note: Unfortunately there’s little any individual can practically do to change the trajectory of this trend in motion. The best you can and should do is to stay informed so that you can protect yourself in the best way possible, and even profit from the situation.

  We think everyone should own some physical gold. Gold is the ultimate form of wealth insurance. It’s preserved wealth through every kind of crisis imaginable. It will preserve wealth during the next crisis, too.

  But if you want to truly “crisis-proof” your wealth, we recently released a video just for you…

  

  

  

  

  

• Oklahoma Leads The World In Seismic Activity As 2015 Quake Count Tops 5,000

  With geologists having confirmed the link between fracking and earthquakes in Oklahoma (and energy executives trying to get those geologists fired), the news this week that The Sooner State leads the world in seismic activity will likely see more uproar from residents.. and more lobbying dollars spent to 'calm' the politicians. As KFOR reports, this year, more than 5,000 earthquakes have been recorded and experts say earthquakes in Oklahoma will likely increase in magnitude over time warning that it's only a matter of time before the state gets a big one that will change life for those of living there.

  "It's unclear exactly how high we might go, and the predictions are upper 5-6 range for most things that I've seen," Todd Halihan, a researcher from OSU, told KFOR NewsChannel4,

  Halihan studies these quakes; his expertise is hydrogeophysics.

   

  "Underneath any of these urban areas, whether it's Stillwater, Cushing, Oklahoma City, Guthrie, these cities are not built to seismic standards. They're not in L.A." Halihan said.

   

  "We have a lot of buildings that were built with earthquakes not even on the radar screen, so we would expect probably a fair bit of damage," Halihan said.

  "We're not out ahead of it yet, we still have fires burning, and we're trying to get ahead of those fires, but we're not there yet," Matt Skinner, spokesperson for the Oklahoma Corporation Commission, said.

   

  "The changing point I think was the Prague quake, because as a result of that, we had a hearing as to how we should proceed in the Prague area for oil and gas exploration," Skinner says.

  Many people believe the commission is sitting back and watching the quakes happen, but they say that's not the case.

  Before…

  

   

  Last year…

  

   

  And now this year…

  

  Source: Earthquakes.ok.gov

  NewsChannel cameras were given a rare look at the work of the commission.

  "March of this year, we issued a directive that applied to over 300 disposal wells that dispose into the Arbuckle formation that said prove that you are not in the basement, in other words, you haven't drilled too deep," Skinner says. "So the idea was to dial back the total volume for the area that's going down to a pre-seismicity level."

   

  We wondered why it's taken until this year to see action, OCC says they were waiting on data from oil and gas companies.

   

  Information that by law, does not have to be shared, but now they're handing it over.

   

  "An arrangement was eventually come to where there's a regular exchange now between the oil and gas industry,"Skinner says.

   

  What they called a game-changer in slowing down the quakes.

   

  "All of the sudden, for the first time, we're seeing stressed faults, where seeing where the basement faulting is" Skinner says.

   

  In rural Oklahoma, data doesn't mean much, just simple living and a call for immediate change.

   

  "I'm really fighting the tears because I've done a lot of crying trying to figure out, what am I going to do? What am I going to do? And if there's me, there's so many other people. It's not just me, it's not just my story, it's thousands of stories," Dill says. "It's our homes, it's where we live, it's my heart and it's ripping it apart, that's what it's doing."

  The Oklahoma Corporation Commission continues shutting down wells and reducing injection amounts. They have set up a site to get more information about what is happening in Oklahoma. But, if anyone expects anything to really change, this resident summed things up perfectly…

  "I've done all my crying and now I'm just angry, I'm so angry… Anything that has to do with the state we might as well forget."

  And, as we detailed previously, here is the man responsible for this…

  When it comes to Oklahoma's "induced seismicity" there is nobody more responsible for either Oklahoma's "shale miracle" or the resultant earthquake epidemic than David Chernicky, CEO of Tulsa-based New Dominion.

  

  This is his story, as recounted by Bloomberg:

  By the late 1960s the Oklahoma City oil field was largely spent. As crude was sucked out, it gradually flooded with vast amounts of salt water, the remnants of an ancient ocean that once covered the Midwest. The pockets of oil and gas that remained in the reservoir were trapped deep inside rocks. The only way to get at them was to “dewater” the field—which meant pumping out hundreds of millions of barrels of salty, often toxic wastewater, then disposing of it.

   

  David Chernicky saw an opportunity. A trained geologist turned wildcatter, he’s devoted most of his 35 years in the oilpatch to perfecting the business of reviving oil fields instead of exploring for new ones. “I try to pick the ugly girl at the dance,” he says. Chernicky spent years studying the Oklahoma City field, poring through stacks of geological studies and surveys, some of which went back 65 or 70 years. He figured it still held about 50 million recoverable barrels of oil. “That 2-foot-thick file of data on Oklahoma City says there’s a ton of oil still there, but you have to think outside the box to get it,” he says.

   

  … In 2003 New Dominion, began work on a new breed of injection well, a type that could take down tens of millions of barrels a year and bury it deep underground. Chernicky, who has a bawdy streak, named the first one Deep Throat.

  Behold: Deep Throat.

  

  According to Bloomberg, few companies have more at stake than New Dominion. "A July 2014 study published in Science found that four high-volume disposal wells owned by New Dominion on the outskirts of Oklahoma City may have accounted for 20 percent of all seismic activity in the central U.S. from 2008 to 2013. Two victims of the 5.7 quake from 2011 have sued New Dominion for damages; the state Supreme Court has agreed to hear the case of Sandra Ladra, a 64-year-old resident of Prague, who sued after her stone chimney crumbled during the quake, sending rocks crashing down on her legs. Should the court establish a precedent where New Dominion and companies like it can be held liable for earthquake damage, the fallout could be severe. “If wastewater wells come under heavy fire from lawsuits and regulations, it could change the entire economics of the oil industry in this state,” says Kim Hatfield, chairman of the regulatory committee at the Oklahoma Independent Petroleum Association.

  Perhaps instead of competing with US shale on the global marketplace in a race who can cut prices the most and stay in business, the Saudis should be more interested in sponsoring Ladra's legal case against New Dominion:because as Steve Everley of Energy In Depth, an industry-backed research group, says, “If you shut down [wastewater] disposal, you’re effectively shutting down production."

  You also kill the US shale miracle without selling a single barrel of oil below cost.

  That, or just bribe Chernicky to admit his process will lead to ever stronger and more destructive erathquakes. For now, however, the legendary wildcatter is sticking to his guns.

  The fourth of 10 children, Chernicky learned to work hard early. His father, Thomas, was a first-generation American whose parents emigrated from Ukraine. After serving in World War II, Thomas worked at Tinker Air Force Base near Oklahoma City, helping retrofit B-52s. The Chernicky children didn’t get any allowance and were all expected to earn their own keep. “Dave was probably the most industrious of the kids,” says his older brother Wayne. “Of all the 10 kids, Dave saw the opportunities to make money the earliest.” David took on four or five paper routes. When he turned 14, he realized he could make $1.10 an hour at McDonald’s, where he’d sometimes work more than 80 hours per week.

   

  After a stint in the Air Force, Chernicky earned a degree in exploration geophysics from the University of Oklahoma. He went to work in Wyoming and the Rocky Mountains for Marathon Oil and Amoco before striking out on his own as an independent petroleum geologist. He quickly gained a reputation for his unconventional methods of finding oil. “I’ve never found an appreciable drop of oil through textbook geology,” he says. When oil prices tanked in the mid-1980s, things got tight. “At that time, working at McDonald’s probably paid better than being a self-employed geologist in Oklahoma,” says Wayne. To get by, David drove a truck for Wayne’s office supply business in Tulsa. “I’ve seen him come through good times and bad times,” says Wayne. “Each time, I see him come out stronger.”

   

  By the mid-1990s, Chernicky had established himself as a technical master of dewatering, putting his consulting company, Chernico Exploration, in high demand. His first big success was dewatering an old oil field called the Red Fork, lowering large, submersible pumps into the wells to suck out massive quantities of water. The more water that was drained, the more oil and gas seeped out of the sandstone. A successfully dewatered field quickly shrinks the ratio of water to oil. In one of its earliest wells, New Dominion initially pulled up 160 barrels of water for each barrel of oil. Over 16 months, that improved to 7.5 to 1. “It was a very smart idea,” says Kurt Rottmann, a petroleum geologist who has worked on Oklahoma oil fields for four decades. “David Chernicky recognized the potential of this very early on.”

   

  Chernicky, however, was growing impatient with consulting and watching other companies botch his handiwork. Dewatering was a precise science, and he felt he could make it work better by controlling every facet of the operation. “Oil companies kept f—ing up my oil fields, so I figured I was ready to try it on my own,” he says. He started New Dominion with two other partners in 1998. By the early 2000s the company was operating more than 100 wells, producing a total of 4,000 to 5,000 barrels of oil a day, plus millions of cubic feet of gas.

  And so Chernicky started the trend of reinjecting wastewater right back into the ground from which oil was pumped, replacing one natural resource, oil, with the potential of a natural disaster, earthquake.

  This is hardly new: Dan Boyd, a petroleum geologist at the OGS, was well aware of previous instances where injecting fluid deep underground caused earthquakes. In 1961 the U.S. Army drilled a 12,000-foot disposal well in the Rocky Mountains to get rid of millions of gallons of toxic waste from napalm production and other sources. Shortly after injection began, quakes began rattling the nearby Denver area, including a 5.3-magnitude temblor in 1967. A year after injection stopped, the seismic activity faded. Boyd believed the wastewater pouring out of Chernicky’s disposal wells might trigger similar activity in Oklahoma. “I’d never seen a well that could put away as much water as Deep Throat,” he says.

  He was right:

  On the night of Dec. 20, 2006, Boyd’s fears were realized. A few minutes after 8 p.m., residents on the southeast edge of Oklahoma City heard a loud boom, followed by a sharp jolt that shook people’s houses. Four hours later, just after midnight, it happened again. Calls flooded into police and fire emergency lines. The initial fear was that something had happened at nearby Tinker Air Force Base—an explosion, an attack—but by the next morning, scientists at the OGS determined the area had been struck by two earthquakes. “It was an epiphany,” says Boyd.

   

  In January 2007, New Dominion opened a second disposal well near Oklahoma City called Sweetheart. A month later, a small swarm of quakes struck nearby. In March, Boyd and three other scientists at the OGS drove to Tulsa for a four-hour meeting with New Dominion. The meeting was hosted by Steve Chernicky, New Dominion’s director of field operations and David’s brother. David also showed up, Boyd recalls, wearing a golf shirt and Bermuda shorts. He placed three or four mobile phones in front of him on the conference room table and excused himself from the meeting each time one rang. While nobody accused New Dominion of causing the earthquakes, there was a “tacit understanding that the well had something to do with this,” says Boyd. “Everybody in the room was thinking about earthquakes. The correlation was obvious.”

  But, just like Wall Street's now confirmed criminal banks, Chernicky covered up the potentially disastrous aftermath of his actions in the future by generously bribing the people here and now. Or, as it is known in financial parlance, lobbying.

  As Chernicky looked for other dewatering opportunities, he found a lot of rundown communities whose oil had run out decades earlier and needed some help. In Carney, he gave $10,000 to finish a high school. In Prague, he donated $1 million for a city water expansion project and $50,000 to help build a new library. In January 2006, after a busy wildfire season, he donated $15,000 to local fire departments. He also started throwing an annual party in Prague called New Dominion Dayz to raise scholarship money for local students. Kids played on inflatable bouncing slides. Riding lawn mowers were given out as raffle prizes. A highlight was Chernicky in the dunk tank. In news articles, Prague’s city manager called Chernicky the “T. Boone Pickens of Prague.”

   

  Chernicky’s largesse has helped to deflect attention from the role New Dominion may be playing in the crescendo of earthquakes across Oklahoma. The record 5.7 quake that hit Prague in November 2011 was the second of a trio that rumbled through over a four-day period, all measuring 5 or higher on the Richter scale. An air-conditioning duct fell through the ceiling of the Prague library Chernicky had helped build. Library Director Pam Batson got some cracks in her home, though she says she’s grateful for the donations from companies such as New Dominion. “It’s sort of like a double-edged sword,” she says

  And so, as long as the bribes, pardon handouts, keep flowing (as does the oil) everyone can stick their head in the sand to what is painfully obvious. Sure enough, "for the moment, there’s little political pressure on Oklahoma’s oil and gas industry to change the way it operates. Republican Governor Mary Fallin has long claimed there isn’t enough information to determine what’s causing the quakes. She describes the OGS’s new position statement as “significant.” But when asked if the governor agrees that the industry is likely responsible for the quakes, her spokesman, Alex Weintz, didn’t respond."

  Local politicians know that doing the right thing means putting their own career in jeopardy as it may lead to thousands of layoffs, not to mention an end to the bribers, pardon, lobbying:

  At the Statehouse, the only two lawmakers willing to talk openly about the issue are Democrat Cory Williams and Republican Jason Murphey, who represent districts that have been shaken by quakes. Last fall they teamed up on a bill to study the quakes in greater depth, but so far nothing’s come of it. “It’s ridiculous,” says Williams, who’s pushing a moratorium on wastewater injection in 16 Oklahoma counties. “The oil industry threatens us by saying if you touch seismicity issues we’ll start laying down rigs and laying people off. This is the problem of having industry so intertwined with government. We know what’s causing it, and we are doing absolutely nothing to stop it and barely anything to regulate it.”

  That may soon change however, thanks to an unexpected outside influence: the Saudi's pounce on US shale as the global "marginal" producer, which in turn is crushing the price of oil, and making shale increasingly unprofitable.

  These are challenging days for New Dominion. Dewatering is among the most expensive ways to produce oil, and with crude trading at around $50 a barrel, down from $100 last summer, New Dominion’s fields likely aren’t as profitable as they once were. “This is the first time in over 20 years that I haven’t had a single drilling rig working for me,” Chernicky says. The company won’t hold its New Dominion Dayz festival this year. In January, Chernicky sued several former business partners, alleging they unduly paid themselves millions in bonuses before the partnership unraveled, a claim the former business partners dispute.

  Of course, the price of oil may fall and it may rise, and if it rises enough New Dominion will be right back in the business of injecting millions of gallons of wastewater right into the same ground from whence the oil came, in the process leading to ever more and ever stronger earthquakes.

  For now, however, New Dominion is adamant: "it's not our fault."

  At New Dominion headquarters, the company promotes its own theories for the astronomic rise in Oklahoma quakes. Jean Antonides, the company’s craggy-faced vice president for exploration, produces a 2-inch-thick cardboard folder stuffed with maps, presentations, and papers—evidence, he says, that the quakes are the result of rapid changes in water levels of underground aquifers caused by drought and heavy rain.

   

  Chernicky, for his part, dismisses the research linking earthquakes to wastewater disposal wells. “The meager amount of science put forward is so flawed, it can’t even be considered science,” he says. “It is emotion.” He contends that the Oklahoma quakes are “the result of tectonic activity happening all over the world.” In a year or two, he predicts, the flurry of quakes bedeviling Oklahoma will migrate north into the seismically sleepy states of Iowa and Nebraska, vindicating the oil industry. The vast majority of earthquake scientists disagree. “Pure b.s.,” says Martin Chapman, a geophysics professor at Virginia Tech University. “They just don’t want to admit they’re causing earthquakes.”

   

  Chernicky is unswayed. He insists nature’s on his side. If humans can cause an earthquake, then they “can probably fart and shift the orbit of the planet, too.” He adds: “Man does not cause tsunamis in Japan. Man did not cause the volcanic blast at Krakatoa. And man does not cause earthquakes.”

  And, as long as everyone – from bribed politicians, to poor citizens demanding the company's "largesse", to bankers funding New Dominion any time's its cash drops dangerously low – is aligned with the company and its business model, nothing will halt the trend of increasingly more frequent and stronger quakes shaking Oklahoma. Until, just like on Wall Street, one day the "big one" – the one that nobody could have possibly predicted – strikes and the sequel to the San Andreas movie is filmed among the ruins where the city of Tulsa once stood.

  

  

  

  

  

• 800 Shotguns Headed To Belgium From Turkey Seized In Italy

  Following the ISIS assault on Paris that left 130 dead prompting Francois Hollande to declare that France is “at war,” authorities quickly established a link to the infamous Brussels suburb of Molenbeek. 

  

  The working class, immigrant neighborhood – which is separated from the historical district by a canal and is but a 20 minute subway ride from Brussels’ European Quarter – has become synonymous with radicalization and terror. As we put it last week, “what Charlestown is to bank robbers, Molenbeek is to European jihadists.” 

  “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,” The New York Times wrote earlier this month.

  But it’s not just Molenbeek. In January, two operatives working under the direction of Paris mastermind Abdelhamid Abaaoud were killed when Belgian police raided a safehouse in Verviers. 

  In short, Belgium has apparently become a kind of hub for jihadists. Not wanting to let a good crisis go to waste, the entire country – and especially Brussels – has been on high alert for nearly a week now as authorities hunt for several suspects who are purportedly planning a “serious and imminent” terrorist attack. 

  In what may be the latest evidence that there are indeed multiple active terror cells operating in the country (or in what may merely be evidence that some anonymous Belgian collector just really loves Winchesters), Italian police seized some 800 shotguns bound for Belgium today at the Port of Trieste.

  

  Here’s the story from La Stampa (translated):

  A load of about 800 shotguns, from Turkey to Germany, Holland and Belgium, has been discovered and seized by the Financial Police and the Customs at the Port of Trieste. The weapons of war were transported, without authorization, by a tractor-trailer driven by a Dutch citizen turkish. The cargo consisted of 781 shotguns model “Winchester SXP” from 12-51 cm, 66 shotguns “Winchester SXP” from 12-41 cm. 15 rifle and kicking.   

   

  Tir had landed in Trieste on 23 November. The weapons were contained in hundreds of cardboard boxes, each of which containing a shotgun, all directed in Belgium. Given the peculiarities of the load, its origin and destination, the Financial Police and customs officials have declined to elaborate documentation. Although there were no irregularities of customs, it had not been requested permission to the authorities of public security for the transportation. 

  And here’s a look at the merchandise: 

  

  Finally, a bit more from The Daily Star: 

  The finance police, who are often in charge of port security, said that while customs rules had not been violated, the Turkish truck driver did not have the licences needed to transport the 781 Winchester SXP shotguns.

   

  Pump-action Winchester SXP rifles are made for hunting and are not considered assault weapons, but police said they had “substantially” increased their border inspections in the wake of the Nov. 13 Paris attacks and subsequent alert in Belgium.

   

  “Given the delicate nature of the cargo, its origin and its destination, the documentation regarding the rifles was immediately examined,” the statement said.

  What should immediately jump out at you here is that these were being sent from Turkey to Belgium. While anyone who’s followed Syria’s protracted civil war knows that Ankara has long been suspected of aiding and abetting Islamic State (just ask the PKK, or Newsweek, or even ISIS themselves), Erdogan’s role in financing the group was thrown into sharp relief this week after Vladimir Putin accused Turkey of facilitating the sale of illegal Islamic State crude (from which the group derives some half a billion dollars per year in revenue). 

  We’ve documented the Turkey-ISIS connection on dozens of occasions this year, but notably we revisited the link on Tuesday courtesy of Nafeez Ahmed in “NATO Is Harboring ISIS, And Here’s The Evidence” and then on Wednesday evening, we took our first peak down what is likely to be a very deep rabbit hole in “Meet The Man Who Funds ISIS: Bilal Erdogan, The Son Of Turkey’s President.”

  Given all of this, one is certainly left to wonder just where in Turkey these 800 pump action shotguns came from and, more importantly, who sent them to Belgium. While we’re sure there were likely a string of intermediaries involved, we wouldn’t be surprised to learn that ultimately, there’s a connection to Ankara and from there, to ISIS.

  *  *  *

  Bonus: for those of you wondering what kind of damage you can do with a Winchester SXP, here’s an official video from the company’s website called “Everybody’s Shootin‘” – just imagine the ducks are people.

  

  

  

  

  

• Haidt-Speak – Coddling, Cry-Bullies, & Ending The Micro-aggression Culture

  Submitted by Mike Krieger via Liberty Blitzkrieg blog,

  The deplorable state of America’s college campuses, overrun by intolerant, censorship happy cry bullies, has been a key topic of discussion here as of late.

  The following video is an excellent lecture on the topic by Jonathan Haidt, Professor of Ethical Leadership at New York University’s Stern School of Business.

  Take the 30 minutes in between mouthfuls of turkey and share with your families.

   

  For related articles, see:

  Protesters at Smith College Demand Journalists Swear Loyalty Oath Before Reporting on Them

  Not a Safe Space – Canadian University Suspends Yoga Class After Students Become Offended

  From Protesting Vietnam to Demanding “Safe Spaces” – What Happened to America’s College Kids?

  Speechless – UCLA Engages in Absurd, Anti-Intellectual and Dangerous Attack on Campus Free Speech

  Rutgers University Warns Students – “There is No Such Thing as Free Speech”

  A Professor Speaks Out – How Coddled, Hyper Sensitive Undergrads are Ruining College Learning

  Statists Declare War on Free Speech – College Students Banned from Handing Out Constitutions in Hawaii

  California Student Banned from Handing Out Constitutions on Campus

  

  

  

  

• Turkey Drops "Independence" From Central Bank Mandate As NATO's Favorite Autocrat Strikes Again

  In the nearly six months since summer elections saw AKP lose its absolute parliamentary majority in Turkey after a strong showing at the ballot box by the pro-Kurdish HDP, it’s been interesting to watch how the central bank has reacted (or, more appropriately, “not” reacted) to periods of weakness in the lira.

  

  Back in August, when things were falling apart in earnest, the cental bank attempted to explain how Turkey planned to deal with the normalization of DM monetary policy by releasing a “road map.” No one was impressed as the “plan” was decidedly short on specifics. As Citi noted at the time, “the so-called road map lacks a well-defined timetable and analytical discussion.”

  Ultimately, Ankara decided to just lay it out there when, on August 19, the central bank said it would not be hiking rates until the Fed liftoff. “Now that the CBT has left rates unchanged and announced that it will largely rely on selling more FX to tame volatility in FX market while waiting Fed to hike first, TRY still remains a fair game,” BofAML said, adding that “CBT has announced its long-awaited road-map for the normalisation of the monetary policy and we believe it’s likely to disappoint the markets because it’s too gradual.” 

  Yes, “too gradual” which is why we said the following just two weeks ago: 

  One important thing to note about this particular situation, is that Turkey has been reluctant to hike in order to arrest the lira’s decline. In fact, the central bank has on any number of occasions explicitly stated that it will follow the Fed. But when, back in August, Turkey attempted to release a “roadmap” of how its central bank intended to respond to policy normalization by DM central banks, the market wasn’t buying it, suggesting that if the Fed hikes, it may not be as simple as simpy saying “oh, ok, we’ll hike too.” That is, they may find themselves unable to catch up, portending still more lira weakness.”

  Now that Turkey is apparently trying to start a global conflict by becoming the first NATO member to shoot down a Russian jet since the Cold War, you can expect further lira weakness. Of course we predicted that too. From earlier this month: 

  And for anyone who thinks that a “strong” AKP government is going to give the lira anything that even approximates lasting relief, or that further ECB easing will give the central scope to remain on hold (or even to cut) in the face of a Fed hike, we suggest you take a hard look at exactly what’s going on politically and militarily both within Turkey and on its borders. There are huge (and likely intractable) idiosyncratic risk factors here that could send the currency plunging at any time.

  We went on to list one more factor that could weigh on the lira: autocratic incompetence. By that we of course mean President Tayyip Erdogan’s contention that the lira and the country’s FX reserves be damned, rates need to be lower. Here’s what Erodgan said a few weekends ago at the G20 summit in Antalya: 

  “In Turkey, the interest rates are high. Our rates are not those in the West, where they are low. First you have to reduce the cost of money. As long as the cost of money is on the rise, you can neither find young businessmen nor young businesswomen.”

  As Reuters noted at the time, “Erdogan has repeatedly called for lower rates to spur growth, equating higher financing costs with treason.” The G20 speech – where central bank governor Erdem Basci was forced to watch as Erdogan the rates strategist lectured everyone, including Christine Lagarde, on monetary policy – “is likely to unnerve investors already worried about central bank independence,” Reuters continued. 

  Indeed, and on Thursday we learn that those worries were not unfounded. Earlier today, we got a look at Turkey’s new government program (Ankara announced the new cabinet earlier this week) and conspicuously missing was the word “independent” in reference to how the central bank chooses monetary policy. As Bloomberg reported earlier, it was the first time the word was ommitted since AKP came to power thirteen years ago. Spot the moment when the market noticed:

  

  More, from Bloomberg:

  The new program says “it will continue to be fundamental that the central bank directly determine by itself the monetary policy tools it will utilize to attain price stability.” The last program, from September 2014, said the central bank “will continue to determine monetary policy and the monetary policy tools it will use to attain price stability in an independent fashion.”

   

  Turkey’s recently appointed Deputy Prime Minister Mehmet Simsek, the $800 billion economy’s foremost chief, said “speculation over wording on central bank independence in the new government program doesn’t reflect the truth.”

   

  Bora Tamer Yilmaz, an economist at Ziraat Yatirim in Istanbul, said the market “is trying to read too much into this.”

  “We should focus on the meaning rather than individual words,” Yilmaz said by e-mail today. “Turkey has improved itself during the last decade in establishing modern institutions, and we are not expecting that process to unwind.”

  Yes, we should “focus on the meaning and not the words.” Sorry Tamer, but it means exactly what everyone who knows anything about this government thinks it means: Erdogan will conduct monetary policy from now on. 

  So here’s a guy who in just the past six months has, i) started a civil war in order to whip the public into an anti-Kurd hysteria, ii) sabotaged the coalition building process so he could call for new elections, iii) arrested numerous members of the press, iv) held a farce of an election where his party only put up a strong showing because voters were scared to death, v) shot down a Russian warplane under suspicious circumstances, and now vi) eliminated the idea of central bank independence. And we haven’t even gotten to the part where he moves to change the constitution on the way to establishing a powerful executive presidency. 

  Meanwhile, the government in Ankara has been variously accused of facilitating black market crude sales for ISIS even as Erdogan uses the group as a smokescreen for his crackdown on political rivals. 

  Put simply: the idea that this country under the current government is a NATO member is absurd and the notion that Washington would support this type of autocratic rule is a testament to the fact that the US only cares about the proliferation of “democracy” if it means securing a foothold in a country that’s not already a strategic ally (like Syria).

  

  

  

  

  

  

• Thanks ISIS: We "Can't Keep Up With Surging Weapons Demand", Pentagon Says

  Any time there is a war and countless people in one, two or more nations die for some ideological, religious, ethnic, cultural or nationalistic “reason”, two entities benefit: those who supply the weapons and those who supply the loans to buy the weapons.

  And when it comes to supplying weapons to the world, in both absolute dollar and relative (as a % of GDP) terms, nobody even comes close to that paragon of democratic values, the United States of America.

  

   

  To be sure, back in May we wrote “How You “Boost” GDP: US Sells Over $4 Billion In Weapons To Israel, Iran And Saudi Arabia” when, as the title suggested, we explained how the Great US “democracy” was spreading not only the greatest virtues of democracy to the middle-east, but every possible caliber of weapons to go with it. For a hefty price of course.

  But not even we had any idea just how massive the “bumper” 2015 would be for the US military-industrial complex.

  As it turns out, with many suggesting the world, already gripped in a global terrorism frenzy courtesy of the CIA-created “Islamic State”, is on the verge of World War III (and with a NATO power bringing down a Russian fighter jet for the first time in over 60 years one can see where they get that idea) the result has been an unprecedented surge in demand for modern weapons of all shapes and sizes… made in the US.

  Demand so high, in fact, that the US simply can’t keep up.

  According to Reuters, the U.S. government is working hard to ensure quicker processing of U.S. foreign arms sales, which surged 36 percent to $46.6 billion in fiscal 2015 and look set to remain strong in coming years, a top Pentagon official said.

  Well of course demand will remain strong: after all that’s what the CIA is for – to destabilize the world, to install puppet governments and to assure that the shareholders of Lockheed, Raytheon, Boeing and General Dynamics have year after record year.

  Here is why the US loves a “contained” world war:

  “Projections are still strong,” Vice Admiral Joe Rixey, who heads the Pentagon’s Defense Security Cooperation Agency (DSCA), told Reuters in an interview late on Monday.

   

  He said the agency was trying to sort out the impact of a much stronger-than-expected fourth quarter as it finalized its forecast for arms sales in fiscal 2016, which began Oct. 1.

   

  The fight against Islamic State militants and other armed conflicts around the globe were fueling demand for U.S. missile defense equipment, helicopters and munitions, Rixey said, a shift from 10 years ago when the focus was on fighter jets.

  Odd: it is almost as if the US would have had the greatest benefit in creating the Islamic State. Oh wait.

  And before someone gets offended by the “World War” moniker, it’s not ours, it’s the Pentagons:

  “It’s worldwide. The demand signal is coming in Europe, in the Pacific and in Centcom,” he said, referring to the U.S. Central Command region, which includes the Middle East and Afghanistan.

  It has gotten so bad, the US is too backlogged, and isunable to deliver on time the weapons the world needs to fight the conflicts that the US stirs:

  U.S. companies and some foreign countries have expressed growing frustration in recent months about delays in arms sales approvals. They argue that the U.S. government has not expanded its capacity to process arms deals despite a big spike in such transactions.

   

  Jeff Kohler, Boeing Co’s (BA.N) vice president for international business development, said earlier this month he and his Gulf customers were “a little frustrated” with delays in getting U.S. approvals for fighter jet sales.

   

  A $3 billion deal for 28 Boeing F/A-18E/F fighter jets for Kuwait, and a separate Qatari deal for F-15 fighters, have been delayed for some time.

  What can possibly derail this war machine which literally converts deaths to profits? The answer, it appears, is budgetary cutbacks:

  Rixey said DSCA was keeping up with surging arms sales requests largely through process improvements and better training, but he warned that potential cuts in Pentagon headquarters funding could pose a problem.

  Clearly we can’t have less people getting killed around the globe just because Congress didn’t apportion enough blood money to the Pentagon.

  Meanwhile, the world is literally arming itself at a rate suggesting world war is around the corner: “DSCA is handling a total of 13,500 cases with a total value of $461 billion. Last year’s total was the biggest yet, outside of a spike caused by Saudi fighter jet sales in 2012.”

  Rixey said his agency was coordinating more closely with the U.S. State Department, the U.S. Commerce Department and other Pentagon agencies and leaders to advocate for U.S. arms sales as a key instrument of U.S. foreign policy.

   

  He said requests from countries that were “well-behaved” and protected U.S. technology were generally processed quickly, but the U.S. government would take its time vetting sales to countries with weaker records on human rights and technology.

  It would take its time, but in the end it will always say yes. Because the punchline is that “Rixey said some munitions had also been sold from U.S. military reserves to ensure that they were available to allies quicker.”

  Because when profits are at stake, who cares about the safety of one’s own people? After all, one must keep the global war profit machine running at full speed at every given moment.

  Confused? Then watch these two movies.

  

  

  

  

  

• How Much Higher Can The U.S. Dollar Go?

  Submitted by Charles Hugh-Smith via PeakProsperity.com,

  Let’s start our examination of the U.S. dollar (USD) by recalling the chart from my August 2014 essay, Why the Dollar Could Strengthen—A Lot.  At that point, the USD had moved modestly off its lows, and had yet to challenge long-term resistance around 80.

  

  Here’s the same chart of the Real Trade-Weighted U.S. Dollar Index now:

  

  The USD broke out of its multi-year downtrend and soared above 100. Needless to say, the USD did in fact strengthen a lot.  After that initial leg up, the dollar has remained in a consolidation range for much of 2015. Though it recently broke out of a wedge/triangle formation to the upside, it’s not yet clear if this is a definitive move higher or more consolidation.

  

  Is the Dollar Rally Done?

  So is the dollar rally done, or could it move higher?

  The long-term chart above (Real Trade-Weighted U.S. Dollar Index) offers some clues.

  Our first observation is that trends in the USD tend to last for some time, so if this rally follows the pattern of previous rallies, it’s unlikely to have run its course in one year.

  Secondly, previous rallies paused for a multi-month consolidation period before launching upward for the second leg of the long-term rally.

  Thirdly, the USD rose sharply to previous peaks and then round-tripped back to the 80 level.

  This raises the question: How high could the dollar rise in this rally?

  How High Could the USD Go?

  How high could the USD rise before it tops out?  Last November, when the dollar had just punched above 85 for the first time in years, I posted this chart that suggested 120 was “not impossible:”

  

  The current rally has already made it halfway to this target (from sub-80 to 100+). If we look again at the FRED chart above (the current Real Trade Weighted Dollar Index), we see that the consolidation periods have occurred roughly mid-way in the rallies. This is supportive of the idea that the initial 20+ point advance could be followed (after the consolidation phase ends) by another leg higher of approximately the same size (20+ points).

  That would get the dollar Index to the 120 target.

  Beyond 120, there are additional “impossible” targets defined by previous rallies:  depending on the chart (Real Trade Weighted Dollar Index from FRED, DXY or USD on charting services), these targets range from 130 to 165.

  

  Who Would Suffer If the Dollar Moved Higher?

  Any move higher in the dollar would encounter serious resistance from everyone whose positions, sales and profits would be negatively impacted by a soaring dollar.

  Any move above current levels around 100 would cause tremendous pain for many powerful participants. U.S. global corporate profits, already under pressure from the stronger dollar, would suffer from the worsening exchange rate, and that would pressure U.S. stock markets that are at least theoretically based on profits.

  Recall how FX (foreign exchange impacts U.S. corporate profits:

  1. Major American corporations get 40+% of sales and 50+% of profits from overseas markets denominated in other currencies.
  2. One euro of profit earned in the EU translated into $1.40 in profit a few years ago. Now the same 1 euro of profit converts to a mere $1.07 in profit when stated in dollars.
  3. That’s a 24% reduction in profit, just from the strengthening dollar.

  The effects of the stronger dollar on profits is visible in this chart. Note that while pundits and apologists are quick to blame “weather” for lagging sales, corporations overwhelmingly identified the rising USD as the cause of profit warnings, not the weather or geopolitical issues.

  

  Everyone who took out loans denominated in USD while their revenues/earnings are in a currency that’s losing value against the dollar will suffer as well.

  If an enterprise earning euros borrowed in dollars when the euro was 1.40, consider what happens to their USD-denominated loan payments now that the euro is 1.07.

  Where is once took only .72 euros to pay $1 in principal and interest on the dollar-based loan, now it take .94 euros to pay that same $1. That’s a 30% increase in loan payments, just from the rising dollar and the declining euro.

  This dynamic is even more punishing to those who borrowed dollars to fund carry trades in other currencies.

  What is a carry trade?

  As my PeakProsperity.com colleague Davefairtex explained last year:

  Carry Trade For Dummies:

  Step 1) Borrow $1 billion US at LIBOR-1M rate; cost 0.16%.

  Step 2) Trade $1 billion US for 1.075 billion AUD (Australian dollar).

  Step 3) Buy 1.075 billion 2-year AUD govt bonds; yield 2.52%

  Step 4) Collect $23 million USD/year for doing no work at all.

  If the currency the bond is denominated in rises in value against the USD, traders get a bonus gain from the appreciation.  For example, those who borrowed yen to buy U.S. Treasury bonds have reaped a nice profit as the USD has rocketed higher against the yen.

  But the reverse is less pleasant. As the USD rockets higher, the profits earned in weakening currencies decline when stated in dollars, while the amount due on the dollar-denominated loan has soared when the payments are converted to the local currency.

  Using our euro-USD example: the profit on the carry trade plummets (when converted to USD) while the amount of euros needed to pay the loan in USD soars.

  A rising USD is a double-whammy to carry trades based on borrowed dollars.

  The sums of money being gambled in carry trades are enormous. According to the Telegraph newspaper (U.K.), roughly two thirds of the $11 trillion in cross-national loans are denominated in U.S. dollars. That suggests that over $7 trillion in carry trades have turned sour.

  If the dollar continues rising, those sour carry trades quickly become catastrophic for everyone who borrowed dollars to buy assets in a weakening currency.

  Everyone who took loans denominated in dollars needs dollars to service the loan and pay it off. That demand is clearly one factor pushing the USD higher.

  In Part 2: Why The Coming Currency Crisis Will Push The USD Higher, we detail why we can anticipate the next global financial crisis will originate in the currency market, and how this will inevitably push the USD higher, which will increase the pressure on carry trades, adding fuel to the USD fire. Perhaps ironically, a much stronger dollar will put tremendous downward pressure on U.S. stock markets in 2016.

  Click here to read Part 2 of this report (free executive summary, enrollment required for full access)

  

  

  

  

  

• Putin, Hollande Hold Joint Press Conference Over Anti-ISIS Talks – Live Webcast

  Moments ago, after nearly two hours of private talks in Moscow between Vladimir Putin and France’s Francois Hollande, a press conference started in which the two world leaders will share the conclusions of their discussions: will France gravitate closer toward Moscow after the events of the past 2 weeks or will it remain a key block in the NATO anti-Russia alliance?

  Some of Hollande’s statements so far:

  • Assad can not play a role in Syrian future
  • France and Russia will share intelligence and exchange information
  • France and Russia will coordinate their strikes on the Islamic State, as well as coordinating what should not be hit
  • Putin will go to Paris on Monday to join climate change conference

  Putin disagrees with Hollande and said that the future of Assad should be “entirely in the hands of the Syrian people”, and adds that Russia will not attack areas that are not controlled by terrorist groups and will share intelligence on deciding which those are.

  More importantly, Putin explains the reason for the deployment of the S-400 SAM system: Russia never thought it would need to deploy this system as ISIS don’t have missiles that can reach the altitudes at which Russian airplanes fly, however it has no air defense protection against Turkish warplane attacks like the one that happened (adding he never expected a Russian jet to be attacked by someone considered an ally), essentially admitting that the S-400s deployed today are a deterrent to further Turkish activity and will be used promptly if a comparable situation to the one from Tuesday is repeated.

  Perhaps most important, however, is topic #1, namely who is funding ISIS, and here Putin just said that Russia has observed industrial-scale oil supplies flowing from militant-controlled regions in Syria to Turkey. All we need now is a YouTube clip as proof.

  A recording of the press conference is available below:

  

  

  

  

  

• US Foreign Policy Explained (In 1 Cartoon)

  The definition of insanity…

   

  

   

  h/t @Ignorant_Effigy

  

  

  

  

  

• Jeez! What Ever Happened To The "Free World"?

  Submitted by Simon Black via SovereignMan.com,

  On August 12, 1961, Walter Ulbricht, the Chairman of the State Council in East Germany, signed an order to close the border and begin building a wall around East Berlin.

  It happened quickly. Soldiers began tearing up the roads leading into West Berlin almost immediately and actually stood with weapons at the border with orders to shoot anyone who tried to cross.

  Before long there were barbed-wire fences. Then concrete walls. Then dogs. Guard towers. And even anti-tank obstacles.

  Of course, the East German government told people that the wall was for their protection, ostensibly to keep out rapists and thieves.

  They said that there were too many foreigners coming in to East Berlin who unfairly bought up state-subsidized goods.

  They also warned people of the looming threat of fascist invaders, and even went as far as to call the wall an “Anti-fascist protective rampart”.

  As a child of the ’80s (I was born at the tail-end of the Carter administration), I remember how the Berlin Wall was a symbol of tyranny and oppression.

  And from the steps of the Brandenburg Gate in West Berlin, Ronald Reagan told the world in a now-famous speech from 1987, “The advance of human liberty can only strengthen the cause of world peace,” before demanding, “Mr. Gorbachev, tear down this wall!”

  Back then if you had talked about building a wall in America, they would have called you a Commie.

  But now, in the Land of the Free, it’s all the rage to build a new wall.

  They’re also talking about rounding up Muslims and having ‘databases’ just in case you have the audacity to be brown.

  There’s already a massive level of surveillance in the Land of the Free. Everything you do online is monitored and tracked.

  The police state grows by the day. Federally-funded police forces now don combat boots, Kevlar vests, and intimidating paramilitary attire to drive around in their urban assault vehicles as if they’re in downtown Mogadishu.

  Nearly every federal agency down to the Fish and Wildlife Service has its own gun-toting police force… which makes it pretty unsurprising that Civil Asset Forfeiture has risen an average of 21% per year for the past two decades.

  Yet despite all of this security and surveillance, the government still doesn’t feel that it’s enough.

  The US State Department released an alert this week telling American citizens to avoid travel and public places… for the next THREE MONTHS.

  Apparently we should all be cowering in fear in our homes, grateful that the NSA is reading our emails.

  The Department of Homeland Security is bringing back “if you see something, say something” in the hopes of having the citizens all rat each other out.

  Former CIA Director Jack Devine stated “I have never felt more uncomfortable than I do today,” and that today “is the most dangerous time ever.”

  Someone needs to give this man a history lesson. Human civilization has had to deal with deranged threats for thousands of years.

  Yes, there are some nut jobs out there—crazed, lone wolf gunmen, angry teenagers, and even terrorists with an agenda, all of whom intend to do harm to innocents.

  But having traveled to nearly 120 countries on all seven continents, I can tell you from personal experience that the world is actually a pretty safe place.

  Today I can hop on a plane and be on the other side of the planet tomorrow morning, even in a country where I don’t know a soul.

  You couldn’t do that 500 years ago. You couldn’t even really do it 100 years ago.

  Centuries ago, even moving outside your own village was fraught with risk and peril. So the time we’re living in today is actually one of the safest in the history of the world.

  The far greater danger out there, more than angry teenagers and men in caves, is the palatable, distinct decline in freedom.

  I don’t know where the ‘Land of the Free’ went… or where the ‘leader of the free world’ ran off…

  But this is a far cry from those days in the ’80s when Western nations stood against tyranny and fear.

  If you celebrate Thanksgiving, I’d encourage you to give thanks that you can see the truth. Give thanks that you’re rational and aren’t giving in to the propaganda.

  But most of all, give thanks that, even though you may not be free right now, all the solutions exist to ensure that you can be once again.

  

  

  

  

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• Meet The Man Who Funds ISIS: Bilal Erdogan, The Son Of Turkey's President

  Russia’s Sergey Lavrov is not one foreign minister known to mince his words. Just earlier today, 24 hours after a Russian plane was brought down by the country whose president three years ago said “a short-term border violation can never be a pretext for an attack”, had this to say: “We have serious doubts this was an unintended incident and believe this is a planned provocation” by Turkey.

  But even that was tame compared to what Lavrov said to his Turkish counterparty Mevlut Cavusoglu earlier today during a phone call between the two (Lavrov who was supposed to travel to Turkey has since canceled such plans).

  As Sputnik transcribes, according to a press release from Russia’s Ministry of Foreign Affairs, Lavrov pointed out that, “by shooting down a Russian plane on a counter-terrorist mission of the Russian Aerospace Force in Syria, and one that did not violate Turkey’s airspace, the Turkish government has in effect sided with ISIS.“

  It was in this context when Lavrov added that “Turkey’s actions appear premeditated, planned, and undertaken with a specific objective.“

  More importantly, Lavrov pointed to Turkey’s role in the propping up the terror network through the oil trade. Per the Russian statement:

  “The Russian Minister reminded his counterpart about Turkey’s involvement in the ISIS’ illegal trade in oil, which is transported via the area where the Russian plane was shot down, and about the terrorist infrastructure, arms and munitions depots and control centers that are also located there.”

  Others reaffirmed Lavrov’s stance, such as retired French General Dominique Trinquand, who said that “Turkey is either not fighting ISIL at all or very little, and does not interfere with different types of smuggling that takes place on its border, be it oil, phosphate, cotton or people,” he said.

  The reason we find this line of questioning fascinating is that just last week in the aftermath of the French terror attack but long before the Turkish downing of the Russian jet, we wrote about “The Most Important Question About ISIS That Nobody Is Asking” in which we asked who is the one “breaching every known law of funding terrorism when buying ISIS crude, almost certainly with the tacit approval by various “western alliance” governments, and why is it that these governments have allowed said middleman to continue funding ISIS for as long as it has?“

  Precisely one week later, in even more tragic circumstances, suddenly everyone is asking this question.

  And while we patiently dig to find who the on and offshore “commodity trading” middleman are, who cart away ISIS oil to European and other international markets in exchange for hundreds of millions of dollars, one name keeps popping up as the primary culprit of regional demand for the Islamic State’s “terrorist oil” – that of Turkish president Recep Erdo?an’s son: Bilal Erdo?an.

  His very brief bio:

  Necmettin Bilal Erdo?an, commonly known as Bilal Erdo?an (born 23 April 1980) is the third child of Recep Tayyip Erdo?an, the current President of Turkey.

   

  After graduating from Kartal Imam Hatip High School in 1999, Bilal Erdogan moved to the US for undergraduate education. He also earned a Masters Degree in John F. Kennedy School of Government at Harvard University in 2004. After graduation, he served in the World Bank as intern for a while. He returned Turkey in 2006 and started to his business life. Bilal Erdogan is one of the three equal shareholders of “BMZ Group Denizcilik ve ?n?aat Sanayi Anonim ?irketi“, a marine transportation corporation.

  Here is a recent picture of Bilal, shown in a photo from a Turkish 2014 article, which “asked why his ships are now in Syria”:

  

  In the next few days, we will present a full breakdown of Bilal’s various business ventures, starting with his BMZ Group which is the name implicated most often in the smuggling of illegal Iraqi and Islamic State through to the western supply chain, but for now here is a brief, if very disturbing snapshot, of both father and son Erdogan by F. William Engdahl, one which should make everyone ask whether the son of Turkey’s president (and thus, the father) is the silent mastermind who has been responsible for converting millions of barrels of Syrian Oil into hundreds of millions of dollars of Islamic State revenue.

  By F. William Engdahl, posted originally in New Eastern Outlook:

  Erdogan’s Dirth Dangerous ISIS Games

  More and more details are coming to light revealing that the Islamic State in Iraq and Syria, variously known as ISIS, IS or Daesh, is being fed and kept alive by Recep Tayyip Erdo?an, the Turkish President and by his Turkish intelligence service, including MIT, the Turkish CIA. Turkey, as a result of Erdo?an’s pursuit of what some call a Neo-Ottoman Empire fantasies that stretch all the way to China, Syria and Iraq, threatens not only to destroy Turkey but much of the Middle East if he continues on his present path.

  In October 2014 US Vice President Joe Biden told a Harvard gathering that Erdo?an’s regime was backing ISIS with “hundreds of millions of dollars and thousands of tons of weapons…” Biden later apologized clearly for tactical reasons to get Erdo?an’s permission to use Turkey’s Incirlik Air Base for airstrikes against ISIS in Syria, but the dimensions of Erdo?an’s backing for ISIS since revealed is far, far more than Biden hinted.

  ISIS militants were trained by US, Israeli and now it emerges, by Turkish special forces at secret bases in Konya Province inside the Turkish border to Syria, over the past three years. Erdo?an’s involvement in ISIS goes much deeper. At a time when Washington, Saudi Arabia and even Qatar appear to have cut off their support for ISIS, they remaining amazingly durable. The reason appears to be the scale of the backing from Erdo?an and his fellow neo-Ottoman Sunni Islam Prime Minister, Ahmet Davuto?lu.

  Nice Family Business

  The prime source of money feeding ISIS these days is sale of Iraqi oil from the Mosul region oilfields where they maintain a stronghold. The son of Erdo?an it seems is the man who makes the export sales of ISIS-controlled oil possible.

  Bilal Erdo?an owns several maritime companies. He has allegedly signed contracts with European operating companies to carry Iraqi stolen oil to different Asian countries. The Turkish government buys Iraqi plundered oil which is being produced from the Iraqi seized oil wells. Bilal Erdo?an’s maritime companies own special wharfs in Beirut and Ceyhan ports that are transporting ISIS’ smuggled crude oil in Japan-bound oil tankers.

  Gürsel Tekin vice-president of the Turkish Republican Peoples’ Party, CHP, declared in a recent Turkish media interview, “President Erdo?an claims that according to international transportation conventions there is no legal infraction concerning Bilal’s illicit activities and his son is doing an ordinary business with the registered Japanese companies, but in fact Bilal Erdo?an is up to his neck in complicity with terrorism, but as long as his father holds office he will be immune from any judicial prosecution.” Tekin adds that Bilal’s maritime company doing the oil trades for ISIS, BMZ Ltd, is “a family business and president Erdo?an’s close relatives hold shares in BMZ and they misused public funds and took illicit loans from Turkish banks.”

  In addition to son Bilal’s illegal and lucrative oil trading for ISIS, Sümeyye Erdo?an, the daughter of the Turkish President apparently runs a secret hospital camp inside Turkey just over the Syrian border where Turkish army trucks daily being in scores of wounded ISIS Jihadists to be patched up and sent back to wage the bloody Jihad in Syria, according to the testimony of a nurse who was recruited to work there until it was discovered she was a member of the Alawite branch of Islam, the same as Syrian President Bashar al-Assad who Erdo?an seems hell-bent on toppling.

  Turkish citizen Ramazan Ba?ol, captured this month by Kurdish People’s Defence Units,YPG, as he attempted to join ISIS from Konya province, told his captors that said he was sent to ISIS by the ‘?smail A?a Sect,’ a strict Turkish Islam sect reported to be tied to Recep Erdo?an. Ba?ol said the sect recruits members and provides logistic support to the radical Islamist organization. He added that the Sect gives jihad training in neighborhoods of Konya and sends those trained here to join ISIS gangs in Syria.

  According to French geopolitical analyst, Thierry Meyssan, Recep Erdo?an “organised the pillage of Syria, dismantled all the factories in Aleppo, the economic capital, and stole the machine-tools. Similarly, he organised the theft of archeological treasures and set up an international market in Antioch…with the help of General Benoît Puga, Chief of Staff for the Elysée, he organised a false-flag operation intended to provoke the launching of a war by the Atlantic Alliance – the chemical bombing of la Ghoutta in Damascus, in August 2013. “

  Meyssan claims that the Syria strategy of Erdo?an was initially secretly developed in coordination with former French Foreign Minister Alain Juppé and Erdo?an’s then Foreign Minister Ahmet Davuto?lu, in 2011, after Juppe won a hesitant Erdo?an to the idea of supporting the attack on traditional Turkish ally Syria in return for a promise of French support for Turkish membership in the EU. France later backed out, leaving Erdo?an to continue the Syrian bloodbath largely on his own using ISIS.

  Gen. John R. Allen, an opponent of Obama’s Iran peace strategy, now US diplomatic envoy coordinating the coalition against the Islamic State, exceeded his authorized role after meeting with Erdo?an and “promised to create a “no-fly zone” ninety miles wide, over Syrian territory, along the whole border with Turkey, supposedly intended to help Syrian refugees fleeing from their government, but in reality to apply the “Juppé-Wright plan”. The Turkish Prime Minister, Ahmet Davuto?lu, revealed US support for the project on the TV channel A Haber by launching a bombing raid against the PKK.” Meyssan adds.

  There are never winners in war and Erdo?an’s war against Syria’s Assad demonstrates that in bold. Turkey and the world deserve better. Ahmet Davuto?lu’s famous “Zero Problems With Neighbors” foreign policy has been turned into massive problems with all neighbors due to the foolish ambitions of Erdo?an and his gang. 

  

  

  

  

  

• The True Meaning Of Thanksgiving

  Submitted by Richard Ebeiling via EpicTimes.com,

  This time of the year, whether in good economic times or bad, is when Americans gather with their families and friends and enjoy a Thanksgiving meal together. It marks a remembrance of those early Pilgrim Fathers who crossed the uncharted ocean from Europe to make a new start in Plymouth, Massachusetts. What is less appreciated is that Thanksgiving also is a celebration of the birth of free enterprise in America.

  The English Puritans, who left Great Britain and sailed across the Atlantic on the Mayflower in 1620, were not only escaping from religious persecution in their homeland. They also wanted to turn their back on what they viewed as the materialistic and greedy corruption of the Old World.

  Plymouth Colony Planned as Collectivist Utopia

  In the New World, they wanted to erect a New Jerusalem that would not only be religiously devout, but be built on a new foundation of communal sharing and social altruism. Their goal was the communism of Plato’s “Republic,” in which all would work and share in common, knowing neither private property nor self-interested acquisitiveness.

  What resulted is recorded in the diary of Governor William Bradford, the head of the colony. The colonists collectively cleared and worked the land, but they brought forth neither the bountiful harvest they hoped for, nor did it create a spirit of shared and cheerful brotherhood.

  The less industrious members of the colony came late to their work in the fields, and were slow and easy in their labors. Knowing that they and their families were to receive an equal share of whatever the group produced, they saw little reason to be more diligent in their efforts. The harder working among the colonists became resentful that their efforts would be redistributed to the more malingering members of the colony. Soon they, too, were coming late to work and were less energetic in the fields.

  

  Collective Work Equaled Individual Resentment

  As Governor Bradford of the Plymouth Colony explained in his old English (though with the spelling modernized):

  “For the young men that were able and fit for labor and service did repine that they should spend their time and strength to work for other men’s wives and children, without recompense. The strong, or men of parts, had no more division of food, clothes, etc. then he that was weak and not able to do a quarter the other could; this was thought injustice. The aged and graver men to be ranked and equalized in labor, and food, clothes, etc. with the meaner and younger sort, thought it some indignant and disrespect unto them. And for men’s wives to be commanded to do service for other men, as dressing their meat, washing their clothes, etc. they deemed it a kind of slavery, neither could husbands brook it.”

  Because of the disincentives and resentments that spread among the population, crops were sparse and the rationed equal shares from the collective harvest were not enough to ward off starvation and death. Two years of communism in practice had left alive only a fraction of the original number of the Plymouth colonists.

  Private Property as Incentive to Industry

  Realizing that another season like those that had just passed would mean the extinction of the entire community, the elders of the colony decided to try something radically different: the introduction of private property rights and the right of the individual families to keep the fruits of their own labor.

  As Governor Bradford put it:

  “And so assigned to every family a parcel of land, according to the proportion of their number for that end . . . This had a very good success; for it made all hands very industrious, so as much more corn was planted then otherwise would have been by any means the Governor or any other could use, and saved him a great deal of trouble, and gave far better content. The women now went willingly into the field, and took their little-ones with them to set corn, which before would a ledge weakness, and inability; whom to have compelled would have been thought great tyranny and oppression.”

  The Plymouth Colony experienced a great bounty of food. Private ownership meant that there was now a close link between work and reward. Industry became the order of the day as the men and women in each family went to the fields on their separate private farms. When the harvest time came, not only did many families produce enough for their own needs, but also they had surpluses that they could freely exchange with their neighbors for mutual benefit and improvement.

  In Governor Bradford’s words:

  “By this time harvest was come, and instead of famine, now God gave them plenty, and the face of things was changed, to the rejoicing of the hearts of many, for which they blessed God. And the effect of their planting was well seen, for all had, one way or other, pretty well to bring the year about, and some of the abler sort and more industrious had to spare, and sell to others, so as any general want or famine hath not been amongst them since to this day.”

  

  Rejecting Collectivism for Individualism

  Hard experience had taught the Plymouth colonists the fallacy and error in the ideas that since the time of the ancient Greeks had promised paradise through collectivism rather than individualism. As Governor Bradford expressed it:

  “The experience that was had in this common course and condition, tried sundry years, and that amongst the Godly and sober men, may well convince of the vanity and conceit of Plato’s and other ancients; — that the taking away of property, and bringing into a common wealth, would make them happy and flourishing; as if they were wiser than God. For this community (so far as it was) was found to breed confusion and discontent, and retard much employment that would have been to their benefit and comfort.”

  Was this realization that communism was incompatible with human nature and the prosperity of humanity to be despaired or be a cause for guilt? Not in Governor Bradford’s eyes. It was simply a matter of accepting that altruism and collectivism were inconsistent with the nature of man, and that human institutions should reflect the reality of man’s nature if he is to prosper. Said Governor Bradford:

  “Let none object this is man’s corruption, and nothing to the curse itself. I answer, seeing all men have this corruption in them, God in his wisdom saw another course fitter for them.”

  The desire to “spread the wealth” and for government to plan and regulate people’s lives is as old as the utopian fantasy in Plato’s “Republic.” The Pilgrim Fathers tried and soon realized its bankruptcy and failure as a way for men to live together in society.

  They, instead, accepted man as he is: hardworking, productive, and innovative when allowed the liberty to follow his own interests in improving his own circumstances and that of his family. And even more, out of his industry result the quantities of useful goods that enable men to trade to their mutual benefit.

  

   

  Giving Thanks for the Triumph of Freedom

  In the wilderness of the New World, the Plymouth Pilgrims had progressed from the false dream of communism to the sound realism of capitalism. At a time of economic uncertainty and growing political paternalism, it is worthwhile recalling this beginning of the American experiment and experience with freedom.

  This is the lesson of the First Thanksgiving. This year, when we, Americans sit around our dining table with family and friends, we should also remember that what we are really celebrating is the birth of free men and free enterprise in that New World of America.

  The true meaning of Thanksgiving, in other words, is the triumph of Capitalism over the failure of Collectivism in all its forms.

  

  

  

  

  

• If "Everything's Awesome" Why Did Aussie CapEx Just Collapse By The Most In Its 30 Year History

  Day after day, the 'stability' in the stock "markets" (specifically in AsiaPac) is posited as 'proof' that China is 'fixed', the worst is over in EMs, The Fed can raise rates, and massive monetray policy manipulation of market signals had no mal-investment consequences. Well all of that utter crap just got obliterated as China's right-hand-man in the credit-fueled commodity boom bust – Australia – just saw its business capital expenditure collapse 20% YoY – the biggest drop ever, accelerating the crash in business spending to 11 quarters. As Goldman warns, this exposes significant downside risk to any forecast for GDP recovery in 2016.

  Recovery? Spin this into recovery!!

  

   

  As Goldman Sach details,

  For consecutive quarters, Australia’s private capex report was weaker than expected across the board – highlighting the risk of an outright contraction in domestic demand in 3Q2015 and a disappointing recovery in growth through 2016. In particular, we note a -9.2%qoq decline in capex in the quarter (BBG consensus: -2.9%qoq), and further sequential deterioration in the FY16 investment intentions component of the report. As it stands, the data speak to an ~-20% contraction in capex in FY16 which – even assuming better capex trends outside of this survey – appears completely at odds with the ~-7% decline in investment forecast by the broader consensus (Consensus Economics). Today’s data highlight that domestic demand likely contracted outright in 3Q2015 and the downside risk to the RBA’s forecast recovery in GDP to a +3.0%yoy pace by end-2016. If growth continues to fall short of expectations as we fear, the prospect of RBA rate cuts remains a very real one.

  Private capital expenditure, Septquarter: -9.2% qoq, -20.0% yoy (Bloomberg consensus: -2.9% qoq, GS: -4.0% qoq);

  By Component:

  • Machinery & equipment (MEI): -8.2% qoq, -12.7%yoy
  • Building & structures (B&S): -9.8% qoq, -23.6% yoy

  Private capital expenditure,2015-16Intentions (4thestimate): -19.7% (down from -18.8% 3rd estimate)

  By industry:

  • Mining sector: -30.6% (from -29.1% previously)
  • Manufacturing: -9.8% (from -8.8% previously)
  • 'Other': -8.5% (from -8.1% previously)

      
  Main Points:
      
  1. Today’s capex report was weaker than expected across the board, with weaker implications for both investment in 3Q2015 and the outlook through FY16 as a whole. Looking specifically at the historical data , the headline -9.2%qoq decline in private capex was a far larger contraction than expected (GS: -4.0%qoq; BBG consensus: -2.9%qoq), with weakness equally spread across the building & structures (-9.8%qoq) and machinery & equipment (-8.2%qoq) components. It is this fall in the latter that has the most relevance for next Wednesday’s 3Q2015 National Accounts and – alongside yesterday’s weak construction data – is a stark reminder that the unwind of Australia’s mining investment boom presents a profound headwind to overall growth.

  2. Looking at the investment intentions data, the read-though was also to the weaker side. To be clear, on face value, the “raw” estimate for FY16 spending increased by ~$4.6bn to $120.4bn compared with the third estimate for FY16. There are several important caveats to this apparent improvement however:

  1. Firstly, compared with the fourth estimate for capex spending for FY15, the raw $120.4 number implies a 20.9% fall.
  2. Secondly, as there is typically a tendency to initially under-estimate in the survey process and therefore almost always a very strong increase in capex estimates at this point in the survey, it is important to adjust the raw numbers using realization ratios. Using long-run realization ratios, for example, has markedly weaker implications – we note that compared with the third estimate for FY16 (-18.8%), the fourth estimate suggests capex will fall by an even larger -19.7% in FY16. In context, there has now been a sequential deterioration in the FY16 capex outlook over each of the past four estimates, with this deterioration broad-based across the “other selected industries” (-8.5%) and mining sectors (-30.6%).
  3. Finally, putting the ~20% decline in FY16 capex suggested by today’s data in context, we note that markedly more modest declines in broader business investment are currently baked into the forecasts of consensus (~-7.0%), Treasury (-7%) and ourselves (GS: -11.5%). To be fair, the capex survey does not incorporate trends in public spending in health and education – however, fiscal constraints and relevant leading indicators all suggest that the outlook in these sectors is subdued at best. All things considered, this survey appears completely at odds with the relatively modest contraction in investment many are forecasting. For our part, we remain the most bearish in the market on the investment cycle and see the risks to our own forecast as skewed to the downside (For full details on our relatively cautious views on the investment outlook, please see: Detail – Australia and New Zealand Economic Analyst: Ongoing risks to Australian Investment: A Regional Perspective, 17/8/2015).

       
  3Q2015 GDP estimate:Ahead of next Wednesday’s National Accounts, today’s weaker-than-expected capex numbers require a -20bp reduction in our 3Q2015 GDP tracking estimate to +0.8%qoq. On face value at least, this is still a relatively solid expansion in activity, but today’s update highlights that the headline increase is masking markedly weaker underlying trends. Specifically, with net exports adding ~1.4pts to GDP in the quarter, domestic demand looks on track for an outright contraction.

  We will revisit our estimate on receipt of the remaining partial data on Monday (profits & inventories) and Tuesday (trade and public demand) next week.

  Monetary Policy:

  Reflecting on the implications of the composition of 3Q2015 GDP for monetary policy, we note that such a large (in part weather-related) boost to growth from net exports is likely unsustainable, yet severe headwinds from the mining capex cycle are expected to remain in place for some time. Indeed, on the RBA’s own forecasts, the adjustment in mining capex is only half complete, with ~3% of GDP worth of mining capex to fall out of the growth equation over the coming years. With the tailwinds from the housing construction cycle starting to fade, population growth slowing and public demand constrained by Australia’s public finances – it is hard to find a sustainable offset to the capex headwind elsewhere in the economy. While it is true that LNG export volumes will ramp-up over time, the trend has been towards project delays and the shipments will be delivered into a very weak price environment in any case.

  Overall, we remain concerned about the growth outlook in Australia. Notwithstanding, a reported improvement in surveyed business conditions, there is nothing in today’s update to comfort the RBA that this is translating to anything concrete on the investment front. In turn, we see material downside risks to the RBA’s forecast reacceleration in GDP growth to a +3.0%yoy rate by the end of 2016. To the degree growth continues to fall short of the RBA’s expectations, the prospect of further easing will remain on the table.

   

  Charts: Bloomberg

  

  

  

  

  

• The Future Of Cannabis

  The recreational cannabis industry is changing fast, and the last few years have been a blur for investors observing the space.

  More people today believe that cannabis should be legal than ever before, and famed investors like Peter Thiel have already made giant bets on the future of recreational cannabis.

  Here’s five facts you need to know on the fast-moving industry:

  1. Recreational cannabis is already legal in four states and D.C. It is also available for medical purposes in 20 other states, as well as Canada. Viridian Capital Advisors, which provides research to the cannabis sector, estimates between 6 to 13 states will legalize recreational usage by end of 2016.
  2. Legal cannabis was a $700 million industry in Colorado last year. In 2014, Colorado retailers sold $386 million of medical cannabis and $313 million for recreational purposes. The two segments of the market generated $63 million in tax revenue, with an additional $13 million collected in licenses and fees.
  3. Stocks in the sector have boomed over the last two years. The Viridian Cannabis Index, which covers 60 publicly traded cannabis companies in the United States and Canada, was up 77.5% in 2013, 38.4% in 2014, and 23.6% in 2015 Q1.
  4. Total legal cannabis sales have sailed in recent years With $1.6 billion in sales in 2013, it is expected to increase to $3.5 billion in 2018, which is good for an expected 17% compound annual growth rate.
  5. Nearly half of U.S. states and all of Canada now have access to medical cannabis. That includes 23 states (148.6 million people), 1 district (0.7 million people) and Canada (35.2 million people). That’s 52% of the entire population of the United States and Canada.

  

   

  The landscape of the cannabis industry is quickly changing. More jurisdictions are turning to legalization of medical and recreational cannabis, and the growth story behind the industry is just beginning for investors.

  Source: Visual Capitalist

  

  

  

  

  

• Russia Says Turkey's Attack On Jet Was "Planned Provocation" As Ankara Moves Tanks Near Syrian Border

  On Tuesday evening, we took a close look at the circumstances surrounding Turkey’s decision to shoot down a Russian Su-24 near the Syrian border. The incident was the most meaningful escalation in the conflict to date and marks the first time a Russian or Soviet plane has been downed by NATO since 1953.

  The pilots ejected, one of whom was shot in his parachute by FSA-affiliated Alwiya al-Ashar militiamen who subsequently celebrated over the body. About an hour later, the FSA’s 1st Coastal Brigade used a US-made TOW to destroy a Russian search and rescue helicopter, killing one Russian marine.

  For his part, Vladimir Putin called Erdogan a backstabber and proceeded to accuse Turkey of flying the black flag of ISIS and funding the Islamic State cause by facilitating the sale of illegal crude. 

  

  Miraculously, there were no further escalations overnight, but as we outlined in detail on Tuesday, something doesn’t add up about the story Ankara is telling. According to a letter Turkey sent to UN Secretary-General Ban Ki-moon and the 15 members of the UN Security Council, the Russian warplane, flying at 19,000 feet, “violated Turkish national airspace to a depth of 1.36 miles and 1.15 miles in length for 17 seconds.” If you do the math on that, it means the Su-24 was basically flying at stall speed. 

  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

  Here’s how we summed up the situation: 

  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. 

   

  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. 

   

  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.

  With that in mind, note that on Wednesday, Sergei Lavrov (not known for holding his tongue or even for observing any semblance of diplomatic decorum) accused Ankara of conducting a pre-meditated strike. “We have serious doubts this was an unintended incident and believe this is a planned provocation,” Lavrov said, after a meeting with his Turkish counterpart Mevlut Cavusoglu. Lavrov also said he would back a plan to close the Turkish-Syrian border. “I think this is the right desicion. I hope President Hollande will tell us more about the issue tommorow. We would be ready to consider all measures that needed for this [closing the border]. By closing the border we will basically thwart the terrorist threat in Syria,” he said.

  Russia also said the Syrian army (so, Iran or Hezbollah) had retrieved the second pilot who is now “alive and well.” Here’s how French ambassador Alexandre Orlov summed up the situation in an interview with Europe 1 radio: “One on board was wounded when he parachuted down and killed in a savage way on the ground by the jihadists in the area. The other managed to escape and, according to the latest information, has been picked up by the Syrian army and should be going back to the Russian air force base.”

  Note the difference in the way Russia and the US describes the FSA. For the US, they are a “moderate opposition group,” for the Russians, they are “jihadists.” Considering they are allied with al-Qaeda, and judging from the gruesome videos released by the group on Tuesday, you’d be forgiven if you’re inclined to go with Moscow’s characterization.

  Meanwhile, Russia is set to deploy the S-400s. “Russia also said Wednesday it would take new measures in Syria to protect its aircraft, deploying powerful S-400 anti-air missile systems, which have a range of nearly 250 miles, to Russia’s Khmeimim airbase in northwestern Syria,” WaPo reports, adding that “the airbase is located a little under 20 miles from the Turkish border, and has the potential to create headaches for Turkish and other aircraft in a U.S.-led coalition that are carrying out a separate airstrike campaign in Syria.”

  These are of course the same S-400s which the Western media claimed were already at Latakia earlier this month – a contention Russia denied at the time. Whether or not they were there is now immaterial – they’ll be operational from this point on. As a reminder, here’s what the systems look like:

  

  What seems clear (as noted above and as discussed at length on Tuesday), is that Turkey is keen on protecting Alwiya al-Ashar and other anti-Assad forces operating near the Turkish border. Indeed, Sergei Lavrov said as much in a press briefing on Wednesday. “[The] question arises whether Turkey is defending Syria area to protect rebel infrastructure,” Lavrov said at a press briefing in Moscow on Wednesday.

  Indeed, Ankara looks to be stepping up its military presence near the area where the Russian plane was shot down. “Turkey has moved 20 tanks from west of country to southern province of Gaziantep, bordering Syria, and increased number of F-16s flying patrols along border to 18 as of yesterday,” state-run Anadolu Agency said today. Here’s a visual that shows you where Gaziantep is in relation to Aleppo and to the Su-24 crash site:

  

  The logical next question to ask here is how prepared Turkey is to defend FSA positions because it’s only a matter of time before the IRGC and Hezbollah invade these areas on the ground and when that happens, you can expect Ankara to cry genocide against Syria’s Turkmen miniority. What comes after that is anyone’s guess. 

  In the meantime, Lavrov says Russia “is not going to war against Turkey,” but remember what we said last month when Turkey shot down a Russian drone: “For now, it appears as though The Kremlin is going to take this one in stride, but that may be “strike one” so to speak, meaning NATO might have one or two more pot shots it can take before Erdogan gets a slightly less “neighborly” call from Moscow.”

  Tuesday was strike two.  

  

  

  

  

• Guest Post: Why Is The US Hanging Turkey Out To Dry?

  Authored by Andrew Korybko via OrientalReview.com,

  Turkey’s shooting down of the Russian anti-ISIL aircraft was an unprecedentedly direct aggression against Moscow that trumps even the tense and hostile militarism of the Old Cold War era. The world stands on edge in the immediate aftermath of this attack, with tabloid-esque commentators warning that the beginning of World War III awaits. President Putin, for his part, has been much more measured in responding to the incident, but still couldn’t contain his shock at having received this “stab in the back delivered by accomplices of the terrorists.”

  The question now comes down to how Russia will respond to what happened, but perhaps even more important for observers to ponder is why the US is unofficially distancing itself from its ally’s aggression. Despite both NATO and Obama giving full backing to Turkey’s fateful decision, Reuters has quoted an anonymous American military official that purposely leaked that the Russian plane was downed while over Syrian airspace, basing the assessment on heat signature detection. This raises questions about why the US is playing both sides of the fence – on one hand, publicly supporting Turkey, while on the other, strategically releasing information that conflicts with Turkey’s official depiction of events.

  The Setup:

  This dichotomy is suggestive of a Machiavellian plan whereby the US manipulates both Turkey and Russia into behaving according to what it has already forecast as their most likely responses, knowing full well that these could be guided into supporting grander American strategic interests. For starters, the US likely intimated to Erdogan that not only does he have the ‘legal’ right to shoot down any Russian aircraft he chooses, but that the US would actually prefer for him to take this course of action sooner than later. This is reminiscently similar to how the US put Sakkashvili up to bombing Tskhinval and invading South Ossetia – it may not have directly issued an official, on-paper order for this to occur, but it left no ambiguity as to how it wanted its proxy to act in each situation.

  According To Plan:

  For the most part, this explains the public pronouncements of NATO and the US’ support for Turkey’s actions, and it also goes a long way in soothing Erdogan’s nerves and reassuring him that he did the right thing. The predicted aftereffect of the plane’s downing was an immediate deterioration of Russian-Turkish relations, with the full consequences potentially affecting the diplomatic, military, economic, and energy spheres. Foreign Minister Sergei Lavrov cancelled his upcoming trip to Turkey and advised Russian tourists to refrain from visiting the country due to the terrorism level being similar to Egypt’s. Prime Minister Dmitry Medvedev has spoken about the possibility of barring Turkish companies from the Russian market and cancelling planned nuclear and gas projects with the country.

   

  

  All of these prospective actions are fully justifiable and grounded in the self-respect that Russia feels in not aiding what has proven itself to be a militantly hostile state no matter the economic stakes involved, but at the same time, one can’t help but wonder whether this is exactly what the US wanted. There’s no doubt that Russia would react this way, as even a cursory glance of its potential ‘response toolkit’ indicates that these are the most likely to be taken amidst any deterioration of relations. Therefore, it can’t be discounted that the US put Erdogan up to shooting down the Russian jet precisely to provoke the predictable Russian response in threatening to cancel its forthcoming energy projects with Turkey, the core of the strategic partnership between the two. If this is the case, and it certainly seems likely, then it shows exactly how far the US is willing to go to make sure that Russian energy (and subsequently, all of the soft power and multipolar advantages that come with it) doesn’t enter the Balkans through the Turkish Stream megaproject, likely because it understands the transformative impact that this would eventually have on the entire region.

  The Curveball:

  Thus far, everything seems reasonable and well within the realm of predictability, but the curveball comes with the Reuters revelation that an unnamed American military source is essentially saying that the Russian position is justified. Unexpectedly, it now seems as though the US is also playing to Russia’s side to an extent, and this raises questions about what it really wants. After all, it’s been proven beyond any doubt that American-supplied TOW anti-tank missiles were used to down the Russian rescue helicopter that attempted to retrieve the two pilots. With this indisputable evidence of indirect American aggression against Russia, it certainly is a curious fact that the US establishment would purposely leak a statement saying that the Turkey downed the Russian plane in Syrian airspace, and basically take Russia’s side on this behind the scenes.

  Playing The Kurdish Card:

  Explaining this diplomatic twist requires knowledge about the popular response that Russian citizens and global supporters worldwide are requesting to Turkey’s aggression. They quite reasonably propose that Russia intensify its arms shipments to anti-ISIL Kurdish fighters, with the wink-and-a-nod approval that some of them would be siphoned off to the PKK and be used against the Turkish military. This is an effective and pragmatic plan, and in reality, it actually doesn’t even require a policy shift from Moscow because support is already being rendered to some Kurdish groups as part of their joint cooperation in the anti-ISIL struggle. The Kurdish Insurgency hasn’t gone away since Erdogan unwittingly unearthed it this summer as an electioneering tool, and the fact that it’s still going strong even after the elections has scared him so much that he might have been the one who ordered the recent assassination attempt against pro-Kurdish HDP co-chairman Selahattin Demirtas. Thus, if Russia chooses to inflict an asymmetrical response to Turkey by beefing up its indirect support for the PKK and other Turkish-based anti-government Kurds or disrupting Blue Stream gas supplies in order to provoke an intensified rebellion, then it could certainly inflict a heavy amount of strategic damage to Erdogan and increase the likelihood either of a military coup in Turkey (explained more in detail as part of a different article accessible here) and/or the creation of an independent Kurdistan.

  That being said, the US has traditionally been the out-of-regional power that has the greatest interest in Kurdistan, seeing the possible state as a ‘geopolitical Israel’ from which it can simultaneously exert influence on the rump portions of Turkey, Iran, Iraq, and Syria. The strategic trajectory of a theorized Kurdish state has been complicated by the anti-ISIL campaign, however, since many Kurds have shown themselves to be pragmatic in cooperating with Russia and Iran against this shared threat. The positive multipolar cooperation that each of these countries has engaged in with the Kurds challenges the US’ planned hegemony over them and their territory, and it thus means that any forthcoming independent Kurdish political entity could theoretically go either towards the multipolar or the unipolar camps. At this point in time, and given all of the dynamic military and diplomatic developments of the past couple of months, the loyalty of a future Kurdish state (no matter if its boundaries are confined only to present-day Turkey and/or Iraq) is totally up for grabs, and it’s impossible to accurately forecast which way it will go.

  

  Kurdish women’ ‘Peshmerga’ batallions cause horror among ISIS gangs in Syria.

  The strategic ambiguity that this entails means a few things to the US and Russia. For the US, it indicates that the time is now for it to bunker down and support Kurdistan’s independence before it loses the strategic initiative to Russia, which might be moving in this direction (whether formally or informally) out of grand geopolitical spite for Turkey. Moscow, as was just mentioned, seems inclined to hit Ankara where it hurts most, and that’s through supporting the Kurdish Insurgency in one way or another. However, it’s not yet known how far this would go, and whether Russia would pursue this strategy as a form of short-term vengeance or if it would resolutely go as far in recognizing Kurdish Independence if it could ever be de-facto actualized. Of course, Russia wouldn’t do anything that could endanger the territorial integrity of its Syrian, Iraqi, and Iranian allies, but if the Turkish-based Kurds contained their ambitions solely within the borders of Russia’s historical rival, then it might be able to rectify itself with this reality, especially if they even refrain from legal independence and instead seek a sort of broadly de-facto independent federative or autonomous status within a unified Turkey (which could only realistically be brought about by an intensified insurgency and/or a coup in Ankara).

  Joining Hands For Kurdistan:

  Having explained all of this, it’s now clear that a remarkable convergence of strategic interests has developed between the US and Russia focusing on Turkish-administered Kurdistan. Understanding the changing calculations that Russia may now be having towards this topic as a response to Turkey’s aggression against it, one can’t necessarily preclude the possibility that the Reuters leak was actually a strategic overture to Russia. Washington might be sending a signal that it wants to speak to Moscow about ways to cooperate in this regard, knowing that each of them possibly have an interest now in seeing the proto-state rise to the fore of the global arena. A shared understanding has likely developed by now that a New Cold War competition for Kurdistan’s loyalty could be fought after the entity is legally formalized (whether as an independent state or a de-facto independent sub-state entity modeled off of the Kurdish Regional Government in Iraq), and that the two Great Powers need to put aside some of their differences in joining hands to see this happen first.

  Such a strong signal could have been discretely and secretly communicated to Russia via secure diplomatic and intelligence channels, but the reason it was so publicly broadcast via Reuters, the global newswire service, is because the US also wants to send a signal to Turkey as well. Despite taking its side on the matter before the global eye, the US is also “stabbing its ally in the back”, to channel President Putin, by purposely leaking the information that the Russian jet was shot down over Syrian airspace. It’s not news that the US has been unhappy with Erdogan for not behaving more submissively in the past and refusing to blindly go along with the previous plans to invade Syria (rendered useless after Russia’s anti-terrorist military intervention there), so it might be trying to convey the message it’s had enough of his games and is now playing their own in return. Of course, the US has always been manipulating Turkey ever since it joined NATO and allowed the Americans to operate out of Incirlik airbase, but this time, the treachery is being taken to a higher level by implicitly throwing out suggestions to Russia, Turkey’s new foe (and only because the US manipulated Turkey into taking aggressive action against it), that it might want to team up in undermining Ankara’s control over its volatile southeast.

  Concluding Thoughts:

  It can safely be assumed that the US influenced Turkey into shooting down the Russian jet over Syrian airspace, predicting quite accurately that this would immediately lead to the deterioration of ties between the two states. An elementary forecast of the specific counter-measures that Russia may take stipulates that these will likely relate to the diplomatic, economic, and energy sectors, which is just what the US wants. Because of Turkey’s aggression against Russia, the strategic partnership between the two is now broken (although not necessarily irreversibly), and Ankara has become the fourth and perhaps most geopolitically significant member of the anti-Russian Intermarum coalition. Furthermore, Turkish Stream looks to be indefinitely put on hold, thus delaying Russia’s game-changing pivot to the Balkans. While the ‘unintended’ consequence of the crisis has been Russia’s foreseeable and absolutely legitimate decision to deploy the S-400 SAM system to Syria, this in a way also plays to the manipulated Turkish-Russian rivalry that the US wanted to produce in order to solidify the completion of the Intermarum project and simultaneously counter Russia’s growing influence in the Mideast.

  The reaction that no one could have predicted, however, is the US purposely leaking comments to Reuters that support the Russian version of events, namely, that the anti-terrorist jet was shot down while flying over Syrian airspace. This completely conflicts with what the US and NATO have said in public, but it shows that the US has had enough time to game out the plane-shooting scenario well in advance, and that it’s playing a sinister divide-and-conquer game against Turkey and Russia. Put in the position where its decision makers are scrambling for responses to the unprecedented aggression against them, Russia can now more easily be led into supporting the Kurdish struggle for sovereignty (whether formally independent or de-facto so) in Turkey, which coincides with one of the US’ premier geopolitical projects.

  From an American perspective, a divided Turkey is doubly useful for its grand strategic designs, as the large pro-NATO Turkish military would remain mostly intact, while the US could gain a major base for force projection (both hard and soft) right in between some of the most important states in the region. It can’t, however, go fully forward with this project unless it has the support of the diplomatic leader of the multipolar world, Russia, otherwise Kurdistan will be just as illegitimate as Kosovo is and might not even come to geopolitical fruition if Moscow and Tehran work to stop it.

  Seen from the Russian standpoint, the US’ intimations actually seen quite attractive. An increase of Russian support to anti-ISIL Kurdish fighters would be a plausibly deniable but strategically obvious way to funnel weapons and equipment to anti-Turkish PKK insurgents. Weakening Turkey from within would be a strong asymmetrical response to a country that has lately been a major thorn in Moscow’s side, and it might create the conditions either for a military coup against Erdogan, a divide between him and Davutoglu (which could be used to Russia’s diplomatic advantage so long as the constitution remains unchanged and Davutoglu legally remains more powerful than Erdogan), or a weakening of Erdogan and a tempering of his anti-Russian and anti-Syrian positions.

  Importantly, the emergence of an independent or semi-independent Kurdish entity in Turkey could create a tempting piece of geopolitical real estate in the New Cold War, but of course, it would then be contested between the multipolar and unipolar worlds. Still, however, it would represent a positive multipolar development in the Mideast, since under the present state of affairs, the entirety of Turkish territory is under unipolar control. If a large chunk of it suddenly became the object of competition between both blocs, then it would definitely signify a strategic advancement at the expense of unipolarity. Of equal importance, this would also significantly impact on the Turkish state and whatever government is in power by that time, and it could possibly make it more amenable to returning to the previously pragmatic relationship with Russia and perhaps even resurrecting Turkish Stream.

  Therefore, Russia surprisingly has nothing to lose and everything to gain by covertly supporting the Kurdish cause in Turkey, no matter if it’s full-out independence or relatively more restrained autonomy, and even if this is objective is shared by the US and done in semi-coordination with it. Turkey would immediately be put on the defensive (although it could try desperately responding by supporting Tatar terrorists in Crimea), the multipolar world have a chance at competing for the loyalty of an ultra-strategically positioned entity, and the consequences that this has for the Turkish government (whether it remains the same or is changed via a [military] coup) could recreate the political conditions for Turkish Stream’s feasibility.

  

  

  

  

  

• To Junk Bond Traders "It Almost Feels Like 2008"

  Despite distressed-debt funds suffering their worst losses since 2008, mainstream apologists continue to largely ignore the carnage in the credit market (even though veteran bond managers have urged "it's not just energy, it's everything.") With the number of loan deals pricing below 80 (distressed) at cycle peaks, and "a less diverse group of investors holding a lot more bonds," price swings continue to be wild but as DB's Melentyev warns, initially "all of this looks random when there is no underlying news to support the big moves. But eventually a narrative emerges — maybe we have turned the corner on the credit cycle."

   

  Investors are shunning the lowest-rated junk bonds.

  

   

  That is underscored by the extra yield that investors are demanding to hold CCC rated credits relative to those rated BB. This has jumped to the most in six years.

  

  As Bloomberg reports,

  With confidence slipping in the strength of the global economy, there are fewer investors to take the opposite side of a trade in the riskiest parts of the market, according to Oleg Melentyev, the head of U.S. credit strategy at Deutsche Bank.

   

  "These are all small dominoes in one corner of the market," Melentyev said. "In the early stage, all of this looks random when there is no underlying news to support the big moves. But eventually a narrative emerges — maybe we have turned the corner on the credit cycle.

  One sometimes-overlooked element that’s contributing to the big price swings is the increasing concentration among investors, according to Stephen Antczak, head of credit strategy at Citigroup Inc.

  Mutual funds, insurance companies and foreign investors make up 68 percent of corporate bondholders compared with 52 percent at the end of 2007.

   

  That means that if one mutual fund investor wants to sell some holdings, there isn’t another one that’s ready to step in. That’s because they typically have similar mandates from investors and often need to sell for the same reasons.

   

  "A less diverse group of investors hold a lot more bonds," Antczak said. "The difference between incremental buyer is more now than it used to be. It takes a bigger move to get people interested."

  Bonds of smaller companies that carry a high amount of debt relative to earnings are most susceptible to falling quickly after earnings are reported, said Michael Carley, a co-founder of hedge-fund firm Lutetium Capital.

  

  Money managers looking at the bonds of those types of companies aren’t spending time examining the issues in those businesses before selling because they’ve got their “own wounds to lick,” said Carley, the former co-head of distressed debt at UBS AG. “And the dealers are saying, ‘I don’t own it; I don’t care.’ So it just plunges.”

  

   

  As we noted previously, for the first time ever, primary dealers' corporate bond inventories have turned unprecedentedly negative. While in the short-term Goldman believes this inventory drawdown is probably a by-product of strong customer demand, they are far more cautious longer-term, warning that the "usual suspects" are not sufficient to account for the striking magnitude of inventory declines… and are increasingly of the view that "the tide is going out" on corporate bond market liquidity implying wider spreads and thus higher costs of funding to compensate for the reduction is risk-taking capacity.

  *  *  *

  One wonders when stock investors will wake up again?

  

   

  

  

  

  

  

  

• Puerto Rico Is About To Default: Your Complete Guide To An Island Debt Debacle

  Last week, we brought you the latest from Puerto Rico’s debt debacle. The commonwealth is desperately trying to restructure some $72 billion in debt while staring down a $354 million bond payment due on December 1. 

  As we discussed at length on Friday, some $270 million of what’s due next week is GO debt guaranteed by the National Public Finance Guarantee Corp. Defaulting on that is bad news and as Moody’s warned earlier this month, a missed payment on the commonwealth’s highest priority obligations “would likely trigger legal action from creditors, commencing a potentially drawn-out process absent swift federal intervention.” 

  Make no mistake, federal intervention is likely to be anything but “swift.”

  A Senate judiciary committee headed by Iowa Republican Charles Grassley will meet on December 1 to discuss a legislative proposal to assist the Padilla government, but it’s hard to imagine that a decision will be made in time to avert at least a partial default. 

  Ultimately, the decision will be between paying bondholders and ensuring that the government can continue to provide public services, and just as Greece prioritized pensions over IMF payments last summer, Padilla isn’t likely to sacrifice the public interest at the altar of the island’s debtors. 

  So, as the clock ticks, we bring you the following helpful guide courtesy of Bloomberg who has made a “list of the island’s debt, how much is outstanding, when major monthly payments are due, and the source of funds that back the securities.”

  *  *  *

  From Bloomberg

  • Puerto Rico Sales Tax Financing Corp.: $15.2 billion. The bonds, known by the Spanish acronym Cofinas, are repaid from dedicated sales-tax revenue. A $6.2 billion portion of the debt, called senior-lien, is repaid first. The remaining $9 billion, called subordinate-lien, get second dibs. $1.2 million of interest is due in February and again in May. Senior Cofinas maturing in 2040 last traded for an average yield of 9.5 percent, while subordinate ones yielded 18 percent.
  • General-obligations: $12.6 billion. The debt backed by the commonwealth’s full faith and credit. The island’s constitution says general obligations must be repaid before other expenses. Puerto Rico owes $357 million of interest in January and an additional $805 million of principal and interest is due July 1. Securities due in 2035 last traded for an average yield of 11.5 percent.
  • Puerto Rico Electric Power Authority: $8.2 billion. Prepa, as it’s called, is the island’s main supplier of electricity and repays the debt from what it charges customers. The utility owes $196 million of interest in January and $420 million of principal and interest July 1. Prepa is negotiating with bond-insurance companies after reaching an agreement with some of its bondholders, who agreed to take a 15 percent loss. Bonds maturing in 2040 last traded at an average yield of 9.2 percent.
  • Puerto Rico Government Development Bank: $5.1 billion. The GDB lends to the commonwealth and its localities. When those loans are repaid, the bank can pay off its debt. The bank owes $354 million in December and $422 million in May. Federally taxable bonds maturing in 2019 last traded for an average yield of 57 percent.
  • Puerto Rico Highways & Transportation Authority: $4.6 billion. The highway agency repays its debt with gas-tax revenue. It owes $106 million of interest in January and $220.7 million of principal and interest in July. The commonwealth has the ability to divert revenue that cover some highway bonds to pay its general-obligation securities, if there are no other available resources, according to the island’s most recent financial disclosure. Bonds maturing July 2028 last traded for an average yield of 32 percent.
  • Puerto Rico Public Buildings Authority: $4.1 billion. The PBA bonds are repaid with lease revenue that public agencies pay for their office buildings. The agency owes $102.4 million of interest in January and $208 million of principal and interest in July. Bonds maturing 2042 last traded for an average yield of 10.4 percent.
  • Puerto Rico Aqueduct & Sewer Authority: $4.1 billion. The utility, called Prasa, supplies most of the island’s water. The debt is repaid from water rates charged to customers. The water agency owes $86.5 million of interest in January and $135.1 million of principal and interest in July. Bonds maturing in 2042 last traded at an average yield of 8.7 percent.
  • Puerto Rico Pension-Obligation Bonds: $2.9 billion. The taxable debt was sold to bolster the island’s nearly depleted pension fund. The bonds are repaid from contributions that the commonwealth and municipalities make to the retirement system. The system pays $13.9 million of interest every month in this budget year. Securities maturing in 2038 last traded for an average yield of 22 percent.
  • Puerto Rico Infrastructure Financing Authority: $1.9 billion. Called Prifa, the agency has sold the island’s rum-tax bonds. These are securities repaid from federal excise taxes on rum made in Puerto Rico. Prifa owes $37.2 million of interest in January and $77.8 million of principal and interest in July. Bonds maturing in 2046 last traded for an average yield of 28 percent.
  • Puerto Rico Public Finance Corp.: $1.09 billion. The bonds are repaid with money appropriated by the legislature. The agency has defaulted every month since August on its debt-service payments because lawmakers failed to allocate the funds. It owes interest every month, the largest being a $24 million payment in February. Bond maturing in 2031 last traded for 7 cents on the dollar, according to trade reports. The yield wasn’t disclosed.

  *  *  * 

  As a reminder, Puerto Rico’s Treasury Single Account likely has negative cash balance, which, according to Height Securities analyst Daniel Hanson, “will make it ‘nearly impossible’ to meet all government payroll obligations over the next six weeks.”

  In other words, even if the government does default in order to save money for the provision of public services, social unrest may now be unavoidable.

  

  

  

  

  

• The Triumph Of Materialism: The Average American Will Spend 830 Dollars On Christmas In 2015

  Submitted by Michael Snyder via The Economic Collapse blog,

  Has there ever been a major holiday more focused on materialism than the modern American Christmas?  This year, Americans are planning to spend an average of 830 dollars on Christmas gifts, which represents a jump of 110 dollars over the average of 720 dollars last year.  But have our incomes gone up accordingly?  Of course not.

  In fact, real median household income in the United States has been experiencing a steady long-term decline.  So in order to fund all of our Christmas spending, we have got to go into even more debt.

  We love to pull out our credit cards and spend money that we do not have on lots of cheap, useless stuff made on the other side of the world by workers making slave labor wages.  We do the same thing year after year, and most of us have grown accustomed to the endless cycle of growing debt.

  In fact, one Pew survey found that approximately 70 percent of all Americans believe that “debt is a necessity in their lives”.  But then we have to work our fingers to the bone to try to make the payments on all of that debt, not realizing that debt systematically impoverishes us.  It may be hard to believe, but if you have a single dollar in your pocket and no debt, you have a greater net worth than 25 percent of all Americans.  I know that sounds crazy, but it is true.

  Overall, when you add up all forms of debt (consumer, business, local government, state government and federal government), Americans are more than 60 trillion dollars in debt.

  Let that sink in for a bit.

  40 years ago, that number was sitting at about 3 trillion dollars.

  We have been on the greatest debt binge in the history of the world.  Even though we were “the wealthiest, most prosperous nation on the entire planet”, we always had to have more.  We just kept on borrowing and borrowing and borrowing from the future until we completely destroyed it.

  And we still haven’t learned anything.  Instead, this Christmas season we will be partying like it’s 2007…

  Americans are planning on celebrating Christmas like it’s 2007.

   

  

   

  A November survey by Gallup found that US adults are planning on spending about $830 on average on Christmas gifts this year.

   

  That’s a huge jump from last year’s $720 average.

   

  Notably, American consumers haven’t suggested a number that high since November 2007, when they were planning on spending $866 on average.

  Sadly, our incomes simply do not justify this kind of extravagance.  As Zero Hedge has pointed out, household incomes “actually peaked at least 15 years ago in 81% of U.S. counties.”

  So why can’t we adjust our lifestyles to match?

  Why must we always have more?

  Here are more details on our declining incomes from the Visual Capitalist…

  • 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 you won’t hear this reported on the mainstream news, will you?

  They want us to think that happy days are here again.

  The following chart comes from the Federal Reserve, and it shows that real median household income in the United States has been trending down since 1999…

  

  Americans should be having smaller Christmases instead of bigger ones, but that doesn’t fit the image of who we still think that we are.

  Recently, I published an article entitled “Goodbye Middle Class: 51 Percent Of All American Workers Make Less Than 30,000 Dollars A Year” that was shared more than 44,000 times on Facebook.  In that article, I included brand new figures that were just released by the Social Security Administration.  As you can see, the quality of our jobs is not great…

  -38 percent of all American workers made less than $20,000 last year.

  -51 percent of all American workers made less than $30,000 last year.

  -62 percent of all American workers made less than $40,000 last year.

  -71 percent of all American workers made less than $50,000 last year.

  Without a doubt, most American families should not be spending hundreds of dollars a year on Christmas gifts.

  At these income levels, most American families are just barely surviving.

  But once again this year, millions upon millions of Americans will flock to the malls and big box stores in a desperate attempt to make themselves happy.

  Sadly, those efforts will be in vain.  In fact, in a previous article I highlighted the fact that Christmas is the unhappiest season of the year.  The suicide rate spikes to the highest level of the year during “the holidays”, and 45 percent of all Americans report that they dread the Christmas season.  The following is an excerpt from a Psychology Today article…

  We are told that Christmas, for Christians, should be the happiest time of year, an opportunity to be joyful and grateful with family, friends and colleagues. Yet, according to the National Institute of Health, Christmas is the time of year that people experience the highest incidence of depression. Hospitals and police forces report the highest incidences of suicide and attempted suicide. Psychiatrists, psychologists and other mental health professionals report a significant increase in patients complaining about depression. One North American survey reported that 45% of respondents dreaded the festive season.

  In recent years, an increasing number of Americans have given up the tradition of Christmas gifts entirely, and many of them that I know seem quite happy to have done so.

  Of course most people are still quite satisfied with the status quo, and there are many that will get very angry with you if you dare to suggest that the way that Americans celebrate Christmas has gotten way out of hand.

  But shouldn’t it alarm us that for most Americans the biggest holiday of the year is all about the “stuff” they are going to buy, the “stuff” they are going to give and the “stuff” they are going to get?

  As a society, we are obsessed with things, but those things are never going to make us happy.

  

  

  

  

  

• Charting The Full Impact Of Europe's Plunging Currency On U.S. Corporate Revenues

  When it comes to the current round of currency war between Europe and the US, Europe is winning and the US is losing, and  nowhere is this more obvious than the revenues of the largest US corporations.

  Here is FactSet showing that Dow 30 companies continued to report sales declines in Europe in Q3 as a result of the surge in the US Dollar.

  “Foreign exchange impacts reduced sales by 7.4 percentage points, with notable year-on-year declines in the euro, yen, and Brazilian real. These currencies devalued versus the U.S. dollar by 15%, 14%, and 37% respectively.” –3M (October 22)

  Coming into the Q3 earnings season, there were concerns in the market regarding the impact of slower economic growth and the stronger dollar relative to the euro on U.S. corporate earnings for the third quarter. With the final DJIA components (Home Depot and Wal-Mart Stores) reporting results for Q3 this past week, how did companies in the DJIA perform in the third quarter in Europe in terms of sales?

  How did the revenue numbers for Q3 2015 compare to prior quarters?

  Overall, 11 of the 30 companies in the DJIA provided revenue growth numbers for Europe for the third quarter. Of these eleven companies, nine reported a year-over-year decline in revenues. This number is equal to the number of Dow 30 companies that reported a year-over-year sales decrease in the previous quarter (9). For seven of these DJIA companies, the third quarter marked (at least) the third consecutive quarter of year-over-year declines in revenues from Europe.

  Why? Thank the Fed that topline growth is declining as a result of the soaring dollar… even if the full impact won’t be felt for a long time because for some unclear reason, earnings multiples are rising even as profitability itself is declining: “The stronger dollar appeared to be a factor in the weaker revenue performance of these companies in Europe. Of the 11 companies in the DJIA that provided revenue growth numbers for Europe, all 11 cited some negative impact on revenues or EPS (or both) for Q3 due to unfavorable foreign exchange during their earnings conference calls.”

  

  At some point the Fed will say enough, and that the time has come to give US corporations the benefit of a weak currency. It will probably come just as the Fed is stuck neck-deep in its “tightening cycle.”

   

  

  

  

  

  

• The December Jobs Number May Really Be The "Most Important Ever"

  Everyone has heard the phrase “this is the most important jobs report ever”, and virtually every time this has been an exaggeration. However according to an analysis conducted by BofA’s Vadim Iaralov, the nonfarm payrolls report on December 4 (a day after the just as critical ECB announcement, but more importantly 12 days before the Fed’s “historic” December 16 “rate-hike” announcement) may just indeed be the most important jobs number. Ever.

  Here is why, according to Bank of America:

  With the much-anticipated 16 December FOMC meeting around the corner, the 4 December US non-farm payrolls (NFP) is one of the most important remaining data points. The significance of recent NFP surprises in driving asset prices has been increasing since summer 2014 and is near historical highs.

   

  

   

  We last observed this pattern of market behavior during the 2004-2006 Fed hiking cycle, suggesting this relationship exists due to market expectations for rate policy normalization.

   

  During the previous hiking cycle the importance of NFP surprises rose ahead of the first hike and continued to rise until the end of the hiking cycle. Despite high anticipation for the next Fed hike, the importance of the employment report could remain elevated even after the initial liftoff. This relationship is particularly pronounced now as the Fed has adopted a data-dependent stance, and each NFP report will likely continue to play a key role in informing the path of subsequent Fed policy decisions.

  The importance is actually quite simple: if the report is a solid beat, and if the Fed beats, that means that the stronger the economy, at least as measured by the jobs report, the steeper the rate of hikes will be, the more negative the impact on risk assets. Perhaps this is why so many sellside firms have been setting the stage for a “newer normal” in which a monthly increase of 100,000 jobs is actually warmly greeted by the Fed, even if in reality it means that the US economy is actually stagnating and barely covering the natural rate of growth.

  So what does this mean for various asset classes:

  In past hiking cycles, financial assets all became more correlated to NFP surprises heading into the initial hike as the market began anticipating Fed policy changes. Currently, the importance of NFP surprises is elevated for USD pairs and rates, but low for equities.

   

  

   

  This is an important divergence from the previous hiking cycle when all three asset classes exhibited consistent reactions to NFP surprises. Historically, on positive surprise days, dollars and equities rallied while rates sold off.

  Here is something surprising: according to BofA “Currently, equities are unsure of how to react to a December rate hike.”

  And it all goes back to what we have been warning about for a few months now: if the Fed hikes, it would be a policy error, one from which the Fed may not recover:

  One possible explanation for this divergence is that a December hike would take place at a time when global growth has been slowing rather than accelerating. World GDP YoY growth has been declining since 1Q14, whereas it was increasing during the 1999 and 2004 hikes. Another potential reason is the hike could disturb global imbalances from years of zero-interest rate policy. For these reasons, the risk of a policy mistake is greater than during previous hiking cycles.

  None of which makes the December NFP any less important, however it does mean that just like the Fed’s taper announcement in 2013, and the Fed’s “hawkish” announcement which sent stock surging, the market reaction to next Friday’s jobs report will have some solid support from the trading desk located on the 9th floor of Liberty 33, and, of course, its ancillary market spoofing division in Citadel.

  

  

  

  

  

• With Mass Shootings, The State Makes Us Less Safe

  Submitted by Justin Murray via The Mises Institute,

  In the wake of last month’s shooting at Umpqua University in Oregon, national debate has once again been sparked over the role of firearm controls. Gun-control laws must be passed, we are told, that target these events and reduce or eliminate their frequency. However, much like most debates in the political realm, convenience and sound bites take the center stage over understanding root causes of violence itself. The debate is further confused by improper data comparison and information gathering techniques, mainly to drive a pre-designed political agenda and not to attempt to solve the homicide problem.

  Before we get into the issue of general homicide, it is important to clear a few common errors in identifying the events in Oregon.

  The biggest claim, made by President Obama, is that this doesn’t happen in the same frequency in Europe. Even the linked “Fact Check” at PolitiFact uses information incorrectly. The biggest mistake is that individual nations are compared 1-to-1. A large event in a single small nation will upend the homicide rate while it is true that a smaller nation will have fewer individual events on virtue of being a smaller nation. Before a meaningful comparison can be made, the data needs to be normalized. To accomplish this, I placed every advanced, safe nation in Europe that had a kind of mass killing event into a single, unified nation for the purposes of this exercise. This normalized the population with both the US and this unified state with nearly identical population levels. The nations selected, that had these kinds of events in the past fourteen years, are The United Kingdom, Switzerland, Sweden, Slovakia, Norway, The Netherlands, Italy, Germany, France, Finland, The Czech Republic, Belgium, and Austria.

  An additional error that was made by PolitiFact is that their research ignored acts formally defined as terrorism, which means the Boston Marathon bombing in the US and the three Paris terrorist attacks in 2015 were ignored. I included all forms of mass killings since it is difficult to argue that a mass shooting is fundamentally different because of the motivation of the perpetrator. After the normalization, the chart of these events and the aftermath looks like this:

  

  

  On the surface, this does appear to meet the criteria of President Obama’s claim. These events do happen more often in the United States than in the above grouping of EU nations, with forty-four distinct events in the United States and twenty-five in the EU. However, counting distinct events doesn’t tell the whole story. To get a better understanding of the risk of mass killings, we have to identify the real cause of concern — the loss of human life. When we bring the human loss into consideration, the story changes significantly.

  

  

  This certainly doesn’t support the claim that the EU is safer from mass killers than the US. The main differences that, it is true, these events happen more often in the US, but the events in the EU normalized zone are more deadly (15 killed per EU event vs 7 per US event) which makes the EU events far worse. Further, the total danger from these events is greater in the EU countries, with the EU zone experiencing 933 injuries and 352 casualties to the 473 injuries and 322 casualties in the US.

  Is More Government Security the Answer?

  We’ve previously pointed out that gun control doesn’t have any meaningful impact on homicide rates in general, but would such controls, and other controls such as improved mental health screening and background checks, resolve this issue? Unfortunately, as the EU has shown, particularly with the recent tragic events in Paris, if a full on ban on ownership doesn’t work, then it is unlikely targeting the above factors will work, either. Not to trivialize those who lose their lives in these events, here is what these events look like compared to the general homicide rate:

  

  I didn’t label this EU or US because both are identical, a small blue sliver in a sea of orange. The total percentage is so small, that it shows up as “zero percent.”

  These events are difficult to counteract because of their randomness and infrequency. The ability of the government to identify ahead of time whether or not a small group of men obtained automatic weapons against their ban is likely impossible. Moreover, other means of prevention, such as laws against restricting individuals with mental health problems from purchasing guns, are only as good as those who actively seek help. None of our nations would be willing to subject ourselves to mandatory annual mental health screenings and placing our results in central databases.

  Gun bans, mental health screenings, and other government solutions to protect us from these unpredictable events fall under the classification of Security Theater. When the State is actively telling us that they’re taking care of our protection, we allow ourselves to be lulled into a false sense of security. Further, many governments restrict or outright ban individuals from ensuring their own safety.

  But State agents can’t be everywhere at all times. Security of your own self is ultimately only possible by engaging in the protection yourself. Around the world, governments have decided on our behalf that we do not have the option to secure our own bodies from violence and, in turn, generate the situations that lead to these events. Much like how most of us would own auto insurance absent government mandates, not because we fear the destruction of our vehicle but because, as the saying goes, it’s better to have it and not need it than need it and not have it. A society that is given the option to protect itself is not a fearful society, it is a prudent one. The victims of Paris were never allowed the option to protect their lives, nor were they fortunate to have armed defenders present or trained combatants to stop the attack before it reached them. People need the opportunity to secure their own safety since, as the past twelve years has shown, the State will fail them.

   

  

  

  

  

  

• THaNKSGiViNG 2015…

  

  

  

  

  

• Out Of Gas: Gazprom Cuts Off Ukraine, Will Turkey Be Next?

  Last month in “Pipeline Politics: Russia, Turkey Clash Over Energy As Syria Rift Shifts Focus To German Line,” we revisited Russia’s recent deal with Shell, E.On and OMV to double the capacity of the Nord Stream pipeline, the shortest route from Russian gas fields to Europe.  

  The MOU, signed earlier this year, angered the likes of Ukraine and Slovakia. In short, the more gas that can transported via the Nord Stream, the less needs to go through Eastern Europe and that means less revenue for the countries through which the pipelines are built. “They are making idiots of us. You can’t talk for months about how to stabilize the situation and then take a decision that puts Ukraine and Slovakia into an unenviable situation,” Slovak PM Robert Fico exclaimed a few months back. 

  For those who may need a refresher, here, coutesy of Bloomberg, is a look at the routes by which Russian gas reaches end customers:

  

  Obviously, the conflict in Ukraine has made for a rather awkward situation when it comes to Russian gas supplies. Long story short, Ukraine wants to cut its dependence on Russian gas and if everyone’s telling the truth, Gazprom would probably just as soon not deal with a country that, i) owes Moscow $3 billion on a defaulted bond, and ii) is effectively at war with Russia. 

  Nevertheless, a couple of months ago the two countries signed an deal ensuring supplies through Q1 of 2016 and guaranteeing Ukraine comparable prices to its neighbors. Well, that looks to have fallen apart, because on Wednesday, Gazprom decided to stop shipments to Ukraine citing a lack of prepayments. Optically, that looks bad for Kiev and so, in the energy equivalent of “you can’t fire me because I quit“, Ukraine announced today that it would stop buying Russian gas. 

  “The government has decided to order (state energy firm) Naftogaz to stop buying Russian gas. It is not that they are not delivering us gas, it is that we are not buying any,” Prime Minister Arseny Yatseniuk said. 

  Kiev says it can get cheaper prices elsewhere. “Gazprom CEO Alexei Miller on Wednesday warned Ukraine and Europe of possible gas disruptions following the cut-off,” AP notes, adding that “Russia uses Ukraine’s pipelines to transport a part of its gas deliveries to other European countries.”

  “Ukraine’s refusal to buy Russian gas threatens a safe gas transit to Europe through Ukraine and gas supplies to Ukraine consumers in the coming winter,” Miller said.

  But the pettiness didn’t stop there. Yatsenyuk went on to announce that Ukraine will be closing its airspace to the Russians due to “security concerns.”

  Importantly, it’s not just Eastern European that will suffer because of strained relations with Moscow and the expanded capacity of the Nord Stream. The deal with Shell, E.On and OMV has also put Moscow in a better bargaining position vis-a-vis Turkey, which is the second largest consumer of Russian gas and which paid Gazprom some $10 billion last year.

  

  Prior to the Nord Stream deal and before Russia got directly involved in Syria, Ankara and Moscow were enjoying a burgeoning trade relationship. However, once Russia began flying combat missions from Latakia, relations between Putin and Erogan began to sour. Turkey is a key player in the effort to supply training, guns, and money to the various rebel groups fighting for control of Syria. Indeed, there’s plenty of evidence to suggest that despite Ankara’s conveniently timed “crackdown” on ISIS (which began in late July and just happened to coincide with an AKP election setback), Turkey is perhaps the number one state sponsor of Islamic State (see here for more). Indeed, on Tuesday Putin accused Turkey of facilitating the group’s black market oil trade. 

  Needless to say, once Russia began to conduct airstrikes on anti-Assad elements, Erdogan was not pleased and it was clear from the beginning that it would only be a matter of time before the border disputes began. Sure enough, Turkey shot down a Russian drone last month and subsequently began to complain loudly about alleged Russian incursions into Turkish airspace. Those complaints led directly to a declaration by Erdogan that Turkey may seek to source its gas from someone else. As Sijbren de Jong, an energy security analyst at the Hague Centre for Strategic Studies told Bloomberg, “Putin is betting on Nord Stream, but that bet is risky.” 

  As the tension continued to build, many began to wonder about the fate of the proposed Turkish Stream pipeline and now that Turkey has shot down a Russian warplane, everyone wants to know whether Russia may decide to retailiate by simply cutting Ankara off, leaving Erdogan to figure out where to source some 53% of his country’s energy needs.

  Of course you can expect the Western media to say that Putin can’t afford to cut Turkey off, but even if the coverage is biased towards the NATO member in the equation, it’s still worth taking a look at the commentary. Here’s what Bloomberg had to say today: 

  Turkey relies on Russia for about half its natural gas supplies, paying state-controlled Gazprom PJSC as much as $10 billion last year. That makes their energy ties an unattractive target for retaliation.

   

  With so much at stake for both sides, Russia may look elsewhere in its response to the downing of its warplane by

  Turkey on Tuesday. Russian Deputy Energy Minister Anatoly Yanovsky said that supplies to Turkey would continue in line with the contract. Longer term, Turkey could reduce its dependence on Russian gas through alternative supplies.

   

  The relationship between Turkey and Russia was already strained before Russia’s warplane was shot down, and talks over a new gas pipeline had stalled, according to Alexander Kornilov, an Alfa Bank analyst in Moscow.

   

  Turkish Stream is redundant because there is already existing transfer capacity to Turkey and the rest of Europe, Sberbank PJSC’s investment bank unit said Wednesday in a report to clients.

   

  While Turkey can’t turn away from Russian supplies right away, it still has leverage to fight retaliatory moves, including if Russia takes a hard line on prices or threatens cuts, according to Sijbren de Jong, an analyst at the Centre for Strategic Studies in The Hague.

   

  The sales volume from Turkey is equivalent of 17 percent of Gazprom’s total exports outside the former Soviet Union, according to company data. 

   

  “The bottom line is militarily, strategically they may want to draw a line and say this has gone too far, but it wouldn’t be wise,” said De Jong. “Essentially if you’ve put so much effort into coveting this burgeoning partnership with Turkey from an energy perspective, that’s all going to be for nothing.”

  Perhaps, but it’s not clear that Turkey has as much leverage here as analysts claim. Consider this for instance: 

  “Turkey will probably not want to halt any existing energy arrangements, but it almost certainly means Turkey will start a renewed look at what alternative energy relations it can have,” said John Roberts, an energy security specialist at Methinks Ltd. in Jedburgh, Scotland. “Two obvious choices are becoming a customer for U.S. LNG; the other is Iran.”

  Here’s a look at the breakdown by country in terms of where Ankara sources its gas:

  

  What analysts seem to be discounting here is that ties between Russia and Iran have strengthened materially over the past six months. Russia’s intervention in Syria will not be forgotten in Tehran. As we’ve detailed exhaustively, ensuring that Damascus doesn’t fall to a puppet government of the Saudis is perhaps the most important geopolitical concern for the Iranians. Losing Syria would cut off a supply route to Hezbollah and rollback Iran’s Shiite crescent. It’s probably not an understatement to say that Tehran will be eternally grateful to Moscow for Russia’s participation in Syria on behalf of the government and as we saw when Assad rejected the Qatar-Turkey line but approved the Iran-Iraq-Syria line, these are countries that will, when they feel the situation calls for it, subjegate energy concerns to geopolitics.

  Throw in the fact that Russia and Iran are already in talks on a number of energy projects and it seems reasonable to suspect that if Iran believes Turkey is becoming too much of an impediment to the campaign in Syria, Tehran may just decide to drive a harder bargain when it comes to gas supplies. In short: if you’re Turkey, you don’t really want to put yourself in a position where your fallback plan in the event you anger your biggest energy supplier is to try and negotiate for more trade with that supplier’s closest geopolitical ally, especially when you are actively seeking to subvert both of their goals in a strategically important country. As WSJ put it on Wednesday, “diverting the energy trade wouldn’t be easy.”

  No, it most certainly would not “be easy”, and the big question going forward is this: is it realistic to believe, given what’s going on in Syria, that Iran will be willing to make it any easier? 

  

  

  

  

  

• Kiss Christmas Goodbye

  Submitted by Tony Sagami via MauldinEconomics.com,

  In my article from November 17, I touched on the growing number of retailers that report shrinking traffic and disappointing sales:

  Our consumer-driven economy is not getting any help from suddenly sober shopaholics. In the most recent report, the Commerce Department reported that retail sales rose by a measly 0.1% in September. And it didn’t matter where you wear Gucci loafers or Red Wing work boots.

  Since then, the retail landscape has gotten even muddier.

  The Commerce Department reported that retail sales increased by a miserly +0.1% in October, below the +0.3% Wall Street was expecting. Additionally, sales for the month of September were revised downward from +0.1% to 0.0%.

  So this is what the last three months look like:

  August 0.0%
  September 0.0%
  October 0.1%

  

  You should pay careful attention to retail sales because there is a strong correlation between plunging retail sales and plunging stock prices!

  Walmart, Macy’s, and Nordstrom are the three high-profile retailers to disappoint Wall Street, but they have lots of company.

  • Shoe retailer DSW, Inc. lowered its full-year earnings forecast from $1.80 – $1.90 per share to $1.40 – $1.50 per share. The problem? Slow customer traffic.

  

  • The Gap reported that its October same-store sales dropped by 15% at Banana Republic and by 4% at Gap stores. Additionally, the company warned that it would miss Q3 expectations.

  

  • Urban Outfitters reported Q3 sales of $825.3 million, well below the Wall Street pipe dream of $868.9 million. Urban Outfitters’ shares closed down 7.4% to a four-year low after spitting up that revenue hairball.

  

  The biggest confirmation of the retailing woes came from the Port of Long Beach, the second-busiest US port.

  The Port of Long Beach handled 307,995 containers in October, down from 310,482 and 0.8% less from the same month last year. More troublesome is the 14% plunge in imported containers since August.

  

  That tells me retailers are cutting back their pre-Christmas orders in anticipation of disappointing holiday sales and due to already bulging inventories.

  Speaking of bulging inventories, I want to point out two retailers with ballooning inventories that I think are profit time bombs just waiting to kill investors.

  • Lululemon Athletica (LULU): Yoga-pants maker Lululemon has been suffering from an inventory bulge. Inventory hit $280 million, a 55% year-over-year increase.

  • Under Armour (UA): Inventory ballooned to $867 million at the end of Q3, a 36% increase.

  I’m not suggesting that you rush out, sell all your retail stocks, or short Lululemon and Under Armour tomorrow morning. As always, timing is everything. However, it is crystal clear to me that the Grinch is definitely going to steal Christmas… and that retail stocks are one of the worst places to invest your money.

  

  

  

  

  

• Bank Of America Forecasts No Recession Until 2027 (If Ever), Sees S&P At 3,500 In 10 Years

  A year and a half ago, in May of 2014, when Bank of America’s chief economist Ethan Harris decided to try his hand at long term (really long-term) forecasts, he made several predictions: that 2015 GDP would be 3.3%, that the long-term potential growth rate of the economy is 2.2%, and that the long-term unemployment rate is 6%.

  One year later, we yet again see just why economists tend to be a source of amusement everywhere they go, because moments ago the same Mr. Harris just admitted that 2015 GDP would actually be 2.5% (at best, and realistically 2.1% if Q4 GDP ends up being 1.8% as the Atlanta Fed forecasts), that the long-term growth rate is now lower at 2.0%, even as the long-term unemployment rate has mysteriously declined to 5%, or in other words, a lower potential growth rate results in lower unemployment.

  Go figure.

  Here is what Harris predicted for the “long-term” in early 2014:

  

  And here is his same forecast as released earlier today:

  

  We leave it up to readers to spot the amusing, if startling, differences.

  And yet one thing that hasn’t changed in the past 18 months is that like then, so now, Bank of America refuses to forecast a recession any time in the next 12 years! To wit:

  Obviously, there is considerable uncertainty in forecasting many years out, so these should be viewed as rough baseline numbers. For example, if history is our guide, at some point in the next decade the US will experience a recession, but predicting a recession far in advance is almost impossible. 

  So predicting a recession at some point in the next 12 years impossible, but predicting next year’s GDP is “possible”… assuming one has a 25% error rate tolerance.

  But if you think that is amusing read the following from another BofA prognosticator, its “Equity & Quant Strategist” Savita Subramanian. This is presented without comment.

  S&P 500 targets: 2200 in 2016 and 3500 by 2025

   

  We expect modest gains for US large cap stocks in 2016: the likelihood of a recession in the next 12 months is low in our view, but valuations have normalized from previously low levels and narrowing returns are to be expected. Our forecast represents a 5% rise from current levels, roughly equivalent to earnings growth, where we forecast 2016 EPS of $125.

   

  10-year S&P 500 forecast: 3500 (+67%)

   

  Our work suggests that valuation is a poor short-term timing indicator, but the single most important determinant of long-term returns. Valuations have historically explained 60-90% of subsequent returns over a 10-year time horizon – see Table 2. Normalized P/E – our preferred valuation metric – has explained 80-90% of returns over the subsequent 10-11 years.

   

  Based on current valuations, a regression analysis suggests compounded annual returns of 8% over the next 10 years with a 90% confidence interval of 4-12% (Table 2). While this is below the average returns of 10% over the last 50 years, asset allocation is a zero-sum game. Against a backdrop of slow growth and shrinking liquidity, 8% is compelling in our view. With a 2% dividend yield, we think the S&P 500 will reach 3500 over the next 10 years, implying annual price returns of 6% per year.

  

  So… no recession until 2027, if ever, and S&P at 3500 by 2025.

  Great, just one thing we would like to know: does Bank of America anticipate another bailout of Bank of America during this upcoming golden age a la 2008, or is that also impossible to predict.

  

  

  

  

  

• From Here To Eternity

  Submitted by MN Gordon via Acting-Man.com,

  “Gentlemen-rankers out on the spree,

  Damned from here to Eternity,

  God ha’ mercy on such as we,

  Baa!  Yah!  Bah!”

   

  — Gentlemen-Rankers, Rudyard Kipling 

  Insults and Offenses

  For the first time in 80 years, vast numbers of hardworking, industrious people are finding themselves up the creek without a paddle.  Buying a home, paying college tuition, and squirreling away a few nuts for retirement has become discouragingly difficult.  What’s more, the presumed benefit of these endeavors has become ever more suspect.

  These days there’s a trifecta of offenses debasing the rewards of hard work, saving money, and paying one’s way.  Quite frankly, it’s insulting.  There’s nothing less to make of it, particularly for those competing in the rat race for their family’s daily bread.

   

  

  Promises, promises …

  Cartoon via polyp.org.uk

   

   Plain and simple, central bank fiat money creation, multiplied by commercial banks through fractional-reserve banking, propagates financial and economic chaos.  The experience of long periods of money supply expansion punctuated by abrupt, episodic contractions, has the effect of whipsawing the working stiff’s labors to get ahead.

  On top of that, the middle class is being squeezed by stagnant incomes, declining savings rates, and escalating debt burdens.  Unskilled jobs are meager and low paying.  In addition, professional services jobs have become commoditized via temporary employment services.

  The global economy is in the midst of a restructuring that has been underway since before the turn of the new millennium.  The associated growing pains are agonizing.  The old rules for success, which included a college education and a cubicle job at a large corporation, no longer apply.  But the new rules for success have yet to be written.

   

  

  The hazards of cubicle life

  Cartoon by Scott Adams

   

  Stealing Your Life

  Economic restructuring is a natural occurrence.  New technologies and increased global interconnections accelerate the change.  Nonetheless, at the same time workers are facing these natural challenges, the Fed is heaping on other encumbrances.

  In short, the clever fellows at the Federal Reserve, with consent of the Treasury, inflate the money supply.  For each new digital monetary unit they create, value’s subtracted from the existing money.  This has the ill effect of covertly confiscating property from people’s wages and savings.  It also has the ill effect of reducing the notion of “an honest day’s work for an honest day’s pay” to a fool’s tale.

   

  

  A philosophical moment in the felt-covered solitude of the quiet cubicle of contemplation

  Cartoon by Scott Adams

   

  For example, think of all the days you’d rather have stayed home with your family than schlepping and slogging the day away for money.  Think of all the time you spent on the road getting dumped on by clients while your kids were growing up.  Think of all the sunny days you missed because you were pounding the phones at the office all day.

  For what?  So that after paying taxes and living expenses, what’s left over – your accumulated wealth – would be inflated away from your bank account? Remember, money, in addition to being property, also represents time and the sacrifices made to earn it.  When the Fed inflates your money away they not only steal your property…they steal your life.

   

  From Here to Eternity

  Certainly, this is a disheartening thought.  However, when it comes down to it, life is too short to be bitter.  The fact is, today’s incommodes are nothing new.  They’ll persist in some form or another from here to eternity.

  Like life’s other injustices, the Fed’s shenanigans should be faced with a stoic grin.  The truth should be spoken quietly and clearly.  What is right and good should be articulated with frequent repetition.  The just message will endure.

  Indeed, having the fruits stolen from one’s productive labor is demoralizing.  Nonetheless, one should still get on with the business of life…and do one’s part to reduce the abundance of nonsense circulating about.  Despite all the fraud and folderol out there, humility and veracity continue to be ideals to strive for.  When all else fails, wash the dishes, make the bed, and find some gratitude.

   

  

  Beware of crafty Turkeys

  Cartoon via you-can-be-funny.com

   

  After all, Thanksgiving Day is approaching.  Pilgrims and Squanto, aside.  Some gratitude for blessings received and misfortunes taken away are in order. Money and markets shall do what they do…independent of what you think.  So don’t give them an extra thought.

  Enjoy the moment.  Relish the time with your family.  Savor the feast.

  

  

  

  

• Volume-less, Range-less 'Market' Sparks Largest Small-Cap Short-Squeeze In 2 Months

  It's one of those days…

  The last 4 days have seen the largest "short squeeze" in 2 months…

  

   

  But the broad market went nowhere…

  

   

  As Small Caps (heavily shorted) surged…

  

   

  On the smallest range day of 2015…

  

   

  The market was glued to VWAP most of the day…

  

   

  On the week – absent the Russia-Turkey dump'n'pump the market has traded in a very narrow, well managed range…

  

   

  Treasury yields drifted very modestly lower today…in an extremely narrow range…

  

   

  Credit remains decoupled…

  

   

  But decoupled from stocks…

  

   

  Draghi jawboning oin ECB's 2-tiered QE sparked EUR weakness, USD strength early on but that faded fast as Europe closed…

  

   

  Commodities all followed the same (inverse) pattern to The USD today with Crude's beta the greatest…

  

   

  Oil and stocks continue to pay nice and decouple…

  

   

  Crude gamma growing…

  

   

  Charts: Bloomberg

  

  

  

  

• Let It Snow – California Drought Recovery Remains "Extremely Unlikely"

  While so much hope is pinned on El Nino relieving California's drought in early 2016, climatologists suggest tempering that optimism a little as what is really needed is snow. "Since it has been dry for so long, people get excited,” says one hydrologist, but, as Bloomberg reports, without snow "the notion of fully recovering from the drought is extremely unlikely,” as if the storms come in as rain, or the mountain snow can’t pile up high enough, a lot of water will be lost.

  California is in its fourth year of drought and almost the entire state is abnormally dry, according to the U.S. Drought Monitor in Lincoln, Nebraska.
  Improvement is possible. However, the drought will certainly go into a fifth year, according to the forecast from the U.S. Climate Prediction Center in College Park, Maryland. As Bloomberg reports,

  The drought relief for California widely expected from El Nino in early 2016 will be far more effective if a chill descends soon — ideally with a bit of snow.

   

  “If we can get some snow on the ground and some cold nights, it will set up the snowpack and get cool air pooling,” said California State Climatologist Mike Anderson.

   

  Cool air, especially at high altitudes, will help ensure snow falls and stays on the ground in the mountains through the winter, as needed to supply the state’s reservoirs. While that may seem like a non-issue given the height of the mountains and the tradition of heavy snows there, recent years have seen some worrisome trends.

   

  During the winter of 2014-15, the three-month average temperature in the Sierra region topped the freezing mark of 32 degrees Fahrenheit (zero Celsius) for the first time in records dating to 1950, data compiled by Anderson show.

   

  California as a whole posted its warmest February on record and both December and January came in among the top 10, according to the National Centers for Environmental Information in Asheville, North Carolina.

   

  Here is why all of this is important: If El Nino delivers the promised increase in big, wet storms off the Pacific from January to March, California needs a lot of what falls from those systems to be snow.

  Snow in the mountains stays there until spring, when it melts, runs off and replenishes the state’s reservoirs. If the storms come in as rain, or the mountain snow can’t pile up high enough, a lot of water will be lost.

  So far, the snow in the mountains hasn’t exactly been impressive, and perceptions may have outstripped reality.

   

  

   

  “Since it has been dry for so long, people get excited,” said Rob Hartman, hydrologist in charge of the California Nevada River Forecast Center in Sacramento. “We have had some small storms that left a sprinkle of snow in the mountains. We are still waiting for winter to arrive. We are not ahead of schedule by any means.”

  But there is some hope…

  “The notion of fully recovering from the drought is extremely unlikely,” Hartman said. “But you have to start somewhere.”

   

  That start begins with a little cool air coming in with the next storm. Checking a forecast last week, Anderson said some outlooks were calling for temperatures to reach freezing and below as far down the mountains as 3,000 feet.

   

  “Those are good signs,” he said.

  

  

  

  

  

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• 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!”

  For Forex traders – checkout Liquidity Expert Advisor – a strategy designed to create liquidity!  For Stock traders – checkout Steinmeyer Law Securities Class Action Group.

  

  

  

  

• 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.”

  *  *  *

  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