• Blast From the Past – Hillary Clinton vs. Bernie Sanders on Panama

  Submitted by Michael Krieger of LibertyBlitzkrieg

  Blast From the Past – Hillary Clinton vs. Bernie Sanders on Panama

  

  Unlike most politicians, Bernie Sanders becomes increasingly impressive the more you learn about him. Forget for a moment whether you think the tax dodging strategies popularized by the Panama Papers are ethical or not, it’s important to note that Bernie Sanders publicly warned about an expansion in such behavior all the way back in 2011. On the other hand, Hillary Clinton and Barack Obama pushed for legislation that made such controversial strategies easier, under the guise of “free trade” with Panama.

  First, here’s what Senator Sanders had to say on the matter in 2011:

  The man’s prescience is remarkable. As his votes against the Patriot Act, Iraq War and banker bailouts demonstrate, Bernie Sanders has been on the right side of history on all the major issues of the 21st century. In contrast, Hillary Clinton has been on the wrong side of history on pretty much everything.

  For some additional insight on the Panama situation, let’s turn to the International Business Times:

  Years before more than a hundred media outlets around the world released stories Sunday exposing a massive network of global tax evasion detailed in the Panama Papers, U.S. President Barack Obama and then-Secretary of State Hillary Clinton pushed for a Bush administration-negotiated free trade agreement that watchdogs warned would only make the situation worse.

   

  Soon after taking office in 2009, Obama and his secretary of state — who is currently the Democratic presidential front-runner — began pushing for the passage of stalled free trade agreements (FTAs) with Panama, Colombia and South Korea that opponents said would make it more difficult to crack down on Panama’s very low income tax rate, banking secrecy laws and history of noncooperation with foreign partners.

   

  Even while Obama championed his commitment to raise taxes on the wealthy, he pursued and eventually signed the Panama agreement in 2011. Upon Congress ratifying the pact, Clinton issued a statement lauding the agreement, saying it and other deals with Colombia and South Korea “will make it easier for American companies to sell their products.” She added: “The Obama administration is constantly working to deepen our economic engagement throughout the world, and these agreements are an example of that commitment.”

   

  Critics, however, said the pact would make it easier for rich Americans and corporations to set up offshore corporations and bank accounts and avoid paying many taxes altogether.

   

  “The FTA would undermine existing U.S. policy tools against tax haven activity,” warned consumer watchdog group Public Citizen at the time, saying the agreement would encourage corporations to thwart any U.S. efforts to combat financial secrecy. The group also noted that U.S. government contractors, as well as major financial firms supported by taxpayer bailouts, stood to gain from the trade deal’s provisions that could make it harder to crack down on financial secrecy.

   

  Despite the warnings from watchdog groups, some Democratic lawmakers urged the Obama administration to aggressively push for the Panama agreement. According to a 2009 email sent to Clinton by her top State Department aide, high-ranking then-Sen. Max Baucus, D-Mont., was pushing for passage of the Panama and Colombia free trade pacts, and Rep. Charles Rangel, D-N.Y., said “the president had to lend his star power to pushing them through.” Obama ultimately did just that, hosting Panama’s president at a 2011 Oval Office event touting the proposed trade pact.

  Beyond once again illuminating stark differences between Hillary and Bernie, this episode also demonstrates how dishonest politicians like Obama and Clinton frequently use “free trade” language to push forward crony legislation that has little to do with trade.

  You’ve been warned.

  

  

  

  

  

• Does Not Compute: The Market Is The "Most Overbought Since 2009" Yet "Most Short Since 2008"

  Yesterday we first reported something unexpected: when looking at the constituents of the record short squeeze that started two months ago, and still continues, traders had largely maintained kept single-name shorts, and instead covered short ETF exposure.

  

   

  This followed a previous observation showing that when it comes to NYSE short interest, it is near the record highs (in absolute terms, if not as a % of market cap) reached during the financial crisis.

  

   

  Furthermore, as we have been reporting for the past 2 months, the “smart money” clients of BofA have been consistently selling this rally, and as of this last week, have sold shares for 10 consecutive weeks,with the selling actually accelerating, and in the last week, during which the S&P 500 was up 1.8%, BofA clients sold a total of $4 billion, the largest since September, and the fifth-largest in BofA history.

  

   

  Bloomberg summarized all of this overnight in a note discussing the well-known short overhang, amounting to $1 trillion in total short interest.

  Amid its biggest about-face in nine decades, a funny thing has happened in the U.S. stock market, where rather than loosen their grip bears have grown ever-more impassioned. They’ve sent short interest to an eight-year high and above $1 trillion, by one analyst’s math. Position reports from the Commodity Futures Trading Commission show mutual fund managers are more skeptical now than any time since at least 2010.

   

  “There’s an enormous demand coming,” said Thomas J. Lee, managing partner at Fundstrat Global Advisors LLC., in an interview with Bloomberg TV . “Retail investors are about to put a lot of money into the equity markets because they’re trend followers and the S&P has had two positive quarters in a row. Funds can’t keep a trillion short position, larger than March ’09.”

   

  It started in August, when bearish investors sent bets against U.S. stocks above 4 percent of available shares for the first time in six years. They haven’t backed off since. By the end of February, the ratio climbed to 4.4 percent, the highest since 2008, according to exchange data compiled by Bloomberg. As of March 15, that level was 4.3 percent, equivalent to a short position just under $1 trillion.

  So, supposedly the market is the most short since 2008.

  Which is odd because according to a report released this morning by UBS, while there are allegedly record shorts, the market is somehow, at the very same time, the most overbought since 2009. Here are technicians Michael Riesner and Marc Muller:

  With the SPX hitting a new reaction high on Wednesday we were obviously too early in expecting the SPX to top out last week. However, our base case has not changed. The SPX continues to trade in the time window of our late March/early April top projection. The market is still in its most overbought position since 2009 and together with the internal momentum starting to deteriorate we see the SPX in a final extension instead of starting a new breakout, and in this context we are sticking to our recent comment and would not chase the market on current levels.

   

  

   

  So, at the very same time, this market is the “most overbought since 2009” and “most shorted since 2008“…

  No Wonder Morgan Stanley chief equity strategist Adam Parker lost it this week, and is seeing nothing but cockroaches.

   

  

  

  

  

  

• Millionaires Are Fleeing Chicago In Record Numbers

  Recently, we’ve shown where wealthy people reside within the US, and where they’re fleeing from (here, and here). We now present to you the US city that is winning the race to drive out their wealthiest taxpayers. 

  As the Chicago Tribune reports, that city is none other than Chicago, Illinois. 

  Millionaires are leaving Chicago more than any other city in the United States on a net basis, according to a report by New World Wealth.

  About 3,000 individuals with net assets of $1 million or more (not including their primary residence) moved from the city last year, representing about 2% of the city’s high net worth individuals.  It is unclear where they went: cities in the United States that saw a net inflow of millionaires included Seattle and San Francisco. One thing is certain: they couldn’t wait to get out. 

  Among the reasons cited for leaving their former home town, many said rising racial tensions and worries about crime as factors in the decision.

  The gun violence part we get. Over the weekend, when we penned that “Chicago Disintegrates – Gun Shootings Soar An Unprecedented 89%: “It’s The Struggling Economy” we broke out the stunning statistics within America’s very own warzone:

  “Gun violence in the windy city is on track to post its worst year in the 21st century, the result of an unprecedented surge in gun deaths in the first three months of the year.  By March 31, 141 people had been killed, according to the Chicago Police Department.

   

  The 141 deaths in the first three months of the year mark a 71.9% jump from the same period in 2015, when 82 people were killed. It’s the worst start to a year since 1999, when 136 people died in the first three months the year, according to the Chicago Tribune.

   

  At that pace – an average of three killings every two days – Chicago would have 564 homicides by the end of the year. That would eclipse the 468 killings recorded in 2015 and 416 in 2014.“

  

   

  Still, at least for the time being, these mass shooting sprees are largely isolated to poor neighborhoods of the windy city. As such, it is difficult to see millionaires be directly impacted by what happens in inner city ghettos.

  Which probably explains why while the article touches on crime and racial tensions as reasons people are leaving, there is also another little, or rather big, matter that is driving the people away: taxes. 

  According to the Tribune, Illinois Comptroller Leslie Munger recently had this to say about the mounting unpaid bills and budget concerns that the state continues to face.

  “We can’t go bankrupt and we can’t print money. Taxpayers are going to have to pay this bill.”

  Actually it can go bankrupt.

  Recall that just two weeks ago we reported that the “Countdown To Insolvency Begins For Chicago Pensions As State Supreme Court Rejects Reform Bid“, in which we wrote that following a controversial Supreme Court decision, “there will be no legislating away pension benefits – even if doing so is the only realistic way for officials to ensure that state and local governments can continue to pay out any benefits at all going forward. That is, even if long-run insolvency is certain, benefits will be paid out in full up to and until the day of reckoning finally comes and it will be up to lawmakers to figure out how to rescue the system in the meantime. If that means raising taxes and/or going into further debt, then that’s what it means.”

  And although they may not be able to print money, we can’t help but wonder if the organization that can, will begin to take on the state insolvency issue in the future to prevent that from happening. After all, the bailout tour must continue to roll on.

  For now however, Chicago’s future is bleak, and when the hammer finally does hit, it will do so without Chicago’s wealthiest present.

  Finally, it may not come as a surprise that of all cities around the globe, Chicago was only third in millionaire exodus rankings.

  Which was first? Paris, France.

  

  A Rolls-Royce is displayed Feb. 11, 2016, at the Chicago Auto Show. 3,000
  millionaires moved out of Chicago in 2015, it is unclear what cars they drove
  

  

  

  

  

  

• Buying Dollar Bills For $1.10

  The following research was jointly produced by: J. Brett Freeze, CFA of Global Technical Analysis and 720 Global

  Buying Dollar Bills For $1.10

  720 Global has written four articles to date on stock buybacks and the harm these actions will likely have on future corporate growth rates and the economy. To better gauge the effect of buybacks we join forces with Brett Freeze to present a unique analysis on the S&P 100.

  As we have previously noted, a large majority of companies, including 94 of the S&P 100, have actively repurchased shares since 2011. These companies often announce and execute share repurchases without providing a rationale to shareholders. As a fiduciary of shareholder’s capital, managements’ core responsibility is to act in the best interest of its shareholders. Unfortunately, we believe the majority of current repurchase activity is dictated by management’s self-serving desire – temporarily inflating the current market-value of company stock, while enriching themselves through the exercise and sale of equity-based incentive compensation.

  There are two conditions that should be met when a company engages in a stock buyback. 1) The shares should be trading below intrinsic value 2) there are no investment opportunities available that would allow the company to continue to grow at a desirable rate. If both conditions can be met a case may be made for share buybacks.

  This article solely focuses on the first aforementioned condition– intrinsic value. For more information on the second condition, please read “In Yahoo, Another Example of the Buyback Mirage” by Gretchen Morgenson of the New York Times. In her recent article, which quoted 720 Global, she demonstrates how Yahoo weakened future earnings growth rates and corporate value through questionable stock buybacks.

  Intrinsic value is not the market price or market capitalization of a company or its stock, but a theoretical value formulated through analysis of the balance sheet and income statement of the company. Conceptually, investors should seek companies whose share prices trade below intrinsic value and shun those trading above intrinsic value. This logic equally applies to corporate management executing buybacks.

  When shares are purchased below intrinsic value, the company has added value. It is equivalent to buying a dollar bill for fifty cents. Conversely, share repurchases executed at a premium to intrinsic value destroy intrinsic value. Existing shareholders who sell are rewarded by the share-repurchase program, but those who hold are irreparably damaged. In the words of Warren Buffett from his assault on buybacks – “Buying dollar bills for $1.10 is not good business for those who stick around.”

  For this analysis we evaluate share repurchase activity and intrinsic values for the companies in the S&P 100 Index. Our measure of intrinsic value for non-financial companies was calculated using Global Technical Analysis’s proprietary discounted cash-flow model. For each non-financial company, 20-years of estimated forward cash flows were discounted by the weighted-average cost of capital (energy company data was normalized, when necessary). For financial companies, our measure of intrinsic value was calculated using Global Technical Analysis’s proprietary residual income model.

  The following table provides a glimpse of the value being reduced by share buybacks of five widely-held companies.

  The entire analysis is presented below by S&P Sector. Within each sector, companies are ranked by cumulative share repurchases relative to Q1 2011 outstanding shares. The final column of data shows the effect of share repurchase activity on intrinsic value. This column reveals the positive or negative effect that buybacks have had on the intrinsic value of each respective company.

  The results of our analysis confirm our beliefs regarding share repurchases. Approximately two-thirds of the S&P 100 destroyed intrinsic value, by an average amount of 12.03%, as a result of their share-repurchase programs.

   

  ***Corporate names have been withheld from this presentation. A full analysis can be acquired by contacting the authors.

  

  

  

  

  

  

  

  

• Which American States Have The Most Billionaires

  Yesterday’s news that New Jersey may be headed for fiscal peril now that the state’s wealthiest resident, hedge fund billionaire David Tepper is headed for warmer (and more tax receptive climes), caught many by surprise. Not his departure that is, but just how much of New Jersey’s tax revenue was contingent on just this one person. As Bloomberg reported, “New Jersey relies on personal income taxes for about 40% of its revenue, and less than 1% of taxpayers contribute about a third of those collections. A one percent forecasting error in the income-tax estimate can mean a $140 million gap.”

  This means that a potential billionaire exodus from states such as CT and NJ (or any other), is emerging as one of the bigger fiscal threats to state budgets.

  So which states are most at risk? For the answer we used the latest Forbes data listing the states with the most billionaires.  According to the magazine, there are “540 billionaires in the United States, with a combined net worth of $2.399 trillion. That’s more billionaires and more combined net worth than any other nation in the world.“

  This is where they live across the U.S.:

  

  For the sake of California’s fiscal stability, we hope governor Jerry Brown has better ideas of how to retain the 124 billionaires (with a cumulative net worth of over half a trillion dollars) currently calling the Golden State home than by merely continuing with his minimum wage hike bonanza. As we reported yesterday, California has already seen an exodus of state residents departing for other places in the US like Texas. If the all important billionaires were to depart, it would get very ugly for the state whose budget is already on edge.

  Source

  

  

  

  

  

• Dutch Referendum May Have Unleashed European "Continental Crisis"

  In early January, European Commission President Jean-Claude Juncker warned that a Dutch advisory referendum, which took place today, on the bloc’s association agreement with Ukraine could lead to a “continental crisis” if voters reject the treaty.

  In an interview in January for Dutch daily NRC Handelsblad, Juncker said Russia would “pluck the fruits” of a vote in the Netherlands against deepened ties between the European Union and Ukraine. “I want the Dutch to understand that the importance of this question goes beyond the Netherlands,” NRC quoted Juncker as saying. “I don’t believe the Dutch will say no, because it would open the door to a big continental crisis.”

  The reason why Jean-Claude “when it gets serious, you have to lie” Juncker was so nervous, is that the vote, launched by anti-EU forces, is seen as test of the strength of Eurosceptics on the continent just three months before Britain votes on whether to stay in the European Union.

  Fast forward to today when the vote just took place, and based on initial exit polls, Juncker was dead wrong. According to Reuters, in a rebuke for the government, which campaigned in favor of the EU-Ukraine association agreement, roughly 64 percent voted “No” and 36 percent said “Yes”. 

  As a reminder, the political, trade and defense treaty is already provisionally in place but has to be ratified by all 28 European Union member states for every part of it to have full legal force. The Netherlands is the only country that has not done so.

  And, it appears, that in a big hit for those who had plotted the Ukraine ascension, the Dutch may have just frozen Ukraine dead in its tracks.

  Eurosceptics had presented the referendum as a rare opportunity for their countrymen to cast a vote against the EU and the way it is run – including its open immigration policies. 

  But here lies the rub. Although it is non-binding, it will be considered as an advisory referendum by the government if turnout reaches 30 percent. Otherwise it will be considered null and void and need not be taken into consideration by the government. 

  And while according to some initial exit polls, the turnout was just 28%, or below the required threshold, the most recent data has the turnout as 32%, or sufficient.

  Still, this number may change before the night is over, so keep a close eye on this otherwise insignificant vote in the Netherlands as it may have momentuous consequences for the country and the entire European project. According to a prominent Dutch pollster, the final turnout will be 31%, or an absolute nailbiter.

  Prominent pollster @mauricedehond thinks final turnout figure will be 31% https://t.co/Iu9ZV2DFhg #veryclose #DutchReferendum

  — Pieter Cleppe (@pietercleppe) April 6, 2016

  The turnout, far lower than in national or local elections, reflected many voters’ puzzlement at being asked to vote on such an abstruse topic. “Yes” voters were certainly confused: “I think the people who asked for this referendum have made a huge commotion,” said Trudy, a “Yes” voter in central Amsterdam. “It’s nonsense, which cost lots of money, and it’s about something nobody understands.”

  Which, of course, is what anyone who is in the vast minority will say.

  Meanwhile, Geert Wilders, leader of the eurosceptic Freedom Party, urged voters to send a message to Europe by saying “No”. “I think many Dutchmen are fed up with more European Union and this treaty with Ukraine that is not in the interests of the Dutch people,” he told reporters. “I hope that later, both in the United Kingdom and elsewhere in Europe, other countries will follow.” 

  As Reuters adds, a clear vote against the treaty in the run-up to Britain’s June 23 referendum on whether to quit the EU could escalate into a domestic or even a Europe-wide political crisis.

  Dutch leaders say voting against the treaty would also hand a symbolic victory to Russian President Vladimir Putin.

  It is unclear if anti-Russian sentiment swayed voters nearly two years on but increasing resentment among the Dutch at the consequences of the EU’s open-border policies has propelled Wilders – who openly opposes Muslim immigration – to the top of public opinion polls.

  In many ways, Wilders is the local Donald Trump.

  

   

  Reuters also notes that the ballot also taps into a more deep-seated anti-establishment sentiment highlighted by a resounding rejection in 2005 of a European Union constitution, also in a referendum.

  However, just like in Greece, the gears are already set in motion to ignore the majority vote.  In parliament, Prime Minister Mark Rutte’s conservative VVD party has said it would ignore a narrow “No” vote, while junior coalition partner Labour has said it would honor it, setting the stage for a split.

  But ignoring a clear “No” would be risky for Rutte’s already unpopular government — which has lost further ground over Europe’s refugee debate – ahead of national elections scheduled for no later than March 2017.

  While we are confident that ultimately the will of the “No” voters will be ignored, just as it was in Greece, the resentment toward an oligarchic class which clearly can only operate under a non-democratic, call it despotic, regime is sure to spread. As for the Netherlands, while nothing may happen for the next 12 months, it will take some very brazen vote tampering next year to perpetuate a status quo which no longer serves the majority of its own country. 
  

  

  

  

  

  

• McDonalds Responds To Minimum Wage Hikes, Launches McCafe Coffee Kiosk

  When it comes to jobs growth in the US, all one can say is thank god for waiters and bartenders: after all, a Starbucks barista is precisely what a recently fired oil chemical engineer making half a million dollars really wants to do with their life.

  

   

  However, the days of easy job gains for the BLS may be coming to an end (even if on a seasonally adjusted, goalseeked basis the trend has a long way to go).

  According to Brand Eating, fast food king McDonald’s has been spotted testing a self-serve McCafe coffee station/kiosk out in downtown Chicago. The station is located in the restaurant but apart from the counter and looks to be a theoretically more convenient way for those who just want a cup of coffee to skip the regular line (while also freeing employees from having to make each drink in the back).

  In essence, this is the company’s latest venture to make employees responsible for one less task as corporate HQ slowly but surely responds to minimum wage hikes sweeping all states, and in the process, outsource its minimum wage workers to simple machines which will never unionize or have any demands aside from being cleaned occasionally.

  As shown below, the coffee station includes a touchpad for ordering and paying (it appears to take credit card only), a beverage spout, and a dispenser for cups.

  

   

  According to Brand Eating, “drink options include lattes, mochas, and cappuccinos that are customizable with various flavorings, types of milk, and amount of espresso. There doesn’t seem to be an option for drip coffee. The price for the drinks is $2.99. The concept and set up is very similar to McDonald’s Create Your Taste customized ordering available at some restaurants.

  The idea makes a lot of sense seeing as, here in the U.S., the McCafe espresso and steamed milk is automatically dispensed from a machine anyway, with syrups added after accordingly. What they’ve basically done here is put the dispenser on the other side of the counter and added automation for the syrup and ordering/payment.

   

  At the very least, having a touchscreen menu to look through is much preferable to me than the video screen menu at my local McDonald’s that intermittently plays a montage of the drinks so that I have to wait through to see the menu.

  What’s next? Why more of this of course.

  

  

  

  

  

  

• "Rotten To The Core"

  Submitted by Bill Bonner, courtesy of Acting-Man

  We live in a world of sin and sorrow, infected by a fraudulent democracy, Facebook, and a corrupt money system. Wheezing, weak, and weary from the exertion of trying to appear “normal,” the economy staggers on.

  

  Staggering on…., Image credit: David Sidmond

  Last week, we gained some insight into the ailment. Something in the diagnosis has puzzled us for years: How is it possible for the most advanced economy in the history of the world to make such a mess of its most basic bodily functions – getting and spending?

  By our calculations – backed by studies, hunches, and deep research – the typical American man (it is less true for women) earns less in real, disposable income per hour today than he did 30 years ago.

  He goes to buy a car or a house, and he finds he must work longer to pay the bill than he would have in the last years of the Reagan administration. How is that possible? What kind of economic quackery do you need to stop capitalism from increasing the value of workers’ time?

  What kind of policies and circumstances are required to stiffen its joints… clog up its innards… and rot its brain? Globalization? Financialization? Bad trade deals? Too much red tape? Too many cronies? Too many zombies?

  

  We can identify at least one source of the quackery…

  All of those things played a role. But our answer is simpler: poison money. The bigger the dose… the sicker it got. When you say you “have some money,” you usually believe that there is, somewhere, an electronic database in which it is recorded that you are the owner of some amount of currency.

  You have $100,000 in your account, right?   Does it mean that there is a little cubbyhole somewhere, with your name on it, in which you will find a stack of 1,000 Ben Franklins? Nope. Not even close. No cubbyhole. No stack of money. No nothing.

  Does it mean the bank is carefully guarding some 1s and 0s, digital information proving that it at least “stores” your money in its database? Nope again! What it means is there is a financial institution of uncertain integrity… with a complex electronic balance sheet of uncertain accuracy… listing alleged financial claims and contracts of uncertain quality…

  …and that you are one of the many thousands of entries on the debit side… with a claim to a certain number of dollars… which the institution may or may not have, each of uncertain value.

  

  When prolific American bank robber Willie Sutton was asked why he robbed banks, he reportedly said “Because that’s where the money is”. Not anymore, not really, Photo credit: Allan Grant

  Today, banks – and this could be said of the entire financial system – no longer have “money.” They have credits and debits. Your deposit is your bank’s liability and your asset.

  But look at the balance sheet. You don’t know how many of the claims shown on the left are right… or whether, when the other creditors get finished with it, any of the assets shown on the right are left. All you know is that the system works. Until it doesn’t.

  System Seizure

  For many months, we have urged readers to prepare themselves for problems. One day, the accumulation of contradictions, misinformation, and plain old “trash” in the system will cause a seizure. You will go to the ATM, and it won’t work.

  That day, your life could take a big turn to the downside… depending on how widespread the problem is… the cause of it… and how you prepared for it. Of course, we don’t know for sure that that day will ever come. We are always in doubt, especially about our own forecasts.

  

  And then, one morning…, Photo credit: sxc

  Still, the potential problem seems likely enough… and grave enough… to justify some minimal precautions. You might cross the street blindfolded without getting run down, but it is still a good idea to look both ways. Usually, we look to the right… where we see the problems inherent in a credit-based money system.

  The feds can create all the credit they want. But real people can’t pay an infinite amount of debt service. Like a junkyard dog reaching the limit of his chain, the credit cycle has a way of jerking people back to reality.

  Real Money

  But there are other potential problems coming from the left. An electronic, credit-based money system is fragile. It can be hacked by thieves. It can be attacked by terrorists. It can be shut down by accident. Even a “bug” could bring it to its knees.

  And then what? How will you get money? How will you spend it? How will you buy gasoline or food? Our advice: Keep some cash on hand. Make sure you own some gold, too – real gold, coins that you can hold in your hand and you can flip to your grandchildren.

  “Hey kid,” you say with a knowing and superior air, “take a look at this. This is real money. You don’t have to plug it in.” By the way… Gold just had its best quarter in 30 years. Do buyers know something? Maybe.

  

  

  

  

  

  

• "My Passion Is Puppetry"

  By Ben Hunt of Salient Partners

  “My Passion Is Puppetry“

  We are supposedly living in the Golden Age of television. Maybe yes, maybe no (my view: every decade is a Golden Age of television!), but there’s no doubt that today we’re living in the Golden Age of insurance commercials. Sure, you had the GEICO gecko back in 1999 and the caveman in 2004, and the Aflac duck has been around almost as long, but it’s really the Flo campaign for Progressive Insurance in 2008 that marks a sea change in how financial risk products are marketed by property and casualty insurers. Today every major P&C carrier spends big bucks (about $7 billion per year in the aggregate) on these little theatrical gems.

  This will strike some as a silly argument, but I don’t think it’s a coincidence that the modern focus on entertainment marketing for financial risk products began in the Great Recession and its aftermath. When the financial ground isn’t steady underneath your feet, fundamentals don’t matter nearly as much as a fresh narrative. Why? Because the fundamentals are scary. Because you don’t buy when you’re scared. So you need a new perspective from the puppet masters to get you to buy, a new “conversation”, to use Don Draper’s words of advertising wisdom from Mad Men. Maybe that’s describing the price quote process as a “name your price tool” if you’re Flo, and maybe that’s describing Lucky Strikes tobacco as “toasted!” if you’re Don Draper. Maybe that’s a chuckle at the Mayhem guy or the Hump Day Camel if you’re Allstate or GEICO. Maybe, since equity markets are no less a financial risk product than auto insurance, it’s the installation of a cargo cult around Ben Bernanke, Janet Yellen, and Mario Draghi, such that their occasional manifestations on a TV screen, no less common than the GEICO gecko, become objects of adoration and propitiation.

  

  For P&C insurers, the payoff from their marketing effort is clear: dollars spent on advertising drive faster and more profitable premium growth than dollars spent on agents. For central bankers, the payoff from their marketing effort is equally clear. As the Great One himself, Ben Bernanke, said in his August 31, 2012 Jackson Hole speech: “It is probably not a coincidence that the sustained recovery in U.S. equity prices began in March 2009, shortly after the FOMC’s decision to greatly expand securities purchases.” Probably not a coincidence, indeed.

  Here’s what this marketing success looks like, and here’s why you should care.

  This is a chart of the S&P 500 index (green line) and the Deutsche Bank Quality index (white line) from February 2000 to the market lows of March 2009.

  

  Source: Bloomberg Finance L.P., as of 3/6/2009. For illustrative purposes only.

  Now I chose this particular factor index (which I understand to be principally a measure of return on invested capital, such that it’s long stocks with a high ROIC, i.e. high quality, and short stocks with a low ROIC, all in a sector neutral/equal-weighted construction across a wide range of global stocks in order to isolate this factor) because Quality is the embedded bias of almost every stock-picker in the world. As stock-pickers, we are trained to look for quality management teams, quality earnings, quality cash flows, quality balance sheets, etc. The precise definition of quality will differ from person to person and process to process (Deutsche Bank is using return on invested capital as a rough proxy for all of these disparate conceptions of quality, which makes good sense to me), but virtually all stock-pickers believe, largely as an article of faith, that the stock price of a high quality company will outperform the stock price of a low quality company over time. And for the nine years shown on this chart, that faith was well-rewarded, with the Quality index up 78% and the S&P 500 down 51%, a stark difference, to be sure.

  But now let’s look at what’s happened with these two indices over the last seven years.

  

  Source: Bloomberg Finance L.P., as of 3/28/2016. For illustrative purposes only.

  The S&P 500 index has tripled (!) from the March 2009 bottom. The Deutsche Bank Quality index? It’s up a grand total of 10%. Over seven years. Why? Because the Fed couldn’t care less about promoting high quality companies and dissing low quality companies with its concerted marketing campaign — what Bernanke and Yellen call “communication policy”, the functional equivalent of advertising. The Fed couldn’t care less about promoting value or promoting growth or promoting any traditional factor that requires an investor judgment between this company and that company. No, the Fed wants to promote ALL financial assets, and their communication policies are intentionally designed to push and cajole us to pay up for financial risk in our investments, in EXACTLY the same way that a P&C insurance company’s communication policies are intentionally designed to push and cajole us to pay up for financial risk in our cars and homes. The Fed uses Janet Yellen and forward guidance; Nationwide uses Peyton Manning and a catchy jingle. From a game theory perspective it’s the same thing.

  Where do the Fed’s policies most prominently insure against financial risk? In low quality stocks, of course. It’s precisely the companies with weak balance sheets and bumbling management teams and sketchy non-GAAP earnings that are more likely to be bailed out by the tsunami of liquidity and the most accommodating monetary policy of this or any other lifetime, because companies with fortress balance sheets and competent management teams and sterling earnings don’t need bailing out under any circumstances. It’s not just that a quality bias fails to be rewarded in a policy-driven market, it’s that a bias against quality does particularly well! The result is that any long-term expected return from quality stocks is muted at best and close to zero in the current policy regime. There is no “margin of safety” in quality-driven stock-picking today, so that it only takes one idiosyncratic stock-picking mistake to wipe out a year’s worth of otherwise solid research and returns.

  So how has that stock-picking mutual fund worked out for you? Probably not so well. Here’s the 2015 S&P scorecard for actively managed US equity funds, showing the percentage of funds that failed to beat their benchmarks over the last 1, 5, and 10 year periods. I mean … these are just jaw-droppingly bad numbers. And they’d be even worse if you included survivorship bias.

  

  Small wonder, then, that assets have fled actively managed stock funds over the past 10 years in favor of passively managed ETFs and indices. It’s a Hobson’s Choice for investors and advisors, where a choice between interesting but under-performing active funds and boring but safe passive funds is no choice at all from a business perspective. The mantra in IT for decades was that no one ever got fired for buying IBM; today, no financial advisor ever gets fired for buying an S&P 500 index fund.

  But surely, Ben, this, too, shall pass. Surely at some point central banks will back away from their massive marketing campaign based on forward guidance and celebrity spokespeople. Surely as interest rates “normalize”, we will return to those halcyon days of yore, when stock-picking on quality actually mattered.

  Sorry, but I don’t see it. The mistake that most market observers make is to think that if the Fed is talking about normalizing rates, then we must be moving towards normalized markets, i.e. non-policy-driven markets. That’s not it. To steal a line from the Esurance commercials, that’s not how any of this works. So long as we’re paying attention to the Missionary’s act of communication, whether that’s a Mario Draghi press conference or a Mayhem Guy TV commercial, then behaviorally-focused advertising — aka the Common Knowledge Game — works. Common Knowledge is created simply by paying attention to a Missionary. It really doesn’t matter what specific message the Missionary is actually communicating, so long as it holds our attention. It really doesn’t matter whether the Fed hikes rates four times this year or twice this year or not at all this year. I mean, of course it matters in terms of mortgage rates and bank profits and a whole host of factors in the real economy. But for the only question that matters for investors — what do I do with my money? — nothing changes. Stock-picking still won’t work. Quality still won’t work. So long as we hang on every word, uttered or unuttered, by our monetary policy Missionaries, so long as we compel ourselves to pay attention to Monetary Policy Theatre, then we will still be at sea in a policy-driven market where our traditional landmarks are barely visible and highly suspect.

  Here’s my metaphor for investors and central bankers today — the brilliant Cars.com commercial where a woman is stuck on a date with an incredibly creepy guy who declares that “my passion is puppetry” and proceeds to make out with a replica of the woman.

  What we have to do as investors is exactly what this woman has to do: get out of this date and distance ourselves from this guy as quickly as humanly possible. For some of us that means leaving the restaurant entirely, reducing or eliminating our exposure to public markets by going to cash or moving to private markets. For others of us that means changing tables and eating our meal as far away as we possibly can from Creepy Puppet Guy. So long as we stay in the restaurant of public markets there’s no way to eliminate our interaction with Creepy Puppet Guy entirely. No doubt he will try to follow us around from table to table. But we don’t have to engage with him directly. We don’t have participate in his insane conversation. No one is forcing you keep a TV in your office so that you can watch CNBC all day long!

  Look … I understand the appeal of a good marketing campaign. I live for this stuff. And I understand that we all operate under business and personal imperatives to beat our public market benchmarks, whatever that means in whatever corner of the investing world we live in. But I also believe that much of our business and personal discomfort with public markets today is a self-inflicted wound, driven by our biological craving for Narrative and our social craving for comfortable conversations with others and ourselves, no matter how wrong-headed those conversations might be.

  Case in point: if your conversation around actively managed stock-picking strategies — and this might be a conversation with managers, it might be a conversation with clients, it might be a conversation with an Investment Board, it might be a conversation with yourself — focuses on the strategy’s ability to deliver “alpha” in this puppeted market, then you’re having a losing conversation. You are, in effect, having a conversation with Creepy Puppet Guy.

  There is a role for actively managed stock-picking strategies in a puppeted market, but it’s not to “beat” the market. It’s to survive this puppeted market by getting as close to a real fractional ownership of real assets and real cash flows as possible. It’s recognizing that owning indices and ETFs is owning a casino chip, a totally different thing from a fractional ownership share of a real world thing. Sure, I want my portfolio to have some casino chips, but I ALSO want to own quality real assets and quality real cash flows, regardless of the game that’s going on all around me in the casino.

  Do ALL actively managed strategies or stock-picking strategies see markets through this lens, as an effort to forego the casino chip and purchase a fractional ownership in something real? Of course not. Nor am I using the term “stock-picking” literally, as in only equity strategies are part of this conversation. What I’m saying is that a conversation focused on quality real asset and quality real cash flow ownership is the right criterion for choosing between intentional security selection strategies, and that this is the right role for these strategies in a portfolio.

  Render unto Caesar the things that are Caesar’s. If you want market returns, buy the market through passive indices and ETFs. If you want better than market returns … well, good luck with that. My advice is to look to private markets, where fundamental research and private information still matter. But there’s more to public markets than playing the returns game. There’s also the opportunity to exchange capital for an ownership share in a real world asset or cash flow. It’s the meaning that public markets originally had. It’s a beautiful thing. But you’ll never see it if you’re devoting all your attention to CNBC or Creepy Puppet Guy.

  

  

  

  

  

• Where One Swiss Bank Will Be Buying Gold

  While the furious rally that proppeled gold higher in the first quarter – by the most in 25 years – appears to have fizzled, it is hardly over. So for those wondering when they should add to their position, or start a new one, here is some advice from Geneva Swiss Bank, which believes that $1,180-$1,190 “may be a good level to buy gold.”

  The bull case is known to everyone by now, but here it is again, from the source:

  • We believe that gold remains a great hedge against currency debasement
  • Investors increasing doubts on the effects of central banks aggressive monetary policies will continue to be a tailwind for the only currency that machines can’t print
  • Last but not least, asset allocators are piling back into gold again.

  The result: the following chart.

  

  

  

  

  

  

• No Turning Point: What Happens in Wisconsin Stays in Wisconsin; Hell to Pay

  Submitted by Mike “Mish” Shedlock of MishTalk

  In the wake of an expected victory in Wisconsin, Ted Cruz gave the expected victory speech.

  “Tonight is a turning point. It is a rallying cry,” said Cruz to an elated crowd of his supporters.

  Nonsense. What happens in Wisconsin stays in Wisconsin.

  Nomination Analysis

  Cruz won 36 of 42 Wisconsin delegates. In the Path to a Trump Victory, Nate Silver estimated Trump needed to win 18 Wisconsin delegates.

  Trump won six, leaving him 12 short.

  New York has 95 delegates. Silver estimates Trump needs 58 of then.

  I expect Trump will pick up 70 putting him back on track. I made that estimate on April 4 in Rumors of Trump’s Demise Overblown; Wisconsin May Not Matter if Trump Sweeps New York.

  Recent Polls

  

   

  Silver’s Poll’s Only Projection

  

  If those numbers for Trump come in, and we will find out on April 19, the momentum will clearly have shifted back to Donald Trump.

  Still on Course

  Financial Times writer Edward Luce sees things pretty much the way I do. In an article today, Luce says Donald Trump Still Just About on Course.

  Despite having self-inflicted the worst two weeks of his campaign, and provoking the opposition of almost every senior Republican in Wisconsin, Mr Trump still took more than a third of the vote — and in a state that he was likely to lose.

   

  Wisconsin’s demographics, which skew towards educated conservatives, are similar to that of Iowa, which Mr Cruz won at the start of the primary season two months ago. New York’s are closer to that of New Hampshire, which Mr Trump won handily the following week.

   

  It is anybody’s guess what Mr Trump will say, or tweet. His capacity for self-destruction can never be underestimated. But it takes a leap of faith to believe he will be defeated on his home turf by a Texan conservative who denigrates “New York values”.

   

  Wisconsin does not drastically alter the bigger picture. Republicans are probably heading towards a contested convention in Cleveland in which they will confront a choice between Mr Trump and Mr Cruz.

  Contested Convention

  It’s a bit premature to come to the conclusion a contested convention is the odds-on-favorite, but it is increasingly likely.

  In January, I stated the only likely way Trump could be stopped was a contested convention. That was long before media glommed onto the idea. Today the notion of a contested convention is mainstream.

  Hell to Pay

  It remains to be seen if we do have a brokered convention but a Talking Points Memo accurately says there will be Hell to Pay, if we do. Emphasis is mine.

  I certainly knew that election night was not the end of the delegation selection process in most states – especially in caucus states. But I confess I did not realize how many states do not allow a candidate any direct control over who ‘their’ delegates even are. So Donald Trump could win all the delegates in a particular state but have party functionaries pick the actual people who will serve as ‘Trump’s’ delegates. So they’re bound on the first ballot but actually there to support Cruz or Kasich or some other unicorn candidate.

   

  I think many people imagine a raucous and wild scene where the Trump delegates walk out of the hall after the convention gives Mitt Romney or maybe Jeb Bush’s son ‘P.’ the nomination. But in fact there may be no Trump supporters there to walk out. Now, obviously there will be some. But maybe not that many.

   

  The ‘Trump delegates’ who agree to vote for someone else on the second ballot may not be former Trump supporters. They may be Cruz supporters or just party regulars.

   

  All of this is why this is bounding toward a wildly destructive conflagration in Cleveland. Elections of all sorts rest not fundamentally on rules and bylaws but on legitimacy. An RNC national committeeman recently complained that the press had given people the wrong impression that voters decided who the nominee was rather than the party. By the rules, he may be right. But good luck sailing that ship across any body of water.

   

  TPM Readers know, because it’s been one of the site’s core perennial issues for 15 years, that people’s right to their vote gets disregarded all the time. But it is by definition almost always the votes of the marginalized and those lacking power, almost always those most loosely tied to the political system. And usually it either does not or cannot be proven to swing an actual election. It is quite another thing, under the bright lights of intense national press scrutiny to take the win away from the guy who unambiguously won the most votes.

   

  Trump’s constituency is the part of the electorate which Republican politicians have been marinating in grievance and betrayal politics for decades. Only it’s not coming from Al Sharpton or Hollywood elites or limousine liberals or Feminazis. It will be coming from their supposed protectors, their party.

   

  It won’t go down well. There will be hell to pay.

  Hell to pay indeed!

  This is precisely why Trump feels marginalized to the point he may not support the Republican candidate if he doesn’t win.

  And why should he?

  Can Cruz Beat Hillary?

  Can Cruz or some alternative “hand-picked” candidate defeat Hillary?

  It seems dubious, at best. To win the election, the Republican nominee will have to pick up votes from some independents and some traditional Democrats.

  What votes can Cruz pick up? Anything? I challenge anyone to explain what inroads Cruz, Kasich, or any other hand-picked Republican Neanderthal can deliver from either Democrats or Independents.

  Appealing to the core is the road to ruin, and Trump proves it.

  And if Trump runs on a third party ticket, it will be next to impossible for Cruz or any other Republican candidate win.

  Can Trump Beat Hillary?

  Despite the talk, Trump will retain nearly all of the traditional Republican vote. Sure, some may vote Hillary or sit the election out. But the strong anti-Hillary sentiment will overcome almost all of that.

  On the plus side, Trump will pick up votes from anti-war Democrats, anti-war independents, anti-establishment independents, anti-Fed independents, and most importantly – angry white Democrats who blame China and Mexico for our problems.

  On the minus side, Trump has offended a lot of people. However, there will be some time for him to make amends and sound more presidential.

  Destructive Republican Party Breakup

  Whether Trump wins the nomination or it is stolen from him, a destructive breakup of the holier-than-thou, war-mongering, neocon pseudo-conservative hypocrites running the Republican party is potentially at hand.

  For that we can all thank Trump, whether you like the guy or not. It’s time to rebuild the Republican party, and this is a good start.

  If the nomination is stolen from Trump, he can finish the job with a third-party candidacy.

  

  

  

  

  

• Before Trump, Sen Bulworth Spoke Truth To Power

  Submitted by Douglas Herman

      “The majority of men are not capable of thinking, but only of believing and are not accessible to reason but only to authority.”

      -­ Arthur Schopenhauer
   
  Voting is like bungee jumping: it’s for people who like big jerks. If the 2016 US Presidential election seems like a manufactured media circus, perhaps we can blame Hollywood. More precisely, we can blame fictional Senator Jay Billington Bulworth and his bluster for providing the blueprint.

  In books and movies, Life often imitates Art. I know from personal experience, having penned a historical fiction novel, The Guns of Dallas, that apparently came true two years after publication. When an old CIA operative named E. Howard Hunt made a deathbed confession to Rolling Stone magazine about the JFK Assassination, he echoes a similar confession my protagonist made in my novel a couple years before.

  But they give no prizes for such prescience.  Instead they give Pulitzer Prizes and Nobel Prizes to liars and war criminals. They give Presidential Medals of Freedom to corrupt, incompetent or deceitful career public servants who do a huge disservice to the public and endanger the Republic. They give Oscars and Emmys and glowing accolades to filmmakers who create violent movies based on fantasies and fabrications that prop up the deep state. But they give no awards for speaking truth to power. Often only a bullet awaits those who do.

  Long before Donald Trump uttered his first shocking statement, a fictional Hollywood politico named Senator Bulworth spoke truth to power and shocked a nation. So much so that the movie lost money, was critically panned and may have gotten the iconic actor and producer, Warren Beatty, blacklisted from Hollywood.

  Why? Truth is a dangerous weapon. More dangerous than a thousand light sabers. But sadly, Truth is the First & Last Casualty in America’s Penultimate War.

  * * *

  Some people think that truth is relative. At least my relatives do. Try telling your friends and family that all truth passes through Three Stages, from ridicule to violent opposition to eventual acceptance, according to that guy Schopenhauer again, who must have been a lot of fun at parties. My friends and family remain at stage one.

  In an essay called Bulworth In 2013, artist Jim Kirwan remarked: “Warren Beatty made Bulworth in 1998 to warn America about what this country had become . . . The film is about a disillusioned Senator who tires of the lies and begins to tell it like it is.  No other major filmmaker has dared to produce, much less chosen to put these topics before the public.”

  Bulworth quickly insults or provokes everyone he meets, from Black civic leaders to Jewish movie moguls to a roomful of the Senator’s corrupt corporate donors.  While on a fundraiser, Senator Bulworth visits the home of some Hollywood heavyweights and is asked bluntly by one of them: “Senator, do you think those of us in the entertainment business need government help in determining limits on sex and violence in today’s films and television programs?”

  Bulworth replies: “You know the funny thing is, how lousy most of your stuff is. You make violent films, you make dirty films, you make family films, but just most of them are not very good, are they? Funny that so many smart people could work so hard on them and spend so much money on them and, I mean, what do you think it is? It must be the money, huh. It must be the money, it turns everything to crap you know. Jesus Christ how much money do you guys really need?”

  And that is how you get black-listed from Hollywood, despite all the Oscars you have won in the past. Talk truth to power and damn if they don’t try to ruin you.

  Bulworth continues on in his suicidal mission. Warren Beatty is masterful and marvelous, like Trump on truth serum or steroids. Intoxicated with his candor, Senator Bulworth begins to rhyme, to a roomful of stunned corporate backers. “And over here, we got our friends from oil/ They don’t give a shit how much wilderness they spoil/ They tell us they are careful, we know that it’s a lie/ As long as we keep driving cars, they’ll let the planet die/ Exxon, Mobil, the Saudis and Kuwait, if we still got the Middle East, the atmosphere can wait/ The Arabs got the oil, we buy everything they sell/ But if the brothers raise the price, we’ll blow them all to hell.”

  Imagine Trump saying something like THAT?

  So ask yourself this, dear reader: When has ONE candidate managed to provoke and then UNITE the hysterical Left liberals and the entrenched, super rich & powerful oligarchs of the Extreme Right against him? Not to mention uniting the puppets and pundits of the mainstream media? Has that ever happened in American history? Before Bulworth? Before Trump?

  Consider the growing list of powerful, special interests arrayed against Donald Trump. Billionaire corporate heads oppose Trump. Dozens of them flew down to Sea Island, Georgia to devise ways to remove Trump from the Republican ticket. “”What we see at Sea Island is that, despite all their babble about bringing the blessings of democracy to the world’s benighted, AEI, Neocon Central, believe less in democracy than in perpetual control of the American nation by the ruling Beltway elites,” wrote Patrick Buchanan. “If an outsider like Trump imperils that control . . . the elites will come together to bring him down, because behind party lines, they’re soul brothers in pursuit of power.”

  Speaking of soul brothers, another billionaire, and self-confessed Nazi collaborator, George Soros backs BlackLivesMatters.  Soros provided in excess of $30 million in “seed” money to BLM.  Tweeted top BLM activist and rapper Tef Poe: “ If Trump wins, young niggas such as myself are fully hell bent on inciting riots everywhere we go.”
   
  Billionaires bankrolling ghetto brothers to burn and riot? And NO outcry from the American media, naturally.
   
  Soros also backs unlimited immigration with his Open Borders group, the same people responsible for blocking a state highway in Arizona. Again not a peep from the mainstream media. But a cabal of connected newspaper columnists, who style themselves “National Security Leaders,” many who pimped for the endless wars in the Middle East, including such aptly named warmongers as Max Boot, Charles Krauthammer, Michael Chertoff and Robert Kagan oppose Trump.  Likewise billionaire Jewish movie moguls, many of whom have donated millions to Hillary Clinton, oppose Trump. Billionaire Chinese oligarchs and manufacturers, with factories filled with low-paid workers and fearful that tariffs may curtail their obscene profits, oppose Trump. Pop political celebs such as Elizabeth Warren and RINO relics Mitt Romney and John McCain oppose Trump and urge voters to reject him.
   
  Every one of these outspoken opponents of Trump was represented in the Bulworth movie in some fashion, especially the network talking heads. In the movie, Bulworth finally confronts the media. The American mainstream media hates and fears Trump, I mean Bulworth. He knows exactly what kind of prostitutes they are. But the media realizes Bulworth is hot news. So they have to cover him. They are forced to cover him, against their will. Exactly as they are forced to cover Trump.

  * * *

  “You know the guy in the booth who’s talking to you in that tiny little earphone,” says Bulworth to some bimbo who reminds me of Meagan Kelly. “He’s afraid the guys at network are gonna tell him that he’s through/ If he lets a guy keep talking like I’m talking to you/ Cause the corporations got the networks and they get to say who gets to talk about the country and who’s crazy today/ I would cut to a commercial if you still want this job/ Because you may not be back tomorrow with this corporate mob/ Cut to commercial, cut to commercial, cut to commercial. Okay Okay I got a simple question that I’d like to ask of this network/ That pays you for performing this task/ How come they got the airwaves? They’re the peoples aren’t they?/ Wouldn’t they be worth 70 billion to the public today?/ If some money-grubbin Congress didn’t give them away?”

  Bulworth, like Trump nearly 20 years later, seems to present the people, the voters,  with a fresh perspective. Even if the apparent fresh perspective is a fraud or a mirage. But to the Powers-That-Be, any courageous man who speaks truth to power presents a fearful challenge: How to rein in this dangerous man, before he does any more damage? Easy enough. Whether a Bulworth or a Trump, similar wild card candidates who have suddenly become the newest darling of the public, they must be taught to toe the party line, or be removed from the picture. Simple.

  How? Assassination or electoral fraud.

  In the movie, Bulworth is eventually removed, at the height of his fame and popularity with the voters. In reality, so is anyone else who dares to challenge the status quo. JFK and RFK most recently. I imagine the powerbrokers are devising a scenario as I write this. Perhaps a disgruntled bus boy with three names, a troubled sort who keeps a diary and owns a handgun will ambush Trump. Naturally the media presstitutes will gloat in private but pretend a somber sorrow. And Hillary will be selected, or someone suitable to Wall Street and the police state. Hardly matters who.

  As our empire erodes, and overseas tyranny evolves into full moral meltdown at home, and the economy becomes a series of bubbles, the sociopaths in charge resort to more inventive and draconian measures. Trump is neither the solution nor the answer but more like another symptom. A long simmering effect of a longer lingering cause. The cause and effect of bad governance, of corruption without any consequences.

  

  

  

  

  

• Governor Of Puerto Rico Set To Impose Capital Controls

  Yesterday, in the latest plot twist surrounding the inevitable Puerto Rico default, we observed that after the commonwealth island’s Senate passed a surprising bill to impose a debt moratorium on any future debt repayment, its bonds – predictably – tumbled.

  

   

  We also noted that the legislation addressed the Government Development Bank, or GDB, which is facing speculation that it’ll lapse into insolvency. The bank’s receivership process, liquidity and reserve requirements and payment obligations would be suspended indefinitely, according to an analyst’s read of the bill, which also seeks to split the entity into a “good bank” and “bad bank.”

  Hedge funds holding debt in the GDB sued on Monday to stop the bank from returning deposits to local government agencies as it faces a growing cash shortage. The funds, which include affiliates of Brigade Capital Management, Claren Road Asset Management and Solus Alternative Asset Management, accused the bank of seeking to “prop up” local agencies at the expense of other creditors. The GDB has a $422 million debt-service payment due May 1.

   

  The Government Development Bank serves the dual purpose of providing financial support to local governments and acting as a financial adviser to the commonwealth. The funds, which say they hold a “substantial amount” of almost $3.75 billion in the bank’s outstanding debt, blamed the entity’s deteriorating condition on a “hopeless conflict” between loyalties to Puerto Rico and to creditors.

  Fast forward to today, when Puerto Rico Governor Alejandro García Padilla signed a measure into law Wednesday that would enable him to declare a moratorium on the commonwealth’s debt payments, mere hours after it cleared the Legislature amid concerns of securing enough support in the lower chamber and a full-court press by creditor lobbyists demanding changes to the bill.

  What was more troubling is that in a move similar to what we have seen in Greece, only this time a voluntary one on behalf of the island and not its vassal owners (as happened with Greece), the newly signed Puerto Rico Emergency Moratorium & Financial Rehabilitation Act also empowers the governor to order the financially battered Government Development Bank (GDB) to restrict the outflow of cash in a bid to stabilize its dwindling liquidity levels, which stood at roughly $560 million as of April 1, according to the bill.

  In other words, capital controls.  

  This, incidentally, confirms what we said yesterday, when we concluded that “the situation is getting messier by the day with a compromise deal now seemingly impossible – absent a US government bailout – and meanwhile Puerto Rico’s money is running out, which will ultimately be the decisive catalyst that leads to the next step in the crisis.“

  That moment may have just arrived.

  As Caribbean Business writes, García Padilla plans to sign an executive order to this effect immediately following the enactment of the moratorium legislation, sources said.

  Several sources told Caribbean Business the urgency to enact the bill stems from concerns that municipalities and other public entities will request the withdrawal of funds each entity holds in the bank, which would further jeopardize the GDB’s operations.

  Acting under the Puerto Rico Constitution’s police powers, the law allows the governor to declare a moratorium on the commonwealth’s entire debt, as well as a stay against any litigation that may result. The measure amends, or “modernizes,” the receivership process of not only the GDB, but also of the Economic Development Bank. If the GDB is placed under the new receivership process, a temporary “bridge” bank could be created to carry out some of the GDB’s functions and honor deposits.

  The law also creates a new entity, called the Puerto Rico Fiscal Agency & Financial Authority, that essentially takes over the GDB’s roles as the island’s fiscal agent and financial adviser. The entity’s board consists of only one member, and in addition to its fiscal agent duties, will take charge of the commonwealth’s debt-restructuring efforts.

  

  

  

  

  

• Rothschild Humiliates Obama, Reveals That "America Is The Biggest Tax Haven In The World"

  In his speech yesterday, following the Treasury’s crack down on corporate tax inversions, Obama blamed “poorly designed” laws for allowing illicit money transfers worldwide. Since the speech came at a time when the entire world is still abuzz with the disclosure from the Panama Papers, Obama touched on that as well: “Tax avoidance is a big, global problem” he said on Tuesday, “a lot of it is legal, but that’s exactly the problem” because a lot of it is also illegal.

  There is one major problem with that: of all the countries in the world, it is none other than the country of which Obama is president, the United States, that has become the world’s favorite offshore “tax haven” destination.

  As Bloomberg, which first broke the story about Nevada’s use as a prominent tax haven early this year, writes, “Panama and the U.S. have at least one thing in common: Neither has agreed to new international standards to make it harder for tax evaders and money launderers to hide their money.”

  Over the past several years, amid increased scrutiny by journalists, regulators and law enforcers, the global tax-haven landscape has shifted. In an effort to catch tax dodgers, almost 100 countries and other jurisdictions have agreed since 2014 to impose new disclosure requirements for bank accounts, trusts and some other investments held by international customers — standards issued by the Organization for Economic Cooperation and Development, a government-funded international policy group.

  In short: while Obama is complaining about corporate tax avoidance and slamming Panama, he is encouraging it in the U.S.

  Places like Switzerland and Bermuda are agreeing, at least in principle, to share bank account information with tax authorities in other countries. Only a handful of nations have declined to sign on. The most prominent is the U.S. The other ona is, of course, Panama, and we just saw what happened there.

   

  The latest reporting “underscores the secrecy in Panama,” said Stefanie Ostfeld, the acting head of the U.S. office of the anti-corruption group Global Witness. “What’s lesser known, is the U.S. is just as big a secrecy jurisdiction as so many of these Caribbean countries and Panama. We should not want to be the playground for the world’s dirty money, which is what we are right now.”

  For Obama, however, it is important to not let facts get in the way of a good speech, or welcoming the dirty, laundered money of the world’s uber wealthy, be they criminals or not, as they transfer their wealth from Panama to Nevada, Wyoming and other tax sheltering destinations in the U.S.

  To be sure, the US has taken steps to keep track of US assets abroad, but not of foreign assets in the US.

  In 2010, Congress passed the Foreign Account Tax Compliance Act, or Fatca, as the U.S. Justice Department began prosecuting Swiss banks for enabling tax evasion. Fatca forces certain financial firms to disclose to the Internal Revenue Service any foreign accounts held by U.S. citizens.

   

  Fatca doesn’t, however, bind banks to provide information on foreigners with U.S. accounts to regulators abroad. The U.S. has entered into agreements with some other countries requiring such exchange with foreign regulators, but tax planners say they are considered relatively easy to avoid.

   

  That’s where the OECD came in, with its own international take on Fatca that the U.S. declined to sign.

  Panama has been one country which has done everything in its power to delay and dilute its compliance with OECD regulations.

  In a January interview, an official at Trident Trust Co., a big provider of offshore vehicles, said it was seeing a large number of accounts moving into Panama because of its weak commitment to the OECD regulations. “The Panama office was extremely overworked, because a lot of people are re-domiciling to Panama from BVI and Cayman,” said Alice Rokahr, a Trident official based in South Dakota. In late February, OECD officials said publicly that Panama had been “removed from the list of committed jurisdictions” that agreed to share information.

   

  The latest coverage of shell companies created by a Panamanian law firm could give the OECD new ammunition to put pressure on the country to sign onto the information-sharing agreements, some tax experts said.

  But while one can criticize Panama, and with cause, for enabling tax evasion, at least its leaders don’t pretend to be saints, who do precisely what they condemn. Far less can be said about Obama.

  “The U.S. doesn’t follow a lot of the international standards, and because of its political power, it’s able to continue,” said Bruce Zagaris an attorney at Berliner Corcoran & Rowe LLP who specializes in international tax and money laundering regulations.  “It’s basically the only country that can continue to do that. Others like Panama have tried, but Panama can’t punch as high as the U.S.“

  And confirming just that, in a statement issued Monday by OECD secretary general Angel Gurria, the OECD said “Panama is the last major holdout that continues to allow funds to be hidden offshore from tax and law-enforcement authorities.”

  The statement didn’t mention the U.S., which is the OECD’s largest funder.

  And there it is: the US, simply because it is the biggest – and wealthiest – bully in the yard, can dispense morality all day long, but just don’t ask it to practice what it preaches.

  Meanwhile, advisers around the world are increasingly using the U.S. resistance to the OECD’s standards as a marketing tool – attracting overseas money to U.S. state-level tax and secrecy havens like Nevada and South Dakota, potentially keeping it hidden from their home governments.

  Advisors such as Rothschild, profiled initially by Bloomberg’s Jesse Drucker.

  Rothschild, the centuries-old European financial institution, has opened a trust company in Reno, Nev., a few blocks from the Harrah’s and Eldorado casinos. It is now moving the fortunes of wealthy foreign clients out of offshore havens such as Bermuda, subject to the new international disclosure requirements, and into Rothschild-run trusts in Nevada, which are exempt.
   
  * * *
   
  For financial advisers, the current state of play is simply a good business opportunity. In a draft of his San Francisco presentation, Rothschild’s Penney wrote that the U.S. “is effectively the biggest tax haven in the world.” The U.S., he added in language later excised from his prepared remarks, lacks “the resources to enforce foreign tax laws and has little appetite to do so.”

  And that is all you need to know.

  

  

  

  

  

• Guest Post: Why Hillary Clinton’s Paid Speeches Are Relevant

  By Eric Zuesse, originally posted at strategic-culture.org

  On the fake-‘progressive’ (actually conservative-Democratic-Party) website that’s run by a longtime CIA asset Markos Moulitsas, “Daily Kos,” there was posted on February 24th an article by “motocat”, headlined, “I have personally been to a closed door corporate Clinton speech. This is what I experienced.” This person, he or she, didn’t indicate what the speech said, other than “how disappointing the whole thing was,” and, that it was a speech by Bill Clinton, not Hillary Clinton, and “It made me feel sort of sad to see how old and feeble he looked. The last time I had seen Bill speak was when he was running for his first term as President. He looked like a different man.”

  Then the author went into speculation about what might be in Hillary Clinton’s speeches:

  “Everyone wondering what Hillary possibly could have said in 30 minutes that was worth 250K is missing the point. These people are celebrities. They are booked to deliver paid speeches, because it benefits those who book them in some way. You might as well ask what Kanye West could possibly say in 45 minutes at Madison Square Garden that would be worth 250K to the promoter.

  I have no doubt that Hillary does not want to release the transcripts of those speeches because those pouring through them for a gotcha news story or to prove a point, will surely find praise for the institutions she was speaking on behalf of. In this political climate, that would be a bad news cycle for her. I also have no doubt that she also showered glowing praise on the countless colleges whose commission speeches she spoke at, as well as praised the accomplishments of whatever non-profit she spoke on behalf of. Does anyone really think her speech to the US Green building council in 2013 was fair and balanced about negative aspects of what the Green building council has done? No. These are performances for a purpose.

  Personally, I am surprised she just doesn’t come out and say the following.

  ‘For many years I worked as a paid speaker. I gave speeches to many different organizations in many different industries, who all paid me very well. It was my job, and part of my job was to be inspiring, encouraging, and flattering to those people in the audience and those who paid me.’

  I’m not sure what people expect to find in these corporate event speeches she gave dozens of throughout the year. Backroom promises? Revelations about how she plans to screw the middle class? Confessions of cardinal sins? No company or speaker would be so stupid as to include that sort of thing in a corporate event speech anyway.

  There are many important issues to be focusing on right now in this race and debate, but this isn’t one of them.”

  There were over a thousand reader-comments to that idiotic article, as of April 1st, and then it said: “Comments are closed on this story.” The readers who had gotten through the article and were sufficiently struck by it to enter a comment to it were generally debating each other, via comments such as “What makes the diarist think that a pubic [that person’s perhaps Freudian misspelling of ‘public’] event selling tickets has any comparison to the intimate and closed door speeches given by the Clintons to the upper echelon of high finance?” versus (responding to that one): “or the private intimate talks by Bernie and with his supporters. How doe [that person’s misspelling of ‘do’, of course] we know Bernie has not promised something.” In other words: a foolish article elicited over a thousand comments from foolish readers, at that Democratic-Party propaganda site. They’re just the Democratic Party equivalent of Rush Limbaugh’s Republican-Party fools – no different, except for the labels they give themselves.

  Hillary Clinton’s paid speeches (which none of those fools knew anything about – not even the article’s writer did) are not relevant because of anything that they said (which was public to all attendees; her meaningful comments might have been made privately to the executive who had hired her for the speech), but because the organizations that paid typically $225,000 to her, for each of them, were paying a servant, for extremely valuable services that that servant is being expected to provide to the owners and top executives of that organization if that servant becomes the U.S. President (or, in the case of her husband Bill) for valuable services that already were provided by that servant when he was a President. They’re pay-offs, for services that are anticipated, or else that have already been provided. They are not (such as the author was assuming) for “the speech.”

  The fools who had read that article weren’t commenting about how atrocious and stupid it was; they were debating with each other, on the basis of their ignorance and stupidity, which enabled that article to hold their interest and then to engage comments from them upon other idiots’ comments about it.

  This is how enough of such self-characterizing ‘liberal’ voters become suckered into voting for a far-right (except on ‘social’ issues) candidate who is as atrocious and unqualified to serve as President as is Hillary Clinton.

  However, if her speeches are relevant as prospective, and/or retrospective, pay-offs to her, then who and what are these groups that have been providing these pay-offs to her: Here’s the complete list, as it was tabulated and posted online in March by the lawyer Paul Campos (then copied without credit to him, by several others). And, as you can see, they are anything but “the countless colleges whose commission speeches she spoke at, as well as praised the accomplishments of whatever non-profit she spoke on behalf of.”

  —

  http://www.lawyersgunsmoneyblog.com/2016/03/you-get-what-you-pay-for

  DATE EVENT LOCATION FEE

  • March 19, 2015 American Camping Association Atlantic City, NJ $260,000.00
  • March 11, 2015 eBay Inc. San Jose, CA $315,000.00
  • February 24, 2015 Watermark Silicon Valley Conference for Women Santa Clara, CA $225,500.00
  • January 22, 2015 Canadian Imperial Bank of Commerce Whistler, Canada $150,000.00
  • January 21, 2015 tinePublic Inc. Winnipeg, Canada $262,000.00
  • January 21, 2015 tinePublic Inc. Saskatoon, Canada $262,500.00
  • December 4, 2014 Massachusetts Conference for Women Boston, MA $205,500.00
  • October 14, 2014 Salesforce.com San Francisco, CA $225,500.00
  • October 14, 2014 Qualcomm Incorporated San Diego, CA $335,000.00
  • October 13, 2014 Council of Insurance Agents and Brokers Colorado Springs, CO $225,500.00
  • October 8, 2014 Advanced Medical Technology Association (AdvaMed) Chicago, IL $265,000.00
  • October 7, 2014 Deutsche Bank AG New York, NY $280,000.00
  • October 6, 2014 Canada 2020 Ottawa, Canada $215,500.00
  • October 2, 2014 Commercial Real Estate Women Network Miami Beach, FL $225,500.00
  • September 15, 2014 Cardiovascular Research Foundation Washington, DC $275,000.00
  • September 4, 2014 Robbins Geller Rudman & Dowd, LLP San Diego, CA $225,500.00
  • August 28, 2014 Nexenta System, Inc. San Francisco, CA $300,000.00
  • August 28, 2014 Cisco Las Vegas, NV $325,000.00
  • July 29, 2014 Corning, Inc. Corning, NY $225,500.00
  • July 26, 2014 Ameriprise Boston, MA $225,500.00
  • July 22, 2014 Knewton, Inc. San Francisco, CA $225,500.00
  • June 26, 2014 GTCR Chicago, IL $280,000.00
  • June 25, 2014 Biotechnology Industry Organization San Diego, CA $335,000.00
  • June 25, 2014 Innovation Arts and Entertainment San Francisco, CA $150,000.00
  • June 20, 2014 Innovation Arts and Entertainment Austin, TX $150,000.00
  • June 18, 2014 tinePublic Inc. Toronto, Canada $150,000.00
  • June 18, 2014 tinePublic Inc. Edmonton, Canada $100,000.00
  • June 10, 2014 United Fresh Produce Association Chicago, IL $225,000.00
  • June 2, 2014 International Deli-Dairy-Bakery Association Denver, CO $225,500.00
  • June 2, 2014 Let’s Talk Entertainment Denver, CO $265,000.00
  • May 6, 2014 National Council for Behavorial Healthcare Washington, DC $225,500.00
  • April 11, 2014 California Medical Association (via Satellite) San Diego, CA $100,000.00
  • April 10, 2014 Institute of Scrap Recycling Industries, Inc. Las Vegas, NV $225,500.00
  • April 10, 2014 Let’s Talk Entertainment San Jose, CA $265,000.00
  • April 8, 2014 Marketo, Inc. San Francisco, CA $225,500.00
  • April 8, 2014 World Affairs Council Portland, OR $250,500.00
  • March 24, 2014 Academic Partnerships Dallas, TX $225,500.00
  • March 18, 2014 Xerox Corporation New York, NY $225,000.00
  • March 18, 2014 Board of Trade of Metropolitan Montreal Montreal, Canada $275,000.00
  • March 13, 2014 Pharmaceutical Care Management Association Orlando, FL $225,500.00
  • March 13, 2014 Drug Chemical and Associated Technologies New York, NY $250,000.00
  • March 6, 2014 tinePublic Inc. Calgary, Canada $225,500.00
  • March 5, 2014 The Vancouver Board of Trade Vancouver, Canada $275,500.00
  • March 4, 2014 Association of Corporate Counsel – Southern California Los Angeles, CA $225,500.00
  • February 27, 2014 A&E Television Networks New York, NY $280,000.00
  • February 26, 2014 Healthcare Information and Management Systems Society Orlando, FL $225,500.00
  • February 17, 2014 Novo Nordisk A/S Mexico City, Mexico $125,000.00
  • February 6, 2014 Salesforce.com Las Vegas, NV $225,500.00
  • January 27, 2014 National Automobile Dealers Association New Orleans, LA $325,500.00
  • January 27, 2014 Premier Health Alliance Miami, FL $225,500.00
  • January 6, 2014 GE Boca Raton, FL $225,500.00
  • November 21, 2013 U.S. Green Building Council Philadelphia, PA $225,000.00
  • November 18, 2013 CME Group Naples, FL $225,000.00
  • November 18, 2013 Press Ganey Orlando, FL $225,000.00
  • November 14, 2013 CB Richard Ellis, Inc. New York, NY $250,000.00
  • November 13, 2013 Mediacorp Canada, Inc. Toronto, Canada $225,000.00
  • November 9, 2013 National Association of Realtors San Francisco, CA $225,000.00
  • November 7, 2013 Golden Tree Asset Management New York, NY $275,000.00
  • November 6, 2013 Beaumont Health System Troy, MI $305,000.00
  • November 4, 2013 Mase Productions, Inc. Orlando, FL $225,000.00
  • November 4, 2013 London Drugs, Ltd. Mississauga, ON $225,000.00
  • October 29, 2013 The Goldman Sachs Group Tuscon, AZ $225,000.00
  • October 28, 2013 Jewish United Fund/Jewish Federation of Metropolitan Chicago $400,000.00
  • October 27, 2013 Beth El Synagogue Minneapolis, MN $225,000.00
  • October 24, 2013 Accenture New York, NY $225,000.00
  • October 24, 2013 The Goldman Sachs Group New York, NY $225,000.00
  • October 23, 2013 SAP Global Marketing, Inc. New York, NY $225,000.00
  • October 15, 2013 National Association of Convenience Stores Atlanta, GA $265,000.00
  • October 4, 2013 Long Island Association Long Island, NY $225,000.00
  • September 19, 2013 American Society of Travel Agents, Inc. Miami, FL $225,000.00
  • September 18, 2013 American Society for Clinical Pathology Chicago, IL $225,000.00
  • August 12, 2013 National Association of Chain Drug Stores Las Vegas, NV $225,000.00
  • August 7, 2013 Global Business Travel Association San Diego, CA $225,000.00
  • July 11, 2013 UBS Wealth Management New York, NY $225,000.00
  • June 24, 2013 American Jewish University University City, CA $225,000.00
  • June 24, 2013 Kohlberg Kravis Roberts and Company, LP Palos Verdes, CA $225,000.00
  • June 20, 2013 Boston Consulting Group, Inc. Boston, MA $225,000.00
  • June 20, 2013 Let’s Talk Entertainment, Inc. Toronto, Canada $250,000.00
  • June 17, 2013 Economic Club of Grand Rapids Grand Rapids, MI $225,000.00
  • June 16, 2013 Society for Human Resource Management Chicago, IL $285,000.00
  • June 6, 2013 Spencer Stuart New York, NY $225,000.00
  • June 4, 2013 The Goldman Sachs Group Palmetto Bluffs, SC $225,000.00
  • May 29, 2013 Sanford C. Bernstein and Co., LLC New York, NY $225,000.00
  • May 21, 2013 Verizon Communications, Inc. Washington, DC $225,000.00
  • May 16, 2013 Itau BBA USA Securities New York, NY $225,000.00
  • May 14, 2013 Apollo Management Holdings, LP New York, NY $225,000.00
  • May 8, 2013 Gap, Inc. San Francisco, CA $225,000.00
  • April 30, 2013 Fidelity Investments Naples, FL $225,000.00
  • April 24, 2013 Deutsche Bank Washington, DC $225,000.00
  • April 24, 2013 National Multi Housing Council Dallas, TX $225,000.00
  • April 18, 2013 Morgan Stanley Washington, DC $225,000.00

  — 

  None of the 91 speeches was to a college, nor to any other such type of organization.

  At zerohedge, the payments for all the speeches were totaled to: $21,667,000.

  Here are some of the other routes through which she is also preparing for her ultimate retirement (and her and Bill’s bequest to daughter Chelsea): arms deals, oil and gas (and here), and donors.

  Anyone who would presume that Hillary Clinton gets paid those types of fees for “her speeches,” because she’s a “celebrity,” needs to go back to elementary school. (But, of course, since the aristocracy are in control of the country, the elementary schools aren't even teaching about such matters – nor are the high schools, which should be.)

  In other words: her paid speeches are just a part of the legal graft she’s in politics for. “You might as well ask what Kanye West could possibly say in 45 minutes at Madison Square Garden that would be worth 250K to the promoter.” No, it’s not like that, at all.

  Hillary Clinton is no Kanye West. She makes her money in a very different way. Serving a far wealthier clientele. What she serves them, is us.

  After all: how else would you get a wealth-distribution that’s like this?

  It requires lots of lies, and lots of suckers for them, to make them believe in “the system.”

  To produce the meat, shepherds are needed; and people such as Hillary Clinton are specialized in doing that type of job.

  Hello, meat; this is the farm.

   

  

  

  

  

  

• Panama Tax Haven Scandal: The Bigger Picture

  A Huge Leak

  The “Panama Papers” tax haven leak is big …

  After all, the Prime Minister of Iceland resigned over the leak, and investigations are taking place worldwide over the leak.

  But Why Is It Mainly Focusing On Enemies of the West?

  But the Panama Papers reporting mainly focuses on friends of Russia’s Putin, Assad’s Syria and others disfavored by the West.

  Former British Ambassador Craig Murray notes:

  Whoever leaked the Mossack Fonseca papers appears motivated by a genuine desire to expose the system that enables the ultra wealthy to hide their massive stashes, often corruptly obtained and all involved in tax avoidance. These Panamanian lawyers hide the wealth of a significant proportion of the 1%, and the massive leak of their documents ought to be a wonderful thing.

   

  Unfortunately the leaker has made the dreadful mistake of turning to the western corporate media to publicise the results. In consequence the first major story, published today by the Guardian, is all about Vladimir Putin and a cellist on the fiddle. As it happens I believe the story and have no doubt Putin is bent. 

   

  But why focus on Russia? Russian wealth is only a tiny minority of the money hidden away with the aid of Mossack Fonseca. In fact, it soon becomes obvious that the selective reporting is going to stink. 

   

  The Suddeutsche Zeitung, which received the leak, gives a detailed explanation of the methodology the corporate media used to search the files. The main search they have done is for names associated with breaking UN sanctions regimes. The Guardian reports this too and helpfully lists those countries as Zimbabwe, North Korea, Russia and Syria. The filtering of this Mossack Fonseca information by the corporate media follows a direct western governmental agenda. There is no mention at all of use of Mossack Fonseca by massive western corporations or western billionaires – the main customers. And the Guardian is quick to reassure that “much of the leaked material will remain private.”

   

  What do you expect? The leak is being managed by the grandly but laughably named “International Consortium of Investigative Journalists”, which is funded and organised entirely by the USA’s Center for Public Integrity. Their funders include

   

  Ford Foundation
  Carnegie Endowment
  Rockefeller Family Fund
  W K Kellogg Foundation
  Open Society Foundation (Soros)

   

  among many others. Do not expect a genuine expose of western capitalism. The dirty secrets of western corporations will remain unpublished.

   

  Expect hits at Russia, Iran and Syria and some tiny “balancing” western country like Iceland. A superannuated UK peer or two will be sacrificed – someone already with dementia.

   

  The corporate media – the Guardian and BBC in the UK – have exclusive access to the database which you and I cannot see.

  They are protecting themselves from even seeing western corporations’ sensitive information by only looking at those documents which are brought up by specific searches such as UN sanctions busters. Never forget the Guardian smashed its copies of the Snowden files on the instruction of MI6. 

   

  What if they did Mossack Fonseca database searches on the owners of all the corporate media and their companies, and all the editors and senior corporate media journalists? What if they did Mossack Fonseca searches on all the most senior people at the BBC? What if they did Mossack Fonseca searches on every donor to the Center for Public Integrity and their companies?

   

  What if they did Mossack Fonseca searches on every listed company in the western stock exchanges, and on every western millionaire they could trace?

   

  That would be much more interesting. I know Russia and China are corrupt, you don’t have to tell me that. What if you look at things that we might, here in the west, be able to rise up and do something about?

   

  And what if you corporate lapdogs let the people see the actual data? 

  Indeed, Wikileaks comments:

  Washington DC based Ford, Soros funded soft-power tax-dodge “ICIJ” has a WikiLeaks problem #PanamaPapers https://twitter.com/ChMadar/status/717395684207550467 …

  And:

  Putin attack was produced by OCCRP which targets Russia & former USSR and was funded by USAID & Soros.

  U.S. Companies Use Foreign Tax Evasion

  American companies are big users of foreign tax havens.  For example, we pointed out in 2014:

  American multinationals pay much less in taxes than they should because they use a widespread variety of tax-avoidance scams and schemes, including …  Pretending they are headquartered in tax havens like Bermuda, the Cayman Islands or Panama, so that they can enjoy all of the benefits of actually being based in America (including the use of American law and the court system, listing on the Dow, etc.), with the tax benefits associated with having a principal address in a sunny tax haven.

   

  ***

   

  U.S. Public Interest Research Group notes:

  Tax haven abusers benefit from America’s markets, public infrastructure, educated workforce, security and rule of law – all supported in one way or another by tax dollars – but they avoid paying for these benefits. Instead, ordinary taxpayers end up picking up the tab, either in the form of higher taxes, cuts to public spending priorities, or increases to the federal debt.

  

  USPIRG continues:

  The United States loses approximately $184 billion in federal and state revenue each year due to corporations and individuals using tax havens to dodge taxes. On average, every filer who fills out a 1040 individual income tax form would need to pay an additional $1,259 in taxes to make up for the revenue lost.

  • Pfizer, the world’s largest drug maker, paid no U.S. income taxes between 2010 and 2012 despite earning $43 billion worldwide. In fact, the corporation received more than $2 billion in federal tax refunds. In 2013, Pfizer operated 128 subsidiaries in tax haven countries and had $69 billion offshore and out of the reach of the Internal Revenue Service (IRS).
  • Microsoft maintains five tax haven subsidiaries and stashed $76.4 billion overseas in 2013. If Microsoft had not booked these profits offshore, they would have owed an additional $24.4 billion in taxes.
  • Citigroup, bailed out by taxpayers in the wake of the financial crisis of 2008, maintained 21 subsidiaries in tax haven countries in 2013, and kept $43.8 billion in offshore jurisdictions. If that money had not been booked offshore, Citigroup would have owed an additional $11.7 billion in taxes.

  Al Jazeera reports:

  Rich individuals and their families have as much as $32 trillion of hidden financial assets in offshore tax havens, representing up to $280bn in lost income tax revenues, according to research published on Sunday.

   

  ***

  “We’re talking about very big, well-known brands – HSBC, Citigroup, Bank of America, UBS, Credit Suisse – some of the world’s biggest banks are involved… and they do it knowing fully well that their clients, more often than not, are evading and avoiding taxes.”

   

  Much of this activity, Christensen added, was illegal.

  So the Panama Papers stories haven’t focused on it, but U.S. corporations are hiding huge sums of money in foreign tax havens.

  Obama and Clinton Enabled Panamanian Tax Evasion Havens

  Of course, Obama and Hillary Clinton enabled and supported Panama’s ability to act as a tax evasion haven.

  So it’s a little disingenuous for them now to say we should “crack down” on tax havens.

  US and UK – Not Panama – Biggest Tax Havens for Money Laundering Criminals and Tax Cheats

  But the bigger story is that America is the world’s largest tax haven … with the UK in a close second-place position.

  The Guardian noted last year:

  The US has overtaken Singapore, Luxembourg and the Cayman Islands as an attractive haven for super-rich individuals and businesses looking to shelter assets behind a veil of secrecy, according to a study by the Tax Justice Network (TJN).

  Bloomberg  headlined in January, The World’s Favorite New Tax Haven Is the United States:

  After years of lambasting other countries for helping rich Americans hide their money offshore, the U.S. is emerging as a leading tax and secrecy haven for rich foreigners. By resisting new global disclosure standards, the U.S. is creating a hot new market, becoming the go-to place to stash foreign wealth. Everyone from London lawyers to Swiss trust companies is getting in on the act, helping the world’s rich move accounts from places like the Bahamas and the British Virgin Islands to Nevada, Wyoming, and South Dakota.

   

  “How ironic—no, how perverse—that the USA, which has been so sanctimonious in its condemnation of Swiss banks, has become the banking secrecy jurisdiction du jour,” wrote Peter A. Cotorceanu, a lawyer at Anaford AG, a Zurich law firm, in a recent legal journal. “That ‘giant sucking sound’ you hear? It is the sound of money rushing to the USA.”

   

  Rothschild, the centuries-old European financial institution, has opened a trust company in Reno, Nev., a few blocks from the Harrah’s and Eldorado casinos. It is now moving the fortunes of wealthy foreign clients out of offshore havens such as Bermuda, subject to the new international disclosure requirements, and into Rothschild-run trusts in Nevada, which are exempt.

   

  The U.S. “is effectively the biggest tax haven in the world” —Andrew Penney, Rothschild & Co.

   

  ***

   

  Others are also jumping in: Geneva-based Cisa Trust Co. SA, which advises wealthy Latin Americans, is applying to open in Pierre, S.D., to “serve the needs of our foreign clients,” said John J. Ryan Jr., Cisa’s president.

   

  Trident Trust Co., one of the world’s biggest providers of offshore trusts, moved dozens of accounts out of Switzerland, Grand Cayman, and other locales and into Sioux Falls, S.D., in December, ahead of a Jan. 1 disclosure deadline.

   

  “Cayman was slammed in December, closing things that people were withdrawing,” said Alice Rokahr, the president of Trident in South Dakota, one of several states promoting low taxes and confidentiality in their trust laws. “I was surprised at how many were coming across that were formerly Swiss bank accounts, but they want out of Switzerland.”

   

  ***

   

  One wealthy Turkish family is using Rothschild’s trust company to move assets from the Bahamas into the U.S., he said. Another Rothschild client, a family from Asia, is moving assets from Bermuda into Nevada. He said customers are often international families with offspring in the U.S.

  Forbes points out that the U.S. is not practicing what it is preaching:

  A report by the Tax Justice Network says that the U.S. doesn’t even practice what it preaches. Indeed, the report ranks America as one of the worst. How bad? Worse than the Cayman Islands. The report claims that America has refused to participate in the OECD’s global automatic information exchange for bank data. The OECD has been designing and implementing the system to target tax evasion. Given the IRS fixation on that topic, you might think that the U.S. would join in.

   

  However, it turns out that the United States jealously guards its information. The Tax Justice Network says the IRS is stingy with data. Of course, with FATCA, America has more data than anyone else. FATCA, the Foreign Account Tax Compliance Act is up and running. The IRS says it is now swapping taxpayer data reciprocally with other countries. The IRS says it will only engage in reciprocal exchanges with foreign jurisdictions meeting the IRS’s stringent safeguard, privacy, and technical standards.

  The Tax Justice Network report blasts the U.S. for being a one-way street:

  The United States, which has for decades hosted vast stocks of financial and other wealth under conditions of considerable secrecy, has moved up from sixth to third place in our index. It is more of a cause for concern than any other individual country – because of both the size of its offshore sector, and also its rather recalcitrant attitude to international co-operation and reform. Though the U.S. has been a pioneer in defending itself from foreign secrecy jurisdictions, aggressively taking on the Swiss banking establishment and setting up its technically quite strong Foreign Account Tax Compliance Act (FATCA) – it provides little information in return to other countries, making it a formidable, harmful and irresponsible secrecy jurisdiction at both the Federal and state levels. (Click here for a short explainer; See our special report on the USA for more).”

  The Washington Post writes:

  One of the least recognized facts about the global offshore industry is that much of it, in fact, is not offshore. Indeed, some critics of the offshore industry say the U.S. is now becoming one of the world’s largest “offshore” financial destinations.

   

  ***

   

  A 2012 study in which researchers sent more than 7,400 email solicitations to more than 3,700 corporate service providers — the kind of companies that typically register shell companies, such as the Corporation Trust Company at 1209 North Orange St. — found that the U.S. had the laxest regulations for setting up a shell company anywhere in the world outside of Kenya. The researchers impersonated both low- and high-risk customers, including potential money launderers, terrorist financiers and corrupt officials.

   

  Contrary to popular belief, notorious tax havens such as the Cayman Islands, Jersey and the Bahamas were far less permissive in offering the researchers shell companies than states such as Nevada, Delaware, Montana, South Dakota, Wyoming and New York, the researchers found.

   

  ***

   

  “In some places [in the U.S.], it’s easier to incorporate a company than it is to get a library card,” Joseph Spanjers of Global Financial Integrity, a research and advocacy organization that wants to curtail illicit financial flows, said in an interview earlier this year.

   

  ***

   

  Too often, however, shell companies are used as a vehicle for criminal activity — disguising wealth from tax authorities, financing terrorism, concealing fraudulent schemes, or laundering funds from corruption or the trafficking in drugs, people and arms.

   

  ***

   

  The Organization for Economic Co-operation and Development, a group of 34 advanced countries, drew up its own tough tax disclosure requirements, called Common Reporting Standards, and asked roughly 100 countries and jurisdictions around the world to approve them. Only a handful of countries have refused, including Bahrain, Vanuatu and the United States.

  Bloomberg reports:

  Advisers around the world are increasingly using the U.S. resistance to the OECD’s standards as a marketing tool — attracting overseas money to U.S. state-level tax and secrecy havens like Nevada and South Dakota, potentially keeping it hidden from their home governments.

  Salon notes:

  Several states – Delaware, Nevada, South Dakota, Wyoming – specialize in incorporating anonymous shell corporations. Delaware earns between one-quarter and one-third of their budget from incorporation fees, according to Clark Gascoigne of the FACT Coalition. The appeal of this revenue has emboldened small states, and now Wyoming bank accounts are the new Swiss bank accounts. America has become a lure, not only for foreign elites looking to seal money away from their own governments, but to launder their money through the purchase of U.S. real estate.

  And the UK is a giant swamp of tax evasion and laundering as well …

  The Independent reported last year:

  The City of London is the money-laundering centre of the world’s drug trade, according to an internationally acclaimed crime expert.

   

  ***

   

  His warning follows a National Crime Agency (NCA) threat assessment which stated: “We assess that hundreds of billions of US dollars of criminal money almost certainly continue to be laundered through UK banks, including their subsidiaries, each year.”

   

  Last month, the NCA warned that despite the UK’s role in developing international standards to tackle money laundering, the continued extent of it amounts to a “strategic threat to the UK’s economy and reputation”. It added that the same money-laundering networks used by organised crime were being used by terrorists as well.

   

  ***

   

  Interviewed by The Independent on Sunday, Mr Saviano said of the international drugs trade that “Mexico is its heart and London is its head”. He said the cheapness and the ease of laundering dirty money through UK-based banks gave London a key role in drugs trade. “Antonio Maria Costa of the UN Office on Drugs and Crime found that drug trafficking organisations were blatantly recycling dirty money through European and American banks, but no one takes any notice,” he said. “He found that banks were welcoming dirty money because they need cash, liquidity during the financial crisis. The figures are too big to be rejected …. Yet there was no reaction.”

  (Background.)

  In a separate article, the Independent wrote:

  Billions of pounds of corruptly gained money has been laundered by criminals and foreign officials buying upmarket London properties through anonymous offshore front companies – making the city arguably the world capital of money laundering.

   

  The flow of corrupt cash has driven up average prices with a “widespread ripple effect down the property price chain and beyond London”, according to property experts cited in the most comprehensive study ever carried out into the long-suspected money laundering route through central London real estate, by the respected anti-corruption organisation Transparency International.

   

  ***

   

  Any anonymous company in a secret location, such as the British Virgin Islands, can buy and sell houses in the UK with no disclosure of who the actual purchaser is. Meanwhile, TI said, estate agents only have to carry out anti-money-laundering checks on the person selling the property, leaving the buyers bringing their money into the country facing little, if any scrutiny.

   

  ***

   

  Detective Chief Inspector Jon Benton, director of operations at the Proceeds of Corruption Unit, said: “Properties that are purchased with illicit money, which is often stolen from some of the poorest people in the world, are nearly always layered through offshore structures.

   

  ***

   

  Companies set up in the Crown Dependencies and British Overseas Territories such as Jersey, British Virgin Islands and Gibraltar are the preferred option for concealment of corrupt property purchases.

   

  More than a third of company-owned London houses are held by effectively anonymous firms ….

  TruePublica notes:

  The consequence of its operations is that money laundering is now at such levels and so widespread that the authorities have recently admitted defeat in its battle of attrition by stating openly it has been completely overwhelmed and lost control. Keith Bristow Director-General of the UK’s National Crime Agency said just six months ago that the sheer scale of crime and its subsequent money laundering operations was “a strategic threat” to the country’s economy and reputation and that “high-end money laundering is a major risk”.

  Indeed:

  TJN  [the Tax Justice Network] says the UK would be ranked as the worst offender in the world if considered along with the three Crown Dependencies (Jersey, Guernsey and the Isle of Man) and the 14 Overseas Territories (including notorious tax havens such as Bermuda, the Cayman and Virgin islands).

   

  In their 2015 Index, TJN state: “Overall, the City of London and these offshore satellites constitute by far the most important part of the global offshore world of secrecy jurisdictions.”

  For background on the Isle of Jersey, see this Newsweek article.

  Agence France-Press points out:

  "London is the epicentre of so much of the sleaze that happens in the world," Nicholas Shaxson, author of the book "Treasure Islands", which examines the role of offshore banks and tax havens, told AFP.

   

  ***

   

  "Tax evasion and stuff like that will be done in the external parts of the network. Usually there will be links to the City of London, UK law firms, UK accountancy firms and to UK banks," he said, calling London the centre of a "spider's web".

   

  "They're all agents of the City of London — that is where the whole exercise is controlled from," Richard Murphy, professor at London's City University, said of the offshore havens.

   

  ***

   

  "When the British empire collapsed, London swapped being the governor of the imperial engine to being an offshore island and allowing money to come with no questions asked," he added.

   

  With public pressure mounting, Murphy said Britain had the power to legislate directly on its overseas territories, but the lobbying power of the financial sector and worries about upsetting the jewel in Britain's economic crown were holding back efforts.

   

  "The City of London seems to believe that without these conduits, then it would not have the competitive edge that it needs," he said.

   

  "The financial institutions have become like wild animals," added Shaxson.

  

  

  

  

• Stocks Soar On Oil Ignition, Biotech Bonanza

  In what was shaping up to be a low-volume snoozer of a day, things changed dramatically at 10:30am when the DOE confirmed last night’s API data according to which US crude inventories had their biggest weekly decline since January even as distillates and gasoline stocks rose. That headline sent WTI soaring by 5.4%, the most since March 16.

  

   

  The crude spike was all the “momentum ignition” that futures needed to stage a dramatic surge, soaring from 2035, jumping as much as 20 points higher to 2055 before the slightly more hawkish than expected FOMC Minutes reported pushed ES lower by 10 point. And then, out of nowhere, a massive buying program emerged out of nowhere, and sent the E-mini tofresh highs.

  

   

  It wasn’t just oil: an even more notable notable move took place in the biotech sector, which surged by over 5%, its biggest intraday gain since November 2011, and accounted for nearly half of the S&P500’s gain. The reason was the collapse of the Valeant-Allergan deal. No really: while talking on CNBC, Brent Saunders said that now that the deal has been pulled, Allergan could weigh deals. That is all the slgos needed to hear and unleashed a massive frontrunning spree, buying up every N/M PE company they could find.

  

   

  To be sure, as equity algos were scrambling into risk, the VIX was getting crushed, and while it was a last second VIX slam that prevented the S&P from closing red for the year yesterday, today’s the selling started early, and from 16 the VIX was back at just around 14 at last check.

  

   

  Not everyone was rushing into a Risk On mode, however: while the 10Y sold off modestly, it was at 1.75%, back to Monday’s levels.

  

   

  But that didn’t stop the S&P500 from closing at the day highs, some 1.1% higher, while the Nasdaq raked in 1.6%, just 80 points away from the “psychological 5000 level” and the highest of 2016, on hope the biotech bubble may be rekindled.

  All this took place as the dollar tumbled from overnight highs, sending the JPY and the EUR surging, and resulting in even more headaches for Kuroda and Draghi, with the latter now once again forced to think how to create another Bund “hit” like last May as the yield on the 10Y Bund is almost at all time lows.

  The USDJPY plunged below the critical support of 110, sliding as low as 119.30, and at last check was trading around 109.70, virtually assuring that the BOJ will have to do something in the coming weeks to push the Japense currency weaker once again.

  

   

  The bulk of the sector moves were summarized by Credit Suisse as follows:

  • Biotech outperforms as investors try and find what companies PFE targets next…and what AGN does next with the $30bn they get from TEVA –likely keeps M&A interest in biotechs, especially smid caps alive
     
  • Asset Managers outperform – DOL Fiduciary Standards less burdensome (Longer phase in time through April 2018…Grandfathering for existing plans …Disclosure requirements were relaxed) – WETF, LPLA, RFJ, SF etc
  • Ferts holding in despite weak MON #s; some debate about whether they would have to update guidance again today (on FX and/or glyphosate) so maybe relief no further guide down but I don’t think many expected a change
  • Energy ripping — Crude at day’s high and Oil E&P, Oil Servs and most subgroups all rallying.  We highlighted Dislocation between HY cash and energy prices this morning – most thought it read bearish for HY (as opposed to bullish for energy) but maybe not
  • Lighting plays hit on CREE (-19% on warning) …ETN read thru
  • Paper names down on BAML call –initiates KS at UP and downgrades UFS to UP
  • Banks underperform;  Several street downgrades (brokers #s continue to get cut)
  • German bunds near record lows on a flight to safety
  • Industrial short cycle names hit on MSM read thru; March Sales being worse than February is driving conversations with clients about “short cycle trends weakening sequentially” as a potential sign that the rally we have seen in short cycle stocks can’t be sustained
  • Casinos weak on WYNN #s – Macau just below expectation

  Finally, some observations from CS on what to look forward to as we are about to enter the prime of earnings season: here’s what stands out

  One of our favorite ways to gauge sentiment around earnings at the sector and industry group level is by tracking the pace of upward EPS estimate revisions.  At the sector level, revisions weakness has been broad based, with no sectors seeing more than 50% of revisions to the upside in the past 13 weeks. However, two of the weakest sectors – Materials and Industrials – have started to rebound off of post financial crisis lows. Consumer Discretionary revisions trends have also seen an uptick in recent weeks.  Revisions in many defensive oriented sectors – Staples, Telecom and Utilities – had been in decline but have recently begun to show signs of improvement. Banks, Diversified Financials and Real Estate have seen revisions trends fall to levels near or below past lows (post ’09), but the latest data shows signs of an uptick so we are watching for a bottom. Banks in particular recently saw revisions hit extreme lows.  Pharma/Biotech revisions have fallen to post ’09 lows, with no signs of a bottom emerging as of yet.

  So it’s all really bad news (but thankfully there are buybacks, and non-GAAP adjustments, and multiple expansion, and of course, the Fed) but because the terrible is becoming a little less terrible for a few companies, just BTFD.

  And now we sit back and watch what crazy things Peter Panic may do tonight to offset the collapse in the USDJPY to levels not seen in one and a half years, which have made a total mockery out of Japan’s QQE and NIRP.

  

  

  

  

• U.S. Oil Production Continues to Drop in Latest EIA Report (Video)

  By EconMatters

  

   

   

  We had nearly a 5 Million drawdown in Oil Inventories during what is technically still the building season for Oil Stocks.  

   

  Read: Oil Saw Biggest Inventory Draw Since January (Zero Hedge)

  
  

  
  

   

   

  © EconMatters All Rights Reserved | Facebook | Twitter | YouTube | Email Digest | Kindle  

  

  

  

  

• How Much Of S&P Earnings Growth Comes From Buybacks

  Having pounded the table on buybacks as the only marginal source of stock purchasing since some time in 2013, we were delighted one month ago when Bloomberg finally got it, writing an article titled “There’s Only One Buyer Keeping S&P 500’s Bull Market Alive.” The answer: corporate stock repurchases of course.

  This is what it found:

  Demand for U.S. shares among companies and individuals is diverging at a rate that may be without precedent, another sign of how crucial buybacks are in propping up the bull market as it enters its eighth year. Standard & Poor’s 500 Index constituents are poised to repurchase as much as $165 billion of stock this quarter, approaching a record reached in 2007. The buying contrasts with rampant selling by clients of mutual and exchange-traded funds, who after pulling $40 billion since January are on pace for one of the biggest quarterly withdrawals ever.

   

  “Anytime when you’re relying solely on one thing to happen to keep the market going is a dangerous situation,” said Andrew Hopkins, director of equity research at Wilmington Trust Co., which oversees about $70 billion. “Over time, you come to the realization, ‘Look, these companies can’t grow. Borrowing money to buy back stocks is going to come to an end.”’

  But, when you have the ECB backstopping purchases of corporate bonds, giving companies a green light to issue debt at will and use the proceeds to buyback even more stock, it won’t end just yet.

  However, now that it is common knowledge that over the past several years the market has been conducting the most elaborate acrobatic example of pulling itself up by its bootstraps, by conducting a slow motion LBO in which just over 1% of the S&P has been purchased with incremental leverage, another question which bears answer is how much of S&P EPS growth comes from buybacks?

  This is important because with Q1 earnings season starting and expected to post the worst, -8.5% drop in EPS since the financial crisis, and one in which collapsing energy and financial will be routinely ignored, we asked what would happen to “earnings” if one also excluded the benefit from buybacks.

  Here is the answer courtesy of Deutsche Bank:

  About 25% of S&P 500 EPS growth comes from buybacks on average since 2012. The S&P 500 companies on aggregate pay out 2/3 of their earnings through dividends & buybacks.

   

  

   

  Buybacks are an important part of the earnings payout and a significant driver of total shareholder return and EPS growth in a slow sales world. However, the complexities in correctly measuring buyback payout ratios, buyback yields and buyback flows cause investor confusion. Just as option expense shouldn’t be excluded from EPS or from any FCF measures used for valuation, it should not be neglected in net buyback activity measures. Buyback yield estimates should reflect the continuous issuance of stock to employees at option exercise prices that are well below the market price at which shares are repurchased. This is why we estimate buyback yield as: (net dollars spent on buybacks less option expense) / market cap. This is because although companies report net dollars spent on buybacks, they spend more per share repurchased than what they receive per share issued.

  In other words, since the financial world now openly excludes everything it does not agree with, if one were to exclude the contribution of buybacks to Q1 earnings, the S&P would be down not 8.5% but double digits. And, more troubling, if excluding energy and buybacks, then Q1 EPS would be not only negative (7 of 10 sectors are projected to decline in Q1, so energy and 6 others), but even more negative. We expect this to be addressed by the mainstream media some time in 2018.

  

  

  

  

  

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• All Quiet On The Eurasian Front

  Submitted by Pepe Escobar via SputnikNews.com,

  So now Iran is back to being demonized by the West as “provocative” and “destabilizing”. How come? Wasn’t the nuclear deal supposed to have brought Iran back to the Western-concocted “concert of nations”?

  Iran will once again be discussed at the UN Security Council. The reason: recent ballistic missile tests, which according to the West, are “capable of delivering nuclear weapons” – an alleged violation of the 2015 UN Security Council Resolution 2231.

  

  This is bogus. Tehran did test-launch ballistic missiles in early March. Supreme Leader Ayatollah Khamenei stressed missiles were key to Iran's future defense. Ballistic missiles have nothing to do with Iran’s nuclear program; and yet Washington kept bringing it to the table during the manufactured nuclear crisis.  

  Russia knows it, of course. The head of the Russian Foreign Ministry’s Department for Non-Proliferation and Arms Control, Mikhail Ulyanov, once again had to go on the record saying the ballistic missile tests did not breach the UNSC resolution.

  What else is new? Nothing. Washington will keep pressure on Tehran for a fundamental reason; the US did not get the natural gas commitments they were expecting after the nuclear deal. Iran privileges selling natural gas to Asian – and European – customers. Eurasian integration is the key.

  South US Sea, anyone?

  Pressure also runs unabated over China related to the South China Sea. Beijing is not exactly worried. As much as Washington and Tokyo ratchet it up, Beijing increases its footprint in the Paracels and the Spratlys. The meat of the matter though is further south.

  For China, the key is non-stop smooth trade and energy flows through a maritime highway that happens to contain crucial choke points. These choke points – most of all the Malacca Strait – are supervised by Indonesia, Malaysia and Singapore.

  

  There’s absolutely no incentive for Indonesia to confront China. And Beijing for its part characterizes Jakarta as a peacemaking power. What matters for Jakarta is actually to boost maritime trade ties with Beijing. Same for Kuala Lumpur – even if Malaysia and China do have their not exactly apocalyptic South China Sea quarrels.

  The (rhetorical) pattern from Washington spells out the usual, well, torrent of words. But what is the Empire of Chaos to do? A naval takeover of the South China Sea?  Order Indonesia and Malaysia not to further improve their own – mutually beneficial — economic ties with Beijing?  

  Let’s keep rotating

  Then there’s NATO. Many a key player across the Beltway is absolutely fed up with turbulent “NATO ally” Sultan Erdogan. Yet the impression is being created – by the Masters of the Universe lording over the lame duck Obama administration – that they are turning to Turkey to reinforce an already anti-Russian NATO, with the whole process covered up in “terrorist” rhetoric. The fact that Ankara is for all practical purposes blackmailing the EU is dismissed as irrelevant. This is a classic misdirection policy.

  Yet it’s still unclear how “NATO ally” Turkey will keep acting in Syria, considering that Washington and Moscow may – and the operative word is “may” — have struck a grand bargain.

  

   

  This does not mean that the pressure over Russia will be relaxed any time soon. The Pentagon announced it will be spending $3.4 billion on deploying hardware and hundreds of “rotating” US troops to Eastern Europe to counter – what else – “Russian aggression”. This after the Pentagon announced it will quadruple the funds for the so-called European Reassurance Initiative in fiscal year 2017, pending Congress approval, which is all but inevitable.

  Moscow is not exactly worried. The US brigade will have about 4,500 troops. Then there will be a few Bradley fighting vehicles, Humvees,
  Paladin self-propelled howitzers and perhaps, by 2017, a Stryker brigade. No air force. Perhaps the odd Warthog. This is basically window dressing to appease hysterical Baltic vassals.  

  Now let’s sing Under Pressure

  Pressure over Iran. Pressure over China. Pressure over Russia – which included the (failed) plot to destroy the Russian economy using the oil production of the GCC petrodollar gang even if that would mean the destruction of the US oil industry, against US national interests.

  Syria has graphically demonstrated Russian military capabilities to the real rulers of the Empire of Chaos – and that has left them dazed and confused. Up to the Syrian campaign, the whole focus was on China, especially Chinese missiles that could hit US guidance satellites for ICBMs and cruise missiles, as well as Chinese ability to shoot down an incoming foe traveling at a speed faster than an ICBM. A silent Chinese submarine surfacing undetected next to American aircraft carriers compounded the shock.

  Now the Masters have realized the Pentagon is even more incapacitated compared to Russia. So Russia, and not China, is now the top “existential threat”. 

  

   

  Certainly if Poland, Hungary, Bulgaria, Turkey, not to mention France and the UK had any idea how far behind the Russians the US really is, then NATO might collapse for good, and the entire “West” would eventually shift away from Empire of Chaos hegemony. And if that was not dramatic enough, reality TV entertainer Donald Trump is emitting signs that the US should disassociate itself from NATO – imagine it dissolving under Trump rule, in parallel to the implosion/disintegration of the EU.

  It may be enlightening to go back to what happened nine years ago, at the Munich security conference. Vladimir Putin already could see it coming, if not in detail at least conceptually. The inevitable geo-economic expansion of China via the One Belt, One Road (OBOR), the official denomination of the New Silk Roads – which are bound to unify Eurasia. The steady progress of the Shanghai Cooperation Organization (SCO), evolving from a sort of Asian economic/trade community towards a sort of Asian NATO as well. The success of the “4+1” coalition in Syria should be read as a precursor to the SCO’s increased international role.

  What’s left for the Empire of Chaos in the Eurasian front is the wishful thinking of attempting to encircle both Russia and China, while both keep actually expanding all across the Eurasian Heartland, shedding US dollars and buying gold, signing a flurry of contracts in yuan and selling oil and gas to all and sundry. Under Pressure? Well, call it a song by Queen and David Bowie; It's the terror of knowing/What this world is about/Watching some good friends/Screaming, "Let me out!"

   

  

  

  

  

  

• Shots Fired: Wikileaks Accuses Panama Papers' Leaker Of Being "Soros-Funded, Soft-Power Tax Dodge"

  Earlier today, for the first time we got a glimpse into some of the American names allegedly contained in the “Panama Papers”, largest ever leak. “Some”, not all, and “allegedly” because as we said yesterday, “one can’t help but wonder: why not do a Wikileaks type data dump, one which reveals if not all the 2.6 terabytes of data due to security concerns, then at least the identities of these 441 US-based clients. After all, with the rest of the world has already been extensively shamed, it’s only fair to open US books as well.”

  The exact same question appeared in an interview conducted between Wired magazine and the director of the organization that released the Panama Papers, the International Consortium of Investigative Journalists, or ICIJ, Gerard Ryle.

  This is what Ryle said:

  Ryle says that the media organizations have no plans to release the full dataset, WikiLeaks-style, which he argues would expose the sensitive information of innocent private individuals along with the public figures on which the group’s reporting has focused. “We’re not WikiLeaks. We’re trying to show that journalism can be done responsibly,” Ryle says. He says he advised the reporters from all the participating media outlets to “go crazy, but tell us what’s in the public interest for your country.”

  Question aside about who it is that gets to decide which “innocent private individuals” are to be left alone, Wikileaks clearly did not like being characterized as conducting “irresponsible” journalism – and to the contrary, many in the public arena have called for another massive, distributed effort to get to the bottom of a 2.4TB treasure trove of data which a handful of journalists will simply be unable to dig through – and moments ago, on Twitter, accused the ICIJ of being a “Washington DC based Ford, Soros funded soft-power tax-dodge” which “has a WikiLeaks problem.”

  Washington DC based Ford, Soros funded soft-power tax-dodge “ICIJ” has a WikiLeaks problem #PanamaPapers https://t.co/xEXlmGg0fG

  — WikiLeaks (@wikileaks) April 5, 2016

   

  Moments later, in a subsequent tweet it added that the “Putin attack was produced by OCCRP which targets Russia & former USSR and was funded by USAID & Soros.“

  #PanamaPapers Putin attack was produced by OCCRP which targets Russia & former USSR and was funded by USAID & Soros. pic.twitter.com/tgeKfLuROn

  — WikiLeaks (@wikileaks) April 5, 2016

  #PanamaPapers: WikiLeaks’ Kristinn Hrafnsson calls for data leak to be released in full https://t.co/5FAOtaO2Ix

  — WikiLeaks (@wikileaks) April 5, 2016

  Should we release all 11 million #PanamaPapers so everyone can search through them like our other publications?

  — WikiLeaks (@wikileaks) April 3, 2016

  And so, a new contest is born: one between the “old” source of mega leaks, and the new one. We wonder if and when Edward Snowden and/or Glenn Greenwald will also chime in.

  But we are far more interested if now, that there appears to be a war brewing between Wikileaks and ICIJ, who what “information” will be released next, and whether whatever comes out will put the entire Panama Papers project in a different perspective, one which, as even Bloomberg has hinted, may have been to benefit the last remaining global tax haven around, the United States itself, as well as the most notorious provider of “tax haven” services in in said country: Rothschild.

  

  

  

  

• The 50 Most Murderous Cities In The World

  Brazil has been in crisis for some time now.

  The country’s economy shrunk -3.8% last year, and its President, Dilma Rousseff, is holding on for dear life. Once chairman of Petrobras, the state-run oil giant currently engulfed in a colossal political scandal, she is now being threatened with impeachment just 15 months into her second four-year yerm.

  Her approval remains at an all-time low of just 11%. The currency has halved in value since 2011, and the country’s credit has been downgraded to junk status.

  However, as VisualCapitalist's Jeff Desjardins explains, it’s not only the economic and political spheres that are troubling in Brazil. The country also has the dubious distinction of being the world center for homicides. Today’s chart, from The Economist, shows the 50 most murderous cities in the world – and Brazil is home to a mind-boggling 32 of them.

  The good news is that key cities, such as Rio de Janeiro, are on the lower side of the spectrum. That said, the host of the 2016 Olympic Games is barely safer than Compton, with a murder rate of 18.6 per 100,000 people each year.

  The bad news is that Brazil now has more than 10% of all the world’s murders. While the murder rate has fallen in the largest cities around the country, it has picked up in many of the smaller ones. Cities such as Fortaleza or Natal are among the most violent in the world, with rates above 60 murders per 100,000.

   

  

  Courtesy of: Visual Capitalist

   

  Other Notes on the Study

  The United States made the list with two of the 50 most violent cities: Baltimore and St. Louis.

  Latin America was home to 44 of 50 of the cities. The only cities not in Latin America: Baltimore, St. Louis, Kingston (Jamaica), and Cape Town (South Africa).

  Venezuela was omitted from these rankings because of highly inaccurate data, but Caracas and other cities in the country are known to be some of the most dangerous cities in the world.

  

  

  

  

  

• The ECB’s Monetary Policy Is Now Creating a Rush Into Derivatives

  Submitted by Mike Krieger of Libertyblitzkrieg

  The ECB’s Monetary Policy Is Now Creating a Rush Into Derivatives

  One of the most catastrophic things central banks have done in the post financial crisis period is destroy financial markets. Investors are no longer investors, they’re merely helpless rats running around the lunatic central planning maze desperately attempting to survive by front running the latest round of central bank purchases.

  While actual macroeconomic and corporate fundamentals do still exert influence on financial asset prices from time to time, the far bigger driver of performance over the past several years is central bank policy. To understand just how destructive this is, recall what we learned in last month’s post, Japan’s Bond Market is One Gigantic Joke – “No One Judges Corporate Credit Risks Seriously Anymore”:

  TOKYO — Fixed-income investors in Japan are increasingly assessing bonds based on their likelihood of being bought by the central bank, rather than the creditworthiness of the issuers.

   

  Still, the fund manager desperately wanted to get hold of the bond because he bets that debt issued by Mitsui and other trading houses will be picked up by the Bank of Japan in its bond purchase program.Even if an investor buys a bond with a subzero yield, the investor could sell it to the central bank for a higher price, the thinking goes.

   

  “It goes to show that no one judges corporate credit risks seriously anymore,” said Katsuyuki Tokushima at the NLI Research Institute.

  As insane as it may be, investors now acknowledge that fundamental analysis is merely an afterthought when compared to the far bigger influence of central bank buying. While this destroys free markets, fuels malinvestment bubbles and rewards cronyism, it doesn’t stop central planners — it merely emboldens them. The latest example of such hubris was on full display last month when the ECB’s Mario Draghi increased QE by a third. Here’s some of what’s happened since.

  From Bloomberg:

  A rush for credit exposure in Europe is manifesting in the swaps market because investors are struggling to find enough bonds to satisfy their demand.

   

  The European Central Bank’s plan to purchase corporate bonds is fueling demand for securities in anticipation of a rally when the purchases start. Investment-grade bond funds in euros had inflows each week since the ECB said on March 10 that it would expand measures to stimulate the economy. That’s already suppressed yields and made it harder to obtain the notes, making credit derivatives more attractive.

   

  Wagers on European credit-default swap indexes have more than doubled since the ECB’s announcement. Investors had sold a net $25 billion of protection as of March 25, near the highest since at least December 2013 and up from $11 billion as of March 4, according to Bank of America’s analysis of data from the Depository Trust & Clearing Corp.

   

  “There’s a dearth of bonds investors can get their hands on,” said Mitch Reznick, the London-based co-head of credit at Hermes Investment Management, which oversees $33 billion. “In this liquidity vacuum, managers can use credit-default swaps as a proxy for the bonds that they can’t obtain in order to get longer in credit.”

  This behavior is a lot of things, but “investing” is not one of them.

  “The quickest way to go long credit is by selling contracts tied to indexes in large size,” said Roman Gaiser, who oversees 3.5 billion euros ($4 billion) of assets as the Geneva-based head of high yield at Pictet Asset Management SA. “That’s easier than buying lots of individual bonds. It’s a quick way of getting exposure to credit.”

   

  Gaiser said he increased a long position in European credit-default swap indexes after the ECB announcement.

   

  Though the ECB hasn’t said which bonds it plans to buy, some investors are holding onto securities they expect to be on its list, according to Rik Den Hartog, a portfolio manager at Kempen Capital Management in Amsterdam. Kempen, which oversees about $5.5 billion of credit, sold bonds and derivatives on Italian utility Enel SpA last month because the default swaps paid almost three times the spread on the notes, Den Hartog said.

  So “investing” has morphed into simply front-running the decisions of unelected central planners. That’s all there is to it, and while that’s disturbing enough, there may be another unappreciated angle to this mess. When QE was rolled out by Bernanke, many of us assumed that printing money to buy bonds would be immediately devastating for the currency in question. The current state of affairs makes me question whether this assumption still works going forward.

  If investors are merely looking to front run central banks, you could make an argument that QE can strengthen a currency, at least in the short run, as global fund managers move into the QE producing nation’s currency in order to front run central bank purchases.

  So in the short-term, will further QE weaken a nation’s currency or strengthen it? It’s an important question to ask in this increasingly twisted world of global finance.

  

  

  

  

  

• Wisconsin Primary: Cruz, Sanders Win – Live Webcast

  Live (if voice-overed) feed from CNN:

   

  It’s official: Ted Cruz and Bernie Sanders win:

  #Breaking: CNN projects Bernie Sanders will win the Democratic #WIPrimary https://t.co/DkPyle0Wrv #CNNElection pic.twitter.com/V25kMzaRm0

  — CNN Politics (@CNNPolitics) April 6, 2016

  #Breaking: CNN projects Ted Cruz will win the Republican #WIPrimary https://t.co/DkPyle0Wrv pic.twitter.com/UYXkIfgRSj

  — CNN Politics (@CNNPolitics) April 6, 2016

  The early but decisive results are out, and Cruz and Sanders have a commanding lead (from CNN):
  

  

  

   

  First exit poll results out:
  

  

  

  That’s that. pic.twitter.com/xTTK6nqQYO

  — Philip Bump (@pbump) April 6, 2016

  * * *

  Exit Poll questions:
  

  Early Fox News exit polls for #Moderates in #Wisconsin: pic.twitter.com/CbBgWYv3TJ

  — FOX Business (@FoxBusiness) April 5, 2016

   

  Some samples of exit polling from Politico:

  A majority of voters casting their ballots in the Wisconsin Republican primary on Tuesday said the party’s nominee should be the candidate who receives the most delegates, regardless of whether that person clinches the 1,237 majority outright, according to an NBC News exit poll.

  While 56 percent said the nomination should go to the candidate with the most votes, 42 percent said the delegates should be able to choose anyone they prefer at July’s Republican National Convention in Cleveland. More than eight-in-ten of those who said they supported Donald Trump (83 percent) said they preferred the nomination go to the person with the most votes, while just 42 percent of those backing another candidate said the same.

  * * *

  Preview

  When the 2016 race kicked kicked off last year, few pundits would have predicted Wisconsin’s April primary might be a game changer on both sides of the aisle. But the Badger state, which heads to the polls today, could be key in determining if the Republicans head to a contested convention and if Bernie Sanders retains momentum after five straight victories.

  Polls close at 9 p.m. EDT. Results could be known shortly after the polls close.

  Before we show what’s at stake, here is a reminder of what the current delegate breakdown looks like.

  First the Democrats:

  

   

  And the GOP:

  

   

  Ahead of tonight’s primary, Trump has 737 of the 1,237 delegates needed to sew up the Republican nomination, and Mr Cruz 475. Clinton has 1,243 delegates to Mr Sanders’ 980, with 2,383 required for the Democratic nomination.

  A Wisconsin victory for Cruz, who is leading in the polls, would raise the odds of the Republican nomination being wrested from Mr Trump in a contested convention, which could tear the party apart. Trump would need to elevate his game and reap 57% of remaining delegates to win outright before July’s party conference, according to the Associated Press.

  The Real Clear Politics polling average put Cruz ahead of Trump, 35 percent to 32 percent, while Kasich trailed wilth 23 percent. On the Democratic side, Clinton led in the poll average, 48 percent to 47 percent.

  Trump unleashed his wife Melania in Milwaukee on Monday as he sought to shore up his support among female voters. “No matter who you are, man or a woman, he treats everyone equal,” said 45-year-old Mrs Trump in a rare speech.

  Among the Democrats, former Secretary of State Mrs Clinton is saddled with persistent questions about her honesty and trustworthiness.

  Grassroots enthusiasm for Mr Sanders remains high, but the self-proclaimed democratic socialist needs to win at least 60% of all remaining delegates.

  Both Clinton and Trump look likely to perform better in New York’s upcoming primary and five northeastern states that vote on 26 April. Wisconsin is the first of several midwestern and northeastern states voting in April. New York holds its primary on April 19.  Connecticut, Delaware, Maryland, Pennsylvania and Rhode Island hold their primaries on April 26.

  Cruz and Mr Trump are calling for Ohio Governor John Kasich, the only other Republican still hanging on in the race, to drop out. But he has refused.

  Raising the stake for Trump is that according to a just released Reuters/Ipsos poll Cruz has pulled into a statistical dead heat with front-runner Donald Trump.  Cruz received 35.2 percent of support to Trump’s 39.5 percent, the poll of 568 Republicans taken April 1-5 found. The numbers put the two within the poll’s 4.8 percentage-point credibility interval, a measure of accuracy. Cruz and Trump were also briefly in a dead heat on March 28.

  Trump has led almost continually in national Reuters/Ipsos polling since last July. Ohio Governor John Kasich, the only other Republican still in the race for the party’s nomination, placed third in Tuesday’s Reuters/Ipsos poll, with 18.7 percent.

  * * *

  Here’s a rundown of everything at stake today:

  GOP

  State voting: Wisconsin

  Delegates up for grabs: 42

  Delegate Allocation explained: Of the 42 delegates, 24 are in Congressional districts, (3 in each of the 8 districts) and 18 are at-large delegates. The at-large delegates are winner-take-all and based on the statewide vote. Whoever wins the statewide vote gets all 18 delegates. The Congressional districts are winner-take-all based on district. So, for example, if Ted Cruz wins one Congressional district, he will get all 3 of the delegates there. If he wins all 8 districts, he will get all 24 delegates.

  Why it matters: The setup makes it possible for the winner to sweep all 42 delegates, and makes it even more likely they will amass a majority. This presents an ideal opportunity for Cruz and John Kasich, who are trying to stop Donald Trump from clinching the 1,237 delegates needed for the nomination. The latest Marquette University Law School poll showed Cruz with 40-30 lead over Trump. Trump leads Cruz by 262 delegates, but Trump still needs to win 57 percent of the remaining delegates to get to 1,237. If Cruz wins big in Wisconsin, he makes Trump’s path to that number more complicated. And if John Kasich manages to win one or 2 congressional districts, that would set Trump back even further.

  However, Trump does have one advantage: Wisconsin is an open primary, where he tends to perform better than in caucuses and closed primaries.

  DEMOCRATS

  State voting: Wisconsin

  Delegates up for grabs: 86 pledged, and 10 superdelegates, former and current Democratic leaders and elected officials, who can select the candidate of their choosing, wherever they want and whenever they want, and can switch at any time.

  Delegate Allocation explained: As is standard for the Democrats, both candidates have to get a minimum of 15 percent of the vote to amass any delegates. Both Clinton and Sanders are virtually certain to hit that threshold.

  Why it matters: Sanders has proven he can play in the Midwest, beating Clinton in Michigan and coming in close behind her in Missouri and Illinois. According to a recent Marquette University Law School poll, he has a four point lead over her. Clinton leads Sanders by 263 pledged delegates, and her lead widens to 701 delegates when incorporating the superdelegates who have committed to her. Even if Clinton loses in Wisconsin, Sanders is unlikely to make a dent in that delegate lead; If the race is as close as the polls are forecasting, the Vermont senator is unlikely to gain many more delegates. And while Clinton needs to win 42 percent of the remaining pledged delegates, Sanders needs to win 57 percent. When factoring in superdelegates, Clinton need to win 36 percent and Sanders needs to win 73 percent.

  But while math may be on her side, a loss in Wisconsin would mean Clinton heads into her adopted home state of New York having lost six states in two weeks — a fact Sanders is well aware of.

  “I don’t want to get Hillary Clinton any more nervous than she already is,” he said at a campaign stop Monday in Wisconsin. “So don’t tell her this, but we win here, we win in New York State, we are on our way to the White House.”

  

  

  

  

  

• The Recovery-less Recovery

  It appears that Ed Yardeni's market-driven global growth barometer is peddling more fiction about the so-called 'recovery'…

  Can you see where perception diverged from reality? (and why…)

  

  Source: Yardeni.com

  Just remember, the market is NOT the economy (unless it is going up).

  

  

  

  

  

• BOJ's Kuroda Threatens More Easing, Stocks Tank, Absurdity Reigns

  Submitted by Wolf Richter via WolfStreet.com,

  “Negative interest expense” or some such absurdity yet to be coined.

  “For now, the effect of negative interest rates is very strong, so we’d like to steadily proceed with this policy,” Bank of Japan Governor Haruhiko Kuroda told parliament today, to reassure the nervous politicians that the economy was on the right track under his fearless and wise leadership.

  Alas, the BOJ’s “tankan” survey, released on Friday, showed that confidence plunged among manufacturers to the lowest point since 2013, while inflation expectations weakened further. The economy in the January-March quarter is likely to shrink again, after having already shrunk in the prior quarter, to form another technical recession. Despite government and BOJ exhortations, wage increases remain elusive, now an imperceptibly small 0.4% from a year ago.

  But just in case the BOJ’s scorched-earth policies of negative interest rates and asset purchases – mostly Japanese Government Bonds, Japanese REITs, and equity ETFs – haven’t accomplished the desired miracles yet, the BOJ would be willing to accelerate the same failed policies, such as pushing interest rates deeper into the negative, and try some new things too, such as diving into riskier assets, he said.

  But it won’t be predictable. The BOJ could mix and match the next policy steps, depending on the economy, prices, and “market moves, particularly those in Japan,” he said. At least, he’s admitting that the BOJ is slave to the financial markets.

  “We won’t necessarily choose a rate cut just because it’s easier to do so,” he said. It could be anything.

  Turns out, Japan Inc., which has been coddled and favored by Abenomics even more so than by prior administrations, is not investing enough in Japan despite tax incentives for investments, but instead is focusing capital investments on its projects in other countries. Capital expenditures in Japan, which would boost the economy, are lagging.

  So the BOJ has kicked off yet another way to coddle and favor Japan Inc. with a special incentive: another stock market pump-up scheme that is now coming to fruition.

  Back in December it promised to buy shares of ETFs that would have to be created for just this purpose. They would incorporate shares of companies that follow the BOJ’s dictum: boost wages, employment, and capital spending.

  So Daiwa Asset Management in partnership with index provider MSCI will develop a special stock index for these anointed companies. Nomura Asset Management and other firms in the Nomura group plan to put their own index together. It’s up to them to decide which companies are doing what the BOJ wants them to do to the extent that they deserve being included. And the special ETFs will track those indices.

  Nomura Asset Management and Daiwa Asset Management have now completed setting up their ETFs that fit this mold. On April 1, both asset managers filed applications with the Tokyo Stock Exchange for listing these ETFs. They’re expected to make their debut on the TSE in mid-May. Nikko Asset Management, DIAM, and Mitsubishi UFJ Kokusai Asset Management are also working on ETFs to that effect.

  Once they start trading, the BOJ will buy shares of these newfangled ETFs at a rate of ¥300 billion ($2.7 billion) a year with the explicit goal of driving up the stock prices of the companies in the ETF. If it works out that way, which is doubtful since practically nothing in the Japanese stock market has worked the way the BOJ had planned, it would be the reward for those companies that asset managers deem obedient to the BOJ’s wishes.

  So just how helpful is all this?

  Stocks tanked, again. There’s a reason why the Japanese stock market has become a hedge-fund hotel, and why Japanese retail investors try to stay away from it. The Nikkei dropped 2.4% today to 15,733. It has plunged 24.6% from its recent peak in June and is sinking deeper into its bear-market mire.

  One thing is clear: While the BOJ has failed in propping up stocks, it has totally succeeded in suffocating the once vast Japanese Government Bond market by buying up every JGB that isn’t nailed down. It’s a marvel, actually. The BOJ’s primary dealers buy the JGBs when the government issues them at a negative yield, knowing that they will soon sell them to the BOJ at an even greater negative yield and thus make a guaranteed profit on the difference.

  The 10-year JGB yield is -0.07%. Pension funds, insurance companies, banks, and money managers have begun to unload their JGB holdings. Only the BOJ is buying.

  It seems that the BOJ will not stop until it owns most of the JGBs out there. It’s paying the government the negative yield, actually paying the government to borrow money to fund its gargantuan deficits. If this farce continues long enough and more of the older JGBs are rolled over, interest expense in the Japanese budget will turn to income, called “negative interest expense” or some such absurdity yet to be coined. Someday this is going to end in tears. But not tomorrow. Kuroda knows this, hoping that the “after tomorrow” won’t be under his watch. After me the deluge!

  All 11 Japanese asset managers that offer money market funds are planning to scuttle them after returning their remaining assets to investors. This marks another big accomplishment of negative interest rates. And the bitter irony? Read…  NIRP Kills Off All Money Market Funds in Japan

  

  

  

  

  

• Who Are The Best Paid Bank CEO: The One Chart Summary

  If you ever wondered what Jamie Dimon meant by “That’s why I’m richer than you”, this summary from the Financial Times explains.    

  

  

  

  

  

  

• As Pfizer-Allergan Sinks, These "Inversion" Deals Could Be Next

  While the surge in Q1 market volatility has had a dramatic impact on asset prices, and led to some unprecedented central bank interventions to stabilize markets, one product that has seen a dramatic hit and has yet to rebound, is M&A.

  According to BofA, North American M&A volumes declined again in March, falling to $107bn from $140bn in February, $157bn in January and the recent peak of $410bn in November of last year.

  

  The implication of the above is that investment banking revenues from M&A advisory work, which had been steadily rising over the past two years, are about to see a sharp decline. And, after a year which saw a record $5 trillion in global M&A, this will be a bitter pill to swallow for the banking community. The top M&A deals of 2015 are shown below.

  

  

   

  However, that may be just the beginning of bankers’ headaches.

  It is no secret that over the past several years, one of the primary drivers behind M&A activity was tax inversions, which however as yesterday’s striking announcement by the US Treasury made clear, are now effectively over, and with them goes much of the impetus for companies to merge.

  And while the Pfizer-Allergan $160 billion merger may be the most notable casualty of the Treasury’s decree, there are various other deals working on corporate inversion deals or who have carried out inversions in the past. They are shown in the list below, courtesy of Bloomberg:

  Progressive Waste-Waste Connections

  Texas-based Waste Connections Inc. agreed to buy fellow garbage-hauling company Progressive Waste Solutions Ltd. in January, and announced plans to move its tax domicile to Canada. The new company would have an effective tax rate of about 27 percent, down from the 40 percent rate that Waste Connections pays now, it said in a statement at the time.

  The proposed regulations would have an impact of less than 3 percent of the new company’s adjusted free cash flow, which is expected to be more than $625 million, the companies said in a joint statement Tuesday. “The two companies remain committed to the strategic merger.”

  Waste Connections shares fell as much as 7.2 percent. Progressive Waste dropped 9.3 percent.

  Terex-Konecranes

  Terex Corp., a U.S. crane and construction-machinery maker, agreed to combine with Finnish competitor Konecranes Oyj last year to create a group with a combined $10 billion in sales, incorporated in Finland.

  While the companies described the transaction as a merger of equals, Terex stockholders would own 60 percent of the combined business.

  Since then, China’s Zoomlion Heavy Industry Science & Technology Co. has made a counteroffer for Terex. Still, with the U.S. closely scrutinizing deals that put American technology into Chinese hands, that deal would have its own regulatory hurdles.
  Terex shares closed 2.3 percent down in New York.

  Johnson Controls-Tyco

  Auto-parts maker Johnson Controls Inc.’s planned merger with Ireland-based Tyco International Plc was targeted by Hillary Clinton’s campaign ads. Clinton called the plan to move Johnson Controls’s address to tax-friendly Cork “an outrage.”

  Tyco itself got a foreign tax address in the late 1990s through an inversion, as part of a takeover of the security company ADT, which was incorporated in Bermuda. Tax inversions seem to be one of the few things the presidential candidates can agree on, with Bernie Sanders, Donald Trump and Clinton all targeting the practice in their campaigns.

  Tyco shares declined 3 percent in New York. Johnson Controls fell 2.2 percent.

  Mylan-Meda

  Drugmaker Mylan NV said Tuesday it’s “comfortable moving forward” with a $7.2 billion deal to buy Sweden’s Meda AB, in response to concerns about the impact of Treasury rules.

  Mylan moved its headquarters from Pittsburgh to the Netherlands in 2015 after buying Abbott Laboratories’ generic drug business in overseas markets like Europe. In February this year, the company agreed to buy Meda.

  Mylan shares fell 2.8 percent in Nasdaq trading while Meda declined 1 percent in Stockholm.

  IHS-Markit

  IHS Inc., which provides data analysis, agreed to buy London-based Markit Ltd. for about $5.5 billion last month with plans to relocate to the U.K. The Englewood, Colorado-based company and Markit said in a regulatory filing Tuesday that they don’t expect the merger to be subject to the new rules.

  “Based on our preliminary review at this time, we also believe that the other U.S. Treasury rule changes will not impact the combined company’s adjusted effective tax rate guidance of a low to mid-twenties percentage range.”

  IHS shares declined 2.6 percent in New York Stock Exchange trading while Markit declined 2.6 percent.

  * * *

  It remains to be seen how much of a hit on the future M&A backlog the Treasury’s announcement will have, but even if banks suffer a drop in revenue, there is one silver lining: tens if not hundreds of thousands of workers who would have been otherwise “synergized” aka laid off as part of the merger process, will keep their jobs that much longer, because instead of boosting shareholder equity and requiring the cutting of overhead to accomodate the new debt, many of the companies that would have otherwise merged will continue as standalone entities. As such they will need all the support they can get.

  The chart below shows the combined employees of the top 10 M&A deals of 2015, and what our estimate is of the combined layoffs between them.

  

  

  

  

  

  

• Year Of The Outsider: Why Bernie Sanders' Democratic Rebellion Is So Significant

  Authored by Thomas Palley,

  2016 was supposed to have been the year of Jeb Bush versus Hillary Clinton: the year when the established Bush dynasty confronted the upstart rival Clinton Dynasty. But the year of the insider has turned into the year of the outsider. On both sides, voters have unexpectedly given vent to thirty years of accumulated anger with neoliberalism which has downsized their incomes and hopes.

  Though the Republican rebellion has been more clear-cut in its dismissal of insider candidates, it is Bernie Sanders’ Democratic rebellion that is of potentially far greater historic significance.

  The Republican rebellion is of much less significance

  The Republican uprising has undoubtedly exhibited greater anger. If Donald Trump or Ted Cruz triumph in the November general election, they threaten an uglier more intolerant politics that could even become tinged with American black-shirtism.

  However, absent the darkest of outcomes, the Republican rebellion is of less lasting political significance for two reasons.

  First, it does not fundamentally challenge the neoliberal economic model that is the root cause of popular anger on all sides. Nationalism, racism, evangelism, and cultural atavism scratch the scapegoat itch, but they do not challenge Corporate America’s and Wall Street’s domination which sustains neoliberalism.

  Second, and more importantly, the Republican rebellion does not change the party’s pre-existing political trajectory and relies on electoral forces that are peaking out.

  That contrasts with Sanders’ Democratic rebellion which explicitly challenges the neoliberal economic model, and is also about defining the political character of the coming Democratic electoral majority.

  Viewed in this light, the Republican rebellion is an eruption from an angry electoral base whose political power is waning, whereas the Democratic rebellion is an eruption from a rising base whose political agenda awaits definition.

  Trump and Cruz are a logical extension of Republican politics

  The Republican elite has been profoundly taken aback by the dismissal of Crown Prince Jeb Bush and the Boy Scout Senator Marco Rubio, but both Trump and Cruz represent a logical extension of Republican politics rather than a break.

  Long ago, Richard Nixon unleashed the politics of hate with his “southern strategy”, aimed at exploiting animosity toward President Johnson’s civil rights legislation to convert the South (i.e. the Confederacy) from Democrat to Republican.

  Trump and Cruz have discarded the dog whistle and explicitly articulated a level of racism and xenophobia the establishment is strategically uncomfortable with. Other than that, they have towed the line on tax cuts for the rich, and Cruz was orthodox on trade until Trump started making hay with the issue.

  Despite Cruz’s odious personality, the Republican establishment prefers him as he has been more orthodox on trade and Social Security, while Trump is also loathed for humiliating Jeb Bush with his taunt of “low energy”.

  That said, if Trump wins the nomination, a rapprochement is likely. For the Republican establishment, tax cuts and preserving neoliberal globalization are preeminent, and Trump is an opportunistic businessman who trumpets deal-making.

  Trump and Cruz accelerate Republicans’ demographic destiny

  The rise of Trump and Cruz has merely accelerated Republicans’ date with demographic destiny. The party of dog whistle racism and immigrant bashing always faced a difficult future because of demographic trends making minorities an increasing share of the electorate.

  Republicans hoped to postpone that difficult future by a combination of voter suppression policies (e.g. making voter registration difficult; reducing polling booth access; and excluding minority voters via “new Jim Crow” laws denying voting rights to convicted felons) and gerrymandering congressional districts in states like Texas, Wisconsin and Michigan. That has already given Republicans control of the House of Representatives despite receiving far fewer total votes.

  The undemocratic construction of the US constitution, which gives two Senate seats to both small states like Wyoming (population 580k) and large states like California (population 38.5 million), also means Republicans have remained competitive in the Senate. That is because of their relative strength in the comparatively under-populated interior states.

  These features could delay electoral developments, but the prognosis was always an outlook in which Republicans were going to be increasingly uncompetitive nationally. Trump’s and Cruz’s hate politics has simply accelerated and cemented that prognosis.

  Wall Street will need a new senior political partner: Democrats for sale?

  That electoral prospect implies Republicans can no longer reliably deliver for Corporate America and Wall Street, which means Corporate America and Wall Street need to find another sure political partner. Therein lies the greater significance of the Sanders – Clinton contest.

  Over the last thirty years, Wall Street has had little difficulty working with and funding Democrats, and the Clintons have been especially cooperative. For many years, Goldman Sachs has been happy to split its political contributions, sending 55% to the Republicans and 45% to the Democrats. Now, Goldman can make a small recalibration and send a little bit more to the Democrats.

  If Hillary Clinton wins, the Democratic Party will remain squarely within the orbit of Wall Street and Corporate America. The Democrats will become the ruling party, but their rule will substantially continue what we have had, perhaps supplemented by an extra spoonful of compassionate economic policy.

  If Sanders wins, there is a chance the Democratic Party can rediscover its modern roots of New Deal social democracy via expanded Social Security, single payer health insurance, debt-free college, the end of neoliberal trade policies, and reining in of corporate power.

  The Democrats: party of identity politics or party of New Deal social democracy?

  These features mean it is the choices of Democrats that will set the political course for the next generation. Demographics imply Democrats will be the majority of the future, but the party’s political identity and agenda is up for grabs.

  If the Clinton vision prevails, the Democratic Party stands to become a party of neoliberal economics, headlined by identity politics. A Clinton-led Democratic Party will also continue President Obama’s tactical appeals to “bi-partisanship”. The goal would be to enlist moderate upper-middle class Republican-leaning professionals into a corporate controlled Democratic Party franchise.

  If the Sanders vision prevails, the Democrats will pivot toward their New Deal social democratic roots. In that case, economic solidarity and inclusion become the headline. And the party again aspires to be a mass movement rather than an awkward stitching together of corporate money, social liberals, and minority voters.

  The curse of money

  However, as long as unlimited money is allowed in politics, there is a perennial danger of a backdoor Wall Street takeover. That is because a New Deal Democratic Party would still need money to compete in elections, leaving an opening for Corporate America and Wall Street to take back control.

  That is why limits on money contributions and repealing the Citizens United decision are so important. It also explains why Sanders has made that the central focus of his political revolution, while Clinton has persistently sought to diminish the issue.

  

  

  

  

  

• The Nattering Naybobs Of Normalization (A Tale Of 3 Fed Heads)

  Authored by Bill Bonner of Bonner & Partners (annotated by Acting-Man.com's Pater Tenebrarum),

  Leaning Into the Wind

  During our lifetime, three Fed chiefs have faced a similar challenge.

  Each occupied the chairman’s seat at a time when “normalization” of interest rates was in order.

  Recently, we remembered William McChesney Martin, head of the U.S. Fed under the Truman, Eisenhower, Kennedy, Johnson, and Nixon administrations. Today, we compare Martin with two of his successors, Mr. Paul Volcker and Ms. Janet Yellen. We allow you to draw your own conclusion.

   

  

  Punchbowl theft alert!

  In 1951, the Fed and the Treasury clashed over “normalizing” interest rate policy after almost 10 years of tight control. In 1942, after the U.S. entered World War II, and at the request of the Treasury, the Fed pegged interest rates at a low level to make it easier for the government to finance the war. Come peacetime, it had to finesse a return to market-set rates.

  Of course, the Fed can never fully shirk its responsibilities or ignore its influence. Its voting committee, the Federal Open Market Committee (FOMC), has the ultimate say on setting short-term rates. But its hand on the controls can be heavy… or light. It can allow the market to express itself. Or it can shut the market up and do the talking itself.

  After the troops came home, Martin developed two metaphors to describe his views on central banking. The first was that the central bank should neither set rates high nor low, but instead “lean into the wind.” The idea was to moderate market forces by exerting a little counter-cyclical pressure.

  If the economy were running hot, the central bank would maintain its funds rate a little higher than usual. If the economy were cooling off, it would aim for a slightly lower rate. That brings us to the second of Martin’s metaphors.

  The job of the Fed, he said, was to “take away the punch bowl just as the party gets going.” In other words, raise interest rates just when the economy starts to enter an unsustainable boom.

   

  Times Change

  Mr. Martin was not necessarily less intelligent than those who succeeded him. But times change. Fashions evolve. Today, Truman’s appointee as Fed chief might as well be wearing spats.

  In February 1951, the annual consumer price index, or CPI – the most common measure of inflation – was running at almost 8% a year. President Truman summoned the entire FOMC to the White House – with Martin as the principal negotiator – to extract a pledge from them to keep interest rates pegged at low levels.

  But the Fed dug its heels in and refused to “maintain the existing situation.” Martin then announced that he would allow interest rates to rise. And rise they did. From just under 1% when Martin took over as Fed chief, short-term rates stood at almost 4% at the start of the 1960s.

   

  Frontal Assault

  The next challenge came at the end of the 1970s. Paul Volcker, appointed by Jimmy Carter, was the man for the job. When Volcker took over the Fed, in August 1979, short-term rates and the CPI were somewhere north of 11%. And he aimed to bring both down to more normal levels.

  But then as now, inflation had its friends. And everyone knew that bringing it under control would be painful. In 1980, Mr. Volcker spoke directly to the challenge:

  After decades of inflation, many of us, more or less comfortably, have adapted our business and personal lives to the prospect of more inflation.

   

  We count on capital gains from inflating house and land values as a substitute for real savings. We assume our competitors will match our aggressive pricing policies, and will also accede to high wage demands. We take comfort in our purchases of precious metals, art, and more exotic “collectibles” – or envy those who did buy – and are tempted to project essentially speculative price movements into the great beyond.

   

  But none of this sense of accommodation to inflation can be a valid excuse for not acting to deal with the disease.

   

  

  Anguish alert!

   

  Getting inflation under control meant taking away not only the punch bowl, but also the entire buffet and open bar of money and credit on which the markets feasted.

  But Volcker did not back away. He said what he meant and meant what he said. In June 1981, he dosed the economy with a 19.1% federal funds rate; in a few months, the fever was broken.

   

  No Return to Normal

  And now, we have Ms. Janet Yellen at the Fed’s helm, her firm grip on the wheel… her steely eye on the horizon. The situation is nothing like that which Mr. Volcker faced. Instead of a CPI in double-digits, today, the Fed is worried that consumer prices are not going up fast enough.

  “An important concern about persistently low inflation,” is how Fed governor Lael Brainard described what was disturbing her sleep. And $7 trillion of developed-country government debt now trades at yields below zero – providing governments around the world with free money.

  Getting back to normal is never easy, especially when you don’t want to get there. On March 27, 2015, Ms. Yellen spoke to her challenge.

   

  

  The creature from the punchbowl!

  Photo credit: Pablo Martinez Monsivais / Keystone / AP

   

  “Normalizing Monetary Policy: Prospects and Perspectives” was the title of her speech. But both the content and the consequences were very different from those of either Mr. Volcker or Mr. Martin.

  Where Mr. Martin had insisted that dictating interest rates was “inconsistent with… a private enterprise system,” Ms. Yellen saw no inconsistency at all. Where Mr. Martin saw the need in a great emergency – World War II – to depart from market-set interest rates, Ms. Yellen is ready to leave the market behind at the drop of the Dow.

  And where Mr. Martin and Mr. Volcker both went resolutely about their work, Ms. Yellen seems unsure. A year ago, she said she would normalize rates “only gradually”… and that, although she had the “macro-prudential regulatory and supervisory tools” to do the job, investors should not expect miracles.

  Nor did they receive any. In the 12 months that have gone by since her speech, only 25 basis points (even sparrows refuse to bend to pick up such trivial morsels) is the total of her niggardly gift to savers. As for “normal”… it is still nowhere in sight.

  

  

  

  

• MoSSaCK FoNSeCa SeaRCH

  

  

  

  

  

• Tuesday Humor: The Paperclip Is Back With Year-End Tax Planning Advice

  The infamous Microsoft help paperclip makes a timely appearance, providing options for all of your year-end tax planning needs.

  

  h/t @ebitdad

  

  

  

  

  

• California Gov. Signs Minimum Wage Hike: Admits It "Doesn’t Make Economic Sense" As Locals Flee For Texas

  As we discussed previously states such as California are saying to hell with economics in their efforts to appease their voting base. Yesterday, both New York and California signed legislation to raise the minimum wage to $15 an hour. New York will phase in the $6 an hour increase over three years, and California will phase in their $5 an hour increase over the next six years.

  The irony of the situation, which will most certainly go under reported, is that even California’s Governor Brown knows that it’s not the right decision to make economically. Regarding the actual economic impact, California’s Governor Brown was quoted as saying that “economically, minimum wages may not make sense.”

  This is clear.

  As we noted before, it is even clear to the locals businesses owners like the Marmalade Café which has seven locations. “First, you have to raise prices, otherwise you’ll be out of business,” owner Selwyn Yosslowitz told the Times. So higher prices for diners. That’s “first.” We imagine you can guess what’s “second.” “We will try to re-engineer the labor force,” Yosslowitz said. “Maybe try to reduce the number of bus boys and ask servers to bus tables.” In other words: “Maybe” we’ll fire some folks and the people who keep their jobs will have to be more efficient. 

  Yosslowitz also worries about the dynamic we’ve discussed over the course of documenting Wal-Mart’s experience with wage hikes: namely that you have to preserve the wage hierarchy. You can’t hike wages for the lowest paid workers and then expect those further up the pay ladder to be satisfied with what they made before. “The other big worry [is] that employees already making $15 an hour will demand a raise as well”, Yosslowitz said. “It’s a chain reaction.”

  Indeed, the problems with haphazard wage hikes are now readily apparent even to those who stand to benefit the most from the new legislation. Take Miguel Sanchez of Highland Park who works two jobs making tortillas. “It’s good for workers, but I imagine this is not going to be good news for employers and small businesses,” he says. “Will the cost of things go up?” he asks. “Are employers going to cut back hours because they can’t afford it? I worry.”

  So even tortilla makers get it, but like Wal-Mart, “some folks” will need to actually see the layoffs before they’ll concede that you can’t cheat economic truisms and that’s really a shame for the people who will lose their jobs in the meantime.

  * * *

  But back to CA Governor Brown who after that brief epipharny he quickly forgot about reality, and told the truth about why he was signing the legislation.

  “Morally and socially and politically, they (minimum wages) make every sense because it binds the community together and makes sure that parents can take care of their kids in a much more satisfactory way.”

  

  Ah yes, as long as you and your political party get votes in the upcoming elections, the actual impact on the people you claim to represent and care about is irrelevant – noted.

  After all, this is what seems to get votes, and as we said previously: “Of course how much you earn and even whether or not you have a job at all only matters to the extent that “shit” costs money, which is why it might be a good idea to just go ahead and vote for “A Future To Believe In”

  

   

  However, in perhaps the most poetic cause and effect scenario, once the people realize that items such as minimum wage actually do nothing but hurt their chances for gaining employment or starting a small business, they leave the state in droves.

  Based on a study of IRS tax returns, over 250,000 California residents moved out of the state between 2013-2014.

  It’s no better in the other “minimum wage hiking state”, New York, where United Van Lines data shows that out of all of their relocation contracts, New York comes in second for “high outbound.”

  Now that higher minimum wages are a reality, we’re certain these numbers won’t get any better in future years.

  

  

  

  

  

  

• Porn Star Explains Why You Are A Scumbag Who "Gets In The Way Of Justice"

  Submitted by Simon Black via SovereignMan.com,

  The Internet practically exploded this weekend after a detailed report was published proving that dozens of corrupt politicians around the world have been stealing public funds and hiding the loot overseas.

  In other news, the Pope is Catholic.

  Not to make light of this, but this hardly comes as a surprise. There’s some Grade A filth in positions of power who routinely funnel public funds into their own pockets.

  Whether they secret the funds offshore, buy expensive flats in London, purchase Bitcoin, or stuff cash under their mattresses seems hardly relevant.

  The real issue is that systems of government routinely put morally bankrupt individuals in control of trillions of dollars of cash.

  Seriously, what do people expect is going to happen?

  Yet this never seems to be concern. The media outcry always seems to focus on the manner in which public officials hide their assets, not the fact that the funds were stolen to begin with.

  This report targets the illicit use of offshore corporations, specifically those set up by a single law firm in Panama.

  In reality, this issue hardly boils down to one firm.

  There are thousands of law firms all around the world, including in the UK and the United States, that register companies for their clients.

  Some of those companies end up being used for nefarious purposes, including fraud and theft.

  But it’s crazy to presume that corrupt officials and con artists are the only ones who would ever need a company in one of these “shady” jurisdictions.

  (Those “shady” jurisdictions, by the way, include Wyoming, South Dakota, and Delaware.)

  Alongside the report is a video with a scantily clad porno actress named Lisa Ann, star of “Who’s Nailin’ Paylin,” a satire in which Ms. Ann spoofs former Vice Presidential candidate Sarah Palin engaged in sexual… congress.

  No I am not making this up…

  In her video, the porn starlet explains that only arms dealers and scumbags set up asset protect vehicles like anonymous shell companies, which can include something like a Delaware LLC.

  Never mind that people in the Land of the Free are living in the most litigious society in human history.

  Or that last year the US government stole more money and private property from its citizens through civil asset forfeiture than all the thieves and felons in the country combined.

  Given such obvious realities, you’d have to be crazy to NOT take steps to protect your savings.

  But if a porn star says that you’re a scumbag who ‘gets in the way of justice’ by setting up a Delaware LLC to safeguard your assets and reduce your legal liability, it must be true.

  So let it be written.

  Look, the anger and disgust of seeing corrupt people getting away with a crime is understandable, particularly when that crime is stealing from taxpayers.

  But nobody ever seems to attack the real problem– that these people are ever put in positions enabling them to steal taxpayer funds to begin with.

  Instead the spotlight is always on how they hide it. That’s like focusing on what color T-shirt the ax murderer was wearing.

  My concern is that is if corrupt officials shift tactics and start buying gold, there will be calls to outlaw gold. Or if they start holding cash, there will be even louder calls to ban cash.

  These reports are incredibly damning for the dozens, even hundreds or thousands of bad actors who abuse the system.

  But at the same time they create a mass hysteria that puts law-abiding taxpayers who value their financial privacy into the same category as some corrupt African dictator.

  Listen in to today’s podcast as we discuss this trend even more, what I call the “New Dark Ages”.

  We’ve entered a time where privacy and personal freedom are trivial inconveniences rather than the bedrock cultural values they used to be.

  For example, I question when our society degenerated to the point that a porn star gets to tell us what we should and should not be able to do with our own private property. . .

  I’d advise you to turn DOWN the volume. This podcast is probably the most intense I’ve ever done. Listen in here.

  (click image for link to podcast)

  

  

  

  

  

  

• 'Economic Models' Forecast GOP White House (With Or Without Trump)

  Despite bookies' odds at 66% that The Democratic Party will win The White House in November, economic models predict a Republican victory (with or without Trump).

   

  

   

  As The Hill reports, Republicans are expected to win the White House under two economic models that have accurately forecast presidential elections for decades. A third model run by Moody’s Analytics predicts Democrats will win the White House, in part because of President Obama’s rising approval rating.

  “As economists this is a very unusual election and there’s a lot more uncertainty introduced this time around that could upset the balance and the historical relationship of how marginal voters vote,” said Dan White, an economist with Moody’s Analytics who oversees the firm’s monthly election model.

   

  Ray Fair, a Yale professor who launched his model in 1978, told The Hill that while all elections include unruly features that an economic model can’t pick up, “this one seems particularly unusual.”

   

  “If there’s any time in which personalities would trump the economy it would be this election,” Fair said.

   

  Fair’s model has correctly forecast all but three presidential races since 1916 but was wrong in 2012, when it predicted a narrow loss for Obama to Mitt Romney.

   

  It relies on just three pieces of information: per capita growth rate of gross domestic product in the three quarters before an election, inflation over the entire presidential term and the number of quarters during the term growth per capita exceeds 3.2 percent.

   

  Given the sluggish economy, his model doesn’t show enough growth under Obama to predict a Democratic win in the election. In his most recent forecast from January, his model predicted a 45.66 percent share of the presidential vote for the Democratic candidate, less than the 49 percent it predicted in 2012.

   

  The other two models, unlike Fair’s, consider the incumbent president’s approval rating. In both cases, Obama’s improving favorability helps his party’s chances of winning the White House. But only one of those models predicts a Democratic win.

  White said that one of the most frequently asked questions he gets is whether a Trump variable could be added into the model to test out how his brand of fireworks factors in.

  No way, he said.

   

  “The model doesn’t know or care if there are two or 10 candidates,” he said. “It knows the economics and whether marginal swing voters will keep the incumbent party in or not.”

  In fact, their models are designed to sweep away the effects of boisterous personalities and the usual ebbs and flows of a long presidential campaign season and instead track specific economic factors that voters deem most important.

  "So the logic that says that these models should have worked over the past few decades also says that they should work in this election cycle, too,” he told The Hill.

   

  “There's no reason to think the models should do better or worse in 2016,” he said.

  

  

  

  

  

• Oil Will Be Over $50 a Barrel by July 4th (Video)

  By EconMatters

  

  A strong API Report reporting over a 4 million barrel drawdown in Oil inventories, and a report out of Kuwait saying that an output freeze deal by major oil producers would proceed without Iran will be bullish for the oil market. We expect the short covering to begin tonight, tomorrow and for the next 8 days before the Doha Meeting.

  
  
  
  
  © EconMatters All Rights Reserved | Facebook | Twitter | YouTube | Email Digest | Kindle  

  

  

  

  

• As Seen On One Billboard: The San Francisco Housing Bubble

  That San Francisco, ground zero of the second tech – this time private (and currently bursting) – bubble, has a housing market that is “just a little frothy” is no surprise to anyone, but even we had to chuckle when we saw this billboard making the twitter rounds.

  

   

  As Marketwatch notes, real estate is so frothy in the San Francisco Bay Area that a new development in the city’s Lake Merced neighborhood felt the need to advertise its townhomes on a billboard as million-dollar deals – get in now while the price is right!

  This is what the “low $1,000,000s” will buy you: a 1,547 square foot, 3-bedroom, 2-bath townhome (listed on real estate site Redfin for $1,012,000+).

  

   

  Feel like hunting for better bargains? Then how about this 3-bedroom, 3.5-bathroom, 2,393 square foot townhome listed for $1,649,900+.

  

  “You’ll take in the lifestyle of the city but leave all the limitations of San Francisco behind,” according to the development’s website. “So, when your day is done, you’ll pull into the garage, hit the button and walk into a place that’s different from the start.”

  Translation: these aren’t located near the hustle and bustle. The Lake Merced area is located in the city’s southwest corner, far from downtown and other popular neighborhoods in the central parts of the city.

  For some context, here’s a look at the rest of the San Francisco housing market. This shack was listed for $350,000 and sold in September 2015 for $408,000, nearly 17% above the asking price. The real-estate agent referred to the “home” as “above and beyond distressed.”

  If that didn’t sufficiently impress (or exasperate) you, take a look at some listings in the city’s more central areas, which may leave you thinking “low 1,000,000s” in Lake Merced is a deal after all.

  This 1-bedroom, 2-bath home is located near the baseball stadium AT&T Park. It’s 1,428 square feet and is listed for $1,950,000, plus $563.36 in monthly homeowners association dues.

  

   

  This 3-bedroom, 2-bath home is located in hipster enclave Mission Dolores and is larger at 2,580 square feet. It is listed with the words “huge price reduction” for just $2,599,000.

  

   

  As a reminder, according to Case Shiller, home prices in San Francisco rose 10.5% over the past year. U.S. house prices overall rose 5.7% compared with a year ago in January, or about three times more than average wages. Since 2012, median housing prices in San Francisco have more than doubled, hitting $1.225 million in February 2016, as the following dramatic charts demonstrate.

  

  

   

  And here is the problem: to be able to purchase a house in San Francisco, a prospective buyer should make on average over quarter million dollars per year, nearly 6 times more than for the broader U.S.

  

  Much more on the San Fran housing market in the Paradon “March 2016 San Francisco Real Estate Report”

  

  

  

  

  

• Here Are Some Of The Americans In The "Panama Papers"

  With media attention squarely falling on the foreigners exposed by the Panama Papers offshore tax haven scandal, everyone has been asking for more information on who are the Americans involved in this biggest data leak in history. After all, as we showed, Mossack Fonseca had over 400 American clients. But who are they?

  Today, courtesy of McClatchy, we get some answers: while there are no politicians of note are in files but plenty of others. Among them: Retirees, scammers, and tax evaders, all of whom found a use for secrecy of offshore companies.

  As the news paper reports, “the passports of at least 200 Americans show up in this week’s massive leak of secret data on secretive offshore shell companies.”

  And yet, the following release may prompt merely more questions: given the high-profile nature of some of the foreign names in the leaks “many of the Americans may seem like small fish.”

  Perhaps few Americans used Panama to hide their shady dealings; perhaps that was as intended.

  In any event, here are some of the findings courtesy of McClatchy:

  Determining a precise number of Americans in the data is difficult. There are at least 200 scanned individual U.S. passports. Some appear to be American retirees purchasing real estate in places like Costa Rica and Panama. Also in the database, about 3,500 shareholders of offshore companies who list U.S. addresses. And almost 3,100 companies are tied to offshore professionals based in Miami, New York, and other parts of the United States.

  Further complicating matters, some U.S. citizens enjoy dual citizenship and open accounts under foreign passports. Others appeared to be American retirees purchasing real estate in places like Costa Rica and Panama.

  Among the cases McClatchy and its partners found: 

  Robert Miracle of Bellevue, Wash., is in the files. He was indicted for a $65-million Seattle-area Ponzi scheme involving investment in Indonesian oilfields, with new investors’ money allegedly used to pay off past investors. Miracle was sentenced on May 13, 2011, to 13 years in prison after pleading guilty to wire fraud and tax evasion.

  Miracle’s company was called Mcube Petroleum, and it remained an active shareholder in several offshore companies in the British Virgin Islands up until he pleaded guilty. The offshores were created by Mossack Fonseca.

  Benjamin Wey is a U.S. citizen and president of New York Global Group. He was indicted last year, along with his Swiss banker, Seref Dogan Erbek, on securities fraud charges. Wey’s alleged scheme to conceal a true ownership interest in publicly traded companies was at the heart of the charges. Wey is accused of using offshores set up with Mossack Fonseca to disguise complicated transactions between Chinese operating companies and publicly traded U.S. shell companies.

  The two “are believed to have profited in the tens of millions, while victim shareholders were left holding the bill,” Diego Rodriguez, an FBI official involved in the case, said in a statement at the time of indictment.

  Florida billionaire Igor Olenicoff, a commercial real estate mogul, appears in the data as a shareholder of Olen Oil Management Limited. He raised a national stir in 2007 after being sentenced to just two years of probation for tax evasion. He paid a $52 million fine after not declaring more than $200 million in offshore shell companies. More recently, he was found guilty in 2014 for making replicas of a pricey sculpture and was ordered to make restitution to the sculptors whose work he had copied.

  There’s Anthony J. Gumbiner, the Dallas-area chairman of Hallwood Group Inc. He’s a British national with deep Texas ties who settled an insider trading case in 1996 with the Securities and Exchange Commission, paying $1.7 million in penalties at the time.

  A jetsetter in the 1980s, Gumbiner was known for his lavish lifestyle in Monte Carlo. More recently, he’s been tied up in litigation over oilfield investments. His Hallwood Energy filed for Chapter 11 bankruptcy protection in 2009.

  It wasn’t until 2015 that the law firm seemed to catch on to Gumbiner’s legal problems and started to conduct enhanced background checks. By then his offshore companies had been inactive since 2011.

  And there’s John Michael “Red” Crim, author of the self-published books “From Here to Malta,” and “I’ve Been Arrested, Now What?”

  

  Federal jurors in Philadelphia in January 2008 convicted Crim and two associates in a plot to have investors use phony trusts to cheat the IRS out of roughly $10 million in tax revenue.

  In an interview with McClatchy’s project partner Fusion, at a halfway house in Los Angeles last February, Crim described how he brought business to Mossack Fonseca and other registered corporate agents.

  “My responsibility is to set-up the documentation, hand it over to the client, and now they’re in business,” Crim said. “I don’t even know sometimes what that business is about, and I didn’t want to spend all my time investigating what they’re doing. I mean, some of (them) just flat out would tell you it was none of your business.”

  In a separate case, federal authorities were unaware that a defendant in a fraud case had an offshore account with Mossack Fonseca. Internet phone company executive Jonathan Kaplan pleaded guilty in Bridgeport, Conn., in 2007 to accepting more than $400,000 in a commercial bribery scheme.

  Kaplan received probation. A law enforcement source, speaking on condition of anonymity because of pending legal matters, confirmed that prosecutors did not know that Kaplan had established an offshore company in the British Virgin Islands in 2004 called SGA Wireless. It remained active until May 2010.

  Reached by phone in New Jersey, Kaplan was asked whether he told authorities about SGA Wireless. He stammered, “I’m going to have to decline. I’ll talk to you.” He then abruptly hung up.

  * * *

  As we said, the surprising lack of any high profile names could merely stoke speculation of list scrubbing, or alternatively, we hope it will force the broader population to shift its attention to the true real locus of “offshore tax evasion”, perhaps the biggest in the world: the United States of America itself.

  

  

  

  

  

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• Turkey: The Business Of Refugee Smuggling & Sex Trafficking

  Submitted by Uzay Bulut via The Gatestone Institute,

  • Professional criminals convince parents that their daughters are going to a better life in Turkey. The parents are given 2000-5000 Turkish liras ($700-$1700) as a "bride price" — an enormous sum for a poor Syrian family.

  • "Girls between the ages of twelve and sixteen are referred to as pistachios, those between seventeen and twenty are called cherries, twenty to twenty-two are apples, and anyone older is a watermelon." — From a report on Turkey, by End Child Prostitution, Child Pornography and Trafficking of Children for Sexual Purposes (ECPAT).

  • Many Muslims have difficulty with, or even an aversion to, assimilating into the Western culture. Many seem to have the aim of importing to Europe the culture of intimidation, rape and abuse from which they fled.

  • Although the desperate victims are their Muslim sisters and brothers, wealthy Arab states do not take in refugees. The people in this area know too well that asylum seekers would bring with them problems, both social and economic. For many Muslim men such as wealthy, aging Saudis, it is easier to buy Syrian children from Turkey, Syria or Jordan as cheap sex slaves.

  On International Women's Day, March 8, Turkish news outlets covered the tragic life and early death of a Syrian child bride.

  Last August, in Aleppo, Mafe Zafur, 15, married her cousin Ibrahim Zafur in an Islamic marriage. The couple moved to Turkey, but the marriage ended after six months, when her husband abruptly threw out of their home. With nowhere to sleep, Mafe found shelter with her brother, 19, and another cousin, 14, in an abandoned truck.

  On 8 March, Mafe killed herself, reportedly with a shotgun. Her only possession, found in her pocket, was her handwritten marriage certificate.

  Mafe Zafur is only one of many young Syrians who have been victims of child marriage. Human rights groups report even greater abuse that gangs are perpetrating against the approximately three million Syrians who have fled to Turkey.

  A detailed report on Syrian women refugees, asylum seekers, and immigrants in Turkey, issued as far back as 2014 by the Association for Human Rights and Solidarity with the Oppressed (known in Turkish as Mazlumder), tells of early and forced marriages, polygamy, sexual harassment, human trafficking, prostitution, and rape that criminals inflicted upon Syrians in Turkey.

  According to the Mazlumder report, Syrians are sexually exploited by those who take advantage of their destitution. Children, especially girls, suffer most.

  Evidence, both witnessed and forensic, indicates that in every city where Syrian refugees have settled, prostitution has drastically increased. Young women between the ages of 15 and 20 are most commonly prostituted, but girls as young as thirteen are also exploited.

  Secil Erpolat, a lawyer with the Women's Rights Commission of the Bar Association in the Turkish province of Batman, said that many young Syrian girls are offered between 20 and 50 Turkish liras ($7-$18). Sometimes their clients pay them with food or other goods for which they are desperate.

  Women who have crossed the border illegally and arrive with no passport are at high risk of being kidnapped and sold as prostitutes or sex slaves. Criminal gangs bring refugees to towns along the border or into the local bus terminals where "refugee smuggling" has become a major source of income.

  Professional criminals convince parents that their daughters are going to a better life in Turkey. The parents are given 2000-5000 Turkish liras ($700-$1700) as a "bride price" — an enormous sum for a poor Syrian family — to smuggle their daughters across the border.

  "Many men in Turkey practice polygamy with Syrian girls or women, even though polygamy is illegal in Turkey," the lawyer Abdulhalim Yilmaz, head of Mazlumder's Refugee Commission, told Gatestone Institute. "Some men in Turkey take second or third Syrian wives without even officially registering them. These girls therefore have no legal status in Turkey. Economic deprivation is a major factor in this suffering, but it is also a religious and cultural phenomenon, as early marriage is allowed in the religion."

  Syrian women and children in Turkey also experience sexual harassment at work. Those who are able to get jobs earn little — perhaps enough to eat, but they work long and hard for that little. They are also subjected to whatever others choose to do to them as they work those long hours.

  A 16-year old Syrian girl, who lives with her sister in Izmir, told Mazlumder that "because we are Syrians who have come here to flee the war, they think of us as second-class people. My sister was in law school back in Syria, but the war forced her to leave school. Now unemployed men with children ask her to 'marry' them. They try to take advantage of our situation."

  If they are Kurds, they are discriminated against twice, first as refugees, then as Kurds. "The relief agencies here help only the Arab refugees; when they hear that we are Kurds, they either walk away from us, or they give very little, and then they do not return."

  The organization End Child Prostitution, Child Pornography and Trafficking of Children for Sexual Purposes (ECPAT) has produced a detailed report on the "Status of action against commercial sexual exploitation of children: Turkey." ECPAT's report cites, from the 2014 Global Slavery Index, estimates that the incidence of slavery in Turkey is the highest in Europe, due in no small measure to the prevalence of trafficking for sexual exploitation and early marriage.

  The ECPAT report quotes a U.S. State Department study from 2013: "Turkey is a destination, transit, and source country for children subjected to sex trafficking."

  The ECPAT report continues,

  "There is a risk of young asylum seekers disappearing from accommodation centres and becoming vulnerable to traffickers.

   

  "It is feared that reports from the UN-run Zaatari refugee camp for Syrians in Jordan are equally true for camps in Turkey: aging men from Saudi Arabia and other Gulf states take advantage of the Syrian crisis in order to purchase cheap teenage brides.

   

  "Evidence indicates that child trafficking is also happening between Syria and Turkey by established 'matchmakers' who traffic non-refugee girls from Syria who have been pre-ordered by age. Girls between the ages of twelve and sixteen are referred to as pistachios, those between seventeen and twenty are called cherries, twenty to twenty-two are apples, and anyone older is a watermelon."

  Apparently, 85% of Syrian refugees live outside refugee camps, and therefore cannot even be monitored by an international agency.

  Many refugee women in Turkey, according to the lawyer and vice-president of the Human Rights Association of Turkey (IHD), Eren Keskin, are forced to engage in prostitution outside, and even in, refugee camps built by the Turkish Prime Minister's Disaster and Emergency Management Authority (AFAD).

  "There are markets of prostitution in Antep. Those are all state-controlled places. Hundreds of refugees — women and children — are sold to men much older than they are," said Keskin. "We found that women are forced into prostitution because they want to buy bread for their children."

  Keskin said that they have received many complaints of rape, sexual assault and physical violence from refugees in the camps in the provinces of Hatay and Antep. "Despite all our attempts to enter those camps, the officials have not allowed us to."

  The Human Rights Association of Turkey has received many complaints of rape, sexual assault and physical violence from Syrian refugees in camps in Turkey. (Image source: UNHCR)

  Officials at AFAD, however, have strongly denied the allegations. "We provide refugees with education and health care. It is sad that after all the devoted work that AFAD has done to take care of refugees for the last five years, such baseless and unjust accusations are directed at us," a representative of AFAD told Gatestone.

  "The number of refugees in Turkey has reached to 2.8 million. Turkey has twenty-six accommodation centers in which about three hundred thousand refugees live. Those centers are regularly monitored by the UN; some UN officials are based in them."

  "Many refugees could have been provided with jobs suited to their training or skills," Cansu Turan, a social worker with the Human Rights Foundation of Turkey (TIHV), told Gatestone.

  "But none of them was asked about former jobs or educational background when they Turkish officials registered them. Therefore, they can work only informally and under the hardest conditions just to survive. This also paves the way for their sexual exploitation.

   

  "The most important question is why the refugee camps are not open to civil monitoring. Entry to refugee camps is not allowed. The camps are not transparent. There are many allegations as to what is happening in them. We are therefore worried about what they are hiding from us."

  "At our public centers where we provide support for refugees," Sema Genel Karaosmanoglu, the Executive Director of the Support to Life organization, told Gatestone.

  "We have encountered persons who have been victims of trafficking, sexual, and gender-based violence.

   

  "There is still no entry to the camps, and there is no transparency as entry is only possible after getting permission from relevant government institutions. But we have been able to gain access to those camps administered by municipalities in the provinces of Diyarbakir, Batman, and Suruc, Urfa."

  A representative at AFAD, however, told Gatestone that "the accommodation centers are transparent. If organizations would like to enter those places, they apply to us and we evaluate their applications. Thousands of media outlets have so far entered the accommodation centers to film and explore the life in them."

  "The number of current refugees is already too high," said the lawyer Abdulhalim Yilmaz, head Mazlumder's Refugee Commission. "But many Arab states, including Saudi Arabia and Bahrain, have not taken in a single Syrian refugee so far. And there are tens of thousands of refugees waiting at the borders of Turkey."

  If these women and children knew what was possibly awaiting them in Turkey, they would never set foot in the country.

  This is the inevitable outcome when a certain culture — the Islamic culture — does not have the least regard for women's rights. Instead, it is a culture of rape, slavery, abuse and discrimination that often exploits even the most vulnerable.

  The horror is that Turkey is the country that the EU is entrusting to "solve" the serious problem of refugees and migrants.

  The international community needs to protect Syrians, to cordon off parts of the country so that more people will not want to leave their homes to become refugees or asylum seekers in other countries. Perhaps many Syrians would even return to their homes.

  The West has always opened its arms to many beleaguered individuals from Muslim countries — such as 25-year-old Afghan student and journalist Sayed Pervez Kambaksh, who was beaten, taken to prison, and sentenced to death in 2007 for downloading a report on women's rights from the internet and for questioning Islam.

  It was Sweden and Norway that helped Kambaksh to flee Afghanistan in 2009 by helping him get access to a Swedish government plane. Kambaksh is now understood to be in the United States.

  Several European countries, however, have become the victims of the rapes, murders and other crimes committed by the very people who have entered the continent as refugees, asylum seekers or migrants.

  Europe is going through a security problem, as seen in the terrorist attacks in Paris and Brussels. Many Muslims have difficulty with, or even an aversion to, assimilating into the Western culture. Many seem to have the aim of importing to Europe the culture of intimidation, rape and abuse from which they fled.

  It would be more just and realistic if Muslim countries that share the same linguistic and religious background as Syrian refugees — and that are preferably more civilized and humanitarian than Turkey — could take at least some responsibility for their Muslim brothers and sisters. Although the desperate victims are their Muslim sisters and brothers, wealthy Arab states do not take in refugees. We have not seen any demonstrations with signs that read "Refugees Welcome!" People know that asylum seekers would bring with them problems, both social and economic. For many Muslim men such as wealthy, aging Saudis, it is easier to buy Syrian children from Turkey, Syria or Jordan as cheap sex slaves.

  Women and girls are not, to many, human beings who deserve to be treated humanely. They are only sex objects whose lives and dignity have no value. Syrians are there to abuse and exploit. The only way they can think of helping women is to "marry" them.

  

  

  

  

  

• "This Is Gonna Hurt"

  One way or another…

   

  

   

  Source: Townhall.com

  

  

  

  

  

• CNBC's Steve Liesman Makes A "Discovery": Americans Are Increasingly Angry And They Want Trump

  Earlier today, CNBC’s Steve Liesman made two very important, in fact “critical”, if about one year overdue, discoveries.

  The first one was that Americans are angry.

  According to the CNBC All-America Survey, a majority of Americans are angry about both the political and the economic system. 

  Perhaps if CNBC had discovered this sooner, it would have figured out that the reason it no longer reports its ratings to Nielsen has something to do with its underlying “rosy” slant on things, one which perhaps brings out people’s, well, anger. That and the occasional informercial for Ferrari and million dollar homes.

  

   

  The second discovery is that angry Americans largely support Trump over Hillary, something we have discussed since last summer.

  As Liesman puts it, nearly three-fourths of the public is angry or dissatisfied with the political system in Washington, compared with 56 percent who are angry or dissatisfied about the economy. This group favors Trump on the economy over Clinton 28 percent to 21 percent.

  

   

  Of those dissatisfied or angry with the economic system, Trump leads on the economy 27 percent to 19 percent for Clinton.

  

   

  All of these “surprises” should have been obvious.  But then the survey revealed several findings which surprised even us.

  First, and rather curiously, income isn’t correlated with anger, with angry respondents found both among the rich and the poor. 55% of people who earn $100,000 or more are dissatisfied or angry with the economic system, the same percentage as those who earn $30,000 or less.

  Also surprising: the wealthiest Americans are more likely to be angry or dissatisfied with the political system than the lowest income Americans.

  Another surprise: while conventional wisdom is that Clinton has more of a lock on the Democratic nomination than Trump has on the GOP nod, the CNBC survey shows that on key economic issues, Bernie Sanders is more of a challenge to Clinton than Kasich and Cruz are to Trump. For example, Sanders is virtually tied with Trump 25 percent to 26 percent on which candidate is judged to have the best policy for regulating Wall Street and the big banks. Clinton has the support of only 16 percent of the public on the issue. Clinton leads with support of 25 percent of the public on who has the best policies for the middle class, followed by 21 percent for Sanders and 16 percent for Trump.

  And finally, since this is CNBC, the channel reported that Trump is seen as best for the stock market by a wide margin. Fully 31 percent say his policies would be best for the stock market’s performance, compared with just 17 percent for Clinton. As many Democrats as Republican’s think Trump would be best for stocks.

  Which begs this question: since those who have the most invested in the stock market “run the system”, as they say, and ultimately decide who the next president is, why wouldn’t they “pick” Trump? And just how much of the most theatrical presidential election in history is, well, just theater?

  * * *

  Liesman’s full interview below:

  

  

  

  

  

• Vietnam War At 50 – Ron Paul Asks "Have We Learned Nothing?"

  Submitted by Ron Paul via The Ron Paul Institute for Peace & Prosperity,

  Last week Defense Secretary Ashton Carter laid a wreath at the Vietnam Veterans Memorial in Washington in commemoration of the "50th anniversary" of that war. The date is confusing, as the war started earlier and ended far later than 1966. But the Vietnam War at 50 commemoration presents a good opportunity to reflect on the war and whether we have learned anything from it.

  Some 60,000 Americans were killed fighting in that war more than 8,000 miles away. More than a million Vietnamese military and civilians also lost their lives. The US government did not accept that it had pursued a bad policy in Vietnam until the bitter end. But in the end the war was lost and we went home, leaving the destruction of the war behind. For the many who survived on both sides, the war would continue to haunt them.

  It was thought at the time that we had learned something from this lost war. The War Powers Resolution was passed in 1973 to prevent future Vietnams by limiting the president’s ability to take the country to war without the Constitutionally-mandated Congressional declaration of war. But the law failed in its purpose and was actually used by the war party in Washington to make it easier to go to war without Congress.

  Such legislative tricks are doomed to failure when the people still refuse to demand that elected officials follow the Constitution.

  When President George HW Bush invaded Iraq in 1991, the warhawks celebrated what they considered the end of that post-Vietnam period where Americans were hesitant about being the policeman of the world. President Bush said famously at the time, “By God, we’ve kicked the Vietnam Syndrome once and for all.”

  They may have beat the Vietnam Syndrome, but they learned nothing from Vietnam.

  Colonel Harry Summers  returned to Vietnam in 1974 and told his Vietnamese counterpart Colonel Tsu, "You know, you never beat us on the battlefield." The Vietnamese officer responded, "That may be so, but it is also irrelevant."

  He is absolutely correct: tactical victories mean nothing when pursuing a strategic mistake.

  Last month was another anniversary. March 20, 2003 was the beginning of the second US war on Iraq. It was the night of “shock and awe” as bombs rained down on Iraqis. Like Vietnam, it was a war brought on by government lies and propaganda, amplified by a compliant media that repeated the lies without hesitation.

  Like Vietnam, the 2003 Iraq war was a disaster. More than 5,000 Americans were killed in the war and as many as a million or more Iraqis lost their lives. There is nothing to show for the war but destruction, trillions of dollars down the drain, and the emergence of al-Qaeda and ISIS.

  Sadly, unlike after the Vietnam fiasco there has been almost no backlash against the US empire. In fact, President Obama has continued the same failed policy and Congress doesn’t even attempt to reign him in. On the very anniversary of that disastrous 2003 invasion, President Obama announced that he was sending US Marines back into Iraq! And not a word from Congress.

  We’ve seemingly learned nothing.

  There have been too many war anniversaries! We want an end to all these pointless wars. It’s time we learn from these horrible mistakes.

  

  

  

  

  

• Goldman Questions Rally, Fears Looming Event Risk Amid Record VIX Longs

  Volatility (VIX) is now at its lowest level since before the August sell-off last summer yet CS Fear Barometer remains elevated leaving the spread between the two options-market-based indicators is at its widest ever.

  

  Credit Suisse sees two main reasons for the difference:

  1) VIX measures just vol whereas CSFB reflects skew (i.e. Demand for puts vs. calls) The skew being elevated is a function of the upside calls being sold broadly in the market plus portfolio hedging; and

  2) CSFB is a 3-month forward look — ie around time of brexit and other potential catalysts)

  But as Goldman Sachs details, with the unemployment rate at 5% the ISM manufacturing index at its current level of 51.8 suggests a VIX level of 19.2. The much higher new orders index (58.3) suggests a VIX level of 16.7. So the VIX is currently pricing further economic improvement…

  

   

  As the market itself seems to shrugg off the collapse in earnings expectations…

  

   

  However, Goldman adds, while volatility may be subdued for the next few weeks, perhaps until the next potential major catalyst, such as “Brexit”, if our economists are correct, Fed chatter may pick up again in H2… which is supported by the fact that investors are pouring money into levered long VIX ETPs.

  

  Investors often chase strong performance but that has not been the case across the VIX ETP space. As the VIX has fallen, investors have been positioning for a rise in volatility via double levered long ETPs.

  

  Levered VIX ETP vega exposure has doubled since the market trough, driven by longs. We monitor vega exposure for a select group of 11 VIX ETPs, with around 4 billion in total market cap. We estimate that the gross vega notional across levered VIX ETPs now stands near a record high at around 244 million vega (in absolute terms), more than doubling since the market bottom in February. The increase has mostly been driven by long and double-levered long VIX ETPs, such as the UVXY and TVIX.

  Volatility investors are often interested in how much volatility exposure (vega) VIX ETPs carry and what percentage of the overall VIX futures market they account for.

  How big is the VIX ETP market? We estimate that the gross vega exposure controlled by the six most active VIX ETPs (VXX, VIXY, UVXY, TVIX, XIV, SVXY) which track the front month future is currently running at 320 million vega, which accounts for about 85% of the outstanding open interest in the VIX futures market.

  

  Simply put, as Goldman sums up, the options market seems to be questioning the quality of the rally and continues to price in more adverse outcomes.

  

  

  

  

  

• Refugees Flooding Italy Surge 80%; Proposed Solution in Single Picture

  Submitted by Mike “Mish” Shedlock of Mishtalk

  Italy’s Interior minister Angelino Alfano warns the refugee “system is at risk of collapse” following an 80 per cent spike in the number of arrivals to Italy across the central Mediterranean Sea in the first quarter of this year compared to 2015.

  Alfano fears that Syrians headed for Turkey will inetead head for Libya for an even more hazardous Mediterranean Sea crossing to Italy.

  How many tens of thousands of people can you keep, year after year? Without returns, either you organize real prisons, or it’s obvious that the system will collapse,” Mr Alfano said. “It doesn’t take a prophet to glimpse the future”.

  Costs are about to soar. Alfano wants to secure new deals with African nations, offering economic aid in exchange for taking back their citizens. Here’s a picture that explains everything.

  Refugee Crisis in a Single Picture

  

  Taking into consideration fences and walls, boat lifts, airlifts, increase security, border checks, prisons, crime, retention centers, and bribes to countries for taking back refugees: what’s this going to cost?

  Italy Seeks Greek-Style Solution

  The Financial Times reports Italy Pleads for Greek-Style Push to Return its Migrants.
  
  In an interview with the FT, Angelino Alfano, Italy’s interior minister, says the EU should move to secure deals with African nations, which are the source of the vast majority of migrants arriving in Italy, offering economic aid in exchange for taking back their citizens and preventing new flows.

   

  Mr Alfano’s request reflects renewed nervousness in Rome about the migration crisis following an 80 per cent spike in the number of arrivals to Italy across the central Mediterranean Sea in the first quarter of this year compared to 2015.

   

  If that increase holds through the warmer spring and summer months, it would smash the record 170,000 migrants who arrived in Italy in 2014, straining resources and creating a political problem for the centre-left government led by Matteo Renzi.

   

  “If Syrians don’t want to stay in Turkey but want to try the trip to Europe, they will go around and try to get here from Libya,” Mr Alfano said. “We still don’t have any evidence that this is happening, but we are monitoring.”

   

  “Irregular [migrants] have to be kept in closed camps from where they cannot escape. So how many tens of thousands of people can you keep, year after year? Without returns, either you organise real prisons, or it’s obvious that the system will collapse,” Mr Alfano said. “It doesn’t take a prophet to glimpse the future”.

  Cost Analysis

  Apparently it does take a prophet because Chancellor Merkel still doesn’t get it. And I have yet to see a complete analysis of the cost of these schemes, from anyone.

  New and Proposed Processes

  • Greece will return refugees to Turkey
  • On a one-for-one basis, Turkey will take those refugees and send them to Germany.
  • Turkey, (off the record as the EI looks the other way), will send refugees back to Syria in violation of international law.
  • Seeking news ways to get to the EU, Syrian refugees will attempt to get to Italy instead of Greece.
  • Italy will send those refugees back to Turkey where they presumably will be part of the existing one-for-one swap with the coalition of the willing (Germany).
  • Italy will return non-Syrians to Tunisia, Libya, and Egypt after bribing those countries with money.
  • In an effort to spread around the refugees monetary bribes go out to at least 10 countries.

  One country stands out in these preposterous scheme. Saudi Arabia, where art thou?

  

  

  

  

  

• Was There A Run On The Bank? JPM Caps Some ATM Withdrawals

  Under the auspices of "protecting clients from criminal activity," JPMorgan Chase has decided to impose withdrawal limits on certain ATM transactions. As WSJ reports, following the bank's ATM modification to enable $100-bills to be dispensed with no limit, some customers started pulling out tens of thousands of dollars at a time. This apparent bank run has prompted Jamie Dimon to cap ATM withdrawals at $1,000 per card daily for non-customers.

  Most large U.S. banks, including Chase, Bank of America Corp., Citigroup Inc. and Wells Fargo & Co. have been rolling out new ATMs, sometimes known as eATMs, which perform more services akin to tellers. That includes allowing customers to withdraw different dollar denominations than the usual $20, typically ranging from $1 to $100.

   

  The efforts run counter to recent calls to phase out large bills such as the $100 bill or the €500 note ($569) to discourage corruption while putting up hurdles for tax evaders, terrorists, drug dealers and human traffickers.

   

  The Wall Street Journal reported in February that the European Central Bank was considering eliminating its highest paper currency denomination, the €500 note. Former U.S. Treasury Secretary Lawrence H. Summers also has called for an agreement by monetary authorities to stop issuing notes worth more than $50 or $100.

  This move appears to have backfired and created a 'run' of sorts on Chase…

  A funny thing happened as J.P. Morgan Chase & Co. modified its ATMs to dispense hundred-dollar bills with no limit: Some customers started pulling out tens of thousands of dollars at a time.

   

  While it was changing to newer ATM technology, J.P. Morgan found that some customers of banks in countries such as Russia and Ukraine had used Chase ATMs to withdraw tens of thousands of dollars in a single day, people familiar with the situation said. Chase had instances of people withdrawing $20,000 in one transaction, they added.

  Remember Greece?

  

   

  And, in what appears to the start of a war on cash in America, The Wall Street Journal reports,  the bank is cracking down, capping ATM withdrawals at $1,000 per card daily for noncustomers.

  The bank run by Chairman and Chief Executive Jamie Dimon said there doesn’t appear to be fraud involved. But in part due to heightened regulatory scrutiny, banks are paying more attention to large cash transfers that could be a sign of money laundering or other types of shady activity.

   

  The move by the largest bank in the country doesn’t affect J.P. Morgan Chase’s own customers, whose maximum daily withdrawals are set depending on the client’s account type.

   

  J.P. Morgan Chase’s change last month affects roughly 18,000 automated teller machines nationwide and followed an interim step earlier this year limiting noncustomer cash removals at $1,000 per transaction. The earlier move was made as a temporary fix while the bank could make software changes to roll out the more stringent daily limit, said bank spokeswoman Patricia Wexler.

  However, as we noted last night,

  What the story is about is the nebulous world of offshore tax evasion and tax havens, which based on data from the World Bank, IMF, UN, and central banks, hide between $21 and $32 trillion, where registered incorporation agents and law firms in small Caribbean countries (and not so small US states) make the laundering of money and the "disappearance" of the super wealthy, into untracable numbers hidden behind shell companies, possible.

  So, there is more than the total US GDP being laundered in offshore tax havens, but yes, let's eliminate the $100 bill to cut down on corruption and money laundering.

  Of course, we are sure this is just another 'storm in a teacup' as why should anyone question a fine upstanding and trustworthy bank withholding people's money when they are assuredly tax evaders, terrorists, drug dealers and human traffickers.

  

  

  

  

  

• Fed Sees Labor Market Worst Since 2009

  Cast your mind back to Friday – when payrolls confirmed everything for everyone and enabled more crowing from an establishment clinging to smoke and mirrors. It appears The Fed disagrees with the 'awesome' jobs market that BLS proposes as today's Labor Market Conditions Index continues to push to its weakest since 2009, drastically divergent from the seemingly all-impotrant non-farm payrolls data.

  The 19-factor labor market conditions index developed by The Fed is not singing from the same Koombaya "everything is awesome" hymn-sheet that The White House would prefer…

  

   

  This kind of divergence has not been seen before in the lifetime of this data series… so what exactly is going on?

  It appears the market is starting to agree…

  

  

  

  

  

  

• The Other Problem With Debt No One Is Talking About

  Submitted by MN Gordon via EconomicPrism.com,

  Nearly 7 years have elapsed since the official end of the Great Recession.  By now it’s painfully obvious the rising tide of economic recovery has failed to lift all boats.  In fact, many boats bottomed out on the rocks in early 2009 and have been taking on water ever since.

  Last week, for instance, it was reported that U.S. credit card debt topped $714 billion in the third quarter of 2015.  That’s up $34 billion from the year before.  Shouldn’t the economic recovery allow consumers to pay down their debts?

  Indeed, it should, if only the economic recovery was the result of real, economic growth.  To the contrary, the recovery has been faux growth driven by cheap Fed credit and financial engineering.  Mutual increases in prosperity haven’t occurred.

  In particular, those outside the financial services business, and other bubble industries, like government lobbyists, have largely missed out on any increase in income or living standard.  Good paying professional jobs that vaporized during the downturn have been replaced with low paying service jobs.  Consumers have used credit card debt to pick up the slack.

  Unfortunately, this short term solution sets up consumers for pain in the future.  At some point, as debt increases faster than incomes, the ability to pay down the principle becomes near impossible.  Even making the minimum payment becomes more and more difficult as new debt is added to the burden each month.

  Playing with Fire

  “We’re playing with fire now,” said Odysseas Papadimitriou, chief executive of credit statistics and analysis site CardHub.  “Either an unexpected economic downtown or the continuation of current spending and payment trends could be enough to unleash an avalanche of defaults.”

  Papadimitriou is correct in his assertion we are playing with fire and that the continuation of current trends could unleash an avalanche of defaults.  But his statement that there could be an “unexpected” economic downturn doesn’t appreciate the natural rhythms of an economy.  Specifically, economic downturns are normal occurrences – they should be expected, not unexpected.

  From what we gather there has been roughly 12 recessions (assuming the 1980 and 1981-82 recessions were two distinct events) in the United States in the post-World War II era.  The average interval between these recessions has been about 58 months.  Based on the official end date of the Great Recession of June 2009, we are currently 82 months into the current recovery.  In other words, we are due for a downturn.  What’s more, we may presently be entering one.

  According the Atlanta Fed’s March 28 GDPNow model forecast, real GDP growth in the first quarter of 2016 is estimated to be 0.6 percent.  By the time you read this, the April 1 update will likely have been posted.  You can take a look at the Atlanta Fed’s latest forecast here.

  The point is, GDP is meager.  Moreover, present credit card debt is unsustainable.  The potential for an avalanche of defaults is already high, regardless of if there’s a recession.  Yet, at this point in the recovery, the looming potential for a recession is highly likely.  Hence, an avalanche of credit card defaults is practically certain.  But that’s not all…

  The Other Problem with Debt No One is Talking About

  The other problem with expanding consumer debt that is rarely, if ever, mentioned is that it accompanies expanding waste lines.  You can chart the strength of the relationship over time with a near perfect +1.0 positive correlation.  Why is this?

  We don’t know for sure.  We haven’t studied the data.  Nor have we researched the causation.  But gut feel tells us it has something to do with discipline.  More precisely lack of discipline.

  For example, the inclination to charge the purchase of a new flat screen TV complements the proclivity to jumbo size a mega gulp soda pop.  Both are entirely unnecessary.  But they go hand in hand.

  Saving up for a flat screen and resisting the jumbo size option takes the sort of self-restraint that’s absent from our debt saturated society.  Of course, the federal government is the worst offender.  Even with their bloated budgets they still need a half trillion dollar annual deficit to keep the machine humming along.

  No doubt, the promises politicians have made to voters for a comfortable retirement and free drugs are at the heart of matter.  Similar to credit card debt, the promises stack up each month and each year like dead wood in the Angeles National Forest.  At some point all it takes is the strike of a single match and the whole mountain conflagrates in a blazing inferno.

  

  

  

  

  

• In Grotesque Irony Iran Warns Obama Not To Cross "Red Lines"

  Last July, the United States entered into an agreement with Iran with the hopes of limiting their nuclear ability. At a high level, the US would lead the way in lifting oil and financial sanctions imposed due to Iran’s nuclear programs; in return Iran would reduce their stockpile of enriched uranium, storage facilities and centrifuges. What was not negotiated, however, were sanctions on missile technologies and conventional weapons.

  Per the White House:

  

   

  Then, in March 2016, Iran launched a series of ballistic missile tests early in the month that got the world’s attention.

   

  As we reported then, In a testament to the “success” of Washington’s foreign policy towards Iran, Iran’s Brigadier General Hossein Salami, deputy commander of the IRGC said the following: “The missiles fired today are the results of sanctions. The sanctions helped Iran develop its missile program.” Furthermore, the rockets had a quite clear message written on their side:

  The message printed on #IRGC missiles tested recently in #Hebrew :????? ????? ?????? ???
  “#Israel must be wiped off the face of the earth”

  — H.Soleimani (@MashreghNews_ir) March 9, 2016

   

  President Obama’s response? He said Iran was “not following the spirit of the deal.”

  This is what he said according to The Hill:

  “Iran so far has followed the letter of the agreement, but the spirit of the agreement involves Iran also sending signals to the world community and businesses that it is not going to be engaging in a range of provocative actions that are going to scare businesses off”

  While we’re sure Iran didn’t bat an eyelid at the latest hollow rhetoric from the White House, it did seem to get irritated when the Treasury then implemented fresh sanctions. The thought is that as the missiles become even more capable of hitting long range targets, they could eventually be equipped to carry nuclear warheads as well, immediately putting various neighboring countries in danger.

  Fast forward to today, when Iranian Deputy Chief of Staff Brig-Gen Maassoud Jazzayeri was quoted by the Fars News Agency as saying:

  “The White House should know that defense capacities and missile power, specially at the present juncture where plots and threats are galore, is among the Iranian nation’s red lines and a backup for the country’s national security and we don’t allow anyone to violate it”

  Clearly, the Iranian Revolutionay Guard was not particularly concerned how Obama evaluates the “spirit” of the deal as long as he remains utterly helpless to change it, something which Iran is absolutely convinced of at this moment.

  And then the moment of truth: Iran actually used Obama’s infamous “red line” phrase… against him, when “Iran warned the US on Monday that any attempt to encroach on the Islamic Republic’s ballistic missile program would constitute the crossing of a “red line.”

  “The US calculations about the Islamic Republic and the Iranian nation are fully incorrect,” Iranian Deputy Chief of Staff Brig-Gen Maassoud Jazzayeri was quoted by the Fars News Agency as saying.

  Jazzayeri accused US President Barack Obama of making vows and breaking them by saying removal of sanctions on Iran would be conditioned on the Islamic Republic halting its ballistic missile program.

  And with that, the farce was complete.

  * * *

  Incidentally, this latest slapdown back and forth but mostly back didn’t escape the GOP Presidential hopeful Donald Trump, who promptly called Obama a baby for thinking Iran was going to adhere to our guidelines: “I hate seeing President Obama today saying that Iran has violated our agreement. I mean, what did he think? He’s now complaining about Iran violating the agreement. What the hell did he think? He’s like a baby. He’s like a baby.“

  

  

  

  

  

• A Quarter Century Of Monetary Voodoo

  Authored by Bill Bonner via Bonner & Partners (annotated by Acting-Man.com's Pater Tenebrarum),

  A Witless Tool of the Deep State?

  Finance or politics? We don’t know which is jollier. The Republican presidential primary and Fed monetary policies seem to compete for headlines. Which can be most absurd? Which can be most outrageous? Which can get more page views?

  Politics, led by Donald J. Trump, was clearly in the lead… until Wednesday. Then, the money world, with Janet L. Yellen wearing the yellow jersey, spurted ahead in the Hilarity Run.

   

  

  A coo-coo for the stock market…

   

  “Cautious Yellen drives global stocks near 2016 peak,” reported a Reuters headline. The story itself was a remarkable tribute to the whole jackass money system.

  At first glance, “cautious Yellen” would seem incongruous with stocks rising to “near 2016 peak.” Caution normally means playing it cool, not encouraging speculation.

  But it wasn’t so much what Ms. Yellen said that sent stocks racing ahead. It was what she hasn’t done. And she hasn’t done exactly what we thought she wouldn’t do. That is, so far this year, she has not taken a single step in the direction of a “normal” monetary policy; our guess is that she never will.

  Why not? Is it because she is a witless tool of Deep State cronies? Is it because her economic theory is silly, superficial, and simpleminded? Or is it because she and her predecessor, Ben Bernanke, have done so much damage to the normal world that there is nothing to go back to?

   

  

  US monetary base and the effective federal funds rate – the “new normal”. It’s the new normal, because any serious change toward a normal state of affairs as it used to be understood will implode the credit and asset bubble – click to enlarge.

   

  They have burned our bridges… our factories… our savings… and everything else behind them. Now, it is better just to pack up, move out… and keep on going. That is more or less what Charlie Munger sees coming.

   

  Prepare for the Worst

  Asked whether the Fed would reduce its balance sheet to pre-Great Recession levels (by selling back to the private sector the $4 trillion worth of bonds it bought over the last eight years), Warren Buffett’s long-time business partner had this to say:

  I remember coffee for 5 cents and brand new automobiles for $600. The value of money will continue to go down. Over the past 50 years, we lived through the best time of human history. It is likely to get worse. I recommend you prepare for worse because pleasant surprises are easy to handle.

  The “normal” financial world is no longer habitable. Ms. Yellen went on to say that these soupçons of recklessness – her hints about not returning to normal – provided an “automatic stabilizer,” to the global financial system. That’s right (and here is where we begin to laugh uncontrollably).

  Not only does outrageously easy credit help “stabilize” the system, so does the anticipation of more of it! Maybe giving out the news that she will NOT even try to get back to normal helps to settle investors’ nerves. Maybe normal wasn’t all that great anyway.

  Either way, speculators can continue whatever perverted hustles they have going… free from the fear that “normal” will walk around the corner and catch them in the act.

  But what’s this? A complicating factor, the “outlook for inflation,” is “uncertain,” says Ms. Yellen. The Financial Times clarifies: “[I]nflation could take longer to return to the Fed’s 2% target.”

   

  

  5 year inflation breakeven rate – Ms. Yellen sees one thing, but the market apparently sees something different… – click to enlarge.

   

  Ms. Yellen is worried about a lack of inflation in much the same way primitive farmers worried about a lack of rain. Her response is to do more of the ritual dances… and say more of the magic incantations… that have so far only produced more drought conditions.

   

  A Quarter Century of Voodoo

  In Japan, they’ve been doing this voodoo for 26 years. We’ve had our eye on Japan since the mid-‘80s, when everyone was sure that Japan Inc. was the hottest thing in the econosphere.

  The miracle economy blew up in 1989, and liquidity disappeared. Since then, Japan Inc. has been the Sahara of the developed world. QE, ZIRP, NIRP, monumental deficits, Abe’s Arrows… nothing worked to make it rain.

   

  

  Data from the island of the parched: the Nikkei remains nearly 60% below its highs of 26 years ago. Meanwhile, the BoJ’s balance sheet has gone into orbit, in the latest ploy that’s not working – click to enlarge.

   

  Negative interest rates, announced late last year, were supposed do the job. Savers were supposed to throw up their hands, open up their wallets… and spend, spend, spend to avoid paying the tax on saving.

  Instead, savers saved more. What else could they do? With negative rates they needed more savings to get the same financial bang per buck. Result: In January, Japan’s retail sales fell 2.3% over the previous month.

  But the Japanese feds aren’t giving up. And now they turn to two of the world’s most celebrated witchdoctors – Paul Krugman and Joseph Stiglitz – for advice on what to do next.

   

  

  Krugstitz – the closest equivalent the modern world has to witchdoctors and voodoo practitioners. You might call them quacks to the powerful. Nothing of what these geniuses have prescribed over the years has worked, so obviously the Japanese asked them for more advice, which predictably turned out to be “do more of what hasn’t worked”. As snake oil selling goes, these guys are brilliant.

   

  Japan has famously run huge fiscal deficits in an effort to get the economy moving. Thanks to a quarter century of these loose budgets, the island now has gross government debt equal to 240% of GDP and nearly nine times tax revenues.

  Most of the spending is used to fund programs for old people – health care and pensions – making it hard to cut back. Japan’s government finances are nothing more than a huge, compulsory, unfunded, old-age benefit program… one that is sure to go broke.

  But don’t worry, Japan. According to the Financial Times, the two Nobel Laureates went to Tokyo and argued – if you can believe it – that Japan needs more liquidity, that is, “a looser fiscal policy.”

  Yes, like New Orleans needed a shower after Hurricane Katrina.

  

  

  

  

  

• Shocking Footage: Chicago Resident Gunned Down While Live-Streaming

  Over the weekend we reported some shocking gun crime statistics in Chicago: according to a CNN report, gun violence in the windy city is on track to post its worst year in the 21st century, the result of an unprecedented surge in gun deaths in the first three months of the year.  By March 31, 141 people had been killed. Last Thursday, eight were shot and two of them died in one hour alone, Chicago Police said.

  The 141 deaths in the first three months of the year mark a 71.9% jump from the same period in 2015, when 82 people were killed. It’s the worst start to a year since 1999, when 136 people died in the first three months the year, according to the Chicago Tribune.

  At that pace – an average of three killings every two days – Chicago would have 564 homicides by the end of the year. That would eclipse the 468 killings recorded in 2015 and 416 in 2014.

  

   

  However, nothing prepared us for this jarring example of just how bad gun violence in Chicago truly is.

  The following graphic footage shows a Chicago resident gunned down Thursday while live-streaming the entire event on Facebook, as he stood on a street corner. The man falls to the ground as the suspect stands over him continuing to fire shots.

  

  

   

  Viewer discretion strongly advised.

   

  This was one of nine shootings across the city on Thursday that left at least two people dead.

  Cited by BuzzFeed, Chicago Police Officer Thomas Sweeny said that the shooting occurred just before 5:00 p.m. in the 5800 block of South Hoyne Avenue. A suspect approached the 31-year-old man, shot him multiple times, then fled in a vehicle, Sweeney said.

  After the shooting stops, another man can be heard talking about taking the individual to a hospital as a woman wails in the background.

  The New York Daily News reported the victim was in critical condition Thursday night and had sustained multiple gun shot wounds.

  

  

  

  

  

• Allergan Implodes: Pfizer Deal In Jeopardy After Treasury Announces "Action To Curb Inversions, Earnings Stripping"

  As if a million M&A arbs suddenly cried out in terror, and were suddenly silenced.

   

  Moments ago the stock of Allergan imploded, crashing by 20%, plunging to $225 or the lowest level since late 2014, in the process blowing up countless M&A arb deals which were hoping the recently blowing out spread, which as of Friday hit a post announcement wide of $61, is attractive enough to take the risk of a Treasury crackdown on tax inversion deal.

  

  Alternatively, maybe someone knew something.

  Something, such as what the Treasury announced 5pm this afternoon in a release titled “Treasury Announces Additional Action to Curb Inversions, Address Earnings Stripping“

  As the title implies, the Treasury has just made it quite clear that any and all tax inversions, of which the Pfizer-Allergan deal is most notable, are no longer welcome. This is what it said.

  Treasury Announces Additional Action to Curb Inversions, Address Earnings Stripping

   

  Today, the U.S. Department of the Treasury and the Internal Revenue Service (IRS) issued temporary and proposed regulations to further reduce the benefits of and limit the number of corporate tax inversions, including by addressing earnings stripping. By undertaking an inversion transaction, companies move their tax residence overseas to avoid U.S. taxes without making significant changes in their business operations. After an inversion, many of these companies continue to take advantage of the benefits of being based in the United States, while shifting a greater tax burden to other businesses and American families.

   

  “Treasury has taken action twice to make it harder for companies to invert. These actions took away some of the economic benefits of inverting and helped slow the pace of these transactions, but we know companies will continue to seek new and creative ways to relocate their tax residence to avoid paying taxes here at home,” said Treasury Secretary Jacob J. Lew. “Today, we are announcing additional actions to further rein in inversions and reduce the ability of companies to avoid taxes through earnings stripping. This will have an important effect, but we cannot stop these transactions without new legislation. I urge Congress to move forward with anti-inversion legislation this year. Ultimately, the best way to address inversions is to reform our business tax system, which is why Treasury is releasing an updated framework on business tax reform, outlining the administration’s proposals to date as a guide for future reform. While that work goes on, Congress should not wait to act as inversions continue to erode our tax base.”

   

  Genuine cross-border mergers make the U.S. economy stronger by enabling U.S. companies to invest overseas and encouraging foreign investment to flow into the United States. But these transactions should be driven by genuine business strategies and economic efficiencies, not a desire to shift the tax residence of a parent entity to a low-tax jurisdiction simply to avoid U.S. taxes.

   

  Today, Treasury is taking action to:

  • Limit inversions by disregarding foreign parent stock attributable to recent inversions or acquisitions of U.S. companies. This will prevent a foreign company (including a recent inverter) that acquires multiple American companies in stock-based transactions from using the resulting increase in size to avoid the current inversion thresholds for a subsequent U.S. acquisition.
  • Address earnings stripping by:
    • Targeting transactions that generate large interest deductions by simply increasing related-party debt without financing new investment in the United States.
    • Allowing the IRS on audit to divide debt instruments into part debt and part equity, rather than the current system that generally treats them as wholly one or the other.
    • Facilitating improved due diligence and compliance by requiring certain large corporations to do up-front due diligence and documentation with respect to the characterization of related-party financial instruments as debt.  If these requirements are not met, instruments will be treated as equity for tax purposes.
    • Formalize Treasury’s two previous actions in September 2014 and November 2015.

   Treasury will continue to explore additional ways to address inversions.
   
  Treasury is also releasing an updated framework for business tax reform, which revises the framework released in 2012. This lays out the key elements of the President’s approach to reform and details the specific proposals the administration has put forward, including a comprehensive approach to reforming the international tax system.

  The Allergan-Pfizer spread now is basically to levels as if the deal never happened:

  

   

  We can’t wait to find out how many M&A arbs, who had anywhere between 2x and 5x (or more) leverage on the arb spread (of which the most notable recent arb chaser is none other than Franklin resources whose Dec 31. $1.3BN pure arb stake is now worth 20% less in an instant) just blew up after hours with just this one simple press release.

  The table below shows why Franklin Resources will be short one employee tomorrow:

  

  We also wonder how this will impact the broader, and quite illiquid, market tomorrow.

  

  

  

  

  

• The Inevitable Failure Of The War On Cash

  Submitted by Jeff Thomas via InternationalMan.com,

  Some years ago, when I suspected there would be a War on Cash at some point, everything in the behaviour of the central banks pointed to the idea—it fit exactly into their own informed, yet unrealistic, pattern of logic. I therefore decided that it would be a likely development and would take place at a time when they had tried everything else and had run out of other ideas. As to a date when this might happen…I had no idea.

  When several countries had begun to limit the amount of money that a depositor could take out of a bank, I decided that the first shots in the War on Cash had been fired and began to publish my prognostications as to what shape it would take. First, there were the benefits to the bank (the elimination of cash transactions, which would assure that virtually all monetary transactions, large and small, would have to be passed through banks, allowing them to effectively “own” all deposits, charge for every transaction and even refuse transactions). The governments would also benefit. In approving the banks’ monopoly on monetary transactions, they’d benefit primarily through the new ability to tax people by direct debit, ending any remnant of voluntary payment of taxation.

  What I didn’t anticipate at that time was that, within a few months, the War on Cash would be escalated quickly—more quickly than was safe for them to do, as it could alarm depositors. (As in the old analogy of boiling a frog, it’s always best to turn up the heat slowly, to lull the victim into complacency as he’s being done in.)

  This indicated to me that the central banks had decided that they’d already waited too late and had better hurry up the programme to assure that it was in place before a currency crisis could heat up.

  Since then, someone came up with an excellent name for the phenomenon, one that succinctly describes the plan in a nefarious way, as it deserves to be described—the War on Cash. Today, anyone who is paying attention is aware of the War on Cash and what it might do to him. As each new salvo by the banks and governments is uncovered, attentive observers are publishing such developments on the Internet.

  However, there’s another facet to the War on Cash that no one (to my knowledge) has yet addressed. The war is still new, and those who will be attacked are understandably still scrambling for their muskets and hurrying to the ramparts. (Musing on how a war will play out usually comes later, as it’s winding down and a victor seems apparent. However, in my belief, it’s wise to examine what the landscape will look like after the war is over, as it can serve to inform us as to what battle tactics should be employed.)

  So, let’s have a look. First off, we know that whenever there’s a coming monetary collapse, major banks look forward to employing their political influence to assure that legislation and emergency government measures protect them in a way that results in putting upcoming competitors out of business. We can expect the same this time around. These smaller banks arise during boom times by creating many small branches—the type seen in strip malls and shopping villages. Typically, they have only 1,000 or so depositors per bank—just barely enough to create profit, but, as “convenience banks,” they can count on a steady business from those who live nearby.

  Larger banks also tend to create numerous branches during good times, in order to hold down the rising competition; however, they resent the need to create endless less-profitable entities that tie up funds that could otherwise go out as directors’ bonuses. Consequently, when a monetary crisis occurs and the government steps in to help out the major banks, many of the smaller competitors are driven under, as they don’t receive the same governmental support. At such times, we see the edifices in the city remain, whilst the little banks in the strip mall disappear. The majors can now be rid of them. During a banking crisis, a country returns to 19th-century banking in terms of available institutions. Want to make a deposit? Make a trip into the city.

  In keeping with the War on Cash, ATMs will also be eliminated. All transactions will be by plastic card or smartphone.

  Certainly, as a result of the dangerous position the banks will already be in, we shall witness a steady increase in the charges by banks for the privilege of having them control depositors’ economic worth. Worse, we shall witness the outright confiscation of deposits (as in Cyprus in 2013) and the control of how much a depositor may debit his account in any given week (as in Greece today). It’s at this point that a universal trend to get around the banks’ control will unquestionably take hold. This, I believe, will manifest itself in two ways: top down and bottom up.

  Top Down

  As I write, bank branches—all of them in small towns—are already closing in “lesser” countries like Romania. This will both grow and spread eventually, to more prominent countries. Banking will be increasingly difficult for depositors, as the ability to actually talk to individuals at the bank will dry up. The bank will become more like a faceless authority that holds power over depositors’ money and will grow to be hated in a relatively short time. (Most of the people of the world have already learned to be deeply distrusting of banks and bankers; outright hatred would not be a major next step.)

  Bottom Up

  In the Eastern provinces of Mexico, the Campesinos already eschew banks, choosing instead to store their money privately. (Chiapas Province is in a virtual economic war with Western Mexico. They value the Libertad as East Indians value gold.) Those Mexicans who live further to the west regard their eastern brothers as somewhat lawless and uncivilised at present. However, when the Campesinos prove to be surviving the crisis better than their western neighbours are, the western provinces will, of necessity, follow their lead. Mexico will be amongst the first countries to return to precious metals as the primary (if not sole) currency, setting the stage for other countries.

  Countries such as Romania and Mexico will serve as an early-warning system. The solutions they and other “fringe” countries employ will spread quickly to the larger world. In order to keep from being controlled by banks, the average person in the EU, U.S. and other “civilised” jurisdictions will learn quickly that, if other forms of trade (alternate currencies, precious metals, barter, etc.) allow him to feed his children when the banks restrict him, he’ll resort to any and all forms of black market dealing that he can find.

  The Treaty of Versailles

  Following World War I, the victors decided to economically cripple the losers—the Germans. The Treaty of Versailles was ruthless in its purpose—to strip Germany of all possibility of future prosperity, so that it could never rise again.

  Of course, what happened was the opposite. Following an economic collapse just five years after the war, the German people, now desperate, chose to follow a new leader who promised that he would “make Germany great again.” The more arrogant he became, the more support he received. The oppression of the treaty failed, as Germans, pushed to the wall, came out fighting.

  I believe that the War on Cash will end without such an extreme, but, just as with the Treaty of Versailles, will be stopped by the people of the world as a result of a monetary stricture that is simply too oppressive to be tolerated. This will by no means be a pleasant historical period to travel through. Many people will have their savings wiped out. Many will literally starve. But the anger that’s created in them will reveal the banks as the clear “enemy” in this drama, and those citizens who are presently respectful of the laws of their country will increasingly defy the enemy. They will resort to an alternate system. This is historically what has always occurred when people have been squeezed to this degree, and it will repeat itself this time around.

  

  

  

  

  

• Valeant Tumbles As Lenders Demand Two Pounds Of Flesh For Covenant Waivers

  Two weeks ago, the catalyst that pushed Valeant CDS to record wide levels implying a 55% probability of default over 5 years, while sending the company’s stock plunging, was news that Valeant was scrambling to engage its lenders to obtain a default waiver to its bank credit agreement to eliminate a technical default that arose when it didn’t file its 10-K before March 15.

  As we reported then, “in anticipation of those meetings, owners of Valeant’s senior bank loans are reaching out to investment banks, including Barclays, who will help mediate the negotiations, the sources said. Barclays did not immediately respond for comment.”    

  As was explicitly warned, the lenders’ demands include higher interest payments and a pledge to pay a larger amount of the bank loans from the proceeds of any Valeant asset sales.

  Since then the stock bounced modestly because apparently the algos forgot that when lenders smell blood and a potential default from a debtor without any other recourse, they will demand a pound of flesh. Or maybe two.

  Well, moments ago the market got a harsh reminder that Valeant is effectively negotiating default compliance with a group of banks who realize they are dealing with a company that has a $9 billion market cap and can thus ask for anything and management and shareholders have no choice but to say yes unless that $9 billion to quickly go to $0.

  According to Bloomberg, Valeant, just as predicted,  “is facing push back from some of its lenders as it seeks to waive a default and loosen restrictions on its debt, according to people with knowledge of the matter.”

  The resistance may complicate Valeant’s efforts to win the support it needs before the Wednesday deadline for lenders to respond. The company, which has about $32 billion in total debt, must gain approval from more than half of the investors holding its more than $11 billion of secured loans. Those that are balking are demanding a higher interest rate and a better fee, said the people, who asked not to be identified because the discussions are private. They also want to impose some restrictions on the terms the company is offering on the proposal, they said.

  Also known as a pound of flesh. Or maybe two.

  Bloomberg reports that the initial Valeant “bid” is a 50 basis-point fee and a 0.5 percentage point boost on the interest it pays on its term loans, people with knowledge of the matter said at the time.  Banks, however, want more: “Some lenders might see it as an opportunity to extract better pricing or other terms,” Justin Forlenza, an analyst at independent credit-research firm Covenant Review, said in an interview. “They can meet at a certain point that lenders and the company can get comfortable with.”

  Now this is only for the default waiver. Additionally, as a result of its collapsing business Valeant has to cure a key negative covenant limiting its interest coverage ratio to just 2.25x. Valeant’s coverage is about to jump to at least 3.00x and here again the banks want moar.

  Under the current proposal, the drug maker is also seeking to loosen restrictions on its credit pact that govern a measure of earnings the company needs to maintain relative to its annual interest expense, Valeant said in a statement on March 30. The interest-coverage ratio was set to jump to three times from 2.25 times, with that level set to be tested before the end of June, according to its current agreement with lenders.

   

  Asking lenders to relax loan covenants suggests Valeant may not be able to repay debt as quickly or generate projected earnings, according to Bloomberg Intelligence analyst Elizabeth Krutoholow.

  The good news for the banks is that Valeant still has lots of spare cash to pay out, and more importantly zero leverage. And since there are virtually no recent comps for such covenant waiver deals, the banks know that they can demand anything they want and will get it, since management has no choice but to concede to any demand, as the alternative is an outright default and complete collapse in the equity value of the company.

  This perhaps explains why after jumping into the $30 range last week, VRX stock is once again back just north of its multi year lows.

  

  

  

  

  

  

• Oil is Setting Up for a Massive Short Squeeze before OPEC Doha Meeting (Video)

  By EconMatters

  

  Barclays, BNP Paribas and a bunch of shorts are going to have to cover before the Doha Meeting. Expect the short squeeze to begin sometime this week.

  © EconMatters All Rights Reserved | Facebook | Twitter | YouTube | Email Digest | Kindle  

  

  

  

  

• Saudis Retaliate To "Oil Freeze" Fallout: Ban Transport Of Iranian Crude In Territorial Waters

  At first, when it announced the terms of its “oil freeze” agreement with Russia one month ago, Saudi Arabia seemed willing to grant Iran a temporary exemption from the supply freeze, at least until it recovers its pre-embargo production levels. That however changed on Friday when the country’s Deputy Crown Prince Mohammed bin Salman, shocked Saudi Arabia’s Arab allies in the Persian Gulf, telling Bloomberg his country would only join the freeze curbe Iran – and all other OPEC member nations – also joined.

  Following the Friday announcement, yesterday Iran’s oil minister Zangadeh made it clear that the country rejects Saudi demands, and would continue ramping up production at will, in the process making the April 17 Doha meeting meaningless.

  And then, in a new and unexpected retaliation by Saudi Arabia for Iran’s intransigence, moments ago the FT reported that Saudi Arabia has taken steps to slow Iran’s efforts at increasing oil exports, banning vessels that transport Iranian crude from entering their waters, according to traders and shipbrokers.

  More details from FT:

  Iranian vessels carrying the country’s crude are restricted from entering ports in Saudi Arabia and Bahrain, according to a circular sent by a shipping insurance company to its members in February.

   

  The notice said ships that have called to Iran as one of its last three ports of entry will also require approval from the Saudi and Bahraini authorities before entering their waters. Shipbrokers and traders have relayed the same messages since.

   

  Iranian oil executives have expressed their concern about the message circulating in the market, saying it is only adding to problems they face in selling their crude.

   

  Saudi Aramco, the state oil company, and The National Shipping Company of Saudi Arabia (Bahri) did not respond to requests for comment.

  It is not clear just how much of an impact this escalation will have because as shown in the map below, Saudi territorial waters are hardly a major factor in Gulf shipping lanes.

  

  However, considering that Iran already faces insurance, financing and legal obstacles despite the lifting of sanctions linked to its oil industry in January, and considering the amount of clout the Saudis have with financial partners, its attempt to make Iran’s oil production more difficult will surely reap at least partial success.

  Indeed, as the FT adds, oil tanker association Intertanko and other industry participants say no formal notice has been given by Saudi Arabia but uncertainty is making some charterers less willing to lift Iranian crude.

  ”It’s seen as an unknown risk,” said one shipbroker. “No one wants to disrupt their relationship with the Saudis.”

  As a reminder, the amount of oil being stored at sea off the coast of Iran has risen by 10 per cent since the start of the year, data from maritime data and analytics company Windward show, and now stands at more than 50m barrels.

  But what is perhaps far more troubling for Iran is that on Friday president Obama criticized Iranian leaders for undermining the “spirit” of last year’s historic nuclear agreement, even as they stick to the “letter” of the pact.

  According to the Hill, in comments following the Nuclear Security Summit in Washington, Obama denied speculation that the United States would ease rules preventing dollars from being used in financial transactions with Iran, in order to boost the country’s engagement with the rest of the world.

  Instead, Obama claimed, that Iran’s troubles even after the lifting of sanctions under the nuclear deal were due to its continued support of Hezbollah, ballistic missile tests and other aggressive behavior.

   

  “Iran so far has followed the letter of the agreement, but the spirit of the agreement involves Iran also sending signals to the world community and businesses that it is not going to be engaging in a range of provocative actions that are going to scare businesses off,” Obama said at a press conference.

   

  “When they launch ballistic missiles with slogans calling for the destruction of Israel, that makes businesses nervous.”

   

  “Iran has to understand what every country in the world understands, which is businesses want to go where they feel safe, where they don’t see massive controversy, where they can be confident that transactions are going to operate normally,” he added. “And that’s an adjustment that Iran’s going to have to make as well.”

  And so a new potential bullish catalyst for oil emerges: If Obama’s anger grows, and if the Iran agreement is ultimately unwound, that would mean that all of the excess oil brought on market by Iran, would promptly be taken off the market once more, in the process eliminating the supply glut overnight.

  It remains to be seen if Obama is ready to sacrifice his foreign “legacy” just to boost the price of oil, and thus, gas at the pump. Then again, considering over the weekend Goldman made a huge U-turn on the “low oil is good for the economy”, and if Obama’s advisors start whipsering in his ear how higher oil prices are critical for US energy companies, that may be precisely what ends up happening.

  

  

  

  

  

• One Junk Bond Analyst's Catastrophic Forecast For What Is Coming

  “cumulative losses over the length of the entire cycle could be worse than we’ve ever seen before”

       – BofA High Yield strategist Michael Contopoulos

   

  While not as quixotic as Morgan Stanley’s Adam Parker piece on market-chasing cockroaches, BofA high yield analyst Michael Contopoulos has moved beyond merely bearish and is now outright catastrophic . That may be a little far fetched, but in his latest note – while he doesn’t call rally chasers “cockroaches” (yet), he seems at a loss to explain the ongoing junk bond rally. His reasoning: fundamentals just keep getting worse by the day, while price action has completely disconnected from reality, and virtually nobody expects what is about to unfold in the junk bond space.

  First, according to his assessment of deteriorating macro and micro indicators, the recent price move makes little sense:

  Despite the strong payroll data the economy still appears to be headed in the wrong direction, as our economist’s tracking model now indicates just 0.6% Q1 GDP growth and a revised 2.0% (from 2.3%) for Q2. Should our team’s figures hold, the period ending March 31st will mark the 3rd consecutive quarterly decline in GDP and the second sub 1% quarter in the last 5. More importantly for high yield investors, however, is that earnings growth continues to be anemic. 2 weeks ago we wrote that too much emphasis has been placed on Adjusted EBITDA, an approximation of cash flow that doesn’t take into account “1-off” charges, working capital, capex, etc. Although we understand the allure of this measure, in our eyes it has the tendency to cover up late cycle problems; namely asset impairments. With the understanding, however, that this measure is likely to be used for some time to come, we highlight the following: Even with 1-off adjustments 6 out of 17 sectors realized negative year-over-year Adjusted EBITDA in Q4, with a 7th sector growing at just 0.5%. On an unadjusted basis, 9 sectors realized negative EBITDA growth for Q4.

   

  

   

  Because one quarter doesn’t tell the whole picture of a company’s earnings momentum, we also calculated both Adjusted and Unadjusted EBITDA by weighting the last 5 quarters 30%, 25%, 20%, 15,%, 10% (Q4 2015 having the highest weight Q4 2014 the lowest). What we find is that the commodities sectors are clearly not the only industries to be experiencing troubles as Capital Good, Commercial Services, Consumer Products, Gaming, Media, Retail, Technology and Utilities are all under pressure. Additionally, on an unadjusted basis Healthcare also doesn’t look like the darling some firm’s spreads would suggest.

  Then he looks at where in the credit cycle the market currently finds itself:

  We’ve written on multiple occasions how the main question mark surrounding the end of this credit cycle is its shape, not whether we’re currently living through it. As mentioned above, fundamentals have been consistently deteriorating even outside of commodities, defaults are rising, new credit creation is becoming difficult, and illiquidity is still a problem. Although technical tailwinds in the form of retail inflows and supportive central bank policies can prolong the market unwind, they do not change its direction as ultimately fundamentals will prevail.

  That is a bold assumption with every central bank having become an activist, but yes: ultimately fundamentals will prevail.

  In terms of the shape of this cycle, absent a recession we expect the pace of defaults to be much closer to the 1998 experience than the 2007 one. In fact, we have coined the phrase “a rolling blackout” to describe the potential for a period of many years where the market experiences general weakness and moderately high defaults as individual sectors take turns realizing their moment of distress. Whether these moments are based on a deterioration of underlying fundamentals, an unwind of crowded trades, or some sort of series of macro-economic incidents is nearly irrelevant, as the uncertainty and consistent underperformance of the overall market will likely frustrate many investors and asset allocators. In our view this is not unlike the 1998-2002 experience, where the very same scenario could played out: years of high yield underperformance, poor returns and moderately high defaults. Recall in those years, high yield returned 2.9%, 2.5%, -5%, 4.4%, -1.9% (and 3 years in a row of negative excess returns) while the default rate slowly crept up from 2% to 8% over the course of 3.5 years before hitting double digits.

  Next, he proceeds to the “apocalyptic part”, stating quite clearly that “the losses over the credit cycle could be worse than we’ve ever seen before.” One reason: central bank intervention that keeps kicking the can instead of allowing the disastrous fundamentals to finally reveal themselves.

  Should the market realize a mid to high single digit default rate for years cumulative losses over the length of the entire cycle could be worse than we’ve ever seen before. A total of 33% of issuers defaulted over the course of the 1987 and 1999 default cycles, higher than the 25% in 2008 as the latter benefitted from unprecedented central bank intervention. But the very same policies which helped alleviate the pain in the last cycle will likely add to the severity of the next one. This is because many of the companies that should have defaulted 7 years ago but instead received a lifeline will likely shutter doors now. As risk premiums have caused yields to jump nearly 400bp, many of these firm’s business models will now likely be unsustainable; especially given the lack of EBITDA growth we have seen this cycle (Chart 1). When these issuers are then coupled with the newest crop of unsustainable businesses from this credit cycle, we could see cumulative default rates approaching 40% this cycle versus the traditional 33%.

   

   

  It’s not just the upcoming surge defaults. Contopoulos also e focuses on product-specific issues which we have discussed before, namely the already record low recovery rates, a unique feature of this particular default cycle. These are only going to get worse.

  However, not only will defaults be higher than in past cycles, but credit losses are also likely to be worse than ever before. That’s because recoveries, even outside of the commodity space have been paltry in the post crisis years. Given where we are in the default cycle, prevailing recoveries are a full 10 points lower than where they should be. Chart 2 highlights historical time periods characterized by low default rates (inside of 4%). Whereas in the past, recoveries tended to surpass 50% in low default environments, the last few years have seen those averaging 40%. This is telling because it means the pressure on recoveries is not being caused by the abundance of assets for sale in the market, which increases as more companies default, but rather because of the quality of these assets as we have discussed in part 1 of our recovery analysis published last year.

   

  

  One reason for the collapse in recovery rates: the extensively documented chronic underinvestment in replenishing the asset base, and instead “investing” in buybacks and dividends.

  So why are today’s assets garnering less enthusiasm than before? One reason, of course, is that a large portion of defaults today are in the commodity space, which are finishing with sub 10% recoveries as investors try to grapple with a market which may not have hit its bottom. However, problems persist even outside of the commodity industries. Take a look at the YoY growth in capex for non-commodity HY issuers (Chart 3). It’s striking how CEOs have invested much less in their businesses this cycle compared to previous ones. In fact, most of the capex growth since 2010 has come from energy issuers on the back of the US energy independence story in the early part of the decade; and we all know not to count on that going forward. On top of that, asset impairments as a percentage of tangible assets are through the roof, chipping away at valuations of an already low asset base. Not surprisingly, non-commodity recoveries reflect the same extent of erosion post 2010 as does overall HY (Chart 4).

  If that wasn’t bad enough, it gets worse: “Given that HY companies have seen hardly any organic growth within last few years, it is of little surprise that recoveries today are so low. The bad news is that we think they are going to decline further.”

  Contopoulos then analyzes various fundamental trends to determine the shape of the upcoming default cycle, and concludes with the following bleak assessment:

  So where does this leave us? According to our model, should the default cycle look similar to the 1999 experience (2yr cumulative DR of 25%), and debt-to-asset ratio touch the highs of that cycle (0.51x), recoveries can be as low as 16c on the dollar. There is also a case to made that if there is no catalyst to total capitulation, and we see a longer flatter default cycle, we could see 2yr cumulative default rates much less than 25%. While this is reasonable, one can also argue that debt-to-asset ratio which today already stands at 0.48x, could ultimately go much further past 0.51x. Additionally, as we have seen in the post crisis years, default rates matter less than debt-to-asset ratios, meaning recoveries even under a rolling blackout scenario could even be worse than we expect.

   

  

   

  Table 3 presents a scenario analysis of the range of recoveries to expect in the next few years depending on one’s forecast of default rates and debt-to-asset ratios. In almost any scenario recovery rates stand to be well below 30% this cycle.

  According to Contopoulos, investors are only slowly starting to appreciate just how bad the future will be for junk bond investors:

  While most investors we have talked to appreciate that recoveries will be lower going forward, we think it’s just as important to highlight just how much. Because, 8% yield may sound attractive if your expected credit losses are 400bps (6% DR*70% LGD). But the picture suddenly becomes unappealing knowing these losses could accumulate to 500bps; suddenly leaving you with an unremarkable excess spread cushion.

   

  And it appears that investors have begun to pay attention, at least as seen from the events in the primary market. It’s no surprise that CCC issuance has cratered in the last year as investors are unwilling to extend credit to low quality issuers. Now it seems they are even rewarding BB issuers for using their newly raised debt judiciously, as can be seen from the lower clearing yields for debt being earmarked for capex investment over anything else

  Welcome to the brave new world of massive default losses and record low recoveries.

  This new world will be one where investors should and will adjust their expected compensation higher to make up for rising defaults, dwindling recoveries, and declining liquidity, all of which are here to stay.

  Come to think of it, we almost prefer Adam Parker’s incoherent ramblings about cockroaches better: at least it gave some sense that there could be a happy ending. If only for the cockroaches that is….

  

  

  

  

  

• Dismal Data Deluge Deletes Dow Dead-Cat-Bounce

  Nothing to see here, move along…

   

  But but but the "great" jobs data… The dead-cat-bounce is over…

  

   

  Trannies had a tough day…

  

   

  But US equities are holding on to some of the gains from Friday's exuberance…

  

   

  Notably there was significant selling at VWAP (suggesting institutional derisking)…

  

   

  Treasuries traded in a worryingly narrow illiquid range today ending very modesly lower in yield…

  

   

  The US Dollar Index ended the day unchanged after weakening from overnight strength after the dismal slew of US data today…

  

   

  Despite the "deadness" of the FX and bond markets, commodities had a volatile day with crude gettin smashed to one-month lows…

  

   

  Finally, as a gentle reminder…

  

   

  Charts: Bloomberg

  

  

  

  

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• How Bad Would A Nuclear Terror Attack Be: Find Out With This Interactive Nukemap

  By Keturah Hetrick of Defense One

  How Bad Would A Radiological Terror Attack Be?

  When it comes to human health, all nuclear scenarios are not created equal. The Chernobyl disaster caused an estimated 16,000 cases of thyroid cancer, while the Fukushima power plant accident barely produced any. A dizzying number of variables go into understanding the damage that a particular nuclear or radiological device might have. But modeling the effects of such devices has become also become easier, and more public, thanks to the Internet.

  It’s “no secret” that organizations like Al-Qaeda and ISIS “are interested in securing nuclear materials so they can use them for terrorist attacks,” Dr. Timothy Jorgensen, a professor of radiation medicine at Georgetown University and the author of Strange Glow: The Story of Radiation, told an audience at the Center for Strategic International Studies on Monday.

  How might we be able to predict the effect of a particular attack? The type and size of bomb, materials used, detonation from the air versus ground, population density, and even wind can help us to predict increases in cancer risk, deaths from a bomb’s blast, and the timing of deaths from radiation sickness.

  “The distribution of doses within the population determine the survivors,” says Jorgensen. “You can predict the type and severity of health consequences by just knowing the doses among individuals.”

  Our bodies absorb radiation through the course of normal life experiences. For example, we absorb 3.0 millisieverts (a common measurement of the body’s radiation absorption, abbreviated as mSv) from a single mammogram. Eating 1,000 bananas adds another 0.1 mSv to our bodies. (Bananas, like all potassium-rich foods, contain very small amounts of radioactive material.)

  Of course, our bodies absorb far more radiation if we’re near a more-potent source, like an atomic bomb explosion or power plant accident.

  At 1,000 mSv, radiation sickness sets in as cells begin to die. Symptoms include spontaneous bleeding, ulcerated organs, and skin that sloughs off. But, you will likely recover, with only a somewhat higher chance of developing cancer later in life.

  About half of a population that receives a 5,000-mSv dose will die. This point is known as the Lethal Dose 50 (LD50).

  Doses above 10,000 mSv cause gastrointestinal (GI) syndrome, leaving the afflicted with less than two weeks to live. Above 50,000 mSv, brain swelling causes Central Nervous System (CNS) syndrome. Death will come in hours.

  Currently, there’s no treatment for CNS syndromes. According to Jorgensen, treatment for CNS “wouldn’t make much sense” because of GI syndrome’s imminence.

  In a normal distribution of radiation doses, that leaves a small number of treatable victims.

  Unfortunately, our abilities to treat victims within that range haven’t improved much. Most deaths from the U.S. bombing of Hiroshima were caused by fires or the detonation’s blast, and less than 10 percent of total deaths fell within the treatable range. If the Hiroshima bombing occurred today, we would be able to reduce the number of deaths by only 5 percent, Jorgensen says.

  Dirty Bombs

  Reports show that last week’s Brussels attackers are among many ISIS affiliates pursuing dirty bombs, renewing fears about the group’s nuclear ambitions.

  Dirty bombs, also known as radiological dispersal devices (RDDs), aren’t actually nuclear weapons. Though they distribute a small amount of radioactive material upon detonation, their blast is far deadlier, and most people exposed to the radioactive blast wouldn’t receive a lethal dose.

  According to a recent report from the Nuclear Threat Initiative, a dirty bomb “would not cause catastrophic levels of death and injury” but “could leave billions of dollars of damage due to the costs of evacuation, relocation, and cleanup,” contributing to the weapons’ reputation as “weapons of mass disruption.”

  “Recent reports out of Iraq warn that Islamic State extremists may have already stolen enough material to build a [dirty] bomb that could contaminate major portions of a city and cost billions of dollars in damage,” the report states.

  Experts agree that terrorists are more likely to use a dirty bomb than other radioactive devices because dirty bombs are less technically complicated to build and require materials that are relatively easy to obtain.

  INDs

  While experts believe that terrorist groups are more likely to use dirty bombs, uranium-based improvised nuclear devices (INDs) aren’t out of the question. But all INDs, which Jorgensen describes as “homemade atomic bomb[s],” are not alike.

  Ground detonations and air blasts result in different casualties. Terrorists are more likely to detonate an IND from the ground, rather than dropping it from a plane. This kind of blast would cause a greater amount of fallout, which increases radiation exposure and thus, health risk.

  If a terrorist group were to detonate a 15-kiloton nuclear bomb (the size of the Hiroshima bomb, considered a plausible size for a terrorist group to build or obtain), the radius for radiation sickness deaths and the radius for deaths from the blast would be about the same size.

  Interestingly, the more energy that an explosion releases, the percentage of people who die from percussive blasts increases, while the percentage who die from radiation sickness decreases. That information helps us to predict deaths from the percussive blast versus deaths from radiation—and to better predict the proportion of the population who might be treatable.

  If a 50-kiloton bomb were detonated over a civilian population, radiation sickness wouldn’t kill anyone – because anyone close enough for a lethal dose would already have been killed by the blast.

  But energy output and altitude are far from the only variables that help us to forecast a nuclear bomb’s health impact.

  Enter the Nuke Map, a project from nuclear historian Alex Wellerstein. The interactive map lets you plug in variables to see the outcome of various nuclear bomb scenarios.

  For example, a 15-kiloton nuclear bomb (the size of the Hiroshima bomb, considered a plausible size for a terrorist group to obtain) dropped from a plane on downtown Washington, D.C. would leave hundreds of thousands of casualties within city limits. That same bomb set off at ground level would result in fewer immediate casualties—but fallout that extended for miles, due to the region’s northeast winds, Jorgensen explained.

  And, even at non-lethal doses, radiation exposure introduces myriad concerns: How far away from the detonation site does cancer risk increase? Is it worth the risk to evacuate hospital and nursing home residents? When is it safe for displaced residents to return home?

  According to Jorgensen, the best way to answer these questions later is public education now. “People… can’t even discuss the topic because they don’t know the difference between radiation and radioactivity dose. They need to have at least that much information to be engaged in the process,” he says. “We, as public health officials, should do a much better job at bringing this message to the public.”

  The interactive Nukemap can be accessed below:

  

  

  

  

  

• Key U.S. Events In The Coming Week

  Key economic releases for the coming week include the ISM non-manufacturing report on Wednesday. There are several scheduled speeches from Fed officials this week. Fed Chair Yellen will take part in a discussion with former Fed Chairs on Thursday.

  Monday, April 4

  10:00 AM Factory orders, February (GS -2.1%, consensus -1.8%, last +1.6%)

  • Factory orders likely declined in February following a 1.6% gain in January. Falling factory orders would reflect the weaker-than-expected durable goods report for February.

  09:30 AM Boston Fed President Rosengren (FOMC voter) speaks

  • Federal Reserve Bank of Boston President Eric Rosengren will speak about economic and cybersecurity risks at the Boston Fed’s cybersecurity conference. In February, Rosengren noted that “if inflation is slower to return to target, monetary policy normalization should be unhurried. A more gradual approach is an appropriate response to headwinds from abroad that slow exports, and financial volatility that raises the cost of funds to many firms.”

  07:00 PM Minneapolis Fed President Kashkari (FOMC non-voter) speaks

  • Federal Reserve Bank of Minneapolis President Neel Kashkari will hold a town hall meeting on ‘too big to fail’. There will be Q&A beforehand at 5:15 PM. The newly appointed President Kashkari has said little in public regarding his views on monetary policy.

  Tuesday, April 5

  01:00 AM Chicago Fed President Evans (FOMC non-voter) speaks

  • Federal Reserve Bank of Chicago President Charles Evans speaks on the economy and monetary policy at the Credit Suisse Asian Investment Conference in Hong Kong. Audience and media Q&A is expected. Last week, President Evans discussed the “asymmetric” risks facing the US economy, noting that “we should buy some insurance against unexpected weakness by accepting a somewhat higher likelihood of stronger outcomes. Translated into monetary policy, this means being more accommodative than usual to provide an extra boost to aggregate demand as a buffer against possible future downside shocks that might otherwise drive us back to the effective lower bound.”

  08:30 AM Trade balance, February (GS -$46.0bn, consensus -$46.2bn, last -$45.7bn)

  • The new advanced goods trade report showed a slightly wider goods deficit in February (-$62.9bn from -$62.4bn), reflecting a widening trade balance across foods & beverages, capital goods, and consumer goods. We expect the services balance to be little changed in February. Overall, we expect the total trade deficit to be -$46.0bn.

  10:00 AM ISM non-manufacturing, March (GS 54.6, consensus 54.1, last 53.4)

  • Service sector surveys improved in March. The Philly Fed (+10.3pt to +13.9), Richmond Fed (+11pt to +9), and New York Fed (+23.7pt to +12.6) indices all rose (the New York survey is a relatively new and not seasonally adjusted series). The Markit Services PMI also rose (+1.3pt to 51.0), escaping contractionary levels. The ISM non-manufacturing index fell by 0.1pt last month.

  Wednesday, April 6

  12:20 PM Cleveland Fed President Mester (FOMC voter) speaks

  • Federal Reserve Bank of Cleveland President Loretta Mester speaks on the U.S. economic outlook and monetary policy at an event hosted by the Cleveland Association for Business Economics, CFA Society Cleveland, and Risk Management Association of Northern Ohio. Last week, President Mester stated, “Given actual and expected economic performance, the risks around the outlook, and the progress toward our policy goals, my assessment at this time is that it will be appropriate to continue to gradually reduce the degree of accommodation this year. Gradual normalization means that monetary policy will remain accommodative for some time to come, providing support to the economy and insurance against downside risks.”

  02:00 PM Minutes from the March 15-16 FOMC meeting

  • Fed officials indicated a more cautious approach to the near-term policy outlook at the March FOMC meeting, a message that was reinforced during last week’s speech by Chair Yellen. In the minutes, we will be watching for (1) any additional signs that the committee is embracing a “risk management” approach for monetary policy, (2) further details around the committee’s view on growth headwinds stemming from abroad, (3) the committee’s assessment of the balance of risks to the economic outlook, and (4) any views regarding the recent acceleration in core inflation.

  08:00 PM Dallas Fed President Kaplan (FOMC non-voter) speaks

  • Federal Reserve Bank of Dallas President Kaplan speaks on a moderated panel at the World Affairs Council of Dallas/Fort Worth. Last month, President Kaplan said that “the Fed needs to show patience in decisions to remove accommodation”.

  Thursday, April 7

  08:30 AM Initial jobless claims, week ended April 2 (consensus 270k, last 276k)

  Continuing jobless claims, week ended March 26 (consensus 2,170k, last 2,173k)

  • Consensus expects initial jobless claims to edge down to 270k. Initial claims moved up last week, although we suspect some of the rise may be due to seasonal effects stemming from the Good Friday holiday.

  05:30 PM Fed Chair Yellen speaks

  • Federal Reserve Chair Janet Yellen will take part in a discussion with former Fed Chairs Ben Bernanke, Alan Greenspan, and Paul Volcker at an event hosted by International House. Last week, Chair Yellen acknowledged that core inflation had risen “somewhat more than my expectation in December,” but said “it is too early to tell if this recent faster pace will prove durable”.

  08:00 PM Kansas City Fed President George (FOMC voter) speaks

  • Federal Reserve Bank of Kansas City President Esther George will speak about the U.S. economy. Q&A is expected. At the March FOMC, President George dissented, citing her preference to raise the target range for the federal funds rate.

  Friday, April 8

  10:00 AM Wholesale inventories, February (consensus -0.2%, last +0.2%)

  • Consensus expects wholesale inventories to decrease slightly in January.

  Source: GS

  

  

  

  

  

• Presenting The Mossack Fonseca Interactive Web Of Secret Companies (And All Available Source Files)

  Even though, as we said in our previous post, the starting role in today’s record document leak should be that of Mossack Fonseca (and its heir apparent, Rothschild, operating out of Reno, NV) the general population is far more curious to learn which names will emerge as a result of this historic crackdown involving 11 million documents and 2,600 gigabytes of data.

  And while the full disclosure effort will take months, if not years, here courtesy of Fusion, is a data map of the intersection between clients, shareholders, companies and agents who have used Mossack Fonseca’s services.

  From Fusion: “the map represents just over a third of all the data we have access to through the leak. We’ve chosen to show you 115,373 of the most connected entities so you can see how, in many case, individuals are actually related in some way.

  What does that say? It tells us that the people who create shell companies through Mossack Fonseca move in similar circles.

   

  You will notice the option to select, “Leticia Montoya”, who is a Mossack Fonseca employee. Through the documents we have connected her with at least 10,000 companies as a stand-in director or shareholder. Ms Montoya earns around $900 a month in the HR department of the company.

   

  The other option is to see companies that are in some way connected with the United States.

  The Mossack Fonseca Universe:

   

  Meanwhile, for those who enjoy primary data, the full universe of currently available source documents is available at the following link. Based on a recent Wikileaks tweet, more may be becoming available soon.

  Should we release all 11 million #PanamaPapers so everyone can search through them like our other publications?

  — WikiLeaks (@wikileaks) April 3, 2016

  Finally, today is not the first time that Mossack Fonseca had made prominent headlines. Here is a Vice report from December 2014 with “The Law Firm That Works with Oligarchs, Money Launderers, and Dictators“

  

  

  

  

• Mossack Fonseca: The Nazi, CIA And Nevada Connections… And Why It's Now Rothschild's Turn

  For all the media excitement about the disclosed names in the “Panama Papers” leak, in this case represented by the extensive list of Mossack Fonseca clients, this is not a story about which super wealthy individuals did everything in their power, both legal and illegal, to avoid taxes, preserve their financial anonymity, and generally preserve their wealth. After all, that’s what they do, and it should not come as a surprise that they will always do that, especially following last year’s disclosure by the same ICIJ which revealed a list of 100,000 HSBC clients who had been dutifully avoiding the payment of taxes.

  What the story is about is the nebulous world of offshore tax evasion and tax havens, which based on data from the World Bank, IMF, UN, and central banks, hide between $21 and $32 trillion, where registered incorporation agents and law firms in small Caribbean countries (and not so small US states) make the laundering of money and the “disappearance” of the super wealthy, into untracable numbers hidden behind shell companies, possible.

  So, in order to learn some more about the real star of this story, the Panamanian lawfirm of Mossack Fonseca, we went to Fusion which has compiled a fascinating story of the company’s history, founders, and key milestone events in its life. 

  

   

  These include the Nazis, the CIA, Mexican drug lords, and of course, the U.S.

  First, here is the Nazi and CIA connection:

  Jurgen Mossack’s family landed here in the 1960s. During World War II, his father had served in the Nazi Party’s Waffen-SS, according to U.S. Army intelligence files obtained by the ICIJ. Once in Panama, the elder Mossack offered to spy on communists in Cuba for the CIA. (Mossack Fonseca said the firm “will not answer any questions related to private information regarding our company founding partners.”)

  Here is the connection to Mexican drug lord Rafael Caro Quintero, and perhaps to the DEA:

  Many times Mossack Fonseca has had no clue which nefarious characters were doing what with the companies the firm created – as when Jurgen discovered in 2005, according to internal emails, that he was the registered agent and listed as the director for a company controlled by the Mexican drug lord Rafael Caro Quintero. The co-founder of the Guadalajara Cartel was convicted in Mexico in 1985 for the brutal murder of U.S. DEA agent Enrique “Kiki” Camarena. (Today, Quintero is again considered a fugitive by the US after walking out of prison in 2013 on a technicality).

   

  Mossack Fonseca’s senior partners instructed an employee to carry out their resignation from the company upon the discovery. “Pablo Escobar was like a newborn compared to R. Caro Quintero!” Jurgen wrote in reaction to the news. “I wouldn’t want to be among those he visits after he leaves prison!”

  And then there is the state of Nevada:

  In 2013, an Argentine prosecutor’s report linked Nevada-incorporated shell companies involved in a major corruption scandal to Mossack Fonseca. When those shell companies became the subject of a federal court battle in Nevada, the leaked files show, Mossack Fonseca employees took steps to remove paper records and to wipe computer files and phone logs at its Las Vegas office. One employee even traveled from Central America to Nevada to bring back files. “When Andrés came to Nevada he cleaned up everything and brought all documents to Panama,” according to an email dated Sept. 24, 2014.

   

  Mossack Fonseca said it “categorically” denies hiding or destroying documents in its statement to the ICIJ: “Let us be clear that it is not our policy to hide or destroy documentation that may be of use in any ongoing investigation or proceeding.”

   

  The leaked records also contradict sworn testimony by Jurgen Mossack, who told the federal district court that his firm was separate from “MF Nevada,” its office in Las Vegas, and had no control over it. Mossack Fonseca “has never maintained an office, establishment or principal place of business in Nevada,” Mossack testified in July 2015. But, according to the ICIJ investigation, internal documents show the opposite, indicating that the firm’s Panama City headquarters controlled MF Nevada’s bank account, and that the firm’s co-founders and one other official with the company owned 100 percent of MF Nevada.

  Why is Nevada important? Because recall that according to a recent investigation by Bloomberg, “The World’s Favorite New Tax Haven Is the United States” …

  

  … and specifically several US states such as Nevada, Wyoming and South Dakota.

  After years of lambasting other countries for helping rich Americans hide their money offshore, the U.S. is emerging as a leading tax and secrecy haven for rich foreigners. By resisting new global disclosure standards, the U.S. is creating a hot new market, becoming the go-to place to stash foreign wealth. Everyone from London lawyers to Swiss trust companies is getting in on the act, helping the world’s rich move accounts from places like the Bahamas and the British Virgin Islands to Nevada, Wyoming, and South Dakota.

   

  “How ironic—no, how perverse—that the USA, which has been so sanctimonious in its condemnation of Swiss banks, has become the banking secrecy jurisdiction du jour,” wrote Peter A. Cotorceanu, a lawyer at Anaford AG, a Zurich law firm, in a recent legal journal. “That ‘giant sucking sound’ you hear? It is the sound of money rushing to the USA.”

  That money is rushing for one simple reason: dirty foreign – and local – money is welcome in the U.S., no questions asked, to be shielded by the most impenetrable tax secrecy available anywhere on the planet.

  One may even say that nowadays, US-based tax havens are the new Switzerland, or Bahamas or, for that matter, Panama. Indeed, for most Americans, offshore tax haven are now meaningless with the passage of the FATCA law, which makes the parking of dirty US money abroad practically impossible. So where does that money go instead – it stays in the US:

  Others are also jumping in: Geneva-based Cisa Trust Co. SA, which advises wealthy Latin Americans, is applying to open in Pierre, S.D., to “serve the needs of our foreign clients,” said John J. Ryan Jr., Cisa’s president.

   

  Trident Trust Co., one of the world’s biggest providers of offshore trusts, moved dozens of accounts out of Switzerland, Grand Cayman, and other locales and into Sioux Falls, S.D., in December, ahead of a Jan. 1 disclosure deadline.

   

  “Cayman was slammed in December, closing things that people were withdrawing,” said Alice Rokahr, the president of Trident in South Dakota, one of several states promoting low taxes and confidentiality in their trust laws. “I was surprised at how many were coming across that were formerly Swiss bank accounts, but they want out of Switzerland.”

  And, to top it off, there is one specific firm which is spearheading the conversion of the U.S. into Panama: Rothschild.

  Rothschild, the centuries-old European financial institution, has opened a trust company in Reno, Nev., a few blocks from the Harrah’s and Eldorado casinos. It is now moving the fortunes of wealthy foreign clients out of offshore havens such as Bermuda, subject to the new international disclosure requirements, and into Rothschild-run trusts in Nevada, which are exempt.

   

  * * *

   

  For financial advisers, the current state of play is simply a good business opportunity. In a draft of his San Francisco presentation, Rothschild’s Penney wrote that the U.S. “is effectively the biggest tax haven in the world.” The U.S., he added in language later excised from his prepared remarks, lacks “the resources to enforce foreign tax laws and has little appetite to do so.”

  Yes, Mossack Fonseca may now be history, and its countless uberwealthy clients exposed, but none other than Rothschild is now delighted to be able to fill its rather large shoes.

  

  

  

  

• Off The Grid Indicators Reveal True State Of U.S. Economy

  From Nicholas Colas at Convergex

  Our basket of unorthodox economic indicators shows an American economy in a state of flux.  On the plus side, used vehicle prices remain stable and pickup truck sales still show positive comps to last year.  Light vehicle dealer inventories at 68 days supply are normal for this time of year, as long as car and truck demand hold up through the spring selling season.  Google still autofills “I want to buy” with “a house” first and now “a timeshare” is second, showing continued strong consumer interest in both primary and discretionary housing.  On the downside, food stamp program participation is still running +45 million individuals and +22 million households, down only modestly from the +48 million participants at the peak in 2013. Our proprietary “Bacon Cheeseburger Index” shows deflationary pressure on par with 2009 and 1998, pulling consumer inflationary expectations lower.  And firearm background checks by the FBI both ramped to new highs in 2015 (+23 million) and show +40% year over year comps in the first two months of 2016.

  There is a t-shirt popular in certain parts of the U.S. that bears the following message: “Alcohol, Tobacco, Firearms… Who’ s bringing the chips?”  Yes, ladies sizes are also available.  And if casual clothing isn’t your thing, the same sentiment is available on caps, mugs, patches, greeting cards and bumper stickers.  Just Google the term and you’ll see a wide variety of options.

  If that sentiment abhors or confounds you, I can understand.  America is a large country, both in terms of geographic and ideological span.  What gets taken for granted in Manhattan draws a quizzical eye in Moline or Monsey, and vice versa.

  Just as it pays to travel through America to understand it completely, we also believe it pays to look beyond the customary economic data to really get under the hood of the domestic economy.  We’ve been doing this piece quarterly, highlighting these “Off the Grid” economic indicators, for 5 years now and they never fail to both illuminate and entertain.  We’ve included our customary chart deck in the attached document, but the rest of this report will be a highlight reel of this quarter’s findings.

  Take one simple example: inflation. 

  • Academic discussions center on either growth in the money supply or the change in the general price levels of goods and services. Core PCE (the Fed’s preferred measure) is currently +1.7%, but we all heard Fed Chair Yellen’s skepticism on this data during her speech this week.
  • The Fed Chair is right to be cautious, for it is inflationary expectations that really matter. If the population believes prices will decline in the future, or at least become relatively less dear, they will delay consumption today.  Look for “Japan” in the economic dictionary to understand the consequences.  To understand where consumer inflation expectations are going, you would do well to consider a basket of commonly and frequently purchased goods.  That, after all, is what anchors inflation expectations for many consumers.
  • Enter our very own “Bacon Cheeseburger Index”, an evenly split mini-basket of items that just happen to make up summertime’s most desirable lunch or dinner treat. Thanks to price declines in all three cholesterol-laden commodities, a bacon cheeseburger now costs 5.1% less than a year ago.
  • A look back at this index to 1990 finds that it is actually a decent indicator of deflation risk. Prior periods when the BCI turned resoundingly negative (3 percent or more) since 1990 include: 2009 (Financial Crisis), 1998 (EM/Long Term Capital), and 1992 (lead up to Iraq Invasion).  In each case, the Fed was cutting interest rates, not raising them.

  So should the Fed actually use the Bacon Cheeseburger Index?  Of course not…  But does it help explain in one compact (if anecdotal) form why the Federal Reserve is happy to hold off on rate increases?  I think it does.

  We have a host of other indicators we track, and in the remainder of this note I will summarize them.

  Auto-related indicators.  Used car prices are a highly underappreciated economic bellweather.  Everyone looks at new car sales, but with every new vehicle that rolls off the lot, a less shiny one stays behind.  The value of that trade-in can stop a potential buyer from signing a new car loan or upgrading models.  Other indicators worth a mention: full sized pickup truck sales (a proxy for small business growth) and overall new vehicle inventories.

  • Used car prices according to Manheim auto auctions – one of the biggest in the business – have remained stable since mid-2010. If there is a worrisome sign, it is that they recently dropped 1.4%. That bears watching, especially with 3 year old off-lease vehicles from the 2013 sales year coming back to dealers.
  • Full sized pickup truck sales are still rising, up 8% year over year.
  • Dealer inventories of new cars and trucks is currently 68 days, down from 73 days last year at this time and 80 days in February. Anything over 60 is considered “High”, but a good spring selling season should clear inventory.

  

  

  Supplemental Nutrition Assistance Program (also called Food Stamps) Participation data tells a story about how deep the economic “Recovery” has run through the strata of American society.

  • Prior to the Financial Crisis (2006 Fiscal Year data), there were 26.5 million Americans in the SNAP program.
  • That number rose to a peak of 47.6 million in 2013 and has only declined to 45.8 million as of the end of the last government Fiscal Year in September.
  • The most recent data available has total participation at 45.1 million and 22.3 million households. This amounts to 14% of all Americans and 20% of all American households.

  We track a range of goods and services to assess where Americans are investing and spending:

  • Background checks by the FBI for firearm purchases hit a new record at 23.1 million last year. At an average transaction price of $600 (an educated guess based on many visits to gun stores over the years) that is $14 billion in firearms sales.  Moreover, data from January and February 2016 shows background check volumes running +40% over last year.  Now, not every check results in a sale, but we assume most do and some no doubt actually represent multiple purchases.  Also worth noting: Google Trend data (the number of searches for a specific term) for ‘Buy a Gun’ are at multiyear lows.  To me, that means that repeat buyers are responsible for the recent growth since they have no need to search for a Federal Firearms Dealer.
  • Precious metal coin purchases from the U.S. Mint show consumers are more interested in gold over silver bullion purchases. On a rolling 6 month basis, the Mint is selling $87 million of gold coins/month now versus $62 million/month a year ago.  As for silver bullion coins, the current average selling rate is $63 million/month versus $69 million last year at this time.  Worth noting: both figures far exceed the amount of incremental capital invested in U.S. equity mutual funds, which is negative $23 billion YTD according to the Investment Company Institute.  As with the firearms data, Google searches for ‘Gold coins” is at multiyear lows and likely indicates bullion buyers are repeat purchasers.
  • Gallup Daily Tracking surveys for dollars spent out of pocket show an average daily outlay of $84, up from last year’s $82 at this time but down from the $87/day level of two years ago.
  • Miles driven continue to climb, according to the U.S. Department of Transportation. For January 2016, the growth here was 2.0% over last year and on a rolling 6 month average basis the comps are still running closer to 3% – numbers we haven’t seen since the middle of the last decade. Cheap gas is, of course, the primary explanation but also forces the question: where is everyone going and why aren’t they spending more when they get there?

  

  

   

  

   

  To measure common items searched on Google for either purchase or sale, we look at what the search engine “Autocompletes” when you type “I want to buy” and “I want to sell”.  Autocomplete is a proprietary Google algorithm that attempts to predict the rest of your query based on what others have completed to the same starting words.

  Yes, hilarity ensues sometimes with Autocomplete (see here: http://www.telegraph.co.uk/technology/google/6161567/The-20-funniest-suggestions-from-Google-Suggest.html), but we’ve tracked what Google has recommended to finish “Buy” and “Sell” searches since 2011. Here’s the latest:

  • “A house” has been the #1 autocomplete for “I want to buy” since Q1 2015, and remains on top this quarter.
  • Moving up to #2 for “Buy” is “a timeshare”. We’ll take it as a positive for both the primary and secondary residence real estate markets that these feature at the top.
  • Rounding out the top 4 are “a car” and “stock”.
  • For “I want to sell”, the top three answers are “Car”, “House” and “Kidney”. And yes, the last one is still illegal in the U.S.

  

  

  

  

  

• The Onion Explains How Virtual Reality Will Change Our Lives

  In the aftermath of such “paradigm” flops as 3D TV, 4K TV, the “wearables” revolution, the tech world is now obsessed with Virtual Reality. Here, courtesy of The Onion, are some potential ways that Oculus Rift and other virtual reality technologies will affect our lives.

  • Pornography: New 360-degree pornographic films will allow viewers to pan all around the bed and across the room to where cameramen and boom mic operators are standing
  • Education: Students will have access to wealth of new interactive visual aids that won’t be updated for the next 50 years
  • Business: Provides another medium that CEO won’t understand but will demand be wedged into the new marketing campaign by June
  • VR Industry: Potential to see moderate growth in this sector
  • Tourism: Could very well grind to screeching halt once travelers realize they can experience Liberty Bell from comfort of own living room
  • Neck Pain: Cases of neck pain projected to triple in both volume and severity over the next five years
  • Music: Immersion in 360-degree drum kits will allow amateurs to thrash with increased sickness
  • Clamming: Virtual reality to have no discernible impact on clamming
  • Mental Health: Putting on a VR headset to discuss feelings of dissociation and detachment with a computer-generated avatar will be extremely quick and affordable

  

  

  

  

  

  

• First Panama Papers Casualty? Former Iceland Premier Calls On Current PM To Resign To "Prevent An Uprising"

  One of the more prominent names featured in the Panama Papers disclosure is that of Iceland’s Prime Minister Sigmundur David Gunnlaugsson. The reason is that according to the leaked files, Prime Minister Sigmundur David Gunnlaugsson and his wife secretly owned a company called Wintris set up in 2007 on the Caribbean island of Tortola in the British Virgin Islands, to hold investments with his wealthy partner, later wife, Anna Sigurlaug Pálsdóttir.

  As Guardian reports, the couple were living in the UK at the time and had been advised to set up a company in the tax haven in order to hold and invest substantial proceeds from the sale of Pálsdóttir’s share in her family’s business back in Iceland.

  Gunnlaugsson owned a 50% stake in Wintris for more than two years, then transferred it to Pálsdóttir, who held the other 50%, for one dollar. The prime minister’s office now says his shareholding was an error and “it had always been clear to both of them that the prime minister’s wife owned the assets”. Once drawn to the couple’s attention in late 2009, the error was corrected.

  Towards the end of Gunnlaugsson’s time as a Wintris shareholder, having returned to Iceland, he was elected to parliament as leader of the Progressive party.

  Gunnlaugsson, who became prime minister four years later, never disclosed his Wintris shares on Iceland’s parliamentary register of MPs’ financial interests.

  As the Guardian also reported earlier, in the video clip below, PM Gunnlaugsson walks out of an interview with Swedish television company SVT. Gunnlaugsson is asked about Wintris, which he says has been fully declared to the Icelandic tax authority. Gunnlaugsson says he is not prepared to answer such questions and decides to discontinue the interview, saying: ‘What are you trying to make up here? This is totally inappropriate.’

   

  The prime minister and his wife then rushed out separate public statements in Icelandic condemning reporters’ intrusions into their private business matters.

  Both stressed their financial interests had always been properly disclosed to the Icelandic tax authorities. The Guardian has seen no evidence to suggest tax avoidance, evasion or any dishonest financial gain on the part of Gunnlaugsson, Pálsdóttir or Wintris.

  But it may be too late.

  As the Guardian adds, the prime minister is this week expected to face calls in parliament for a snap election after the Panama Papers revealed he is among several leading politicians around the world with links to secretive companies in offshore tax havens.

  The financial affairs of Sigmundur Davíð Gunnlaugsson and his wife have come under scrutiny because of details revealed in documents from a Panamanian law firm that helps clients protect their wealth in secretive offshore tax regimes. The files from Mossack Fonseca form the biggest ever data leak to journalists Opposition leaders have this weekend been discussing a motion calling for a general election – in effect a confidence vote in the prime minister.

   

  On Monday, Gunnlaugsson is expected to face allegations from opponents that he has hidden a major financial conflict of interest from voters ever since he was elected an MP seven years ago.

  As Iceland’s Visir reports, quoting a facebook post by Iceland’s former PM Johanna Sigurdardottir, she is calling upon Gunnlaugssonto resign to “prevent a social uprising”, and calling on him to “give a straightforward account of all the facts of the matter”. Google translated:

  Prime Minister Johanna Sigurdardottir said debt his people to leave immediately and prevent an uprising in society.

   

  Johanna Sigurdardottir, a former prime minister, says that the Prime Minister must immediately resign and the government all to leave. The Facebook post her she says that it is not just the credibility of the nation to the international community that is at stake – but will people never feel what leaders have been proven to be. It has formed a real breaches of confidentiality between the Government and the people of the country. Riots and anger in the community will not be weaker this collapse. Furthermore, says Johanna society will not have the Prime Minister that it needs to be ashamed, Prime Minister of the obvious has become the deception and dishonesty, the Prime Minister described was mistrust on the currency and the Icelandic economy by hiding their money in tax shelter, the Prime Minister does not seem to understand what morality is and wants to get yourself set up its own protocol, which is currently placed in the group with the perverse power brokers in the world. Prime Minister owes his people to leave immediately and prevent an uprising in society.

  The former finance minister Steingrímur Sigfússon told the Guardian: “We can’t permit this. Iceland would simply look like a banana republic. No one is saying he used his position as prime minister to help this offshore company, but the fact is you shouldn’t leave yourself open to a conflict of interest. And nor should you keep it secret.”

  Essentially, Gunnlaugsson political career is over, and the only question is whether Goldman has already picked a banker to replace him.

  

  

  

  

  

• A Massive Shift Is Underway!

  By Chris at www.CapitalistExploits.at

  I was abruptly awoken yesterday by a “PMS day.” A Richter-like force, brimming under the surface, evidenced by the stomping, grumbling, and frustration that accompanies this phenomenon. As a husband, I’m grateful for the warning signs; I can hide (I mean prepare) accordingly.

  It’s not hard to see change when it’s upon us. Identifying it ahead of time is a little bit trickier, but not much. The signs, like a grouchy wife, are often there if we care to look.

  I have often wondered if the average Joe in the midst of the Industrial Revolution ever looked around and noticed the change that was coming?

  The amazing changes witnessed since the late 1700’s are easily understood in hindsight. What is not commonly understood (in large part because we’re in the midst of it) is that today we stand on the brink of a technological revolution that will fundamentally alter the way we live work and play.

  But first, to understand the future we need to look to the past.

  Let’s take the aforementioned Industrial Revolution, which can be broken down into 3 key areas of innovation and disruption:

  The First Stage

  The first stage of the Industrial Revolution, around 1780, entailed harnessing steam power. Remember those old steam trains and water mills seen now only in children’s books and third world hell holes? Well, what they did was mechanize production, resulting in huge advances in manufacturing.

  The Second Stage

  Around 1870 electricity, which provided mechanization and production at a greatly increased level, in large part replaced steam.

  The Third Stage

  Around 1970 the use of information and electronics to amplify, enhance, and automate production came into the fold.

  Fast forward to 2016 and what is upon us, and taking place at an exponential rate, is a revolution driven by a coalescing and a convergence of multiple technologies, each providing a magnifying effect on one another.

  Just as an amazing chocolate cake requires a number of ingredients, today we have multiple ingredients (technologies) coming together and forming entirely new systems. In doing so, these technologies are  completely replacing and disrupting existing industries, products and power structures.

  It’s easily one of the most exciting and potentially frightening times to be an entrepreneur, investor and consumer. Frightening because expecting things to be the way they’ve always been is the most dangerous thing one can do; exciting because the tsunami-like shift of power and capital taking place at ever increasing speed affords incredible opportunity.

  If you’ve read the media over the past couple years you may be familiar with peer-to-peer lending, crowdfunding, crowdsourcing, Bitcoin (both the currency and the blockchain) or the sharing economy, which includes services such as Uber, Airbnb, Wikileaks and even Tesla.

  A common theme with all of these is that they disrupt an existing industry which often enjoys a stranglehold.

  Peer-to-peer lending, for instance, usurps investment banks and lending institutions. Bitcoin and crypto currencies usurp the need for central banks, financial institutions, stock exchanges, custodians, notaries, and credit cards to name but a few. Then we have 3D printing, which disrupts manufacturing by allowing individuals to design, create, and produce customized goods in their own home for less than the mass-produced alternatives.

  Fighting is Futile

  Fighting technology is a losing battle. You may as well fight oxygen.

  Take for example the case against Kim Dotcom. The US Government have spent millions of dollars doing all that they can to shut down file sharing, and they chose little Kim and his company Megaupload as the poster child designed to teach “all who may dare to follow” a lesson.

  Here’s how successful they’ve been…

  

  Why are these exponential technologies so successful? That answer is the same one that explains why the US military has been wildly unsuccessful in fighting Al Qaeda. It’s a lesson they should have learnt from the Soviets 20 years earlier.

  The answer is decentralization.

  Attacking a bunch of goat herders in Jesus sandals, who are scattered across inhospitable terrain, with factions on every continent, is like trying to defeat soil.

  Technological advancements were the game changer for the terrorists. Not only are terrorists decentralised, but the cost of military hardware and advancements in technology have altered the global power structure.

  Not only do these exponential technologies disrupt industries, they will also bring about disruptive changes in political regimes and even borders at an increasing speed.

  The Soviet Example

  1986 was the year that the Mujaheddin first shot down a Soviet Mi-24 Hind helicopter. The Ruskies had been in Afghanistan for 7 years enforcing their will. A military superpower to be reckoned with. 3 years later they were gone, tail between their legs.

  Why?

  The US-made Stinger missile. Costing less than $75,000 it was a steal, easily operated by a single man. And sporting a kill ratio of 70%, the Stinger in the hands of a bunch of goat herders changed the economics and success of large scale, centralised warfare.

  

  Who would have guessed that a shoulder held missile, manned by a poverty-stricken group of villagers, would stave off a military superpower?

  While the Stinger missile and cyber warfare today massively disrupt the existing balance of power, seemingly innocuous technologies we’re all now used to, and consume regularly, do much the same thing.

  Authorities tried to stop Airbnb as well as Uber. City officials have banned their use, lobby groups have fought and continue to fight them, and yet both have continued to grow.

  They grow not because of the companies themselves marketing heavily, but because their users share it. When something is fundamentally useful and valuable to the consumer, human nature is to share it.

  If a particular product is centralised and found in a large factory, shutting its operations would be a cinch. This is why labour unions dominated society during the industrial era.

  Today that’s not the case. In order to stop product use each and every consumer would need to be stopped.

  The world we’re living in includes billions of people connected digitally, holding unprecedented processing power, storage capacity, and access to knowledge that only a decade ago was un-achievable to even the most powerful of the world’s leaders.

  If centralized powers are to fight this trend they will be fighting a decentralized network of billions of individuals scattered across the globe. Borders matter less and less in our connected world.

  Networks which are viral, decentralised and useful, are incredibly difficult to stop, and with every passing day they grow in strength. Once a tipping point is reached they become part of the very fabric of society and things are never the same again.

  The Disrupted

  Napster was one of the early movers in sharing music online. In 2001 it was shut down by the authorities. Much like file sharing mentioned above, today music sharing is multiples of what Sean Parker ever had in mind.

  The disrupted?

  

  Here we have traditional music sales. Anyone who was making a living from selling CDs has had to find something else to do.

  At our upcoming Seraph Summit in Del Mar, California, attendees will get to meet Andres Barreto, the founder of Grooveshark, another music sharing service that post-dated Napster. Disruptive technologies are top of the list of subject matter.

   

  The disruptive technologies reshaping how we live, work and play have a number of characteristics:

  1. They defy the status quo. Whenever you disrupt the status quo you are smashing head long into people’s livelihoods. It’s never pretty. This explains why Julian Assange is still holed up in the Ecuadorian embassy in London. It explains the list of lawsuits against Tesla by the automotive industry. It explains the banking industries fear of, and rejection of, Bitcoin.
  2. They disrupt the balance of power. To point number 1 above, it’s not possible to disrupt existing power structures without defying the status quo and it’s not possible to defy the status quo, succeed and simultaneously not disrupt the balance of power.
  3. They are decentralised. There are only two ways to change incredibly powerful institutions and power structures. One is the industrial age method of head-to head-combat. War! The other is with exponential decentralised technology, which is almost impossible to stop.
  4. They are transparent. Bitcoin is open source. Tesla’s technology is open source. Crowd funding and peer-to-peer lending all function with transparency embedded.
  5. Distribution. They can be distributed rapidly, efficiently and at scale.

  These facts are aiding to compound and multiply the rate of growth in emerging technologies such as 3D printing, robotics, artificial intelligence, biotech, nanotechnology, virtual reality, and a host of others, including blockchain.

  Perhaps the most important point to consider is point number 5. The thing to understand is how exponential technologies permanently reshape the demand curve.

  The Impacted

  There are few industries that are not being (or will not be) impacted by this tidal wave of disruption. The shift from centralized industries to decentralized is unmistakable and accelerating every day.

  When an entire host of accelerating technologies come together, working off each other, the results are spectacular. New systems are formed with increasing speed and old systems fragment and fall apart as their inherent weaknesses become increasingly evident.

  I recently had an excellent conversation with a friend on this very topic. I recorded it and if you’re a subscriber you’ll get it early next week. He’s also joining us in Del Mar, California in a few week’s time, and if you’re a forward-thinking investor you should consider joining us too.

  Seriously, if you wish to get a deep understanding of the most powerful trends in motion today and how they are shaping the world then you need to book your space now before we’re full.

  The timing could not be better. The changes afoot today are causing a shift of wealth the magnitude of which promises to be one of the largest in human history.

  The Elephant in the Room

  I’ll leave you with a question.

  What entity or entities can you think of that are exhibiting the following traits?

  • Dishonest, shielding information from the public who are their “clients”
  • Centralized
  • Lacking in transparency
  • Hold, via coercion, the balance of power

  Have a good weekend!

  – Chris

  “This kid came up with Napster, and before that, none of us thought of content protection.” – Morgan Freeman

   

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• Four Major Fallacies in the Oil Market (Video)

  By EconMatters

  

  We discuss some of the current fallacies in the Oil Market in this video. From Russia Oil Production, Inventory Builds, Saudi Arabia`s Strategy, and Market Sentiment regarding the rally off the bottom.

  © EconMatters All Rights Reserved | Facebook | Twitter | YouTube | Email Digest | Kindle  

  

  

  

  

• About That Historic Q1 Market Rebound: 24 Of 26 Massive Snapback Rallies Occurred Within A Secular Bear Market

  Dy Dana Lyons of My401kPro.com

  Stocks Should Double In 3 Years (…Or Drop By A Third)

  In our April 1st Chart Of The Day, we showed that the Dow Jones Industrial Average (DJIA) did something that it has only done 3 other times since 1900. After dropping over 10% during the quarter, it recovered to close the quarter positive.

  

  The 3 prior quarters that saw the DJIA accomplish this feat were the 4th quarter of 1933, the 4th quarter of 1971 and the 4th quarter of 2000. Following these reversals, the index had some interesting returns over the subsequent 3 years: it was up a lot…or it was down a lot. After the 1933 occurrence, the DJIA rallied as much as 98% over the next 3 years. Following the 1971 and 2000 events, the index dropped by as much as 35% and 33% in 3 years, respectively.

  So which will it be this time? The size of the deficit that stocks overcame in the 1st quarter may give us a clue. At its low, the DJIA was down -11.3% for the quarter. Looking at the prior reversals, we see that the DJIA’s max intra-quarter loss in 4Q, 1971 was -10.9% and in 4Q, 2000 it was -10.1%. The max drawdown in 4Q, 1933 was…-11.3%, exactly the same as this past quarter.

  Therefore, bulls can take heart in the fact that our prior circumstances are more similar to the 1933 event. And if history is to repeat, we should expect the DJIA to nearly double over the next 3 years to around 35,000. Of course, we can never be too sure, so we would recommend adjusting one’s portfolio to take advantage of both potential scenarios.

  In all seriousness, one thing that may be instructive about such reversals is the overall investment climate in which they occur. The three prior events took place within secular bear markets. Additionally, there were 26 other quarters since 1900 which saw the DJIA recover at least 8% off its quarterly low after being down at least 10%. All but 2 of those quarters (4Q, 1987 and 4Q, 1997) occurred within a secular bear market.

  Therefore, if there is anything that is to be gleaned from such large positive reversals, perhaps it is that they tend to occur within negative secular environments.

  

  

  

  

  

• Stanley Druckenmiller: "This Is The Most Unsustainable Situation I Have Seen In My Career"

  By Jody Chudley, originally posted on the Daily Reckoning

  Simple Math Shows America Is Headed for an Economic Disaster

  With so many voices streaming at us through our televisions and computers, a person can’t be blamed for tuning out.

  For the most part, tuning out is exactly what we should do. But sometimes it is very important that we pay attention…

  By listening to Jeremy Grantham, Jim Grant and a host of other investors, a person could have avoided and profited the crashing of the tech bubble of the late ’90s.

  By listening to Kyle Bass, Michael Burry and Prem Watsa, an investor could have avoided and even profited from the crashing of the housing bubble in 2008.

  Today is another time when we all need to be paying attention. This time, the man we need to be listening to is Stan Druckenmiller.

  

  For 25 years as a hedge fund manager, Druckenmiller compounded money at an annualized rate of return of 30%. Incredibly, he did it without a single down year.

  Druckenmiller has a dire warning for all of us. One that requires action.

  There is nothing for Druckenmiller to gain from providing this warning. He isn’t talking his book or trying to gain investor support — he isn’t promoting anything. He doesn’t even have a political agenda.

  He is spending his own time and money to try to bring this issue to light because he believes it is crucial for the United States.

  Druckenmiller simply believes that America is heading for a disaster, and he is trying to use his high-profile position to get people motivated to stop it.

  What you need to know about Stan Druckenmiller is that his incredible investing performance was rooted in his skills in making macroeconomic forecasts.

  When describing how he was able to compound money at such a crazy rate and not have a single down year, Druckenmiller said:

  How did we do it? Very simple. While others were focusing on the present, we looked and focused on the future in terms of analyzing unsustainable situations.

   

  And when I look at the current picture of expected tax revenues combined with benefits promised to future generations, this is the most unsustainable situation I have seen ever in my career.

  The disaster that Druckenmiller sees coming for the United States is all about changing demographics and entitlement spending. They don’t add up to a sustainable situation.

  In 1940, entitlement payments, which include everything from disability payments to Social Security to Medicare, amounted to just over 20% of annual government spending in the United States.

  Today, entitlement spending has swelled to nearly 70% of the annual federal budget.

  Things are about to get a whole lot more complicated. The 20-year baby boom that took place after World War II is now beginning to result in a retiree boom.

  For context, Druckenmiller points out that in 2030, the average age of an American citizen will be older than the average age of a resident of Florida today.

  This demographic trend is going to create an entitlement spending catastrophe.

  The way the system works, the current workforce provides the tax revenue to support the current senior population. A huge rise in the retiree population relative to the number of people working results in a funding dilemma.

  Since 1980, the number of working-age people the country has had has outnumbered those age 65 and over by a count of 5-to 1.

  The country has had enough workers generating tax revenue to support the number of retirees.

  By 2030, that ratio is going to drop to 2.5-to-1.

  By 2029, there will be 11,000 new seniors arriving every day and only 2,000 new adults being added to the workforce to pay for them.

  There is just no way that the workforce at that time is going to be able to fund the entitlements of these seniors.

  This is a problem because those are commitments that have been made and will have to be paid.

  Corporations are required to disclose on their balance sheet the future defined pension obligations that their employees have earned.

  Those are very real liabilities for companies that are going to have to be paid, so they should be included.

  The balance sheet of the United States, meanwhile, doesn’t account for the future payments that it has promised to its senior citizens. Again, like defined benefit pension payments, these are very real obligations.

  They should be recorded as liabilities of the United States.

  Here is how much the U.S. debt would increase, assuming no change in tax rates, if those obligations were included:

  

  Source: Stan Druckenmiller presentation

  That chart makes the size of the problem abundantly clear. There are a lot of people already very concerned with the amount of debt the United States has. Imagine how they would feel if they were aware that with these liabilities conclude the number is 20 times larger.

  This is a case of simple math.

  Either tax rates increase in a massive way or the payments to seniors have to be cut significantly. The status quo doesn’t work. There just isn’t going to be anywhere close to enough money coming in to fund the payments going out.

  The country can’t borrow its way out of a funding issue of this size.

  This issue that Druckenmiller is so passionate about is a huge problem. One with no possible solution that will be popular with the American voters.

  Either higher taxes or lower benefits. Likely some combination of both. Both very unattractive options for big percentages of the voter base.

  You can hear the politicians kicking this can further down the road, can’t you?

  Fixing this is going to require some real sacrifice by the American people. That doesn’t sound like a very appealing platform upon which to get re-elected.

  The finances of the entire world are run by short-term thinkers. Central bankers have been dead set on trying to inflate economies for a decade now using more and more aggressive easy-money policies.

  To try to make the short term a little better, these central bankers have been perfectly willing to roll the dice on the long term.

  The issue that Druckenmiller has raised will have to be dealt with. I’m sure it will be dealt with far later than it should be as politicians do kick that can down the road.

  By doing that, they are only going to make the corrective actions that the country has to take more severe.

  It is crucial that all of us realize that our long-term financial well-being really needs to be taken care of by one person. That one person is the man or woman you look at in the mirror in the morning when you are brushing your teeth.

  We have to make sure we protect our wealth diligently and invest in assets that will retain their value when the consequences of all of this short-term thinking arrive.

  Because eventually, they will.

  

  

  

  

  

• Why Silicon Valley’s “It’s Different This Time” Is Now A Broken Record

  Submitted by Mark St. Cyr

  Why Silicon Valley’s “It’s Different This Time” Is Now A Broken Record

  Like a broken record whenever a profit measure was asked of “Silicon Valley” (i.e., everything social or tech) as to when something would either be profitable or, begin returning investor cash with either net profits or dividends. The response was always the same “It’s different this time.” Meaning: there aren’t any now, but just you wait! Some are still waiting, and waiting, and waiting, and….

  The only reason this retort was tolerated for as long as it had been is for that other “it’s different this time” meme that took hold in unison when it came to everything one thought they understood about investing, free markets and capitalism itself: quantitative easing e.g., QE.

  As long as the Fed enabled “free money” to chase momentum plays – the gravy train to cash-out-riches was running on rails. Yet, here too investors, savers, and more would ask “When does normalization type policies begin that benefit the prudent balance sheet or fiscally responsible?” And here the retort was much same, “Not now, but just you wait!” And again they too are still waiting, and waiting, and waiting, and…

  Of course the answer to the question of why we’re waiting is, you guessed it – “it’s different this time.” Four words that replaced a teenager’s one word answer to everything: “Because!” But that’s what a Ph.D is for I guess – making the simple more complex. But I digress.

  However, today there are visible cracks showing in the armor of that once fool-proof defense. Everywhere you look (but you have to open your eyes too see) the once celebrated IPO cash-out where dreams and fortunes are made regardless if the business model works, stable, or is even viable, has been all but erased 4 months into 2016. And how much longer it goes on is anyone’s guess.

  As we stand today, as of this writing, there have been zero IPO’s of any “unicorns.” Zero, as in zip, zero, nada. Why? Is it – different this time?

  It seems too me the deciding difference is more of the same old, same old. i.e., Without QE’s enabling “hot money” for momentum chasing – net profits matter. Not “net-eyeballs” for fairy-tale story telling. And net profits today are as rare as the vaunted unicorn itself: mythical. Unless it’s Non-GAAP, then as they say “You’re crushing it!”

  Today, investors of all stripes seem to be no longer buying into myths. At least not without “free money” (e.g., QE) that is.

  “Eyeballs for ads” (aka – user growth etc., etc.) has been the celebrated metric used and touted for everything social et al from its inception. Not sales, not profits, nor a whole lot of other business centric measurements as to the health and viability of an enterprise. No, like a broken record only user growth metrics (i.e., eyeballs) mattered. Yet, there’s currently a very, very, very (did I say very?) big problem with this whole “eyeballs” or “user growth” defense. The issue is: The fairy tale metric has morphed into a real-life counter factual that can no longer be hidden. And this nightmare is growing day, by day, by day, and by day. Let’s list a few shall we?

  Regardless of how a next in rotation fund manager, economist, think tank alumni, or Ivy League’d Ph.D professor et al wants to justify these “markets.” Anyone with a modicum of business acumen understands there’s no fundamental business reason or metric that logically explains why we should be at these heights. None. It’s a fairy-tale story based on a mirage as its factual base. All smoke and mirrors supported via a cohort of complacent onlookers, along with, just as many fervent believers hoping, and praying that this “Never-land” can exist forever. Do I need to remind you that even the Bank of Japan’s governor Mr. Kuroda actually uses the term “Peter Pan” to describe his monetary thesis? Welcome to monetary policy 21st century style. Remember – it’s different this time.

  Yet, how is it, here we are within spitting distance of the all time, never before seen in human history highs and: there hasn’t been a one? Not any unicorns cashing out? None in all of 2016 thus far? How is it different this time? Why is it different this time? How can all this good in the markets be so bad not only for the “eyeballs for ad dollars” based social everything genre, but all IPO candidates in general?

  Oh right, I forgot. Not to sound like a broken record but “it’s different this time.” I would suggest this time, is a looking a lot like last time. Can you say A – O – L? Many can – they just won’t.

  Another point is; when it comes to that cashing-out IPO stock option dream and picking up a San Francisco McMansion on the cheap at $5 million or so. Those dreams are beginning to take on more of a realization that a shipping container reality might be here to stay far longer than first anticipated. Or, if you’re lucky, you might find a nice place in some box, or under some stairwell or crawl space to rent while you wait for that “just you wait!” IPO announcement we’re told is coming any day now.

  Only issue? Hopefully that box, or room in a McMansion isn’t rented from someone who is also waiting. Or, you may find they’ll need to use that space eventually for themselves as they list their bedroom on AirBnB™ to help foot the bill. But not too worry. For they’ll state, “It’s just any day now!” when they’ll cash out their shares with ____________ (fill in the blanks) unicorn’s IPO. If it ever does – at a value that pays. After all: there’s always next quarter, right? Just like earnings. But again I digress, sorry.

  How about some past unicorn cash outs? How are they doing? Twitter™? Linkedin™? Square™? If you hold shares in these companies you should be crushing it when it comes to your portfolio. After all, these companies have seen their shares hurt “unfairly” as many a Silicon Valley aficionado or next in rotation fund manager will attest. So, with a historic rise that dwarfed all previous measures prior in the “markets,” with the best recovery ever (yes, ever) in a quarter in the stock markets history. The share prices of these companies should be on fire, no?

  No. In actuality if you still own shares I would surmise the description would be more in kind with underwater, or drowning in a sea of red, yes? Well remember, it’s different this time, right?

  But these are new business models we’re told. It is us or you that “just doesn’t get it” when it comes to all these new businesses emanating from tech. Disruption is the key! Profits come later, making net profits much later (if ever!) It’s all about “eyeballs for ads.” Once they get that user growth model back on track just you wait!

  Well we’re still waiting, but more importantly, Wall Street has been waiting and has clearly shown it’s losing its patience. And for many, not only are they no longer willing to wait. But more importantly: They’re either pulling out, or turning a blind eye to “eyeballs” entirely. Now it’s, “Where’s my money or, I’m showing you the door.” And it’s gaining ground daily.

  There’s no better example today than Yahoo™. Here’s a company only a mere 3+ years ago was heralded with its hiring of Marissa Mayer as CEO, its stake in Alibaba™, along with its “eyeballs for ads” count was, and still is, one of the highest on the web. Today? Now that  QE is no longer, the only thing worth keeping (as to sell) seems to be its stake in Alibaba. Although at a far lower value than they were from its own IPO heights.

  How valuable is all that “eyeballs for ads” goodwill? As the ole saying goes: “How much you got?” For it seems via the rumor mill it isn’t going to take all that much to acquire it. Talk about a diminishing value. As for being a board member? That now has a life expectancy of “how long before you can move out?” And as for its once high flyer, party throwing CEO? Maybe LinkedIn will be her next ticket to fame. No, not as an executive – but as a job board participant. Oh and by the way, LinkedIn shares are still on sale – and nobody seems to care. Except those with double-digit percentage losses. But alas, once again, I digress.

  It seems she’s just the latest in an ever-growing list of “social everything” brilliance – as long as there’s QE to supply the brain power. And the debacle at Yahoo is just the latest of the oldest names. For I believe: It’s coming to the “new” in much the same fashion and will snowball even quicker. And yes, even with the markets at these levels. Why? Easy…

  The fairy-tale can no longer withstand reality. Net profits, and return of money and/or investment matters. Period. Unless…

  You’re one of the fortunate that is somehow already located within an index fund that is targeted and/or held by either a central bank or sovereign wealth fund. If not? “There’s no soup for you!” (i.e., money to wait.) That time has now since passed for “it’s different this time.” And not the way the “Valley” has argued these last 6+ years. (And I believe that too is about to find itself in a whole ‘nother “it’s different this time” reality check in the very near future.)

  The time of “eyeballs for ads” has peaked in my opinion. That story as I’ve argued over the years would unravel quicker than a sweater thread, and all it would take was when the meme of “it’s different this time” began being debunked by measurements the “Valley” itself couldn’t just talk over or spin away.

  As a matter of fact I’m of the opinion that today: the more words used to protect the fairy-tale meme will actually work against it. I’ll finish with the latest example for anyone who wants to truly understand just how encompassing the “it’s different this time” narrative really has become and – to what extent.

  There is probably no other industry that has been disrupted, broken, changed, and far more other ways than I can type – than music. And there has been no other business model in the “eyeballs/ears for ads” internet genre than streaming music services. Billions of listeners, billions of this, billions of that. Valuation touted of $BILLIONS, and more. “It’s the way of now!” “Streaming is it!” “Invest now or miss the boat!” “This is where the money of the decade is to be made!” And on, and on, and on. However, there’s a problem.

  Remember how I implied “would unravel quicker than a sweater thread?” And all it would take was when the meme of “it’s different this time” began being debunked in ways so glaringly obvious without saying a word? Well, here is the latest fulfillment of that argument.

  Streaming music; for all that it’s been touted to be; both the be all, and, end all of music. Along with why its business model would be the darling of investors everywhere. I ask you not only to contemplate this yourself, but also, think about how this one fact is going to play into the minds of not only current investors, but rather, those desperately needing new investors today for all that “cashing out” to take place tomorrow. Ready?

  Vinyl sales, yes, as in those plastic looking arcane relics of yesteryear that adorn many a bar room wall or lie boxed is some grandparents basement hasn’t just made some resurgence that you didn’t read on you latest social media “eyeballs for ad revenue” of choice. No, this resurgence isn’t making such a comeback as to replace digital. However, what is has done is antiquated that meme of “it’s different this time” when it comes to those “eyeballs for ads” supported models. Ready? (If you’re an investor in one form or another of the “eyes for ads” model you might want to take a seat. Don’t say I didn’t warn you.)

  According to the Recording Industry Association of America (RIAA) vinyl sales generated more revenue in 2015 than ALL the ads/advertising on YouTube™, Spotify™, and Soundcloud™ – Combined!

  But what about all those eyeballs/and ears you ask? Sorry, but the pun just writes itself:

  It’s differen..It’s differn…It’s differen…It’s differen…It’s differen…It’s differen…

  

  

  

  

  

• Iran Oil Minister Rejects Saudi Demand To Freeze Crude Production

  In the aftermath of Bloomberg’s surprising Friday report, according to which Saudi Arabia flipflopped on its previous promise that it would freeze its oil output while allowing Iran to grow supply until it hit its pre-embargo peak, instead saying that it would only join the freeze curbe Iran – and all other OPEC member nations – also joined, crude tanked.

  Today, what little hope there may have been that Iran will suddenly change its mind and join the production freeze evaporated on Sunday when Iran’s oil minister rejected a Saudi demand to stop throttling up its petroleum production. As the WSJ adds, this threatens what has become a farcical deal to “limit crude output and raise prices” when the major oil producers meet in Doha on April 17.

  The follows Zanganeh’s admission that Iran’s oil and condensates exports surpassed 2mm b/d, a trend Iran will certainly not want to imperil.

  

  Iranian Oil Minister Bijan Zanganeh

  As the WSJ notes, Zanganeh’s remarks were his first comments since a report emerged last week that Saudi Arabia, the world’s largest crude exporter, would limit its production only if Iran followed suit.

  The dueling positions by the Middle East’s two biggest rivals for power and economic might have set off a scramble among other oil-producing nations to salvage a deal to freeze their output and stop growth in the world’s petroleum supplies. Global oil production outpaces demand by almost two million barrels on any given day, sending prices to their lowest levels in over a decade.

  Ironically, in advance of the Doha meeting which many thought had a chance of reaching some agreement, other OPEC members had pushed their oil production to the limit, flooding the market with even more excess supply. Most will find it virtually impossible to throttle production back.

  As a reminder, Saudi Arabia and other members of the 13-nation Organization of the Petroleum Exporting Countries are set to meet with nonmembers like Russia on April 17 in Doha to hash out a production freeze.

  The Bloomberg report on Friday. citing an interview with the kingdom’s Deputy Crown Prince Mohammed bin Salman, shocked Saudi Arabia’s Arab allies in the Persian Gulf.

   

  Before the prince’s comments, Saudi Arabia had been signaling it would hold production steady, instead of increasing, even if Iran ramped up its output. Iran just received relief from Western sanctions that had crippled its oil industry and is increasing output to achieve presanctions levels.

  As for Iran, it is merely sticking to what it has said before it would do: Zanganeh told Iran’s semiofficial Mehr News Agency that he still intended to bring Iran’s oil production to its presanctions level of four million barrels a day an increase of one million barrels a day compared with late 2015.

  As noted above, Iran’s oil and gas condensate exports rose by 250,000 barrels a day in March to surpass two million barrels per day, the ministry’s Shana news service quoted Mr. Zanganeh as saying.

  Even though Mr. Zanganeh told Mehr he would certainly attend the Doha meeting if “he had time,” his refusal to heed to Saudi demands that Iran freeze its output calls the success of the upcoming meeting into question.

  With the Iran breaking ranks, Kuwait and Qatar are scrambling to reach Riyadh to salvage the prospective agreement, according to the WSJ. Kuwait’s acting oil minister Anas al-Saleh said cooperation between OPEC and nonmembers would “certainly help stabilize oil prices.”

  “We believe that a common agreement on a positive stand will serve market stability,” the minister said.

  Of course, Kuwait has already made it clear that without Iran there is no deal: as we reported on March 8, Kuwait’s oil minister said on Tuesday that his country’s participation in an output freeze would require all major oil producers. “I’ll go full power if there’s no agreement. Every barrel I produce I’ll sell,” Anas al-Saleh told reporters in Kuwait City last month.

  He may now have no choice.

  Oil prices have risen since Saudi Arabia and Russia met in Doha in February and first broached the idea of a freeze. Prices have climbed over $40 a barrel in recent weeks, after hitting lows of $27 a barrel in January. But prices fell on Friday after the Saudi prince’s comments were published. It remains to be seen if oil will revert back to its February lows now that any hope for a coordinated supply cut is no longer on the table.

  

  

  

  

  

• IMF's Lagarde Responds To Tsirpas: Calls Use Of Credit Event As Negotiating Tactic "Simply Nonsense"

  After last night’s oddly drafted letter by the Greek PM Tsipras (which contained a combination of typed text and scribbles) to IMF head Lagarde in the wake of the Wikileaks revelation which was interpreted by many, the Greek government included, that the IMF would seek a “credit event” to facilitate its debt-reduction negotiations with Angela Merkel, it was only a matter of time before the IMF officially responded to the Greek premier and population. She did so moments ago.

  The highlights:

  • … any speculation that IMF staff would consider using a credit event as a negotiating tactic is simply nonsense
  • … if it were necessary to lower the fiscal targets to have a realistic chance of them being fully met, there would be an attendant need for more debt relief.
  • … this weekend’s incident has made me concerned as to whether we can indeed achieve progress in a climate of extreme sensitivity to statements of either side
  • … I have decided to allow our team to return to Athens to continue the discussions.
  • … it is critical that your authorities ensure an environment that respects the privacy of their internal discussions and take all necessary steps to guarantee their personal safety.
  • … the IMF conducts its negotiations in good faith, not by way of threats, and we do not communicate through leaks

  Full letter:

  Dear Prime Minister,

   

  Thank you for your letter of April 2, in which you ask about the IMF’s position regarding the program negotiations with Greece.

   

  My view of the ongoing negotiations is that we are still a good distance away from having a coherent program that I can present to our Executive Board. I have on many occasions stressed that we can only support a program that is credible and based on realistic assumptions, and that delivers on its objective of setting Greece on a path of robust growth while gradually restoring debt sustainability.

   

  Otherwise it would fail to re-establish confidence, with the implication, among others, that Greece would soon again be forced to adopt yet more measures. Of course, any speculation that IMF staff would consider using a credit event as a negotiating tactic is simply nonsense.

   

  As you and I have discussed several times, including recently on the telephone, I have been consistent in pointing out that, if it were necessary to lower the fiscal targets to have a realistic chance of them being fully met, there would be an attendant need for more debt relief. In the interest of the Greek people, we need to bring these negotiations to a speedy conclusion.

   

  I agree with you that successful negotiations are built on mutual trust, and this weekend’s incident has made me concerned as to whether we can indeed achieve progress in a climate of extreme sensitivity to statements of either side. On reflection, however, I have decided to allow our team to return to Athens to continue the discussions.

   

  The team consists of experienced staff who have my full confidence and personal backing. For them to be able to do their work, as you have invited us, it is critical that your authorities ensure an environment that respects the privacy of their internal discussions and take all necessary steps to guarantee their personal safety.

   

  Finally, the IMF conducts its negotiations in good faith, not by way of threats, and we do not communicate through leaks. To further enhance the transparency of our dialogue, I have therefore decided to release the text of this letter on our website at www.imf.org. I also look forward to any personal conversation with you on how to take the discussions forward.

   

  Sincerely yours,

   

  Christine Lagarde

  And so once again conditions between Greece and the IMF (the only Troika agency that advocates more Greek debt cuts) are right back to their traditional sub-frigid place.  As to whether Greece can guarantee the personal safety of the IMF’s team, we shall find out imminently: the critical negotiations are set to begin in the next few days.

  

  

  

  

  

• A Look Inside Iceland's Kviabryggja Prison: The One Place Where Criminal Bankers Face Consequences

  What do Lloyd Blankfein, Jamie Dimon, James Gorman, John Thain, Jimmy Cayne, and any of the revolving door of AIG CEO’s have in common? Three things come to mind rather quickly: 1) All were financial executives during the 2008 global financial crisis. 2) All of their firms received massive public bailouts. 3) None of them went to jail for their firm’s involvement in said crisis. As a matter of fact, most are still plugged in somewhere on Wall Street, presumably helping to facilitate the next great financial crisis.

  While everyday Americans were (and still are) quite disgusted with the fact that absolutely nobody was actually held accountable for the creation of the financial crisis, it’s safe to say that most have given up hope that anyone will be convicted. As a matter of fact, US Attorney General Eric Holder once said that banks are so large that it would be difficult to prosecute anyone. 

   That’s nice.

  Enter Iceland, a small country of roughly 330,000 residents, where as Bloomberg reports, bank executives are actively being prosecuted and sent to jail for their negligent actions.

  Unlike the jellyfish in the US, Iceland appointed Olafur Hauksson as special prosecutor to investigate bankers and their roles in the financial crisis. The result? 26 convictions of bankers and financiers since 2010. In upholding the convictions, Iceland’s Supreme Court said that actions were “thoroughly planned”, and “committed with concentrated intent” – refreshingly different than Holder’s let’s just let them get away with it because it’s hard to figure out verbiage.

  This is Olafur Haukson: a person who is the diametrical opposite of Holder; a person who dares to prosecute bankers.

  

  Olafur Haukson, special prosecutor to investigate the banking cases

  As Bloomberg writes, in contrast to the Icelandic saga, no bank CEOs in the U.S. or the U.K. have been convicted for their roles in the subprime mortgage crackup and related disasters. Bringing white-collar criminal cases may be easier in Iceland because courts don’t use juries. Rather, they employ neutral experts to help judges understand the intricacies of finance. In Britain’s highest-profile case stemming from the crash, the country’s Serious Fraud Office investigated London-based real estate magnates Vincent and Robert Tchenguiz in connection with their business dealings with Kaupthing. The brothers were never charged, and in 2014 the SFO even had to pay them £4.5 million ($6.4 million) in damages to settle their claims of malicious prosecution.

  Hauksson, a bear of man with a fighter’s jaw, is pressing ahead with a half-dozen more cases related to the crash. The former top lawman in Akranes, a port town up the coast from Reykjavik, Hauksson was one of only two applicants for the job of special prosecutor—and the only lawyer. “It was important for the country to look carefully at what happened in the months that led up to the banking collapse,” he says. Few expected him to succeed in untangling the web of self-dealing that stretched from Reykjavik to Luxembourg to London. “He was used to issuing parking fines and breaking up drunken brawls,” says Sigrun Davidsdottir, a journalist who writes about the bank cases on her website, Icelog. “It’s earth-shattering what he’s accomplished.”

  What he has accomplished is to do the unthinkable: send criminal bankers in prison.

  Working with the Financial Supervisory Authority, his office found that the country’s top three banks routinely made huge loans to their biggest stockholders. Worse, the banks secured the debts with their own equity, which spelled doom when share prices nosedived in September 2008. That month, Kaupthing Chairman Einarsson and CEO Sigurdsson surprised investors by announcing that Sheikh Mohammed bin Hamad bin Khalifa al Thani, a member of Qatar’s royal family, had acquired a 5.1 percent stake in the bank. The two bankers, with the help of Gudmundsson in Luxembourg and stockholder Olafsson, had directed Kaupthing to lend the sheik $280 million to buy the stake through a daisy chain of shell companies in the British Virgin Islands and Cyprus, according to court records. Arion Bank was formed from the domestic assets of Kaupthing after it failed in October 2008.

  The result: Iceland’s economy is vibrant and growing: “It’s a rebound other European nations would envy. Iceland’s gross domestic product is set to expand almost 4 percent this year, according to forecasts compiled by Bloomberg. The unemployment rate of 2.8 percent is about one-third the average of the European Union. As the state prepares to lift capital controls later this year, the banking sector continues to strengthen: State-owned Islandsbanki, the nation’s No. 2 lender with $8.4 billion in assets, boasts a common equity Tier 1 ratio of 28.3 percent. That’s more than twice the 12.7 percent average recorded by Europe’s 25 largest banks as of Dec. 31, according to Bloomberg data. “Before the crisis, the banks grew too fast and too much,” says Unnur Gunnarsdottir, director general of the Financial Supervisory Authority, which oversees the lenders. “That will not happen again.”

  * * *

  Despite Haukson’s success in ensuring criminal bankers pay for their actions, Hauksson isn’t letting up. He still has half a dozen more cases relating to the 2008 crash. Those on the receiving end of his convictions get to visit the beautiful Kviabryggja Prison, an old farmhouse turned prison, located in a remote area bordered by the North Atlantic.

  Kviabryggja Prison in western Iceland doesn’t need walls, razor wire, or guard towers to keep the convicts inside. Alone on a wind-swept cape, the old farmhouse is bound by the frigid North Atlantic on one side and fields of snow-covered lava rock on another. To the east looms Snaefellsjokull, a dormant volcano blanketed by a glacier. There’s only one road back to civilization.

   

  This is where the world’s only bank chiefs imprisoned in connection with the 2008 financial crisis are serving their sentences, Bloomberg Markets magazine reports in its forthcoming issue. Kviabryggja is home to Sigurdur Einarsson, Kaupthing Bank’s onetime chairman, and Hreidar Mar Sigurdsson, the bank’s former chief executive officer, who were convicted of market manipulation and fraud shortly before the collapse of what was then Iceland’s No. 1 lender. They spend their days doing laundry, working out in the jailhouse gym, and browsing the Internet. They and two associates incarcerated here—Magnus Gudmundsson, the ex-CEO of Kaupthing’s Luxembourg unit, and Olafur Olafsson, the No. 2 stockholder in the bank at the time of its demise—can even take walks outside, like Kviabryggja’s 19 other inmates, all of whom were convicted of nonviolent crimes.

   

  * * *

   

  At Kviabryggja Prison, the tumult in the capital seems worlds away. It’s dead quiet around the single-story barracks, and in the distance rise massifs that form Iceland’s western fjords. The Kaupthing convicts are marking time in different ways. A couple of them are tutoring fellow inmates. The subjects: math and economics.

  This is where Iceland’s criminal bankers can be found now:

  

  

   

  Meanwhile, in the US…

  

  

  

  

  

  

• "Land Of The Free?"

  Submitted by The Burning Platform

  

  

  

  

  

• The Great Global Weight Gain: The World Has Too Much Food

  For the first time in history, more people are obese than underweight, according to a new study. In 1975, more than twice as many people were underweight than obese…

  

   

  Behind the global spike is greater access to cheap food as incomes have risen. "It’s been very easy, as countries get out of poverty, to eat a lot, and to eat a lot of unhealthy calories,” said the study’s senior author, adding that "the price of fresh fruits, vegetables, and whole grains are often “noticeably more than highly processed carbohydrates." The rich world can blunt the health impacts of unhealthy weight with drugs, but health systems in the developing world may not be equipped to do the same.

  The past 40 years have seen an unprecedented increase in the number of obese adults worldwide, climbing to about 640 million from 105 million in 1975. If the current trend continues, about one-fifth of adults will be obese by 2025.

   

  The rate has more than doubled for women and tripled for men, according to a new analysis published in the Lancet. Under the present trajectory, the chance of meeting a goal set by the World Health Organization to halt the increase over the next decade is, according to the study, “virtually zero.”

   

  

   

   

  A person who has a body-mass index higher than 30, or weighs at least 203 pounds and is 5-foot-9-inches tall, is considered obese.

   

  The world population’s average weight has increased by about 3.3 pounds (1.5 kilograms) per decade since 1975, the researchers estimate. Excess weight raises the risk of diabetes, heart disease, and other chronic conditions.

   

  “The issue really comes down to people either not having enough to eat or not having enough healthy food to eat,” he said. “It becomes a manifestation of the same problem.”

  Governments need to prepare for the jump in medical costs that accompany unhealthy weight and focus on prevention now to avoid higher costs in the future, said Bill Dietz, director of the Sumner M. Redstone Global Center for Prevention and Wellness at George Washington University. “They should be as nervous as a cat on a hot tin roof about the tsunami of diabetes that’s coming their way,” Dietz said. “The cost of this rise in the prevalence of obesity is going to be staggering.”

  The main takeaway? Excess weight has become a far bigger global health problem than weighing too little. While low body weight is still a substantial health risk for parts of Africa and South Asia, being too heavy is a much more common hazard around the globe.

  

  

  

  

• "Unprecedented Leak" Exposes The Criminal Financial Dealings Of Some Of The World's Wealthiest People

  An unprecedented leak of more than 11 million documents, called the “Panama Papers“, has revealed the hidden financial dealings of some of the world’s wealthiest people, as well as 12 current and former world leaders and 128 more politicians and public officials around the world.

  More than 200,000 companies, foundations and trusts are contained in the leak of information which came from a little-known but powerful law firm based in Panama called Mossack Fonseca, whose files include the offshore holdings of drug dealers, Mafia members, corrupt politicians and tax evaders – and wrongdoing galore.

  The law firm is one of the world’s top creators of shell companies, which can be legally used to hide the ownership of assets. The data includes emails, contracts, bank records, property deeds, passport copies and other sensitive information dating from 1977 to as recently as December 2015.  

  It allows a never-before-seen view inside the offshore world — providing a day-to-day, decade-by-decade look at how dark money flows through the global financial system, breeding crime and stripping national treasuries of tax revenues.

  Here is the brief summary of how these documents have been revealed, via the Sueddeutsche Zeitung:

  Over a year ago, an anonymous source contacted the Süddeutsche Zeitung (SZ) and submitted encrypted internal documents from Mossack Fonseca, a Panamanian law firm that sells anonymous offshore companies around the world. These shell firms enable their owners to cover up their business dealings, no matter how shady.

   

  In the months that followed, the number of documents continued to grow far beyond the original leak. Ultimately, SZ acquired about 2.6 terabytes of data, making the leak the biggest that journalists had ever worked with. The source wanted neither financial compensation nor anything else in return, apart from a few security measures.

   

  The data provides rare insights into a world that can only exist in the shadows. It proves how a global industry led by major banks, legal firms, and asset management companies secretly manages the estates of the world’s rich and famous: from politicians, Fifa officials, fraudsters and drug smugglers, to celebrities and professional athletes.

  A quick snapshot of the scale of the leak in context:

  

  * * *

  Mossack Fonseca’s fingers are in Africa’s diamond trade, the international art market and other businesses that thrive on secrecy. The firm has serviced enough Middle East royalty to fill a palace. It’s helped two kings, Mohammed VI of Morocco and King Salman of Saudi Arabia, take to the sea on luxury yachts.

  In Iceland, the leaked files show how Prime Minister Sigmundur David Gunnlaugsson and his wife secretly owned an offshore firm that held millions of dollars in Icelandic bank bonds during that country’s financial crisis. In the video clip below, PM Gunnlaugsson walks out of an interview with Swedish television company SVT. Gunnlaugsson is asked about a company called Wintris, which he says has been fully declared to the Icelandic tax authority. Gunnlaugsson says he is not prepared to answer such questions and decides to discontinue the interview, saying: ‘What are you trying to make up here? This is totally inappropriate’

   

  The ICIJ records show Sergey Roldugin, a long-time friend of Vladimir Putin, as a behind-the-scenes player in a clandestine network operated by Putin associates that has shuffled at least $2 billion through banks and offshore companies, German daily Süddeutsche Zeitung and other media partners has found. In the documents, Roldugin is listed as the owner of offshore companies that have obtained payments from other companies worth tens of millions of dollars.

  The files include a convicted money launderer who claimed he’d arranged a $50,000 illegal campaign contribution used to pay the Watergate burglars, 29 billionaires featured in Forbes Magazine’s list of the world’s 500 richest people and movie star Jackie Chan, who has at least six companies managed through the law firm. The files contain new details about major scandals ranging from England’s most infamous gold heist to the bribery allegations convulsing FIFA, the body that rules international soccer.

  In the “Operation Car Wash” case in Brazil, prosecutors allege that Mossack Fonseca employees destroyed and hid documents to mask the law firm’s involvement in money laundering. A police document says that, in one instance, an employee of the firm’s Brazil branch sent an email instructing co-workers to hide records involving a client who may have been the target of a police investigation: “Do not leave anything. I will save them in my car or at my house.”

  In Nevada, the leaked files show, Mossack Fonseca employees worked in late 2014 to obscure the links between the law firm’s Las Vegas branch and its headquarters in Panama in anticipation of a U.S. court order requiring it to turn over information on 123 companies incorporated by the law firm. Argentine prosecutors had linked those Nevada-based companies to a corruption scandal involving an associate of former presidents Néstor Kirchner and Cristina Fernández de Kirchner.

  Today, Mossack Fonseca is considered one of the world’s five biggest wholesalers of offshore secrecy. It has more than more than 500 employees and collaborators in more than 40 offices around the world, including three in Switzerland and eight in China, and in 2013 had billings of more than $42 million.

  An interactive summary of some of the most prominent individuals named:
  

  The leak also provides details of the hidden financial dealings of 128 more politicians and public officials around the world.

  The cache of 11.5 million records shows how a global industry of law firms and big banks sells financial secrecy to politicians, fraudsters and drug traffickers as well as billionaires, celebrities and sports stars. These are among the findings of a yearlong investigation by the International Consortium of Investigative Journalists, German newspaper Süddeutsche Zeitung and more than 100 other news organizations.

  The files expose offshore companies controlled by the prime ministers of Iceland and Pakistan, the king of Saudi Arabia and the children of the president of Azerbaijan.

  They also include at least 33 people and companies blacklisted by the U.S. government because of evidence that they’d been involved in wrongdoing, such as doing business with Mexican drug lords, terrorist organizations like Hezbollah or rogue nations like North Korea and Iran.

  “These findings show how deeply ingrained harmful practices and criminality are in the offshore world,” said Gabriel Zucman, an economist at the University of California, Berkeley and author of “The Hidden Wealth of Nations: The Scourge of Tax Havens.” Zucman, who was briefed on the media partners’ investigation, said the release of the leaked documents should prompt governments to seek “concrete sanctions” against jurisdictions and institutions that peddle offshore secrecy.

  The documents make it clear that major banks are big drivers behind the creation of hard-to-trace companies in the British Virgin Islands, Panama and other offshore havens. The files list nearly 15,600 paper companies that banks set up for clients who want keep their finances under wraps, including thousands created by international giants UBS and HSBC.

  An ICIJ analysis of the leaked files found that more than 500 banks, their subsidiaries and branches have worked with Mossack Fonseca since the 1970s to help clients manage offshore companies. UBS set up more than 1,100 offshore companies through Mossack Fonseca. HSBC and its affiliates created more than 2,300.

  Some of the key findings summarized via AFR:

  

  

  

  

  * * *

  In the largest media collaboration ever undertaken, journalists working in more than 25 languages dug into Mossack Fonseca’s inner workings and traced the secret dealings of the law firm’s customers around the world. They shared information and hunted down leads generated by the leaked files using corporate filings, property records, financial disclosures, court documents and interviews with money laundering experts and law-enforcement officials.

  Reporters at Süddeutsche Zeitung obtained millions of records from a confidential source and shared them with ICIJ and other media partners. The news outlets involved in the collaboration did not pay for the documents.

  Before Süddeutsche Zeitung obtained the leak, German tax authorities bought a smaller set of Mossack Fonseca documents from a whistleblower, a move that triggered the raids in Germany in early 2015. This smaller set of files has since been offered to tax authorities in the United Kingdom, the United States and other countries, according to sources with knowledge of the matter.

  The larger set of files obtained by the news organizations offers more than a snapshot of one law firm’s business methods or a catalog of its more unsavory customers. It allows a far-reaching view into an industry that has worked to keep its practices hidden — and offers clues as to why efforts to reform the system have faltered.

  * * *

  The year-long investigation was coordinated by the International Consortium of Investigative Journalists (ICIJ), who worked with hundreds of journalists from the world’s top media organisations including the ABC’s Four Corners program.

  What the documents reveal is the inner workings of a global industry of law firms and big banks who sell financial secrecy to those who can afford it.

  The ICIJ findings include evidence that:

  • Offshore companies linked to the family of China’s top leader, Xi
    Jinping, as well as Ukrainian President Petro Poroshenko, who has
    positioned himself as a reformer in a country shaken by corruption
    scandals
  • 29 billionaires featured in Forbes Magazine’s list of the world’s 500 richest people
  • Icelandic Prime Minister Sigmundur David Gunnlaugsson and his wife secretly owned an offshore firm that held millions of dollars in Icelandic bank bonds during the country’s financial crisis
  • Associates of Russian President Vladimir Putin secretly shuffled as much as $2 billion through banks and shadow companies
  • New details of offshore dealings by the late father of British Prime
    Minister David Cameron, a leader in the push for tax-haven reform
  • Offshore companies controlled by the Prime Minister of Pakistan, the King of Saudi Arabia and the children of the President of Azerbaijan
  • 33 people and companies blacklisted by the US Government because of evidence that they have done business with Mexican drug lords, terrorist organisations like Hezbollah or rogue nations like North Korea
  • Customers including Ponzi schemers, drug kingpins, tax evaders and at least one jailed sex offender
  • Movie star Jackie Chan, who had at least six companies managed through the law firm

  The leaked data allows a never-before-seen view inside the offshore world — providing a day-to-day, decade-by-decade look at how dark money flows through the global financial system, breeding crime and stripping national treasuries of tax revenues.

  Most of the services the offshore industry provides are legal if used by the law-abiding. But the documents show the extraordinary lengths individuals will go to in order to hide the true owners of companies.

  Mossack Fonseca offers extra services to provide “front people” known as nominees to act as shareholders, directors or even the owners of your company. This can make it extremely difficult for authorities trying to investigate money laundering or follow the money through complex networks of offshore accounts.

  Firm worked with more than 14,000 ‘middlemen’ on clients’ behalf

  An ICIJ analysis of the leaked files found that more than 500 banks, their subsidiaries and branches had worked with Mossack Fonseca since the early 1970s to help clients manage offshore companies.

  In all, the files indicate Mossack Fonseca worked with more than 14,000 banks, law firms, company incorporators and other middlemen to set up companies, foundations and trusts for customers.

  The documents reveal that these offshore players often failed to follow legal requirements to ensure their clients were not involved in criminal enterprises, tax dodging or political corruption.

  Mossack Fonseca says the middlemen are its true clients, not the eventual customers who use offshore companies. The firm says these middlemen provide additional layers of oversight for reviewing new customers. As for its own procedures, Mossack Fonseca says they often exceed “the existing rules and standards to which we and others are bound”.

  Mossack Fonseca offers backdating of documents

  The leaked files also show the firm regularly offered to backdate documents to help its clients gain advantage in their financial affairs. It was so common that an email exchange from 2007 showed firm employees talking about establishing a price structure — clients would pay $8.75 for each month farther back in time that a corporate document would be backdated.

  In a written response to questions from ICIJ and its media partners, the firm said it “does not foster or promote illegal acts”.

  “Your allegations that we provide shareholders with structures supposedly designed to hide the identity of the real owners are completely unsupported and false,” the firm said.

  The firm added that the backdating of documents “is a well-founded and accepted practice” that is “common in our industry and its aim is not to cover up or hide unlawful acts”.

  The firm said it could not answer questions about specific customers because of its obligation to maintain client confidentiality.

  * * *

  There is much more in the full set of releases covered in the ICIJ’s website, however we wonder what if any action will be taken against any of these criminals who also happen to be some of the world’s wealthiest people and most powerful politicians: after all, it is they who make the rules.

  * * *

  Finally, for those curious why not a single prominent US name features in the list above, the reason may be found within the snapshot of the non-profit ICIJ’s “funding supporters“:

  Recent ICIJ funders include: Adessium Foundation, Open Society Foundations, The Sigrid Rausing Trust, the Fritt Ord Foundation, the Pulitzer Center on Crisis Reporting, The Ford Foundation, The David and Lucile Packard Foundation, Pew Charitable Trusts and Waterloo Foundation.

  And then, at the bottom of the Panama Papers disclosure site we again find Open Society which, as everyone knows, is another name for George Soros.

  

   

  Finally, let’s recall that as Bloomberg reported earlier this year, the world’s biggest and “favorite” new tax haven as of this moment, is… the United States itself.

  

  

  

  

  

• Chart Of The Quarter: Nothing Else Matters

  US equity markets rebounded by the greatest amount ever in Q1 to end the quarter with a "keep the dream alive" positive return. This 'central-bank'-sponsored bounce occurred as S&P 500 earnings expectations plunged 9.6% – the biggest quarterly collapse since Q1 2009. As FactSet details,

  During the first quarter, analysts lowered earnings estimates for companies in the S&P 500 for the quarter. The Q1 bottom-up EPS estimate (which is an aggregation of the estimates for all the companies in the index) dropped by 9.6% (to $26.32 from $29.13) during this period. How significant is a 9.6% decline in the bottom-up EPS estimate during a quarter? How does this decrease compare to recent quarters?

   

  During the past year (4 quarters), the average decline in the bottom-up EPS estimate during a quarter has been 4.4%. During the past five years (20 quarters), the average decline in the bottom-up EPS estimate during a quarter has been 4.0%. During the past ten years, (40 quarters), the average decline in the bottom-up EPS estimate during a quarter has been 5.3%. Thus, the decline in the bottom-up EPS estimate recorded during the first quarter was larger than the 1-year, 5-year, and 10-year averages.

   

  In fact, this was the largest percentage decline in the bottom-up EPS estimate during a quarter since Q1 2009 (-26.9%).

   

  At the sector level, nine of the ten sectors recorded a percentage decline in the bottom-up EPS estimate for the first quarter that was larger than the 5-year average for that sector. Six of the ten sectors recorded a percentage decline in the bottom-up EPS estimate for the first quarter that was larger than the 10-year average for that sector.

   

  As the bottom-up EPS estimate for the index declined during the quarter, the value of the S&P 500 increased during this same time frame. From December 31 through March 31, the value of the index increased by 0.8% (to 2059.74 from 2043.94). This quarter marked the 10th time in the past 12 quarters in which the bottom-up EPS estimate decreased during the quarter while the value of the index increased during the quarter.

  What doe this idiocy look like?

  

   

  And all it took was the coordinated easing from most of the world's largest central banks…

  

   

  It's not the first time Central Banks have lifted stocks away from reality…

  

   

  Simply put, nothing else matters.

  

  

  

  

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• Character Traits And Skills That Are Hard To Find During A Crisis

  Submitted by Brandon Smith via Alt-Market.com,

  

  I have never lived through a national scale crisis and like most people, I hope I never have to. That said, with the growing instability present in the state of the world today it would be rather foolish to assume that the near future holds nothing but fairy dust, unicorns and gumdrops. Preparation is a necessity.

  Many Americans cannot yet relate to the concept of full spectrum crisis, but most of us have at least experienced localized disasters. In order to understand what a national emergency might look like, one simply needs to examine the microcosm of localized disasters and then imagine the same exact problems but magnified 1,000 times.

  From my personal experience with local crises, I can say that the worst threat comes not from the event itself, but the ways in which people choose to deal with the event. That is to say, for smart, courageous and prepared people with the right traits and skills, there is no such thing as a crisis. For stupid people who overestimate their abilities or who let fear dominate their thinking, any crisis becomes an insurmountable moment of utter terror.

  The right people in the right place at the right time — no crisis. The wrong people in the right place at the right time — total destruction. Therefore, the key to surviving any crisis is to have the right people in place, and to be well away from the wrong people.

  The question is, who are the right people? How do we identify them? And, how do we examine ourselves and determine if we are ready or unready? Here are some of the increasingly rare character traits and skills that make a crisis manageable for any community.

  The Ability To Act Without Permission

  This is one of the hardest character qualities to find in people in a moment of crisis. Remember back to any crisis moments you have personally experienced and ask yourself how many people around you actually tried to solve the problem immediately, and how may stood around waiting for someone else to take the lead?

  During larger scale disasters this frequently manifests as widespread apathy. Thousands or even millions of people milling around for someone in “authority” to tell them what they should do rather than taking measures themselves. I am not a big believer in leadership by dictation. The moment you give one or very few people the power to dictate the actions of entire groups, your society is already doomed. However, I am a believer in leadership by example because I have seen it work.

  Unfortunately, people who have the ability to lead by example are few and far between. Without people of this quality within your community, it is unlikely you will survive. Decisiveness wins the day.

  The Ability To Teach

  When I mention the ability to teach, I am not referring to people who we designate officially as “teachers” or people who call themselves teachers. Most teachers do not actually know how to teach anything.

  I am thoroughly convinced that the ability to to teach, to transfer knowledge in a way that people can easily understand and replicate, is an inborn skill — a few people are gifted with it, most people are not. I have seen men and women with expert level knowledge in numerous fields of study who are bumbling buffoons when it comes to passing that knowledge on to others. This is because it is not enough to have mastered a skill set; you must also be able to read other people and figure out how they process information. You have to be highly intuitive to teach, and this is not something that can be learned, it is something that comes naturally.

  Finding great teachers during terrible times is the best way for a community to strengthen rather than weaken. It is also the only way that a society can rebuild after a collapse.

  The Ability To Think Outside Of The Box

  Crisis scenarios sometimes require imaginative solutions in order for the threat to be removed. Thinking outside of the box means a person is unafraid to gamble, and also unafraid to enact measures which have no precedence in history. Thinking outside of the box is not guaranteed to work, but it is a desirable trait when predictable responses are likely to fail.

  An outside-the-box thinker is a kind of inventor – he invents or engineers a mechanism that no one else could have conceived of because he does not see the crisis in front of him in linear terms; he does not see it as a situation he is trapped within. Rather, he sees the crisis as if outside the bubble looking from above. Many people have done this at least once in their lives; few people are able to do this on a regular basis.

  The Ability To Stay Calm

  It is truly amazing how few people are able to recognize they are in the midst of an emergency or disaster and remain calm and collected. Keep in mind, people who are apathetic during a crisis are not “remaining calm,” they simply are too ignorant to understand the gravity of the situation. Remaining calm requires you to see the danger and to act accordingly without panic.

  Vetting people for such a character trait is pretty easy; just watch how they respond to smaller stress events. Do they run and hide every time literally or psychologically, or do they stand their ground and work out the problem? Do they let their emotions take full control, or do they manage them?

  Reactionaries can make any crisis far worse by their mere presence. Get rid of them, or teach them how to manage stress if you can.

  The Ability To Direct Force Intelligently

  Sometimes a crisis is not a natural event but a man-made event, and the only way to stop the crisis is to eliminate the man or men responsible. This requires self-defense, and self-defense requires force. Sadly, when most people do direct force to stop an attack rather than cowering in fear they tend to do it haphazardly and without intelligent direction. They simply lash out in anger, and sometimes the wrong people get hurt in the process.

  This is kind of like using a shovel rather than a scalpel to scoop out a tumor.

  The ability to direct force intelligently requires not only a propensity for acting without permission, but also in some cases remaining patient. When action is taken, it must be done with precision and insight. Finding a person who appreciates this methodology is like finding a four leaf clover nowadays.

  The Ability To Psychologically Process Carnage

  Disasters are usually messy and horrifying affairs leading to grisly and macabre scenes. The key is to be able to process the sight of such carnage without being mentally broken by it, while also maintaining one’s humanity. I call these people “quiet professionals.”

  People who think that dealing with the pain and death of others requires you to act like a robot have missed the point entirely and are not safe and functional people to have present in a crisis.

  Instead, it is vital that we continue to hold onto our empathy, but not let it disrupt our ability to take action to help those who are suffering. Anyone who simply shuts off all emotion is likely a sociopath, and while sociopaths do have a knack for functioning well in grisly jobs they also have a knack for putting other people at risk. Sociopaths are incapable of caring about others, while quiet professionals take responsibility for others despite the ugliness of the situation.

  The Ability To Self-Sacrifice

  This is not a quality that can be easily seen in other people. Situations that actually call for self-sacrifice usually occur only in the worst of times, and it is nearly impossible to know for certain how anyone, including ourselves, will act when that time comes.

  To be clear, self-sacrifice by itself is not a noble quality. There are people out there that long for martyrdom, but they do so in the name of personal glory rather than in the name of saving others. Not only should self-sacrifice be enacted only when it is certain to save lives and no other options are available, it should also only be enacted without selfish aspirations of promoting one’s own legacy. Such an attitude invariably leads to disaster rather than redemption.

  The Ability To Recognize When Others Are More Qualified To Accomplish A Task

  It is vital that people have the ability to take initiative during a crisis and get things done. But, it is also vital for people to recognize when the person next to them is better qualified for a specific task.

  “Leadership” — good leadership — is about deferring responsibilities in a practical way. If you cannot do this then you are not a leader, you are an annoyance or an obstacle. I have seen far too many people in leadership positions sabotage their own efforts by refusing to hand over responsibility to those better suited to certain tasks.

  If you are a motivator, but not a teacher, then motivate your best teachers to teach rather than trying to take charge of both tasks and failing miserably. If you are not skilled in a particular area, then don’t try to micromanage people who are. Finding people who are “doers” is a fantastic thing, as long as they can refrain from overstepping their realm of ability and stepping on the toes of others.

  The worst possible scenario I can imagine is to have a community in which leadership is not shared according to expertise to some extent. Identify micro-managers and mini-tyrants early, or suffer the fate of a completely dysfunctional community in the face of unprecedented challenges.

  It is perhaps not coincidental that all of the above character qualities are growing rarer as our culture grows more and more unstable. The notion of preparedness for crisis revolves far too much around collecting supplies and menial skills and not enough around collecting people of excellent character. That is to say, true preparedness is about building up necessary supplies and talents, but it is also about organizing with uniquely qualified people. Ignoring the latter task is to set yourself up for inevitable failure.

  

  

  

  

• Trump: "The Country Is Headed For A Massive Recession; It's A Terrible Time To Invest In Stocks"

  Donald Trump continued to streamroll over all conventional narratives when during a massive 96-minute interview with the Washington Post on Thursday which was released today, in which he talked candidly about his aggressive style of campaigning and offered new details about what he would do as president, he said that economic conditions are so perilous that the country is headed for a “very massive recession” and that “it’s a terrible time right now” to invest in the stock market, which, the traditionally cheerful WaPo said embraces “a distinctly gloomy view of the economy that counters mainstream economic forecasts.”

  Unfortunately, his “gloomy view” is supported by such events as the record surge in gun violence and deadly shootings in Chicago, where the locals also do not ascribe to the WaPo’s rosy take on events, and instead blame the economy and the lack of jobs for the ongoing social collapse in the windy city. 

  In any case, Trump dismissed concern that his comments, which the WaPo said “are exceedingly unusual, if not unprecedented, for a major party front-runner”, which is precisely Trump’s style, “could potentially affect financial markets.”

  “It’s irresponsible. It’s baffling that he would do this and also substantively wrong. There is no recession in sight.” -Doug Holtz-Eakin

  — Robert Costa (@costareports) April 2, 2016

  As the WaPo adds, “over the course of the discussion, the candidate made clear that he would govern in the same nontraditional way that he has campaigned, tossing aside decades of American policy and custom in favor of a new, Trumpian approach to the world.”

  In his first 100 days, Trump said, he would cut taxes, “renegotiate trade deals and renegotiate military deals,” including altering the U.S. role in the North Atlantic Treaty Organization.

  This is what he said:

  “I think we’re sitting on an economic bubble. A financial bubble… We’re not at 5 percent unemployment. We’re at a number that’s probably into the 20s if you look at the real number. That was a number that was devised, statistically devised to make politicians – and in particular presidents – look good. And I wouldn’t be getting the kind of massive crowds that I’m getting if the number was a real number.”

   

  “I’m talking about a bubble where you go into a very massive recession. Hopefully not worse than that, but a very massive recession. Look, we have money that’s so cheap right now. And if I want to borrow money, I can borrow all the money I want. But I’m rich… If somebody is a great, wonderful person, going to employ lots of people, a really talented businessperson, wants to borrow money, but they’re not rich? They have no chance…

   

  Is it a good time to invest now? “Oh, I think it’s a terrible time right now… because the dollar’s so strong… You have – think of it – you have cheap money that nobody can get unless you’re rich. You have the regulators are running the banks. Not the guys that are being paid $50 million a year to run the banks. I mean, when you look at many of your friends that are running banks that are being paid $40 and $50 million, yeah, they’re not running the banks. The regulators are running the banks. You have a situation where you have an inflated stock market. It started to deflate, but then it went back up again. Usually that’s a bad sign. That’s a sign of things to come.”

   

  “Part of the reason it’s precarious is because we are being ripped so badly by other countries. We are being ripped so badly by China. It just never ends. Nobody’s ever going to stop it. And the reason they’re not going to stop it is one of two. They’re either living in a world of the make-believe, or they’re totally controlled by their lobbyists and their special interests. Meaning people that want it to continue. Because what China, what Mexico, what Japan – I don’t want to name too many countries, because I actually do business in a lot of these countries – but what these countries are doing to us is unbelievable. They are draining our jobs. They are draining our money.”

   

  “I can fix it. I can fix it pretty quickly…I would do a tax cut. You have to do a tax cut. Because we’re the highest-taxed nation in the world. But I would start…I would immediately start renegotiating our trade deals with Mexico, China, Japan and all of these countries that are just absolutely destroying us. ”

  Below are some of the annotated highlights of his bearish take on the economy via the WaPo.

  Trump has for months contended that the U.S. economy is in trouble because of what he sees as an overvalued stock market, but his view has grown more pessimistic of late and he is now bearish on investing, to the point of warning Americans against doing so.

   

  “I think we’re sitting on an economic bubble. A financial bubble,” Trump said. He made clear that he was not specifying a sector of the economy but the economy at large and asserted that more bullish forecasts were based on skewed employment numbers and an inflated stock market.

   

  “First of all, we’re not at 5 percent unemployment. We’re at a number that’s probably into the twenties if you look at the real number,” Trump said. “That was a number that was devised, statistically devised to make politicians — and, in particular, presidents — look good. And I wouldn’t be getting the kind of massive crowds that I’m getting if the number was a real number.”

   

  Trump said, “it’s precarious times. Part of the reason it’s precarious is because we are being ripped so badly by other countries. We are being ripped so badly by China. It just never ends. Nobody’s ever going to stop it. And the reason they’re not going to stop it is one of two. They’re either living in a world of the make-believe, or they’re totally controlled by their lobbyists and their special interests.”

   

  “I’m pessimistic,” Trump said. “Unless changes are made. Changes could be made.” By Trump, for instance: “I can fix it. I can fix it pretty quickly.” Trump firmly believes that a turnaround on trade would be the necessary beginning of a solution to any looming recession.

   

  He mentions the Trans-Pacific Partnership as one pact he would immediately seek to renegotiate, putting him at odds with congressional Republicans who supported giving the president fast-track trade authority last year.

   

  Coupled with his push on trade would be a “very big tax cut,” which Trump unveiled last September. That proposal increases taxes on the “very rich” but reduces taxes for most taxpayers and would cut the corporate tax rate to 15 percent. To woo companies back to the United States, he would offer an incentive of a deeply discounted rate and would no longer allow corporations to defer taxes on income earned overseas.

  * * *

  The Washington Post was displeased by Trump’s pessimistic view, which it said “runs counter to that of most economists, whose rough consensus is that the U.S. economy has about a 20 percent chance of slipping into recession this year largely because growth remains weak across the world, according to a Wall Street Journal survey of economists in March.”

  Most economists aren’t overly worried about an imminent downturn because job creation remains strong, workers are starting to see their wages grow and the Federal Reserve remains cautious about shifting away from the low-interest-rate stance that has helped stimulate the economy.

  Cheerful economists promptly chimed in to defend the economy:

  “It’s irresponsible. It’s baffling that he would do this and also substantively wrong. There is no recession in sight.” -Doug Holtz-Eakin

  — Robert Costa (@costareports) April 2, 2016

   

  Of course, whether Trump is right or not with his warning about the economy and the market, only time will tell, although as we reported in mid-January, Trump is certainly hoping for a market crash. The reason is that historically, the market performance in the three months leading up to a Presidential Election has displayed an uncanny ability to forecast who will win the White House… the incumbent party or the challenger. Since 1928, there have been 22 Presidential Elections. In 14 of them, the S&P 500 climbed during the three months preceding election day. The incumbent President or party won in 12 of those 14 instances. However, in 7 of the 8 elections where the S&P 500 fell over that three month period, the incumbent party lost.

  

  In other words, if Trump wants to win he would certainly benefit from a major drop in the S&P in the all important September to November period. That is, assuming he gets the nomination.

  * * *

  Of note also was Trump’s insistence that he would be able to get rid of the nation’s more than $19 trillion national debt: “We’re not a rich country. We’re a debtor nation. We’ve got to get rid of – I talked about bubble. We’ve got to get rid of the $19 trillion in debt.” How long would that take? “Well, I would say over a period of eight years.”

  This is how he says he would do it: “I’m renegotiating all of our deals, the big trade deals that we’re doing so badly on. With China, $505 billion this year in trade.” He said that economic growth he foresees as a consequence of renegotiated deals would enable the United States to pay down the debt.

  But Trump’s most interesting comment had nothing to do with economics – it was his admission that everyone close to him — family, friends, Republican leaders — have been urging him to tone down his attacks and reach out to former rivals, both to reassure wary voters and to begin the difficult process of unifying a party in which many have sworn to never back him. Trump does not intend to take the advice. He said such overtures are “overrated.” “I think the first thing I have to do is win,” he said. “Winning solves a lot of problems. And I have two people left”: his two remaining Republican rivals, Sen. Ted Cruz of Texas and Ohio Gov. John Kasich.

  Bob Woodward summarizes his take of the Trump interview

  

  

  

  

• Shocking Video From Brussels Anti-Islam Protest Of Moment Muslim Woman Is Run Over By Car

  Various far-right groups, including the anti-migrant Generation Identitaire movement, demonstrated in Belgium’s notorious Molenbeek district, the notorious terrorist breeding ground of the Belgian capital, on Saturday. At the same time, leftist groups held counter-rallies. Though the demonstrations were banned in Brussels following the March attacks, several rallies still took place in Belgian capital.

  Since the attacks in Brussels Zaventem Airport and Maelbeek metro station that rocked the Belgian capital on March 22, Belgium has been on high alert, while tension between various local groups and migrants has escalated to unprecedented levels, confirmed by today’s events, when according to local news, at an anti-racism rally in the Brussels district of Molenbeek, the police clashed with hundreds of youths. Later, police temporarily closed the area after the police made 19 arrests at the Place de la Bourse, according to RTL

  Thirteen rioters were arrested in the neighborhood which appears like a warzone.

  

  @B3zero https://t.co/MN1O3v4gJS

  — B3zero (@B3zero) April 2, 2016

  #Molenbeek en sécurité pic.twitter.com/2hdLduXD2P

  — samirlebelge (@samirlebelge) April 2, 2016

  Happening Now – Brussels police detains about 30 peaceful anti racists chanting at place de la bourse pic.twitter.com/bkT4i4NWMU

  — denise reese (@denice_ruptly) April 2, 2016

   

  According to RT, at least two armed far-right activists with Molotov cocktail arrested in the Molenbeek district.

  But the most shocking and violent moment took place when a car drove toward the police line, spraying a fire extinguisher. While driving off, the Audi hit a woman head on, according to twitter reports.

  The video below captures the moment of impact of what RT reports, was a Muslim woman wearing a hijab, without so much as slowing down, as she bounces off the bonnet. The woman was taken to hospital immediately afterwards

  Viewer discretion advised.

  

   

  The perpetrator, who the Belgian media say is a resident of Molenbeek, has since reportedly been arrested.

  #Molenbeek #zonderwoorden #nocomment #perplexe pic.twitter.com/pSKINbUXMv

  — brussels mood (@brusselsmood) April 2, 2016

  

  And as the world becomes witness to increasing violence by both sides, one thing is certain: Molenbeek residents will feel compelled to escalate their acts of violence even more in the next inevitable attack, which in turn will lead to an even more violent response, and so on until deadly violence between assorted groups of people is a daily fixture across Europe.

  

  

  

  

• Black Lives Matter Activist: "If Trump Wins We Will Incite Riots Everywhere"

  The social fallout from Trump’s rising popularity continues with the most disturbing event taking place recently when prominent Black Lives Matter activist and rapper Tef Poe tweeted a message for “white people”: if Donald Trump wins the presidency, “niggas” will ‘incite riots everywhere.’

  “Dear white people if Trump wins young niggas such as myself are fully hell bent on inciting riots everywhere we go. Just so you know,” Poe tweeted. A screenshot of the tweet was captured below by the Daily Media.

  

   

  He followed up with another promise: “Trump wins aint no more rules fammo. We’ve been too nice as is.”

  

  As Daily Media adds, “Poe is by no means a nobody, he has appeared in innumerable articles charting the rise of ‘Black Lives Matter’ and was credited with coining the phrase, “This ain’t your grandparents’ civil rights movement.”

  The rapper was one of the co-founders of Hands Up United, a “social justice” organization that emerged after the death of Michael Brown that was responsible for coordinating large BLM protests in the St. Louis area.

  Ironically, as the website updates, Poe has since deleted his tweet and then claimed that he never made the comments, instead suggesting it was “slander.”

  “He’s now whining about “slander”. Talk crap, then play the victim when you get challenged on your crap. Same process EVERY time with social justice warriors.”

  This is shown in the tweet below:

  @TefPoe Slander? you tweeted & deleted…now you cry slander? lol, typical false victim SJW. pic.twitter.com/sH9cAto7hK

  — LucidHurricane™ (@_LucidHurricane) March 17, 2016

  Unfortunately this kind of fallout continues with prominent movement leaders across all social groups becoming increasingly belligerent toward each other, which fundamentally is driven by one simple thing: the ongoing deterioration of the US economy. Recall from the post profiling the surge in Chicago shootings that even local Chicago citizens agrees that the root of America’s rising anger is the lack of economic opportunity.

   “I think it’s got something to do with economics,” Gabb says of the continued shootings. As CNN adds, most residents say communities continue to suffer from an economy that is nowhere strong enough to keep at-risk youths from looking for financial support in the wrong places.

   

  The lament is one heard across most poor areas in the US: “I’m hoping that some money is invested in some job creation. We bailed out Wall Street, why not bail out Main Street? It would make a world of difference,” Acree says.

   

  “If you really want to stop this epidemic of violence, the best way to stop a bullet is with a job.”

   

  Which is odd, because according to the BLS, jobs across the US are growing at a brisk pace of over 200K per month.

  Sadly, we expect this form of social devolution to continue no matter who is president in November because the underlying issue of most social problems in America, the withering economy, will not only remain unaddressed – after all a Congressman once told Bernanke to “get to work” instead of doing his job, which the Fed promptly did by further enriching the richest Americans at the expense of all other social tiers – but, worse, anyone who dares to point it out is promptly accused of “peddling fiction.”

  

  

  

  

• Greek Prime Minister Sends Angry Letter To Christine Lagarde Over IMF Leak

  Today’s Wikileaks disclosure, in which two IMF officials hinted that the IMF may use a “credit event as a means to pressurize(sic) Greece” as it has been subsequently put by Greek officials, has elicited another round of widespread anger in Athens and could jeopardize the upcoming Greek debt negotiations.

  The anger has been made more acute because Greece previously accused Poul Thomsen, one of the IMF staffers caught on the leak, of effectively sabotaging talks in the past when the IMF refused to compromise on Greek pension cuts after the government proposed alternatives with an equivalent fiscal impact.

  As such, hoping to ride on the latest wave of populist anger, it was only a matter of time before the country’s prime minister Alexis Tsipras officially responded to the IMF.

  His letter to the head of the IMF is below:

  Dear Christine

   

  I am writing to you to express my deep concern about publications on the position of IMF officials with key roles in the Greek program.

   

  The first issue is, of course, whether their position reflects the official IMF view. Using a credit event as a means to pressurize Greece and the other member states is clearly beyond the bounds of the negotiation process as we understand it.

   

  The second issue is whether Greece can trust, and continue negotiating in good faith with, IMF officials who express views such as those expressed in these publications. Particularly so as they seem to be threatening to delay the process in the belief that only a credit event will work to extract concessions. Successful negotiations are often difficult but they always require trust and credibility from all sides. I sincerely hope that the IMF position is to reach a quick, successful and sustainable conclusion of the review and I am sure you will take all necessary measures to ensure that the negotiation process will remain on track.

   

  As always, I would be happy to talk to you any time on these issues, as I am sure your share my concern.

   

  Yours Sincerely,

   

  Alexis Tsipras

  A snapshot of the letter:

  

  While we expect that this latest scandal will quickly be forgotten, what we find most paradoxical about the situation is that the Greek ire is focused on the one entity that, while hardly innocent as per Lagarde’s previous comments, is actually is pushing for a Greek debt reduction over the refusal of European, and especially German, institutions. Granted, we also understand the Greek ire: being used as guniea pigs by the IMF in its policy battle with other NGOs is hardly pleasing and if anything, is a reflection of the Greek recent collapse into quasi-vassal status and ongoing ward of the ECB. Recall that Greece still has capital controls as its banking system is completely insolvent, and that this leverage Europe has over the country and the money of its savers will not change for a long time.

   

  

  

  

  

• The Great Divide: The Death Of The Middle Class

  Submitted by Jeff Nielson via SprottMoney.com,

  Several months ago, a chart produced by one of the Big Banks was presented to readers . It was supposed to be innocuous data on global wealth distribution, but instead portrayed a horrifying picture.

   

  The focal point of the aforementioned article was that when it came to “the world’s poorest people,” the Corrupt West has now produced a greater percentage of severe poverty in its own populations than in India, and an equal percentage of such poverty as exists in Africa.

  Stacked beside this, we see that when it comes to the richest-of-the-rich, the Corrupt West remains in a league of its own. Supposedly, we are living in “the New Normal,” where life is supposed to get increasingly harder and harder. So why does the New Normal never affect those on top?

  Of course all of these extremely poor people being manufactured by our governments (as these regimes give away our jobs, destroy wages, and eviscerate our social programs) have to come from somewhere. Certainly they don’t come from the Wealthy Class.

  Indeed, the chart above provides us with a crystal-clear view of where all these poor and very-poor people are coming from: the near-extinct Middle Class. In order to manufacture hundreds of millions of impoverished citizens in our nations, the Old World Order has had to engage in a campaign to end the Middle Class.

  We are conditioned to consider economic “classes” within our own societies, but with the chart above, we’re given a global perspective. Where does the Middle Class exist today, globally? At the upper end, it exists in China, and to a lesser extent, in Latin America and other Asian nations. At the lower end of the Middle Class, we see such populations growing in India and even Africa.

  Only in the West, and especially North America, is the Middle Class clearly an endangered species. Two incredibly important aspects of this subject are necessary to cover:

  1) How and why has the One Bank chosen to perpetrate Middle Class genocide?

  2) What are the consequences of the Death of the Middle Class?

  Attempting to catalogue the nearly infinite number of ways in which the oligarchs of the One Bank have perpetrated their Middle Class genocide is impractical. Instead, discussion will be limited to the five most important programs responsible for the Death of the Middle Class: three of them relatively new, and two of them old.

  a) Globalization

  b) Union decimation/wage destruction

  c) Small business decimation

  d) Money-printing/inflation

  e) Income taxation

  Globalization was rammed down our throats in the name of “free trade,” the Holy Grail of charlatan economists . But, as previously explained, real free trade is a world of “comparative advantage” where all nations play by a fair-and-equal set of rules. Without those conditions, “free trade” can never exist.

  The globalization that has been imposed upon us is, instead, a world of “competitive devaluation,” a corrupt, perpetual, suicidal race to the bottom. The oligarchs understood this, given that they are the perpetrators. The charlatan economists were too blinded by their own dogma to understand this. And, as always, the puppet politicians simply do what they are told.

  Next on the list: union decimation and wage destruction are inseparable subjects, virtually the flipside of the same coin. “But wait,” shout the right-wing ideologues, “unions are corrupt, everyone knows that.”

  Really? Corrupt compared to whom? Are they “corrupt” standing next to the bankers, who have stolen all our wealth ? Are they “corrupt” standing next to their Masters, the oligarchs who are hoarding all our stolen wealth ? Are they “corrupt” standing next to our politicians, who betrayed their own people to facilitate this economic pillaging? No, compared to any of those groups, unions (back when they still existed) were relative choir-boys.

  When it comes to corruption, nobody plays the game as well as those on top. Compared to the Fat Cats, everyone else are rank amateurs. When unions were strong and plentiful, everyone had jobs. Almost everyone earned a livable wage (or better). Gee, weren’t those terrible times! Look how much better off we are now, without all those “corrupt unions.”

  The other major new component in the deliberate, systemic slaughter of the Middle Class was and continues to be Small Business decimation. “Small business is the principal job-creator in every economy.” Any politician who ever got elected can tell you that.

  If this is so, why do our corrupt governments funnel endless trillions of dollars of Corporate Welfare (our money) into the coffers of Big Business, while complaining there is nothing left to support Small Business? Why do our governments stack the deck in all of our regulations and bureaucracies, greasing the wheels for Big Business and strangling Small Business in their red tape?

  Why do our governments refuse to enforce our anti-trust laws? One of the primary reasons for not allowing the corporations of Big Business to grow to an illegal size is because these monopolies and oligopolies make “competition” (meaning Small Business) impossible. One might as well try to start a small business on the Moon.

  Then we have the oligarchs’ “old tricks” for stealing from the masses (and fattening themselves): banking and taxation. Of course, to the oligarchs, “banking” means stealing, and you steal by printing money. As many readers are already aware, “inflation” is money-printing – the increase (or inflation) of the supply of money.

  In the absence of the gold standard, there is no way to protect savings [i.e. wealth] from confiscation through inflation .

  – Alan Greenspan (1966 version )

  Remove the Golden Handcuffs , as central banker Paul Volcker bragged of doing in 1971, and then it’s just print-and-steal – until the whole fiat currency Ponzi scheme implodes.

  Then of course we have income taxation: 100 years of systemic thievery. No matter what the form or structure, by its very nature every system of income taxation will:

  i) Provide a free ride to those at the very, very top

  ii) Be revenue-neutral to the remainder of the wealthy

  iii) Relentlessly steal out of the pockets of everyone else (via over-taxation)

  This is nothing more than a matter of applying simple arithmetic. However, many refuse to educate themselves on how they are being robbed in this manner, year after year, so no more will be said on the subject.

  These were the primary prongs of the oligarchs’ campaign to exterminate the Middle Class. As always, skeptical readers will be asking “why?” The answer is most easily summarized via The Bankers’ Manifesto of 1892 . This document was presented to the U.S. Congress in 1907 by Republican congressman, and career prosecutor, Charles Lindbergh Sr.

  It reads, in part:

  The courts must be called to our aid, debts must be collected, bonds and mortgages foreclosed as rapidly as possible.

  When through the process of law, the common people have lost their homes they will be more tractable and easily governed through the influence of the strong arm of government applied to a central power of imperial wealth under the control of the leading financiers [the oligarchs]. People without homes won’t quarrel with their leaders.

  We have “the strong arm of government.” The oligarchs saw to that by bringing us their “War on Terror.” When it comes to throwing people out of their homes, and creating a population of serfs, that’s a two-part process.

  Step 1 is to manufacture artificial housing bubbles across the Western world, and then crash those bubbles. However, this is only partially effective in turning Homeowners into Homeless. To truly succeed at this requires Step 2: exterminating the Middle Class. A Middle Class can survive a collapsing housing bubble, assuming they remained reasonably prudent. The Working Poor cannot.

  Finally, after more than a century of scheming, the oligarchs have all of their pieces in place. In the U.S., they’ve even already built many gulags – to warehouse these former Middle Class homeowners – since a large percentage of those people are armed.

  This brings us to one, final point: the consequences of the Death of the Middle Class. What happens when you destroy the foundation of a house? Just look.

  

   

  As readers have been told on many previous occasions, the “velocity of money” is effectively the heartbeat of an economy. It is another way of representing the economics principle known as the Marginal Propensity to Consume, probably the most important principle of economics forgotten by charlatan economists.

  The principle is a simple one, since it is half basic arithmetic and half common sense. Unfortunately, these are both skills beyond the grasp of charlatan economists. If you take all of the money out of the pockets of the People, and you stuff it all into the vaults of the Wealthy (where it sits in idle hoards), then there is no “capital” for our capitalist economies – and these economies starve to death .

  What is the response of the oligarchs to the relentless hollowing-out of our economies? They have ordered the puppet politicians to impose Austerity: taking even more money out of the pockets of the people. It is the equivalent to someone with anorexia going to a doctor, and the doctor imposing a severe diet on the patient (i.e. victim). The patient will not survive.

  The Middle Class is dying. Unlike the oligarchs’ Big Banks, we are not “too big to fail.” Our jobs are gone. Our unions are gone. Our Middle Class wages are gone. Very soon, our homes will be gone. But don’t worry! It’s just the New Normal.

  

  

  

  

• America's "Capitalist" Economy Explained By 2 Dogs

  Presented with no comment…

   

  

   

  Source: Townhall.com

  

  

  

  

  

• Why JPMorgan Believes Central Banks Can No Longer Save The Day

  In recent weeks, JPMorgan has turned decidedly sour on the US equity market: one month ago, on March 3, JPM announced that “for the first time this cycle”, it has gone underweight stocks.

  Equities, credit and commodities have all rallied in the last three weeks, as some of the immediate threats to the world economy have faded from attention, possibly only because the bad earnings season has wound up. But, to us, the fundamentals of growth, earnings and recession risk have not improved, and if anything have worsened. We remain wary of the near-empty ammo box of policy makers.

   

  Our 12-month-out US recession odds have risen to 1/3, while equity-implied odds have instead fallen to near 1/5. But even with no recession this year or next, we see US earnings rising only slowly by low single digits and see little to boost multiples. The eventual recession should bring US stocks down some 30%, creating a strong downward risk skew to returns over the next few years.

   

  We use the rally in stocks to sell it and go underweight stocks, versus HG corporate bonds and cash. The strong rebound of the past few weeks does create near-term momentum, and thus keeps our first UW small.

  To be sure, the continued bounce since the JPM call has not been exactly reassuring of the forecast’s accuracy. However, what is surprising is that when faced with unpalatable price action, sellside researchers usually flip their call quickly.

  Not in this case, because in a surprisingly candid piece released overnight, JPM’s Jan Loeys doubles down, and after asking rhetorically “Can central banks really save the day, or cycle?”, his answer is no. In fact, after saying now is the time to sell stocks, JPM’s head of global asset allocation is now even far more concerned about the over economy where his biggest concern is that central banks are powerless to stop the “collapsing productivity growth.”

  Loeys begins as follows:

  Equities and bonds are both up on the week, fueled by supportive central bank talk. Commodities and the dollar are down, with EM asset classes continuing to outperform. Our overall strategy remains on the defensive side. We started a year ago to dollar-average from the long risk positions we have held over the past seven years towards a more defensive one where we finally arrived last month.

   

  The main drivers of this year-long process are the sense that the cycle in economic and earnings growth is maturing, leading us to the eventual recession, as well as the more structural force of the global collapse in productivity growth. Of the two, we view the latter one as the more ominous, as it is potentially much longer lasting, with no obvious force driving it, nor a policy solution in sight to reverse it.

   

  Both of these negatives to world economies and risk markets have in common that they are of uncertain timing. Hence, our use of the time-honored strategy is going slowly by dollar averaging. Over the past month, data are tracking our economic forecasts, and have kept our global projections on net unchanged.

   

  That is good news after the steady drip-drip of downgrades of the past two years. It has allowed us to reduce our 12-month US recession risk to 28%, even as it keeps us with a view that the US economy is more likely than not to contract over the next 2-3 years in response to falling profits.

  And here is why JPM’s explanation why central banks are now powerless to stop the ongoing global contraction: 

  We are not getting any solace on our fears over collapsing productivity growth, though. Investors have been happy to see the 628K rise in US payrolls in Q1, but at that pace, jobs are growing faster than the economy, implying that GDP per worker/hour, which is productivity, is actually falling. US companies are hiring people frantically as they are unable to get more product and services out of their existing workforce. This is not a good omen for future growth in the economy and earnings, in our view.

  

  This is something we noted last night when we noted the increasing prevalence of warnings about an upcoming US stagflation. It is also what is most troubling to JPM.

  Without real upgrades to earnings or growth forecasts, we think that the recent rally in risk assets gained much from dovish actions and messages from central banks, in particular the ECB, Fed and the PBoC. One can only applaud the seriousness and pro-activeness that central banks apply to their mandates. But aren’t investors counting too much on central banks carrying the day if not the cycle?

   

  This analyst thinks so, without disparaging their efforts, as central banks are almost out of ammo, and their tools are not well suited to handle the problems of slowing company profits and productivity.

   

  It is our perception that much of the weaker than expected growth over the past 4 years results from a supply side problem. Lower rates can boost spending, but are not much of a solution to falling productivity growth. The latter needs greater innovation, competition, globalization, and capital investment, in our view. Low rates can boost the latter, but have not helped enough, as rising capex over recent years did not prevent falling productivity growth.

  * * *

  But perhaps most amusing was the following Freudian slip in the JPM piece:

  “We do not see easy money as a bait to lure unsuspecting investors into risky assets.”

  Then why bring it up… and if you don’t, who does?

  

  

  

  

• White House Censors French President's Use Of The Words "Islamic Terrorism"

  Submitted by Mac Slavo via SHTFPlan.com,

  Not only does President Obama refuse to join the words “Islam” and “terrorism,” but the White House won’t let anyone else do it either.

  In a video that appeared on the White House website this morning, the words of French President Francois Hollande were censored to remove the following segment:

  Islamist terrorism, is in Syria and in Iraq. We therefore have to act both in Syria and in Iraq, and this is what we’re doing within the framework of the coalition.

  Here’s the censored video that has since been taken down from the White House website.

  Here’s a screenshot of the transcript that was published on the site, which contains President Hollande’s full statement.

  

  You know it’s obvious that Obama is avoiding using the phrase “Islamic terror” when even the NY Post notices. Back in November, after the Paris attack, columnist Michael Goodwin called for the President’s resignation. Goodwin wrote:

  President Obama has spent the last seven years trying to avoid the world as it is. He has put his intellect and rhetorical skills into the dishonorable service of assigning blame and fudging failure. If nuances were bombs, the Islamic State would have been destroyed years ago.

   

  He refuses to say “Islamic terrorism,” as if that would offend the peaceful Muslims who make up the vast bulk of victims. He rejects the word “war,” even as jihadists carry out bloodthirsty attacks against Americans and innocent peoples around the world.

  After the attacks in San Bernadino, California in December, we pointed out that Obama attempted to shift the blame away from radical Islam to…wait for it…workplace violence.

  President Obama said that the San Bernardino terrorists had mixed motives for killing 14 people and injuring 17 others. He warned Americans not to draw any conclusions:

  “At this stage, we do not yet know why this terrible event occurred.”

   

  “We do know that the two individuals who were killed were equipped with weapons and appeared to have access to additional weaponry in their homes. But we don’t know why they did it.”

   

  …

   

  “It is possible that this was terrorist-related, but we don’t know. It’s also possible this was workplace-related.”

   

  “We don’t know why they did it. We don’t know at this point the extent of their plans.”

  Are you f*cking serious, Mr. President?

   

  As we noted earlier, The Intent Here Was Jihad And It Was Carefully Premeditated And Planned. President Obama, his national security team and the FBI know this.

  Maybe if we all hide under our blankies and refuse to say the words, we can pretend this threat doesn’t exist too.

  

  

  

  

• IMF's Christine Lagarde: "When The World Goes Downhill, We Thrive"

  When we wrote earlier that based on a leaked Wikileaks transcript, which the Greek government interpreted “as revealing an IMF effort to blackmail Athens with a possible credit event to force it to give in on pension cuts which it has rejected“, the article promptly went viral. While it remains to be determined if the IMF indeed made such an implied threat, we attribute this spike in interest to the general public’s surprise that the IMF could stoop to such a low, even by its own standards, level as to use a nation of 11 million people as a lab rat on which to conduct policy experiments.

  But why the surprise?

  As the below transcript from a April 2012 interview given by Lagarde to the Wharton school at UPenn, none other than IMF president Lagarde herself admitted that for the IMF to “thrive”, the world has to “goes downhill“, and that the IMF “to be sustainable” it needs to be “very in touch with our client base.”

  She added that “when the world goes well and we’ve had years of growth, as was the case back in 2006 and 2007, the IMF doesn’t do so well both financially and otherwise”

  It goes without saying that Lagarde’s sole prerogative as the managing director of the IMF is to make sure it “does well.”

  She concluded by saying that “we need to be able to invent and reinvent ourselves in many ways.” One such client-facing “reinvention” just happened to be caught on tape.

  Here is the key section:

  Knowledge@Wharton: Of all the things that you do here, what are you most passionate about? What would you really like to make sure happens? It could be a small thing, it could be a large thing. What is it that really has your heart?

   

  Lagarde: That’s complicated. I think it’s this issue of relevance … that is of real concern to me. You see, this is a very fascinating institution because it’s completely counter-cyclical. When the world around the IMF goes downhill, we thrive. We become extremely active because we lend money, we earn interest and charges and all the rest of it, and the institution does well. When the world goes well and we’ve had years of growth, as was the case back in 2006 and 2007, the IMF doesn’t do so well both financially and otherwise.

   

  For this institution, which is a fascinating mix of almost all countries of the world with a single objective that should transcend all their respective individual policies and strategies, for it to be sustainable, we need to be very agile, very in touch with our membership, with our client base, if you will. We need to be able to invent and reinvent ourselves in many ways. So, as I was explaining about going from bilateral to multilateral surveillance, from a narrow focus to something that is more holistic, that is exactly what is at stake

  

  h/t @rudyhavenstein

  

  

  

  

• Shuffling The Deckchairs On The USS Perpetual Growth

  Submitted by Paul Brodsky via Macro-Allocation.com,

  The USS Perpetual Growth was picking up speed, steaming over calm seas despite a growing chorus of capital market Cassandras fearing trouble under the surface and further out at sea.

  “Full speed ahead” Skipper Yellen barked to her economates, unperturbed by ominous radar images or the uselessness of econometric expertise at the zero bound, unmindful of passenger dysentery because 95.1% of the ship’s births were full.

  

  “Look at all this liquidity!” she likely informed Captain Blithely, her commander in chief on shore, who had spent his presidency too disengaged of economic matters (or too politically astute) to have a cogent public thought on the matter, or perhaps smart enough to figure out everyone in Washington answers to the banks and that fixing their collateral damage social programs would be the best he could hope to do.

  Indeed, the Fed Chair had gone rogue among her peers, charting her central bank’s shipping lane on a divergent path from her counterparts, Draghi and Kuroda, who were steering their monetary fleets to port. Captain Yellen seemed oblivious to the economic (and rhetorical) dangers of relying on consumption: an economy should not be beholden to eating its own productive cells.

  We have argued there could be only one reason the Fed would want to hike rates: it is now responsible for US dollar policy and it wants a strong one to weaken other currencies, to prop up exporting economies, and to attract global capital and deposits to the US. Alas, the wind just died – not just for the US, but for all ships at sea.

  Leading up to her March 29 press conference, numerous Fed speakers had tried to jawbone the market into believing the Fed remained on track to hike rates more, maybe even in April. And yet the markets had entirely dismissed such a possibility, in fact betting the Fed would be lucky to hike rates again in 2016. One point four percent US GDP put a quick end to that. She’ll get her year over year inflation, but not growth.

  And so the de facto captain of the US economic ship of state walked the Fed’s position back to better reflect market doubts. “Economic and financial conditions remain less favorable than they did back at the time of the December FOMC meeting” she offered. Well, okay, if you insist. Tell the market something it doesn’t know.

  The Fed Funds rate is functionally pointless now that Interest on Excess Reserves are higher and deposit rates are zero. The bottom line is that the Fed must keep asset prices up because assets are collateral for potentially deflationary systemic debt.

  

   

  Yes, the Fed can do this with a strong dollar, but it can also use talk therapy rhetorical warfare its communication policy. The great global monetary parlor game is navigating the rocky shoals of greater economic discontent.
   

  

  

  

  

• "Production Freeze" Narrative Collapses In Two Days: Russian Oil Output Hits New Post-Soviet Record

  How quickly the oil production freeze narrative has fallen apart.

  

  Source: stockboardasset

  Indeed, it’s been a tough two days for oil bulls holding on to hope that excess oil production will normalize in the near term and that the world’s oil suppliers would somehow manage to curb oil production in the aftermath of the OPEC’s November 2014 cartel collapse.

  First it was yesterday’s Bloomberg story which cited the Saudi Deputy Crown Prince Mohammed bin Salman as saying that the Saudis would not participate in an oil production freeze unless everyone including Iran which has made it  joined  “If all countries including Iran, Russia, Venezuela, OPEC countries and all main producers decide to freeze production, we will be among them.“

  The second one came overnight.

  Recall that one month ago, just as Russia and Saudi Arabia were finalizing their “agreement” to freeze oil production which was the major catalyst for the oil surge from its 13 year lows hit in early February, we got the surprising news that far from throttling production, Russian crude and condensate production just set new post-Soviet daily record of 10.92 million barrels.

  

  Well, overnight we got the latest update of Russian oil output, and according to Bloomberg it just set a new post-Soviet high in March “as the success of a proposed crude production freeze between OPEC members and other major producers appeared to be in doubt.”

  Bloomberg reports that Russian production of crude and a light oil called condensate climbed 2.1 percent in March from a year earlier to 10.912 million barrels a day, according to the Energy Ministry’s CDU-TEK unit. That narrowly beat the previous high of 10.910 million barrels in January.

  With most of the Organization of Petroleum Exporting Countries members, Russia and some others outside the group scheduled to meet in Doha this month to discuss an accord on capping output, Saudi Arabia’s Mohammed bin Salman signaled in an interview with Bloomberg that if any country raises output, the kingdom will also boost sales. Prices on Friday sank more than 4 percent after the comments. Iran previously said it plans to boost production after the lifting of sanctions following a deal to curb its nuclear program.

   

  Saudi Arabia, Russia, Venezuela and Qatar in February first proposed an accord to cap oil output to reduce a worldwide surplus and boost prices. Brent prices in London have gained nearly 40 percent from the 12-year low reached in January.

  But what was most notable is that Russian oil exports rose 10% to 5.59 million barrels a day, according to the Energy Ministry data. This is just the start because as we wrote two weeks ago, according to Reuters calculations based on Energy Ministry data, Russia will have as much as 4.3 million tonnes of idle refining capacity next month, more than twice the 1.9 million tonnes unused in March. Russian refineries traditionally have the largest offline capacity in April, as companies scramble to finish maintenance before consumption of oil products peaks in summer.

  This forces producers to divert crude towards exports, because there is nowhere to store the oil that otherwise would have gone to refineries.

   

  This means that as soon as next month, there will be an extra 2.4 million tonnes of extra oil being exported by Russia; how this oil will be sold to some willing end buyer without crushing oil prices in what is already a 3 million barrel/daily oversupplied market, is unknown.

  The Russian export glut is already starting to be felt, and that may be just the beginning: two additional factors may push oil supply in the open market materially higher in the coming weeks. The first as we previously explained is that up to 30 million barrels in floating storage may soon come onshore as the sliding contango makes offshore storage no longer economical. The second as also previously discussed is that some shale oil producers, including Oasis Petroleum and Pioneer Natural Resources Co, are activating drilled but uncompleted wells (DUCs) in a reversal in strategy that threatens to bring more crude to a saturated market and dampen any sustained rebound in prices.

  Taken together these factors perhaps explain why oil tumbled on Friday as stocks made another 2016 high.

  

  

  

  

• "I'm 100% Sure" The US Presidential Campaign Is Being Tampered With

  There is a growing recognition of the increasing tail wagging the dog nature of the internet's control over election outcomes. We recently detailed "the hidden persuaders" at work showing how the internet has spawned subtle forms of influence that can flip elections and manipulate everything we say, think and do. Confirming all of this to be chillingly true is Andrés Sepúlveda, who rigged elections throughout Latin America for almost a decade. On the question of whether the U.S. presidential campaign is being tampered with, he is unequivocal – "I'm 100 percent sure it is."

  Liberty Blitzkrieg's Mike Krieger excerpts a must-read Bloomberg article,

  In July 2015, Sepúlveda sat in the small courtyard of the Bunker, poured himself a cup of coffee from a thermos, and took out a pack of Marlboro cigarettes. He says he wants to tell his story because the public doesn’t grasp the power hackers exert over modern elections or the specialized skills needed to stop them. “I worked with presidents, public figures with great power, and did many things with absolutely no regrets because I did it with full conviction and under a clear objective, to end dictatorship and socialist governments in Latin America,” he says. “I have always said that there are two types of politics—what people see and what really makes things happen. I worked in politics that are not seen.”

   

  Rendón, says Sepúlveda, saw that hackers could be completely integrated into a modern political operation, running attack ads, researching the opposition, and finding ways to suppress a foe’s turnout. As for Sepúlveda, his insight was to understand that voters trusted what they thought were spontaneous expressions of real people on social media more than they did experts on television and in newspapers. He knew that accounts could be faked and social media trends fabricated, all relatively cheaply. He wrote a software program, now called Social Media Predator, to manage and direct a virtual army of fake Twitter accounts. The software let him quickly change names, profile pictures, and biographies to fit any need. Eventually, he discovered, he could manipulate the public debate as easily as moving pieces on a chessboard—or, as he puts it, “When I realized that people believe what the Internet says more than reality, I discovered that I had the power to make people believe almost anything.”

   

  Sepúlveda says he was offered several political jobs in Spain, which he says he turned down because he was too busy. On the question of whether the U.S. presidential campaign is being tampered with, he is unequivocal. “I’m 100 percent sure it is,” he says.

   

  – From the excellent Bloomberg article: How to Hack an Election

  Yesterday, Bloomberg published one of the most fascinating articles I’ve read all year. Below are some choice excerpts from the piece, which I encourage you to read in full.

  It was just before midnight when Enrique Peña Nieto declared victory as the newly elected president of Mexico. Peña Nieto was a lawyer and a millionaire, from a family of mayors and governors. His wife was a telenovela star. He beamed as he was showered with red, green, and white confetti at the Mexico City headquarters of the Institutional Revolutionary Party, or PRI, which had ruled for more than 70 years before being forced out in 2000. Returning the party to power on that night in July 2012, Peña Nieto vowed to tame drug violence, fight corruption, and open a more transparent era in Mexican politics.

   

  Two thousand miles away, in an apartment in Bogotá’s upscale Chicó Navarra neighborhood, Andrés Sepúlveda sat before six computer screens. Sepúlveda is Colombian, bricklike, with a shaved head, goatee, and a tattoo of a QR code containing an encryption key on the back of his head. On his nape are the words “</head>” and “<body>” stacked atop each other, dark riffs on coding. He was watching a live feed of Peña Nieto’s victory party, waiting for an official declaration of the results.

   

  When Peña Nieto won, Sepúlveda began destroying evidence. He drilled holes in flash drives, hard drives, and cell phones, fried their circuits in a microwave, then broke them to shards with a hammer. He shredded documents and flushed them down the toilet and erased servers in Russia and Ukraine rented anonymously with Bitcoins. He was dismantling what he says was a secret history of one of the dirtiest Latin American campaigns in recent memory.

   

  For eight years, Sepúlveda, now 31, says he traveled the continent rigging major political campaigns. With a budget of $600,000, the Peña Nieto job was by far his most complex. He led a team of hackers that stole campaign strategies, manipulated social media to create false waves of enthusiasm and derision, and installed spyware in opposition offices, all to help Peña Nieto, a right-of-center candidate, eke out a victory. On that July night, he cracked bottle after bottle of Colón Negra beer in celebration. As usual on election night, he was alone.

   

  His teams worked on presidential elections in Nicaragua, Panama, Honduras, El Salvador, Colombia, Mexico, Costa Rica, Guatemala, and Venezuela. Campaigns mentioned in this story were contacted through former and current spokespeople; none but Mexico’s PRI and the campaign of Guatemala’s National Advancement Party would comment.

   

  Usually, he says, he was on the payroll of Juan José Rendón, a Miami-based political consultant who’s been called the Karl Rove of Latin America. Rendón denies using Sepúlveda for anything illegal, and categorically disputes the account Sepúlveda gave Bloomberg Businessweek of their relationship, but admits knowing him and using him to do website design. “If I talked to him maybe once or twice, it was in a group session about that, about the Web,” he says. “I don’t do illegal stuff at all. There is negative campaigning. They don’t like it—OK. But if it’s legal, I’m gonna do it. I’m not a saint, but I’m not a criminal.” While Sepúlveda’s policy was to destroy all data at the completion of a job, he left some documents with members of his hacking teams and other trusted third parties as a secret “insurance policy.”

   

  Sepúlveda provided Bloomberg Businessweek with what he says are e-mails showing conversations between him, Rendón, and Rendón’s consulting firm concerning hacking and the progress of campaign-related cyber attacks. Rendón says the e-mails are fake. An analysis by an independent computer security firm said a sample of the e-mails they examined appeared authentic. Some of Sepúlveda’s descriptions of his actions match published accounts of events during various election campaigns, but other details couldn’t be independently verified. One person working on the campaign in Mexico, who asked not to be identified out of fear for his safety, substantially confirmed Sepúlveda’s accounts of his and Rendón’s roles in that election.

   

  Sepúlveda says he was offered several political jobs in Spain, which he says he turned down because he was too busy. On the question of whether the U.S. presidential campaign is being tampered with, he is unequivocal. “I’m 100 percent sure it is,” he says.

   

  Rendón, says Sepúlveda, saw that hackers could be completely integrated into a modern political operation, running attack ads, researching the opposition, and finding ways to suppress a foe’s turnout. As for Sepúlveda, his insight was to understand that voters trusted what they thought were spontaneous expressions of real people on social media more than they did experts on television and in newspapers. He knew that accounts could be faked and social media trends fabricated, all relatively cheaply. He wrote a software program, now called Social Media Predator, to manage and direct a virtual army of fake Twitter accounts. The software let him quickly change names, profile pictures, and biographies to fit any need. Eventually, he discovered, he could manipulate the public debate as easily as moving pieces on a chessboard—or, as he puts it, “When I realized that people believe what the Internet says more than reality, I discovered that I had the power to make people believe almost anything.”

   

  For most jobs, Sepúlveda assembled a crew and operated out of rental homes and apartments in Bogotá. He had a rotating group of 7 to 15 hackers brought in from across Latin America, drawing on the various regions’ specialties. Brazilians, in his view, develop the best malware. Venezuelans and Ecuadoreans are superb at scanning systems and software for vulnerabilities. Argentines are mobile intercept artists. Mexicans are masterly hackers in general but talk too much. Sepúlveda used them only in emergencies.

   

  Chávez won but died five months later of cancer, triggering an emergency election, won by Nicolás Maduro. The day before Maduro claimed victory, Sepúlveda hacked his Twitter account and posted allegations of election fraud. Blaming “conspiracy hackings from abroad,” the government of Venezuela disabled the Internet across the entire country for 20 minutes.

   

  Sepúlveda didn’t like the idea of working in Mexico, a dangerous country for involvement in public life. But Rendón persuaded him to travel there for short trips, starting in 2008, often flying him in on his private jet. Working at one point in Tabasco, on the sweltering Gulf of Mexico, Sepúlveda hacked a political boss who turned out to have connections to a drug cartel. After Rendón’s security team learned of a plan to kill Sepúlveda, he spent a night in an armored Chevy Suburban before returning to Mexico City.

   

  Early polls showed Peña Nieto 20 points ahead, but his supporters weren’t taking chances. Sepúlveda’s team installed malware in routers in the headquarters of the PRD candidate, which let him tap the phones and computers of anyone using the network, including the candidate. He took similar steps against PAN’s Vázquez Mota. When the candidates’ teams prepared policy speeches, Sepúlveda had the details as soon as a speechwriter’s fingers hit the keyboard. Sepúlveda saw the opponents’ upcoming meetings and campaign schedules before their own teams did.

   

  Money was no problem. At one point, Sepúlveda spent $50,000 on high-end Russian software that made quick work of tapping Apple, BlackBerry, and Android phones. He also splurged on the very best fake Twitter profiles; they’d been maintained for at least a year, giving them a patina of believability.

   

  Just about anything the digital dark arts could offer to Peña Nieto’s campaign or important local allies, Sepúlveda and his team provided. On election night, he had computers call tens of thousands of voters with prerecorded phone messages at 3 a.m. in the critical swing state of Jalisco. The calls appeared to come from the campaign of popular left-wing gubernatorial candidate Enrique Alfaro Ramírez. That angered voters—that was the point—and Alfaro lost by a slim margin. In another governor’s race, in Tabasco, Sepúlveda set up fake Facebook accounts of gay men claiming to back a conservative Catholic candidate representing the PAN, a stunt designed to alienate his base. “I always suspected something was off,” the candidate, Gerardo Priego, said recently when told how Sepúlveda’s team manipulated social media in the campaign.

   

  In 2012, Colombian President Juan Manuel Santos, Uribe’s successor, unexpectedly restarted peace talks with the FARC, hoping to end a 50-year war. Furious, Uribe, whose father was killed by FARC guerrillas, created a party and backed an alternative candidate, Oscar Iván Zuluaga, who opposed the talks.

   

  Rendón, who was working for Santos, wanted Sepúlveda to join his team, but Sepúlveda turned him down. He considered Rendón’s willingness to work for a candidate supporting peace with the FARC a betrayal and suspected the consultant was going soft, choosing money over principles. Sepúlveda says he was motivated by ideology first and money second, and that if he wanted to get rich he could have made a lot more hacking financial systems than elections. For the first time, he decided to oppose his mentor.

   

  Sepúlveda went to work for the opposition, reporting directly to Zuluaga’s campaign manager, Luis Alfonso Hoyos. (Zuluaga denies any knowledge of hacking; Hoyos couldn’t be reached for comment.) Together, Sepúlveda says, they came up with a plan to discredit the president by showing that the guerrillas continued to traffic in drugs and violence even as they talked about peace. Within months, Sepúlveda hacked the phones and e-mail accounts of more than 100 militants, including the FARC’s leader, Rodrigo Londoño, also known as Timochenko. After assembling a thick file on the FARC, including evidence of the group’s suppression of peasant votes in the countryside, Sepúlveda agreed to accompany Hoyos to the offices of a Bogotá TV news program and present the evidence.

   

  It may not have been wise to work so doggedly and publicly against a party in power. A month later, Sepúlveda was smoking on the terrace of his Bogotá office when he saw a caravan of police vehicles pull up. Forty black-clad commandos raided the office to arrest him. Sepúlveda blamed his carelessness at the TV station for the arrest. He believes someone there turned him in. In court, he wore a bulletproof vest and sat surrounded by guards with bomb shields. In the back of the courtroom, men held up pictures of his family, making a slashing gesture across their throats or holding a hand over their mouths—stay silent or else. Abandoned by former allies, he eventually pleaded guilty to espionage, hacking, and other crimes in exchange for a 10-year sentence.

   

  Three days after arriving at Bogotá’s La Picota prison, he went to the dentist and was ambushed by men with knives and razors, but was saved by guards. A week later, guards woke him and rushed him from his cell, saying they had heard about a plot to shoot him with a silenced pistol as he slept. After national police intercepted phone calls revealing yet another plot, he’s now in solitary confinement at a maximum-security facility in a rundown area of central Bogotá. He sleeps with a bulletproof blanket and vest at his bedside, behind bombproof doors. Guards check on him every hour. As part of his plea deal, he says, he’s turned government witness, helping investigators assess possible cases against the former candidate, Zuluaga, and his strategist, Hoyos. Authorities issued an indictment for the arrest of Hoyts  but according to Colombian press reports he’s fled to Miami.

   

  In July 2015, Sepúlveda sat in the small courtyard of the Bunker, poured himself a cup of coffee from a thermos, and took out a pack of Marlboro cigarettes. He says he wants to tell his story because the public doesn’t grasp the power hackers exert over modern elections or the specialized skills needed to stop them. “I worked with presidents, public figures with great power, and did many things with absolutely no regrets because I did it with full conviction and under a clear objective, to end dictatorship and socialist governments in Latin America,” he says. “I have always said that there are two types of politics—what people see and what really makes things happen. I worked in politics that are not seen.”

   

  Last year, based on anonymous sources, the Colombian media reported that Rendón was working for Donald Trump’s presidential campaign. Rendón calls the reports untrue. The campaign did approach him, he says, but he turned them down because he dislikes Trump. “To my knowledge we are not familiar with this individual,” says Trump’s spokeswoman, Hope Hicks. “I have never heard of him, and the same goes for other senior staff members.” But Rendón says he’s in talks with another leading U.S. presidential campaign—he wouldn’t say which—to begin working for it once the primaries wrap up and the general election begins.

  Now I wonder…who might that be?

  

   

  As we concluded prevously, we are living in a world in which a handful of high-tech companies, sometimes working hand-in-hand with governments, are not only monitoring much of our activity, but are also invisibly controlling more and more of what we think, feel, do and say. The technology that now surrounds us is not just a harmless toy; it has also made possible undetectable and untraceable manipulations of entire populations – manipulations that have no precedent in human history and that are currently well beyond the scope of existing regulations and laws. The new hidden persuaders are bigger, bolder and badder than anything Vance Packard ever envisioned. If we choose to ignore this, we do so at our peril

  

  

  

  

• "The Coming War Will Solve Our Unemployment & Growth Problem"

  Submitted by Carmen Elena Dorobat via The Mises Institute,

  On the eve of World War II, Keynes delivered the following chilling address on the BBC, talking about the "grand experiment" of curing unemployment through war expenditure:

  Two years later to the day, in a lecture delivered shortly after his arrival in the U.S., Mises described what the great experiment really looked like:

  We are witnesses to the most frightful and phenomenal occurrence in human history: the decay of Western civilization.

   

  London, one of the centers of this civilization… is almost completely destroyed. The buildings of the Parliament of Westminster are in ruins; the House of Commons holds its assemblies in the catacombs. […] 

   

  The theater of war is spreading, and the day seems not distant when peace will have lost its last refuge. It is a moral and material collapse without precedent.

  Are we really set to revisit this disgusting Keynesian Endgame once again?

  A similar situation had occurred in the US in the 1930’s.

   

  What solved the question? War! Because World War II had occurred during the 1940’s and that became the solution for the United States. So, let’s look at the entrepreneurs in Japan. They are stuck with the deflationary mindset.

   

  They have to switch their mindset and should start making capital investments. We are looking for the trigger.

  

  

  

  

• Chicago Disintegrates – Gun Shootings Soar An Unprecedented 89%: "It's The Struggling Economy"

  While the Obama administration has been vocal about its intentions to limit access to guns for Americans across the nation, in the process achieving the opposite and leading to record gun sales, FBI firearm background checks that just hit an all time high for the month of March…

  

  … and record stock prices of US gun makers such as Smith and Wesson, perhaps it should focus on what has become the epicenter of ground zero for violence and gun homicides in the US: Obama’s “home town” of Chicago.

  According to a CNN report, gun violence in the windy city is on track to post its worst year in the 21st century, the result of an unprecedented surge in gun deaths in the first three months of the year.  By March 31, 141 people had been killed, according to the Chicago Police Department. On Thursday, eight were shot and two of them died in one hour alone, Chicago Police said.

  The 141 deaths in the first three months of the year mark a 71.9% jump from the same period in 2015, when 82 people were killed. It’s the worst start to a year since 1999, when 136 people died in the first three months the year, according to the Chicago Tribune.

  At that pace – an average of three killings every two days – Chicago would have 564 homicides by the end of the year. That would eclipse the 468 killings recorded in 2015 and 416 in 2014.

  

   

  Overall, shootings have also skyrocketed. According to data provided by Chicago police, the number of shootings in the first three months of the year jumped from 359 in 2015 to 677 in 2016 – an 88.5% increase.

  

   

  The result are countless stores of personal tragedy. For example, eighty-year-old Betty Johnson has lived in Chicago’s Roseland neighborhood since 1968. She raised two children and several grandchildren on the city’s far south side, where she has lived her entire life.

  After her granddaughter Sabrina was killed in a car accident in 2008, Johnson gained full custody of her great-grandson Andre Taylor.

  She looked on proudly as he busied himself with swimming, football and karate. She knew the dangers someone his age faced if he spent too much time on the streets of Chicago.

   

  On a Sunday night in March, her worst nightmare was realized. Andre, 16, was shot in the head and killed just a block from his home.

   

  “It has gotten much worse out here,” Johnson says, standing outside her home and looking out onto the streets she knows so well.

  There was gang violence when Johnson was growing up, “but you never heard anything like what’s going on today,” she says.

  And it’s getting worse. Another example is 14 year old Tyjuan Poindexter.

  Michael Gabb knows the pain Betty Johnson feels all too well. He helped raise his grandson Tyjuan Poindexter. The 14-year-old had never been in serious trouble, and Gabb was raising him in his home in the Kenwood neighborhood.

   

  He believes Tyjuan was mistaken for a gang member when he was killed in a drive-by shooting just a few blocks from his home. Gabb told CNN six months ago he was hopeful police would find the people responsible. Mayor Rahm Emanuel even paid a visit to Gabb’s home to offer his condolences.

   

  Almost six months later, Gabb is still hopeful his grandson’s killer will be found. But he thinks it may only happen if someone steps forward with information.

   

  He hopes things can change so others don’t suffer the same fate as his grandson. But how that change will occur and what’s causing the violence is something difficult to narrow down to one definitive explanation.

   

  Gabb, like many residents and advocates throughout the city, agree that there are several contributing factors; some old, some new.

  What is perplexing is that even the ordinary people are getting it: “I think it’s got something to do with economics,” Gabb says of the continued shootings. As CNN adds, most residents say communities continue to suffer from an economy that is nowhere strong enough to keep at-risk youths from looking for financial support in the wrong places.

  “There’s not enough money to sustain certain families and people go into drugs,” Gabb says.

  However, and very sadly, it is none other than the president who insists that anyone suggesting the US economy is in dire shape is “peddling fiction.” In other words, classic denial of what is happening in his own back yard.

  It’s hard for longtime community pastor Ira Acree to watch. He has been serving the Austin community on Chicago’s West Side for 26 years.

  “It’s horrifying,” he says. “It’s horrifying to look at the numbers from this winter, because if it’s that bad in the winter, we better brace for a long, hot summer.“

  And since it is indeed the economy’s fault, it is about to get much worse. Acree, like Gabb, believes the struggling economy in many communities is a big part of the problem.

  “All of the violence is rooted in the illegal drug economy,” Acree says. “Many guys have allowed their economic desperation to cause them to resort to these measures. The economy is terrible, especially in African-American neighborhoods.”

  Acree says the violence is the worst he’s seen since the 1990s, and he’d like to see a state of emergency declared for wide areas of the city by President Barack Obama, who called Chicago home for so many years.

  The lament is one heard across most poor areas in the US: “I’m hoping that some money is invested in some job creation. We bailed out Wall Street, why not bail out Main Street? It would make a world of difference,” Acree says.

  “If you really want to stop this epidemic of violence, the best way to stop a bullet is with a job.“

  Which is odd, because according to the BLS, jobs across the US are growing at a brisk pace of over 200K per month.

  What is rarely mentioned, however, is the true state of affairs even for those with jobs, according to which the net income of virtually every social group of Americans has devolved dramatically in recent years. As a recent Pew survey showed, by 2014, median income had fallen by 13 percent from 2004 levels, while expenditures had increased by nearly 14 percent. This change in the expenditure-to-income ratio in the years following the financial crisis is a clear indication of why and how households feel financially strained. 

  

   

  But that will be ignored as the myth of a recovery has to be perpetuated at all costs.

  Meanwhile Chicago is disintegrating and as long as the culture of denial persists, there is no hope. The local residents know it too.

  Jahmal Cole, 32, grew up in the city of North Chicago, about 45 miles from Chicago’s South Side. But in 2007, he moved to the Chatham neighborhood on the South Side, one of the toughest, to help young kids most at risk of falling prey to gangs and drugs.

  “I think that we’ve developed a mentality in Chicago — we see ourselves part of the North Side, South Side,” Cole says.

  If they tried to learn from others, or immerse themselves in other opportunities, Cole believes lives could be changed. His nonprofit organization, My Block, My Hood, My City, is dedicated to providing young people with opportunities to see things they don’t even know exist.

  “They don’t know what’s available,” he adds. “They don’t know the museum is open Tuesday nights. Many of these kids have never even seen the lakefront in their entire life.” Many will never see a lifestyle different from one where squad cars are part of the norm and the constant hovering of police helicopters is more known than a YMCA. It’s a way of life he views as “traumatizing” to the children and part of a cycle he is trying to break.

  He knows there isn’t one easy fix: “I don’t think there’s a program a policy or a resolution that’s going to solve violence in Chicago,” Cole says. He believes many teens and residents suffer from what he calls “poverty of imagination.” Cole hopes to bring new experiences to one child at a time and hopes that will make a difference.

  But for Betty Johnson, as she stands outside her longtime home, thinking about all of the years she’s lived in Chicago, there isn’t as much hope as there is sadness anymore.

  “I feel sorry for all of these young kids coming up today,” she says. Johnson wishes she could do more to save her other grandkids from the streets of Chicago and from the same fate as her great-grandson Andre.

  “If I wasn’t so old, I’d take the other grandkids that are living with me and go so far up in the country, it would take three hours to get to me,” she says. “It’s just so bad that this is the way we have to live.”

  Meanwhile, anyone who dares to expose the naked, if heavily armed emperor, will continue to be accused by those tasked with fixing the economy for all, not just for the 1%, as perpetuating the peddling of fiction. Sadly, it may be the ultimate disintegration of this city that forces the administration, either the current one or the next one, to wake from its stupor.

  Until then, thousands more will die.

  

  

  

  

• A "Generational" Peak In Corporate Profit Margins

  Submitted by Jesse Felder via TheFelderReport.com,

  Over the past few years I’ve written a fair amount about the record-high levels of corporate profit margins. I’ve been focused on this topic because corporate earnings are one of the most popular ways to value equities thus the sustainability of record-high profit margins should be an issue of great concern to investors. If profit margins revert to historical averages, earnings-based valuation measures investors are using to justify investment in equities today could quickly go against them making stocks appear much more expensive than they do currently. And this process may now be underway.

  

  To the point of mean reversion in profit margins, in the past I have referenced the words of a pair of investment legends. Jeremy Grantham has called profit margins, “the most mean-reverting series in finance.” And back in 1999, Warren Buffett explained why:

  In my opinion, you have to be wildly optimistic to believe that corporate profits as a percent of GDP can, for any sustained period, hold much above 6%. One thing keeping the percentage down will be competition, which is alive and well. In addition, there’s a public-policy point: If corporate investors, in aggregate, are going to eat an ever-growing portion of the American economic pie, some other group will have to settle for a smaller portion. That would justifiably raise political problems—and in my view a major reslicing of the pie just isn’t going to happen.

  Both of these two gentlemen clearly believe, and very strongly, that corporate profit margins have an equilibrium. They can rise above or fall below that equilibrium but the very nature of capitalism, along with its social contract, will force an inevitable reversion to the mean.

  I believe there are three major factors behind the recent bubble in corporate profit margins.

  First, and most obvious, is the simple trend in interest rates over the past 35 years or so. As rates have fallen to lows not seen in many generations, debt has become much less costly, especially when you also consider that corporate spreads on top of these ultra-low rates have also fallen to ultra-low levels.

  

  Second, corporate taxes as a percent of income have been falling for a long time, as well. Recently, this may be due in large part to the growth of tax avoidance strategies, mainly those involving relocating corporate headquarters to tax havens.

  

  Third, labor costs have also been falling for quite some time. Much of this may be due to the trend toward automation and, perhaps far more so, the offshoring of labor over the past several decades. This falling corporate cost is very apparent in the labor share of income numbers that many have discussed recently, including Paul Tudor Jones.

  

  These three secular trends have provided a tailwind for profit margins for a long time now. However, they may be reaching, or have already reached, their full potential and begun reverting. In terms of interest rates, the Fed Funds rate has essentially been stuck at zero for seven years now. Corporate spreads hit rock bottom almost two years ago and have been reversing course ever since. Furthermore, after a long period of deregulation in the banking industry that saw lending standards loosen considerably, it appears that regulation is making a sustained comeback and the effect will likely be just the opposite.

  Politically, corporations are finding it increasingly difficult to defend their use of tax avoidance schemes. Politicians have been squawking about this for a long time but it now appears as if they are ready to actually do something about it. More and more companies are reporting growing political risk in this regard as new legislation is being introduced in a variety of countries to combat it.

  Finally, the trend toward offshoring looks to be in the process of reversing as overseas labor costs rise and companies focus more and more on the potential quality and branding benefits of, “reshoring.” Google trends shows a surge in the popularity of this search term in recent years.

  

  So I agree with Grantham and Buffett that profit margins are very likely to continue to revert to their historical mean, driven by the natural forces of capitalism, and its social contract. And this will most likely be seen in either the rising cost of debt, taxes or labor, or perhaps all three.

  In the short-term, history suggests the current profits recession very likely will lead to an economic recession accompanied by a bear market. In fact, profit margin peaks regularly lead major stock market peaks and profit margins peaked this cycle about four years ago already. In addition, the recent fall in earnings and profit margins is already beginning to damage those earnings-based valuation measures. The S&P 500 now trades at its highest price-to-earnings ratio since the bull market began even as the index remains well off its recent price highs. And profit margins still could have a long way to fall before even reaching their average level since 1950.

  Longer-term, if these new secular trends working against profit margins are to remain in place, earnings growth will be much harder to come by for corporate America than it has been over the past few decades. And there are plenty of signs it is already becoming very difficult for them. Corporate cash flow has essentially been flat for the past five years. At the same time, more and more companies recently have resorted to financial engineering via buybacks, non-GAAP reporting and even outright fraud. My guess is this is all in an attempt to make up for broadly slowing organic profit growth due the these secular tailwinds shifting to headwinds.

  Should these shifts actually turn out to be longer-term secular trends, they pose a great risk to equities in both the short-term and the long-term. Falling profit margins and rising valuations (as earnings fall) make for a pretty bearish one-two punch for the stock market. I can’t imagine investors being very eager to pay higher valuations for companies growing more slowly. That equation usually works in reverse. And there’s no reason I can see to expect these challenges to corporate profit margins to let up any time soon.

  

  

  

  

• Wikileaks Reveals IMF Plan To "Cause A Credit Event In Greece And Destabilize Europe"

  One of the recurring concerns involving Europe’s seemingly perpetual economic, financial and social crises, is that these have been largely predetermined, “scripted” and deliberate acts.

  This is something the former head of the Bank of England admitted one month ago when Mervyn King said that Europe’s economic depression “is the result of “deliberate” policy choices made by EU elites.  It is also what AIG Banque strategist Bernard Connolly said back in 2008 when laying out “What Europe Wants“

  To use global issues as excuses to extend its power:

  • environmental issues: increase control over member countries; advance idea of global governance
  • terrorism: use excuse for greater control over police and judicial issues; increase extent of surveillance
  • global financial crisis: kill two birds (free market; Anglo-Saxon economies) with one stone (Europe-wide regulator; attempts at global financial governance)
  • EMU: create a crisis to force introduction of “European economic government”

  This morning we got another confirmation of how supernational organizations “plan” European crises in advance to further their goals, when Wikileaks published the transcript of a teleconference that took place on March 19, 2016 between the top two IMF officials in charge of managing the Greek debt crisis – Poul Thomsen, the head of the IMF’s European Department, and Delia Velkouleskou, the IMF Mission Chief for Greece.

  

  In the transcript, the IMF staffers are caught on tape planning to tell Germany the organization would abandon the troika if the IMF and the commission fail to reach an agreement on Greek debt relief. 

  More to the point, the IMF officials say that a threat of an imminent financial catastrophe as the Guardian puts it, is needed to force other players into accepting its measures such as cutting Greek pensions and working conditions, or as Bloomberg puts it, “considering a plan to cause a credit event in Greece and destabilize Europe.”

  According to the leaked conversation, the IMF – which has been pushing for a debt haircut for Greece ever since last August’s 3rd Greek bailout – believes a credit event as only thing that could trigger a Greek deal; the “event” is hinted as taking place some time around the June 23 Brexit referendum.

  As noted by Bloomberg, the leak shows officials linking Greek issue with U.K. referendum risking general political destabilization in Europe.

  The leaked transcript reveals how the IMF plans to use Greece as a pawn in its ongoing negotiation with Germany’s chancelleor in order to achieve the desired Greek debt reduction which Germany has been pointedly against: in the leak we learn about the intention of IMF to threaten German Chancellor Angela Merkel to force her to accept the IMF’s demands at a critical point.

  From the transcript:

  THOMSEN: Well, I don’t know. But this is… I think about it differently. What is going to bring it all to a decision point? In the past there has been only one time when the decision has been made and then that was when they were about to run out of money seriously and to default. Right?

   

  VELKOULESKOU: Right!

   

  THOMSEN: And possibly this is what is going to happen again. In that case, it drags on until July, and clearly the Europeans are not going to have any discussions for a month before the Brexits and so, at some stage they will want to take a break and then they want to  start again after the European referendum.

   

  VELKOULESKOU: That’s right.

   

  THOMSEN: That is one possibility. Another possibility is one that I thought would have happened already and I am surprised that it has not happened, is that, because of the refugee situation, they take a decision… that they want to come to a conclusion. Ok? And the Germans raise the issue of the management… and basically we at that time say “Look, you Mrs. Merkel you face a question, you have to think about what is more costly: to go ahead without the IMF, would the Bundestag say ‘The IMF is not on board’? or to pick the debt relief that we think that Greece needs in order to keep us on board?” Right? That is really the issue.

   

  * * *

   

  VELKOULESKOU: I agree that we need an event, but I don’t know what that will be. But I think Dijsselbloem is trying not to generate an event, but to jump start this discussion somehow on debt, that essentially is about us being on board or not at the end of the day.

   

  THOMSEN: Yeah, but you know, that discussion of the measures and the discussion of the debt can go on forever, until some high up.. until they hit the July payment or until the leaders decide that we need to come to an agreement. But there is nothing in there that otherwise is going to force a compromise. Right? It is going to go on forever.

  The IMF is also shown as continuing to pull the strings of the Greek government which has so far refused to compromise on any major reforms, as has been the case since the first bailout.

  As the Guardian notes, Greek finance minister Euclid Tsakalotos has accused the IMF of imposing draconian measures, including on pension reform. The transcript quotes Velculescu as saying: “What is interesting though is that [Greece] did give in … they did give a little bit on both the income tax reform and on the … both on the tax credit and the supplementary pensions”. Thomsen’s view was that the Greeks “are not even getting close [to coming] around to accept our views”. Velculescu argued that “if [the Greek government] get pressured enough, they would … But they don’t have any incentive and they know that the commission is willing to compromise, so that is the problem.”

  Below is Paul Mason’s summary of what is shaping up as the next political scandal.

  The International Monetary Fund has been caught, red handed, plotting to stage a “credit event” that forces Greece to the edge of bankruptcy, using the pretext of the Brexit referendum.

   

  No, this is not the plot of the next Bond movie. It is the transcript of a teleconference between the IMF’s chief negotiator, Poul Thomsen and Delia Velculescu, head of the IMF mission to Greece. 

   

  Released by Wikileaks, the discussion took place in Athens just before the IMF walked out of talks aimed at giving Greece the green light for the next stage of its bailout.

   

  The situation is: the IMF does not believe the numbers being used by both Greece and Europe to do the next stage of the deal. It does not want to take part in the bailout. Meanwhile the EU cannot do the deal without the IMF because the German parliament won’t allow it.

   

  * * *

   

  Let me decode. An “event” is a financial crisis bringing Greece close to default. Just like last year, when the banks closed, millions of people faced economic and psychological catastrophe.

   

  Only this time, the IMF wants to inflict that catastrophe on a nation holding tens of thousands of refugees and tasked with one of the most complex and legally dubious international border policing missions in modern history.

   

  The Greek government is furious: “we are not going to let the IMF play with fire,” a source told me.

   

  But the issue is out of Greek hands. In the end, as Thomsen hints in the transcript, only the European Commission and above all the German government can decide to honour the terms of the deal it did to bail Greece out last July.

   

  The transcript, though received with fury and incredulity in Greece, will drop like a bombshell into the Commission and the ECB. It is they who are holding E300bn+ of Greek debt. It is the whole of Europe, in other words, that the IMF is conspiring to hit with the shock doctrine.

  The Greeks are understandably angry and confused; As Bloomberg reported earlier, “Greece wants to know whether WikiLeaks report regarding IMF anticipating a Greek default at about the time of the U.K. June 23 referendum on its EU membership is the fund’s official position” government spokeswoman Olga Gerovasili says Saturday in e-mailed statement.  For its part, an IMF spokesman in e-mail Saturday said it doesn’t “comment on leaks or supposed reports of internal discussions.”

  Two side observations:

  1. has a “Snowden” leaker now emerged at the IMF; if so we can expect many more such bombshell accounts in the coming weeks; or perhaps the reason for the leak is less nuanced: a bugged hotel.

  Acc to #IMF leak, conf call was held March 19, when Velculescu was still in Athens, Hilton Hotel. Makes you wonder if Hilton is bugged.

  — Yannis Koutsomitis (@YanniKouts) April 2, 2016

  2. it may be another turbulent summer in Europe.

  Source

  

  

  

  

  

• "We Won The Votes, They're Trying To Steal Them" Trump Urges Tennesseans To Crash Establishment Party

  Building on the worst two week-period of his campaign, Donald Trump took to Twitter overnight to implore his Tennessean supporters to rise up, raging that the state’s Republican Party was "trying to steal" his delegates and urging them to crash a party meeting on Saturday morning to stop them – "We won the votes. They are trying to steal them. I can’t believe I am writing this. But the Tennessee Republican Party wants to steal your vote TOMORROW." As Politico reports Establishment leaders, alarmed by an intensifying backlash, have hired extra security for the event.

  It's been a tough couple of weeks for Trump, as The Establishment's full court press has narrowed his lead over Cruz…

  

   

  And now he is fighting back as Politico reports, Tennesse GOP establishmentarians prepare to assign delegates for a state he won strongly,

  Morris urged supporters to crash the party's 10 a.m. Saturday executive committee meeting by arriving a half-hour in advance. “There is a small group of Tennessee establishment insiders pulling a fast one. DON’T LET THIS HAPPEN,” he wrote.

  Party leaders, alarmed by an intensifying backlash throughout the night, have hired extra security for the event — which party chairman Ryan Haynes noted had been scheduled to take place in a small, unsecured conference room — and they're considering canceling the event altogether.

  "We've seen what's happened at other events around the country," Haynes said, referencing spurts of violence at some Trump campaign rallies. "The last thing we'd want to see is something get disorderly.”

   

  Added Haynes, "We've been in contact with individuals in law enforcement here in Tennessee.”

  The skirmish is the latest in the increasingly fierce battle for delegates to the Republican National Convention in Cleveland.

  At issue are the state’s 14 at-large delegates that were not assigned in the March 1 primary but are set to be selected by the party’s executive committee. Trump won the Tennessee primary and many of the delegates were directly elected at that time. Morris wrote that Trump’s campaign had struck a deal with party leaders on Wednesday to fill the remaining at-large slots with Trump’s share of the vote.

   

  Haynes said Morris exploded earlier in the week when the party informed the campaign they'd only get six of their seven delegate choices at Saturday's meeting. Tennessee's GOP rules give the party the ultimate authority to name delegates, though it usually accepts input from the campaigns.

   

  "They informed us that they did not care about party procedures. They don't care about the Republican Party," Haynes said.

   

  Haynes added that on Friday, the list of delegates changed again and only four of Trump's original seven requests were included, prompting Morris' scathing call to supporters.

   

  “The State Party Chairman, Ryan Haynes, agreed to that ON WEDNESDAY,” Morris wrote. “Those pulling his puppet strings changed his mind and now apparently he wants to appoint delegates representing candidates who don’t support Donald Trump and WHO DID NOT RECEIVE ANY ALLOCATED DELEGATES on March 1.”

  One state executive committee member, Scott Smith, rebutted the Trump campaign's allegations in an email, saying that the root of the conflict is the fact that some of Trump's Tennessee supporters "depend on threats, manipulation, outlandish accusations and behavior."

  

  

  

  

• U.S. Oil Production to Drop to 5 Million Barrels Per Day over Next 12 Months (Video)

  By EconMatters

  

  With the amazing drop in Oil Rigs just over the last two months, the pain for U.S. Oil Producers is just getting started, expect U.S. Oil Production to start dropping off a cliff. We delve into the Oil Data metrics as to why April, May and June are strong months to be invested from the long side in the Oil Market – the seasonally strong part of the market from a demand perspective.

   

   

   

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