• Dead, White, & Blue – The Great Die-Off Of America's Blue Collar Whites

  …in the 2016 campaign season, it couldn’t be clearer that the billionaire version of white privilege is going great guns, but as for working class whites, not so much. As Barbara Ehrenreich, founding editor of the Economic Hardship Reporting Project, notes today, the sense of white privilege has taken a hit in America and that’s not surprising. A recent study she cites suggests that middle-aged whites with no more than a high-school degree now have death rates that, in developed countries, come close only to those last seen among Russian men after the collapse of the Soviet Union. In other words, whole cohorts of white Americans have ever less to cheer about in their lives, which may help explain all those public cheers for Trump et al.

  Submitted by Barbara Ehrenreich via TomDispatch.com,

  The white working class, which usually inspires liberal concern only for its paradoxical, Republican-leaning voting habits, has recently become newsworthy for something else: according to economist Anne Case and Angus Deaton, the winner of the latest Nobel Prize in economics, its members in the 45- to 54-year-old age group are dying at an immoderate rate. While the lifespan of affluent whites continues to lengthen, the lifespan of poor whites has been shrinking. As a result, in just the last four years, the gap between poor white men and wealthier ones has widened by up to four years. The New York Times summed up the Deaton and Case study with this headline: “Income Gap, Meet the Longevity Gap.”

  This was not supposed to happen. For almost a century, the comforting American narrative was that better nutrition and medical care would guarantee longer lives for all. So the great blue-collar die-off has come out of the blue and is, as the Wall Street Journal says, “startling.”

  It was especially not supposed to happen to whites who, in relation to people of color, have long had the advantage of higher earnings, better access to health care, safer neighborhoods, and of course freedom from the daily insults and harms inflicted on the darker-skinned. There has also been a major racial gap in longevity — 5.3 years between white and black men and 3.8 years between white and black women — though, hardly noticed, it has been narrowing for the last two decades. Only whites, however, are now dying off in unexpectedly large numbers in middle age, their excess deaths accounted for by suicide, alcoholism, and drug (usually opiate) addiction.

  There are some practical reasons why whites are likely to be more efficient than blacks at killing themselves. For one thing, they are more likely to be gun-owners, and white men favor gunshots as a means of suicide. For another, doctors, undoubtedly acting in part on stereotypes of non-whites as drug addicts, are more likely to prescribe powerful opiate painkillers to whites than to people of color. (I’ve been offered enough oxycodone prescriptions over the years to stock a small illegal business.)

  Manual labor — from waitressing to construction work — tends to wear the body down quickly, from knees to back and rotator cuffs, and when Tylenol fails, the doctor may opt for an opiate just to get you through the day.

  The Wages of Despair

  But something more profound is going on here, too. As New York Times columnist Paul Krugman puts it, the “diseases” leading to excess white working class deaths are those of “despair,” and some of the obvious causes are economic. In the last few decades, things have not been going well for working class people of any color.

  I grew up in an America where a man with a strong back — and better yet, a strong union — could reasonably expect to support a family on his own without a college degree. In 2015, those jobs are long gone, leaving only the kind of work once relegated to women and people of color available in areas like retail, landscaping, and delivery-truck driving. This means that those in the bottom 20% of white income distribution face material circumstances like those long familiar to poor blacks, including erratic employment and crowded, hazardous living spaces.

  White privilege was never, however, simply a matter of economic advantage. As the great African-American scholar W.E.B. Du Bois wrote in 1935, “It must be remembered that the white group of laborers, while they received a low wage, were compensated in part by a sort of public and psychological wage.”

  Some of the elements of this invisible wage sound almost quaint today, like Du Bois’s assertion that white working class people were “admitted freely with all classes of white people to public functions, public parks, and the best schools.” Today, there are few public spaces that are not open, at least legally speaking, to blacks, while the “best” schools are reserved for the affluent — mostly white and Asian American along with a sprinkling of other people of color to provide the fairy dust of “diversity.” While whites have lost ground economically, blacks have made gains, at least in the de jure sense. As a result, the “psychological wage” awarded to white people has been shrinking.

  For most of American history, government could be counted on to maintain white power and privilege by enforcing slavery and later segregation. When the federal government finally weighed in on the side of desegregation, working class whites were left to defend their own diminishing privilege by moving rightward toward the likes of Alabama Governor (and later presidential candidate) George Wallace and his many white pseudo-populist successors down to Donald Trump.

  At the same time, the day-to-day task of upholding white power devolved from the federal government to the state and then local level, specifically to local police forces, which, as we know, have taken it up with such enthusiasm as to become both a national and international scandal. The Guardian, for instance, now keeps a running tally of the number of Americans (mostly black) killed by cops (as of this moment, 1,209 for 2015), while black protest, in the form of the Black Lives Matter movement and a wave of on-campus demonstrations, has largely recaptured the moral high ground formerly occupied by the civil rights movement.

  The culture, too, has been inching bit by bit toward racial equality, if not, in some limited areas, black ascendency. If the stock image of the early twentieth century “Negro” was the minstrel, the role of rural simpleton in popular culture has been taken over in this century by the characters in Duck Dynasty and Here Comes Honey Boo Boo. At least in the entertainment world, working class whites are now regularly portrayed as moronic, while blacks are often hyper-articulate, street-smart, and sometimes as wealthy as Kanye West. It’s not easy to maintain the usual sense of white superiority when parts of the media are squeezing laughs from the contrast between savvy blacks and rural white bumpkins, as in the Tina Fey comedy Unbreakable Kimmy Schmidt. White, presumably upper-middle class people generally conceive of these characters and plot lines, which, to a child of white working class parents like myself, sting with condescension.

  Of course, there was also the election of the first black president. White, native-born Americans began to talk of “taking our country back.” The more affluent ones formed the Tea Party; less affluent ones often contented themselves with affixing Confederate flag decals to their trucks.

  On the American Downward Slope

  All of this means that the maintenance of white privilege, especially among the least privileged whites, has become more difficult and so, for some, more urgent than ever. Poor whites always had the comfort of knowing that someone was worse off and more despised than they were; racial subjugation was the ground under their feet, the rock they stood upon, even when their own situation was deteriorating.

  If the government, especially at the federal level, is no longer as reliable an enforcer of white privilege, then it’s grassroots initiatives by individuals and small groups that are helping to fill the gap — perpetrating the micro-aggressions that roil college campuses, the racial slurs yelled from pickup trucks, or, at a deadly extreme, the shooting up of a black church renowned for its efforts in the Civil Rights era. Dylann Roof, the Charleston killer who did just that, was a jobless high school dropout and reportedly a heavy user of alcohol and opiates. Even without a death sentence hanging over him, Roof was surely headed toward an early demise.

  Acts of racial aggression may provide their white perpetrators with a fleeting sense of triumph, but they also take a special kind of effort. It takes effort, for instance, to target a black runner and swerve over to insult her from your truck; it takes such effort — and a strong stomach — to paint a racial slur in excrement on a dormitory bathroom wall. College students may do such things in part out of a sense of economic vulnerability, the knowledge that as soon as school is over their college-debt payments will come due. No matter the effort expended, however, it is especially hard to maintain a feeling of racial superiority while struggling to hold onto one’s own place near the bottom of an undependable economy.

  While there is no medical evidence that racism is toxic to those who express it — after all, generations of wealthy slave owners survived quite nicely — the combination of downward mobility and racial resentment may be a potent invitation to the kind of despair that leads to suicide in one form or another, whether by gunshots or drugs. You can’t break a glass ceiling if you’re standing on ice.

  It’s easy for the liberal intelligentsia to feel righteous in their disgust for lower-class white racism, but the college-educated elite that produces the intelligentsia is in trouble, too, with diminishing prospects and an ever-slipperier slope for the young. Whole professions have fallen on hard times, from college teaching to journalism and the law. One of the worst mistakes this relative elite could make is to try to pump up its own pride by hating on those — of any color or ethnicity — who are falling even faster.

  

  

  

  

  

• It's Official (Again): The Current "Recovery" Is Worse Than The Great Depression's

  In a perfectly timed update to his infamous April 2009 "worse then The Great Depression" chart, Kevin O'Rourke has unveiled his latest chart-du-poor. With US manufacturing collapsing, bond yields tumbling, and The Fed about to hike rates to prove they can, this so-called 'recovery' has fallen below that following The Great Depression. As O'Rourke sums up, "pretty dismal stuff. Let’s hope that we can at least avoid the famous 1937-38 double dip."

   

  In 2009, things looked dire… with the crash in industrial production outpacing that of The Great Depression…

  

   

   

  In 2010, thanks to unprecedented reflationary policies, everything was awesome…

  

  (but by the end of the year, and as O'Rourke puts it "reflation turned to austerity in Europe, and the global recovery slowed, to the point where at times it seemed to be petering out almost altogether.")

   

  Which brings us to today – In August of 2015, the inevitable happened: our current recovery was overtaken by that of the interwar period. "Pretty dismal stuff," as O'Rourke opines.

  

   

  Concluding, rather ominously, "Let’s hope that we can at least avoid the famous 1937-38 double dip, visible at the end of the interwar series."

   

  Source: The Irish Economy blog

  

  

  

  

  

• The NBA is headed for Financial Problems

  By EconMatters

  

    

  Distressed Cost Structure

   

  The NBA has been a distressed business since the glory days of the “Bird-Magic” and “Air Jordan” era. It really suffered at the gate with the downturn in 2008 due to the financial crisis, and judging by early attendance numbers this year coupled with irresponsible and out of control cost structures on the player side of the equation for the past 5 years the NBA is badly in need of a financial restructuring to better align their costs with their profits.

   

  Gold Rush Free Agency Mentality

   

  Player salaries have been steadily rising due to poor mismanagement practices by ownership and a free agency process where the players hold all the cards. The Super Star players like Lebron James set the ball rolling for free agency with his Decision Circus which lifted all boats and had incompetent General Managers around the league seemingly caught in a Gold Rush Hysteria giving max contract deals for role players like Carlos Boozer. It isn`t really the Super Star players getting max contract deals which is hurting the league`s finances as much as the average to downright mediocre players receiving huge fully guaranteed contracts which are often so bad that the teams end up just writing off the contracts and cutting the players loose with several years left on the contracts.

   

  Poor Incentives in Place for Winning

   

  The poor mismanagement by ownership of these franchises is one factor, the other is the actual product on the court, and a broken business model. Unlike the NFL where in any given year many teams legitimately have a chance to win the Super bowl, in the NBA in a good year only 4 or 5 teams legitimately have a chance to win an NBA title. The rest of the teams are either purposely losing due to a poorly constructed ‘Drafting Incentive Plan’ purposely tanking to gain a better percentage chance in a lottery process, or putting a poor product on the court with no chance of winning an NBA title. This year it is even worse with basically only 3 teams having legitimate chances of winning an NBA title, and all the rest looking like poorly constructed versions of fantasy basketball teams with major shortcomings.

   

  The Houston Rockets

   

  An example of how even the better general managers around the league are pretty awful at controlling costs is the situation with the Houston Rockets. Daryl Morey GM of the Houston Rockets who has been cost conscious in the past avoiding some of the pitfalls of routinely giving bad contracts to substandard to average players has even fallen into this Gold Rush Mentality of the Free Agency Madness.

   

  This offseason Daryl Morey gave a backup point guard $6 Million per year in Patrick Beverley who averages 5 points a game, he also gave another role player in Corey Brewer $8 Million per year to average 6 points a game on 31% FG shooting, he gave $3.3 Million per year to an unproven second round K.J. McDaniels who averages 1 point a game, and acquired Ty Lawson`s $12 Million salary in the offseason and is averaging a robust 7 points a game. The Houston Rockets are already committing over $22 Million per year guaranteed to Dwight Howard who averages 13 points a game and $16 Million per year to James Harden who averages 29 points a game but refuses to play defense, and is a team morale killer who already quit on a coach getting Kevin McHale fired.

   

  Make no mistake the NBA is a player`s league, and that is going to be its downfall, the inmates are officially running the asylum. The players make so much money, and the ownership has poorly negotiated with the player`s union, where unlike the NFL players who are cut due to poor performance with substantial non-guaranteed portions of future salary obligations, the NBA teams have to eat the entire guaranteed contract regardless of performance on the court.

   

  Catch-22

   

  The catch-22 for ownership is once they are in this position is that they cannot fire the players, so the coach must always be the one to get fired. This further undermines any coach as the players realize they run the show. Accordingly they put effort forth on the court when they feel like it, and the coach has no real authority over the players to command effort on a nightly basis. And given that most of the teams have no realistic chance of competing for an NBA title, often times NBA players just mail it in from an effort standpoint, further undermining the quality of the product for the fan base which ultimately hurts season ticket sales.

   

  Network Deals & On Demand

   

  The only thing that has saved the NBA so far has been a large broadcast right`s deal with the networks in the ‘thought that content was king’ bubble, that other than the NFL, is now showing signs of severe hubris as major cord cutting is even affecting sports programming providers like ESPN as subscribers bail due to the rising costs. The NBA owners have been spending like drunken sailors expecting these huge television deals to continue into perpetuity, and they are in for a rude awakening come negotiations over the next television rights packages. On Demand is eating into everyone`s pie, even sporting events, with only the premium live events able to command higher advertising rates going forward.

   

  Global Competition for Viewers

   

  Plus with the emergence of global television, Soccer and other sports are much more competitive even for viewership in the United States. And given the poor quality of product, often subpar effort on the court with mismatched incentives, and most teams having little chance of winning an NBA title – the NBA is in dire need of restructuring from a management, product and costs standpoint. Just watch NBA games and look at the number of empty seats each night around the league and compare this to college football games.

   

  NBA Rosters & Bad Salary Deals

   

  All one has to do is look at almost any NBA roster to find ridiculous contracts where the salaries don`t match the player`s performance on the court. Every NBA team is saddled with these hefty fully guaranteed financial ‘lemons of contracts’ due to incompetent general managers and poor ownership decisions with regard to running the franchise. The players run the show, and have for the last 10 years, and the product is being run into the ground as a result of a poorly handled Draft Incentivization Plan, and incompetent negotiations with the player`s union over the years by the Executive Management Team of the NBA.

   

  Brand Building is often more important than Winning in Basketball – “The Beard”

  In fact, the players today care more about building their brand so as to secure a huge shoe deal than about actually winning games. Case in point is James Harden`s $200 Million shoe deal with Adidas or dating a Kardashian, and the Rocket`s having a top 10 Team Salary Obligation of $90 Million, and a bottom 10 Winning percentage of 0.389! There is hardly any incentive at all for James Harden to actually play hard on defense when he has already cashed in on his brand!

   

  This is why when a team actually plays good team ball like the San Antonio Spurs or the Golden State Warriors and plays hard on defense it is such a shock to the system, and a huge advantage over the other NBA teams. This serves as an outlier event as opposed to normal behavior, and thus why the NBA routinely puts forth such an uninteresting and noncompetitive product on a nightly basis across the entire league!

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• US Intervention: Before And After

  Seasonally-adjusted democracy…

  Before and… After

  

  Source: PeakProsperity.com

  

  

  

  

• China 'Recovery' Meme Snaps – Tech & Growth Stocks Are Plunging

  With the dismal 10% drop in China Zhongdi Dairy’s IPO as it started trading, it appears Chinese investors are losing faith in the highest-flying stocks. Following Monday’s miracle afternoon rescue, ChiNext (tech-heavy) and Shenzhen (tech and growth-heavy) indices are plunging. Shanghai, which initially rose thanks to strength in housing stocks, has given up all its gains as last night’s Schrodinger PMIs were neither good nor bad enough to prompt immediate massive monetary liquidity tsunami.

   

  

   

  In Shenzhen only 230 of the 1686 stocks are up, with 420 stocks down over 5% and 40 limit-down at -10%.

  Telecoms, Tech, and Oil & Gas sectors are all weaker as Financials hold on to gains.
  

  Only the smallest-cap stocks are broadly higher with large and mega caps considerably lower.

   

  Charts: Bloomberg

  

  

  

  

  

• Murder And Mayhem In The Middle East (Why It Matters To Those Living In The West)

  Submitted by Chris Martenson via PeakProsperity.com,

  To understand what’s happening in Syria right now, you have to understand the tactics and motivations of the US and NATO — parties sharing interwoven aims and goals in the Middle East/North African (MENA) region.

  While the populations of Europe and the US are fed raw propaganda about the regional aims involved, the reality is far different.

  Where the propaganda claims that various bad dictators have to be taken out, or that democracy is the goal, neither have anything at all to do with what’s actually happening or has happened in the region.

  For starters, we all know that if oil fields were not at stake then the West would care much much less about MENA affairs.

  But a lot of outside interests do care. And their aims certainly and largely include controlling the region’s critical energy resources. There’s a lot of concern over whether Russia or China will instead come to dominate these last, best oil reserves on the planet.

  Further, we can dispense with the idea that the US and NATO have any interest at all in human rights in this story. If they did, then they’d at least have to admit that their strategies and tactics have unleashed immeasurable suffering, as well as created the conditions for lots more. But it would be silly to try and argue about or understand regional motivations through the lenses of human rights or civilian freedoms — as neither applies here.

  Divide And Conquer

  Instead, the policies in the MENA region are rooted in fracturing the region so that it will be easier to control.

  That’s a very old tactic; first utilized to a great extent by Britain starting back in the 1700s. 

  Divide and conquer. There’s a reason that’s a well-worn catch phrase: it’s hundreds of years old.

  But to get a handle on the level of depravity involved, I think it useful to examine what happened in Libya in 2011 when NATO took out Muamar Gaddafi and left the country a broken shell — as was intended.

  I cannot really give you a good reason for NATO involving itself in taking out Gaddafi. I only have bad ones.

  The official reason was that after the Arab Spring uprising in Libya in early 2011 (with plenty of evidence of Western influences in fanning those flames) things got ugly and protesters were shot. This allowed the UN to declare that it needed to protect civilians, and the ICC to charge Gaddafi with crimes against humanity, declaring that he needed to stand trial.

  Here’s how it went down:

  On 27 June, the ICC issued arrest warrants for Gaddafi, his son Saif al-Islam, and his brother-in-law Abdullah Senussi, head of state security, for charges concerning crimes against humanity.^[268] Libyan officials rejected the ICC, claiming that it had "no legitimacy whatsoever" and highlighting that "all of its activities are directed at African leaders".^[269]

   

  That month, Amnesty International published their findings, in which they asserted that many of the accusations of mass human rights abuses made against Gaddafist forces lacked credible evidence, and were instead fabrications of the rebel forces which had been readily adopted by the western media. 

  (Source)

  After the ICC's indictment, it was a hop, skip and a jump to declaring a NATO-enforced ‘no fly zone’ over Libya to protect civilians.

  From there it was just a straight jump to NATO actively shooting anything related to the Gaddafi government. NATO had thereby chosen sides and was directly supporting the rebellion.

  The pattern in play here is always the same: cherry-picked events are used as a pretext to support the side seeking to topple the existing government and thereby leave a sectarian wasteland to flourish in the inevitable power vacuum.

  If you are like most people in the West, you know almost nothing of any of this context. It’s not well reported. And Libya is rarely in the news even though it's going through increasingly desperate times.

  I found a speech given by Gaddafi a few months before he was killed to be especially compelling and revealing. I will reproduce it in its entirety here:

  For 40 years, or was it longer, I can't remember, I did all I could to give people houses, hospitals, schools, and when they were hungry, I gave them food. I even made Benghazi into farmland from the desert, I stood up to attacks from that cowboy Reagan, when he killed my adopted orphaned daughter, he was trying to kill me, instead he killed that poor innocent child. Then I helped my brothers and sisters from Africa with money for the African Union. 

   

  I did all I could to help people understand the concept of real democracy, where people's committees ran our country. But that was never enough, as some told me, even people who had 10 room homes, new suits and furniture, were never satisfied, as selfish as they were they wanted more. They told Americans and other visitors, that they needed "democracy" and "freedom" never realizing it was a cut throat system, where the biggest dog eats the rest, but they were enchanted with those words, never realizing that in America, there was no free medicine, no free hospitals, no free housing, no free education and no free food, except when people had to beg or go to long lines to get soup.

   

  No, no matter what I did, it was never enough for some, but for others, they knew I was the son of Gamal Abdel Nasser, the only true Arab and Muslim leader we've had since Salah-al-Deen, when he claimed the Suez Canal for his people, as I claimed Libya, for my people, it was his footsteps I tried to follow, to keep my people free from colonial domination – from thieves who would steal from us.

   

  Now, I am under attack by the biggest force in military history, my little African son, Obama wants to kill me, to take away the freedom of our country, to take away our free housing, our free medicine, our free education, our free food, and replace it with American style thievery, called "capitalism," but all of us in the Third World know what that means, it means corporations run the countries, run the world, and the people suffer. So, there is no alternative for me, I must make my stand, and if Allah wishes, I shall die by following His path, the path that has made our country rich with farmland, with food and health, and even allowed us to help our African and Arab brothers and sisters to work here with us, in the Libyan Jamahiriya.

   

  I do not wish to die, but if it comes to that, to save this land, my people, all the thousands who are all my children, then so be it.

   

  Let this testament be my voice to the world, that I stood up to crusader attacks of NATO, stood up to cruelty, stood up to betrayal, stood up to the West and its colonialist ambitions, and that I stood with my African brothers, my true Arab and Muslim brothers, as a beacon of light. When others were building castles, I lived in a modest house, and in a tent. I never forgot my youth in Sirte, I did not spend our national treasury foolishly, and like Salah-al-Deen, our great Muslim leader, who rescued Jerusalem for Islam, I took little for myself…

   

  In the West, some have called me "mad", "crazy", but they know the truth yet continue to lie, they know that our land is independent and free, not in the colonial grip, that my vision, my path, is, and has been clear and for my people and that I will fight to my last breath to keep us free, may Allah almighty help us to remain faithful and free. 

  (Source)

  Gaddafi’s great crime seems to be giving away too much oil wealth to his people. Was he a strongman? Yes, but you have to be to rule in that region right now. Was he the worst strong man? No, not by a long shot.

  As bad as he was, at least he didn’t kill a million Iraqis on trumped up charges of non-existent weapons of mass destruction.  Nor was he chopping off 50 heads per week and stoning females for adultery as is the case with Saudi Arabia right now.

  But again, whether he killed protestors or not, or committed war crimes or not, is irrelevant to the power structure. What mattered was that he had locked out Western interests, and instead used his country's oil wealth to provide free or extremely cheap health care, education and housing to a wide swath of Libyans.

  So let’s cut to the murder scene. Here’s how it went down:

  At around 08:30 local time on 20 October, Gaddafi, his army chief Abu-Bakr Yunis Jabr, his security chief Mansour Dhao, and a group of loyalists attempted to escape in a convoy of 75 vehicles.^[7][8] A Royal Air Force reconnaissance aircraft spotted the convoy moving at high speed, after NATO forces intercepted a satellite phone call made by Gaddafi.^[9]

   

  NATO aircraft then fired on 11 of the vehicles, destroying one. A U.S. Predator drone operated from a base near Las Vegas^[8] fired the first missiles at the convoy, hitting its target about 3 kilometres (2 mi) west of Sirte. Moments later, French Air Force Rafale fighter jets continued the bombing.^[10]

   

  The NATO bombing immobilized much of the convoy and killed dozens of loyalist fighters. Following the first strike, some 20 vehicles broke away from the main group and continued moving south. A second NATO airstrike damaged or destroyed 10 of these vehicles. According to the Financial Times, Free Libya units on the ground also struck the convoy.^[11]

   

  According to their statement, NATO was not aware at the time of the strike that Gaddafi was in the convoy. NATO stated that in accordance with Security Council Resolution 1973, it does not target individuals but only military assets that pose a threat. NATO later learned, "from open sources and Allied intelligence," that Gaddafi was in the convoy and that the strike likely contributed to his capture.^[11]

  (Source)

  To believe NATO, it had no idea Gaddafi was in that convoy (honest!), but just managed to have a Predator drone handy as well as a large number of jets armed for ground targets (not anti-aircraft missiles, as a no-fly zone might imply). It merely struck all of these vehicles over and over again in their quest to kill everyone on board because they were “military assets that posed a threat.”

  Because you live in the real world, you know that NATO knew exactly where Gaddafi was at all times and that he was in that convoy attempting to escape NATO's bombing raid.  Further, you won’t be surprised to learn that many of these vehicles were pickup trucks that really posed no military threat to NATO.  The point was to kill Gaddafi, and numerous resources were brought to bear on that mission.

  Gaddafi’s killing was the assassination of a foreign leader by Western interests. In this case, Gaddafi was just yet another target in a long line of leaders that attempted to keep those same interests at bay.

  After NATO was finished making a mess of Libya by taking out Gaddafi and leaving a right proper mess of a power vacuum, it simply departed — leaving the country to fend for itself.  Libya descended, of course, into an outright civil war and has remained ever since a hotbed of sectarian violence and increasing ISIS control and presence.

  If NATO/US had to follow the Pier I rule of “you break it, you buy it” they would still be in Libya offering money and assistance as the country settles down and begins the long process of rebuilding.

  But no such luck. That’s absolutely not how they operate. It’s disaster capitalism in action. The idea is to break things apart and then make money off of the pieces. It's not to help people.

  Otherwise, how do we explain these images?

  

  While imperfect by many standards, all of these countries were stable and increasingly prosperous before outside interests came in and turned them into a living nightmare.

  It is this context that explains why such reactionary and violent groups as ISIS arose. They are the natural response of violated people seeking to assert some control over lives that otherwise have no hope and even less meaning.

  I’m not justifying ISIS; only explaining the context that led to its rise.

  Speaking of which, let’s turn back to Libya:

  ISIS is tightening its grip in Libya

  Nov 15, 2015

   

  GENEVA (Reuters) – Islamic State militants have consolidated control over central Libya, carrying out summary executions, beheadings and amputations, the United Nations said on Monday in a further illustration of the North African state's descent into anarchy.

   

  All sides in Libya's multiple armed conflicts are committing breaches of international law that may amount to war crimes, including abductions, torture and the killing of civilians, according to a U.N. report.

   

  Islamic State (IS) has gained control over swathes of territory, "committing gross abuses including public summary executions of individuals based on their religion or political allegiance", the joint report by the U.N. High Commissioner for Human Rights and the U.N. Support Mission in Libya said.

   

  The U.N. had documented IS executions in their stronghold city of Sirte, in central Libya along the Mediterranean coast, and in Derna to the east, from which they were later ousted by local militias. Victims included Egyptian Copts, Ethiopians, Eritreans and a South Sudanese, the report said.

   

  Some were accused of "treason", others of same-sex relations, but none were given due legal process, according to the report, which covered the year through October.

   

  Four years after the overthrow of Muammar Gaddafi, Libya is locked in a conflict between two rival governments – an official one in the east and a self-declared one controlling the capital Tripoli – and the many armed factions that back them.

  (Source)

  After that atrocious summary, how bad does life under Gaddafi sound now? Again, he was targeted for execution by Western interests and the resulting mess is of little surprise to anybody with even modest curiosity about how violent overthrows tend to work out in the MENA region.

  But where is the UN security council denouncing the war crimes? And where is the ICC leveling crimes against humanity charges? Nowhere. There’s no more Western political interest in Libya now that it has been broken apart.

  As they say in the military: once is bad luck, twice is a coincidence, but three times is enemy action. This pattern of eliminating “a very bad man” and leaving the country in a complete mess has happened three times of late, with Syria targeted to be the fourth. So enemy action it is.

  ISIS and other extreme jihadist groups arose because of brutal conditions that made such harsh interpretations of ancient religious texts make sense by comparison.  When you have nothing left to believe in, one’s belief system can compensate by becoming rather inflexible.

  I know I have greatly simplified a terribly complex dynamic, but — speaking of beliefs — I don’t believe that terrorists are born, I believe they are raised.  When one has nothing left to lose, then anything becomes possible, including strapping on a suicide belt and flicking the switch.

  What I am saying is that this is not a battle between Christians and Muslims, nor is it a battle between good and evil, both characterizations that I’ve read recently in great abundance. That’s all nonsense for the masses.

  This is about resources and true wealth that is being siphoned from the people who have had the misfortune to be born on top of it, and towards other regions with greater power and reach. 

  There’s nothing different in what I am reading today from what the British redcoats did in India from the late 1700’s throughout the 1800’s.  Their military might assured that the East India Tea Company could continue to extract resources from the locals. 

  At the time the locals were called heathens, implying they were subhuman and therefore could be safely dispatched. Now they are called terrorists — same thing.  Dehumanize your foe to help rationalize one’s behaviors. It’s a tried and true practice of war propaganda.

  How This Affects You

  While we might be tempted to sit in our Western environs, secure in the idea that at least we aren’t ‘over there’ where all the bad things are happening, it would be a mistake to think that this turmoil will not impact you.

  I’m not talking about the ultra-remote chance of being a victim of blow-back terrorism either. I am referring to the idea that it would be a mistake to think that any government(s) that think nothing of ruining entire MENA countries will hesitate to throw anybody else under the bus that gets in their way.

  Ben Bernanke gave no thought to throwing granny under the bus in order to help the big banks get even bigger. He willingly and knowing transferred over a trillion dollars away from savers and handed it to the big banks.

  Similarly, we shouldn't expect enlightened behavior to emerge from the shadows of leadership once things get even dicer on the world stage.  In fact, we should expect the opposite.

  It would be a mistake to think that powers in charge would not turn their malign intent inwards toward their own populace if/when necessary. Today it’s Syria, yesterday it was Libya, but tomorrow it might be us.

  The people of France recently got a small taste of the horror that has been visited upon the people of Iraq, Syria, Yemen and Libya. And while I have no interest in seeing any more violence anywhere, perhaps the people of France will finally begin to ask what happened and why. I don’t mean the fine details of the night of the massacre, but how it came to be considered a ‘thing to do’ at all by the people who did it. (For those unaware, France has been particularly involved for years in fomenting revolt within Syria)

  Conclusion

  My intention in stringing these dots together is so that we can have an informed discussion about what’s happening in Syria and the Middle East at large. I am not at all interested in trying to understand events through the framing lenses of religion and/or ‘terrorism’, both of which are tools of distraction in my experience.

  Instead, I want to understand the power dynamics at play. And to try to peel back the layers, to understand why the powers that be consider this region so important at this moment in history.

  I think they know as well as we do that the shale oil revolution is not a revolution at all but a retirement party for an oil industry that has given us everything we hold economically dear but is on its last legs.

  I think that the power structures of the next twenty years are going to be utterly shaped by energy – who has it, who needs it and who’s controlling it.

  Saudi Arabia is acting increasingly desperate here and I think we know why.  They have a saying there: “My father rode a camel, I drove a car, my son flies a jet and his son will ride a camel.” 

  They know as well as anyone that their oil wealth will run out someday; and so, too, will the West’s interest in them.  With no giant military to protect them, the royalty in Saudi Arabia should have some serious concerns about the future.

  Heck, it’s even worse than that:

  Saudi Wells Running Dry — of Water — Spell End of Desert Wheat

  Nov 3, 2015

   

  Saudi Arabia became a net exporter of wheat in 1984 from producing almost none in the 1970s. The self-sufficiency program became a victim of its own success, however, as it quickly depleted aquifers that haven’t been filled since the last Ice Age.

   

  In an unexpected U-turn, the government said in 2008 it was phasing out the policy, reducing purchases of domestic wheat each year by 12.5 percent and bridging the gap progressively with imports.

   

  The last official local harvest occurred in May, although the United Nations Food and Agriculture Organization projects that a small crop of about metric 30,000 tons for traditional specialty bakery products will "prevail" in 2016. At its peak in 1992, Saudi Arabia produced 4.1 million tons of wheat and was one of the world’s top 10 wheat exporters.

   

  

  (Source)

  The Saudis did something very unwise – they pumped an aquifer filled over 10,000 years ago and used it to grow wheat in the desert.  Now their wells are running dry and they have no more water.

  And yet their population is expanding rapidly even as their oil fields deplete.  There’s a very bad intersection for Saudi Arabia, and the rulers know it.

  It helps to explain their recent actions of lashing out against long-standing regional foes and helps to explain the increasing desperation of their moves to help destabilize (and even bomb) their neighbors.

  My point here is that as resources become tight, the ruling powers can be expected to act in increasingly desperate ways.  This is a tenet of the Long Emergency of which James Kunstler wrote.

  The only response that makes any sense to me, at the individual level, is to reduce your needs and increase your resilience.

  This is something we cover in great detail in our new book, Prosper!: How To Prepare for the Future and Create a World Worth Inheriting, so I won’t go into all the details here.  Instead, my goal is to help cast a clarifying light on recent events and add some necessary detail that can help us more fully appreciate what’s happening around the world and why taking prudent preparations today is becoming increasingly urgent.

  

  

  

  

  

• House Democrat Warns Obama's Actions Could Lead To "Devastating Nuclear War"

  It was so much easier when Obama was running a military “sneakers on the ground” campaign in Iraq and Syria where there was no official confirmation of the thousands of “military advisors” engaging directly with various known and unknown adversaries. However, a recent surge of media reports by mainstream publications exposing America’s illicit troops operating in the middle eastern combat zones has made a total mockery of the latest US attempt at clandestine ops, and as a result earlier today the White House was forced to admit it would backtrack on its countless promises there would be “no boots on the ground” in Iraq.

  Did we say countless, we actually counted some of them – there are at least 16 specific instances in just the past two years in which Obama promised to not do what he just did:

  Remarks before meeting with Baltic State leaders, Aug. 30, 2013

  “In no event are we considering any kind of military action that would involve boots on the ground, that would involve a long-term campaign. But we are looking at the possibility of a limited, narrow act that would help make sure that not only Syria, but others around the world, understand that the international community cares about maintaining this chemical weapons ban and norm. So again, I repeat, we’re not considering any open-ended commitment. We’re not considering any boots-on-the-ground approach.”

  Remarks in the Rose Garden, Aug. 31, 2013

  “After careful deliberation, I have decided that the United States should take military action against Syrian regime targets. This would not be an open-ended intervention. We would not put boots on the ground. Instead, our action would be designed to be limited in duration and scope.”

  Interview on Bloomberg View, Feb, 27, 2014

  “We are doing everything we can to see how we can do that and how we can resource it. But I’ve looked at a whole lot of game plans, a whole lot of war plans, a whole bunch of scenarios, and nobody has been able to persuade me that us taking large-scale military action even absent boots on the ground, would actually solve the problem.”

  Address to the Nation on Syria, Sept. 10, 2014

  “I want the American people to understand how this effort will be different from the wars in Iraq and Afghanistan. It will not involve American combat troops fighting on foreign soil. This counterterrorism campaign will be waged through a steady, relentless effort to take out ISIL wherever they exist, using our air power and our support for partner forces on the ground.”

  Remarks at the White House, Feb. 11, 2015

  “The resolution we’ve submitted today does not call for the deployment of U.S. ground combat forces to Iraq or Syria. It is not the authorization of another ground war, like Afghanistan or Iraq. … As I’ve said before, I’m convinced that the United States should not get dragged back into another prolonged ground war in the Middle East. That’s not in our national security interest, and it’s not necessary for us to defeat ISIL. Local forces on the ground who know their countries best are best positioned to take the ground fight to ISIL, and that’s what they’re doing.”

  Remarks at the Pentagon, July 6, 2015

  “There are no current plans to do so. That’s not something that we currently discussed. I’ve always said that I’m going to do what’s necessary to protect the homeland. One of the principles that we all agree on, though, and I pressed folks pretty hard because in these conversations with my military advisers I want to make sure I’m getting blunt and unadulterated, uncensored advice. But in every one of the conversations that we’ve had, the strong consensus is that in order for us to succeed long-term in this fight against ISIL, we have to develop local security forces that can sustain progress. It is not enough for us to simply send in American troops to temporarily set back organizations like ISIL, but to then, as soon as we leave, see that void filled once again with extremists.”

  And many more such remarks; for the full list see here.

  However, Defense Secretary Ash Carter’s teleprompter was still warm from this unexpected announcement of a dramatic change in the White House’s narrative, when the problems rapidly emerged.

  First, it was the core Iraqi Shi’ite militias who quickly denounced the planned deployment, and threatened any US special forces found on the ground with swift death: “We will chase and fight any American force deployed in Iraq,” said Jafaar Hussaini, a spokesman for one of the Shi’ite armed groups, Kata’ib Hezbollah. “Any such American force will become a primary target for our group. We fought them before and we are ready to resume fighting.“

  Then it was Iraq’s new Prime Minister, Haider al-Abadi, who also rejected the need for US troops: “We do not need foreign ground combat forces on Iraqi land,” Abadi said in a statement.

  One wonders under what jurisdiction the Obama administration has decided to send troops to Iraq, if both the country’s sovereign government and its de facto army are making it very clear that the US is not welcome.

  And while we wait to find out just how Russia will respond to this very clear escalation in what is a proxy war that has now shifted from the air and the sea to its final destination, the ground, another stumbling block has emerged for Obama now that his private war in Iraq (and Syria) has been exposed to the world: Congress, and particularly members of his own party, Democrats who suddenly feel betrayed by their progressive, pacifist, Nobel-peace prize winning president.

  According to the National Review, White House press secretary Josh Earnest urged lawmakers to pass new legislation providing Obama with the explicit authority to counter ISIS. “This effort is serious, and should be the focus of serious debate,” Earnest told reporters during his Tuesday briefing. “It will take more than three weeks to pass an authorization for the use of military force (AUMF), but Congress, in each of these cases, must stop using the fact that these issues are difficult as an excuse for doing nothing.”

  Ironically, while traditionally the administration has blamed Republicans for doing nothing when it does not get its way, this time it is the Democrats who are lazy.

  Because as NRO adds, Carter got a hint of just how difficult it may be to sell Congress on such legislation when Representative Tulsi Gabbard (D., Hawaii) suggested that Obama’s decision to place American fighter jets equipped “to target Russian planes” on the border between Turkey and Syria, and his stated opposition to Russian-backed Syrian dictator Bashar al-Assad, could lead the U.S. into a nuclear war with Vladimir Putin’s regime.

  What is surprising is not that a Democrat will stand in the way of a neocon “liberal” president, who changes his political spots on a daily basis, depending entirely on the direction where the money is blowing from; what is surprising is that someone actually gets the stakes involved in the Syrian global proxy war (where the powers involved at last check include the US, Russian, Germany, France, and the UK) which as we have warned for the past year, can escalate to nothing short of a nuclear exchange. To wit:

  “Russia’s installation of their anti-aircraft missile-defense system increases that possibility of — whether it’s intentional or even an accidental event — where one side may shoot down the other side’s plane,” Gabbard told Carter. “And that’s really where the potential is for this devastating nuclear war.”

  Dear Ms. Gabbard: do you really think Obama does not know this?

  

  

  

  

  

• Martin Armstrong Warns "QE Has Failed… Central Banks Are Simply Trapped"

  Submitted by Martin Armstrong via ArmstrongEconomics.com,

  

  The central banks are simply trapped. They have bought in bonds under the theory that this will stimulate the economy by injecting cash. But there are several problems with this entire concept. This is an elitist view to say the least for the money injected does not stimulate the economy for it never reaches the consumer. This attempt to stimulate by increasing the money supply assumes that it does not matter who has the money. If we are looking only at the institutional level, then this will not contribute to DEMAND inflation only ASSET inflation by causing share markets to rise in proportion to the decline in currency value.

  

   

  The European Central Bank (ECB) then pushes interest rates negative to punish savers and consumers for not spending money that never reaches their pocket. Negative rates promotes hoarding cash outside of banks which in turn then inspires the brilliant idea of eliminating cash to force the objective and end hoarding. But negative rates have been simply a tax on money. The attempt to “manage” the economy from a macro level without considering the capital flow within the system is leading to disaster.

  

  Then we have the problem that the central banks in attempting QE operations, cannot figure out how to reverse the process. They cannot sell the debt back to the market thereby defeating the original concept of creating elastic money supply. You increase the money supply during a recession to prevent banks being forced to sell assets to meet a panic demand for cash. Transactional banking has altered the classic borrow short lend long operations of banks cancelling out the idea of requiring and elastic money supply. All central banks can do now is allow the bonds they bought to mature and expire. If they attempt to sell the bonds they bought back into the marketplace, they will drive rates higher in a panic.

  

   

  The ECB is now expected to inject “fresh” stimulus into Euroland’s economy come Thursday given Mario Draghi said he and his policymakers would “do what we must” to return inflation from its current level of 0.1% to 2% asap. Draghi now implies that he has failed for unless he takes aggressive action, there is a tremendous risk of a dramatic disappointment in financial markets as QE is revealed as a failure.

  The combination of a continued declining recovery and a deflationary atmosphere present a compelling case that the ECB will accelerate it program despite strong opposition from German policymakers and others on the 25-strong committee. Since late October, many officials from Euroland have gathered in Frankfurt to brainstorm just what the central bank could do now to turn things around.

  Many can only see that the same course must be extended and pledging to buy about €60bn of bonds a month from March 2015 until September 2016 was not enough as they assumed would create inflation to achieve 2%. This has produced a total buying spree of about €582bn out of a planned €1.1tn. All this did was ease up some credit markets, but bad loans are still the huge problem for banks and raising taxes dampens the BELIEF that there is a viable future to even borrow to expand the economy.

  European economic growth remains extremely weak and inflation has failed to pick up as much as the ECB had anticipated BECAUSE they are NOT lowering taxes and that is the ONLY way to reignite DEMAND inflation from the consumer. Increasing the money supply which never reaches their pockets is pointless especially when banks are not interested in lending in the face a serious unperforming loans as taxes and tax enforcement increase. Clearly, the ECB has already changed its tone on the September 2016 deadline.

  

  The ECB’s position is to remain in denial arguing that QE is indeed working, but it is just not working fast enough. Without the ability to control taxation, buying bonds and attempting to simply inject capital that cannot reach the consumer becomes a joke. It is more like a medieval doctor who bleeds his patient and assumes when the patient dies it was not the method of bleeding and perhaps he took out too much blood but the fact he did not bleed him soon enough. Inflation by their own measurement has remained under 1% for two years.

  

   

  There is absolutely no credibility in terms of returning inflation to a 2% target. Obviously, the argument is to bleed the system further by buying even more bonds. The burning question is the very theory of QE being inflationary. The ECB has bought mostly government bonds amounting to slightly less than 75% of all purchases. The balance is composed of repackaged loans as covered bonds or as asset-backed securities.Buying in government debt clearly creates no jobs and it certainly does not expand the economy. Government produces nothing but a drain upon the wealth of a nation that is produced only by the people. The larger the government, the lower the economic growth for you are spending more to sustain government that creating an economy.

  The Federal Reserve was established in 1913 with the directive that to stimulate they would buy directly corporate paper – NEVER government. When banks were reluctant to lend, the Fed would buy the corporate paper and that would prevent unemployment. Thanks to World War I, the structure of the Fed was altered and they were directed to buy government bonds. That directive was never reversed. Today, while most central banks have stuck to buying mainly government or quasi government bonds which do not directly stimulate the economy,they have failed to comprehend the significant difference between buying corporate debt issues compared to government. This is a primary misconception of how to manage an economy and holds a large key as to why QE has failed combined with raising taxes and increasing tax enforcement to pay for QE.

  

  Indeed, if we look at central banks as a whole, the Bank of Japan purchased exchange traded funds and property directly that was in the form of Japan real estate investment trusts,as part of its QE program.

  

  However, real estate trusts are a dead asset class. They also produce nothing and represented purely a collapsing asset value. This failed utterly to “stimulate” the economy for it merely relieved others of sure losses.

   

  

  The ECB became the first major central bank to follow Larry Summer moving into negative interest rate territory which was really aq tax on money. The ECB cut its deposit rate below zero last year punishing people for saving money when in fact they fear the future and will not spend lacking confidence. We have now seen this policy adopted in Scandinavia and Switzerland. The US Federal Reserve is not following this course and sees that negative rates destabilizes pension funds and the efficient use of capital. The Fed counters this trend warning that its domestic policy objectives cannot be held hostage to international and it sees that interest rates must rise to be “normalized” to prevent a further economic crisis. This clash between policies between the ECB and the Fed are more likely to weaken the euro against the dollar.

  

   

  Moreover, I have argued that the Fed should abandon paying 0.25% on excess reserves. Foreign institutions are moving cash to their US branches to simply deposit money at the Fed. This money is  accumulating massively and obviously it is NOT stimulating the economy. The ECB can buy European bonds and the cash is being sent into the dollar and deposited at the Fed. Total deposits at the Fed in excess reserve facility is approaching $3 trillion. This may be creating money which in theory would be inflationary, but if it is simply parked, it has no inflationary impact for the velocity of money in this cash become zero.

  

   

  Clearly, the ECB cannot stimulate the European economy with QE unless it also lowers taxation and buys private debt directly to stimulate the economy when banks are now simply transactional. Allowing the ECB to buy bonds with lower negative yields while raising taxes is proving to be a lethal policy that is sending capital on every boat to the USA. Currently, the ECB has a ban on buying anything with a yield below minus 0.2%. The ECB somehow must convince markets not only that it can hit its inflation target, but that its policy is even sound. QE is not working and it cannot work under these conditions.

  

  

  

  

  

• The "Robin Hood" CEO Who Famously Raised His Employees' Minimum Wage To $70,000 Has A Dirty Secret

  When Gravity Payment’s CEO Dan Price announced on April 13 that he would raise the minimum wage of his staff to $70,000 a year, the story went beyond viral: it took the media, especially the part of it which has been obsessing with income and wealth inequality which in the aftermath of Piketty would be most of it, by meteoric storm. Not only that, but the soon to be lionized young chief executive doubled down on this story of “purest of corporate nobility” by announcing he would cut his own compensation of $1.1 million to offset the cost.

  Price’s story rocketed around the world, “a capitalist fairy tale to counter growing inequality.” As Bloomberg’s Karen Weise writes “with his tousled long hair and dark brown eyes, Price combined Brad Pitt’s smolder and Boo Boo Bear’s aw-shucks demeanor to become an articulate and attractive messenger. Rush Limbaugh denounced him as a socialist. Jesse Ventura christened him Robin Hood.”

  By 3 a.m. the morning after the announcement, Price’s phone was buzzing. The Today Show wanted him the next morning, as did Good Morning America. He hopped a plane to New York. “I did something like 25 live TV interviews in three days,” he says. “We are really passionate about reforming credit card processing. This seemed like an opportunity—we could have a really big impact doing that.”

  Fox News pilloried him. Actor Russell Brand, in a laudatory YouTube video, joked, “It’s difficult to ignore the fact that Dan Price looks a lot like Jesus.”

  

  Price signed with the talent agency William Morris Endeavor Entertainment and now charges as much as $20,000 per speech, Pirkle says. Price told his team that the company was getting free booth space at Inc. magazine’s annual conference, in addition to a speaking fee. “In terms of what they’re paying us for a one-hour talk, we’re looking at well over $100,000,” he said. Inc. put him on its November cover. (Inc. didn’t respond to requests for comment.)

  The idea came to him, he later told the media, after talking to a friend who earned less than he did. He’d read about a study showing that extra income improves the happiness of people who earn less than about $75,000. “It’s not about making money; it’s about making a difference,” Price told the Today Show, one of two dozen TV interviews he did in the days following the announcement.

  When Price made his $70,000 announcement, he told his staff, “My pay is set based on market rates and kinda what it would take to replace me. And because of this growing inequality, as a CEO that amount is really, really high. I make, uh, you know, a crazy, uh, my compensation is really, really high.”

  

  Gravity staffers plank during meetings to encourage each other to speak quickly.

   

  As he’s recounted over and over, Price says his aha moment about pay came in late March, on the hike with his friend. “I realized that there were people I was working with—that I said I valued as partners, I said I really want to invest in—and they were making less than her,” he told The Daily Show’s Trevor Noah.

  Overnight, he became the hero of progressives everywhere demanding lower CEO pay and higher worker pay.

  And if his story was true, he could have indeed become the poster child for corporate nobility in an age of runaway executive pay.

  Unfortunately for Dan Price’s enthralled fans and adoring media supporters, as a must-read expose by Bloomberg’s Karen Weise which digs below the surface of what now appear to have been very hollow words reveals, Price had a dirty secret revealing that his true motives were far different than what he disclosed repeatedly on prime time TV.

  The lawsuit.

  In the summer, the New York Times ran a longer piece on Price, now 31, showing that raising wages wasn’t so simple. Job applicants had overwhelmed his company, and two employees quit, saying the increase wasn’t fair to higher earners. “Potentially the worst blow of all,” the Times wrote, was that about two weeks after the announcement, Price was sued by his older brother Lucas, who owns about 30 percent of Gravity, alleging Price paid himself too much in the first place. Price insinuated that his brother may have sued in reaction to the generous pay increase. “I know the decision to pay everyone a living wage is controversial,” he told the Seattle Times, which first reported the lawsuit. “I deeply regret the rift this has caused in my relationship with my brother.”

  The important detail here to remember is that suing Price was none other than his brother, Lucas, co-founder of the company.

  As Weise continues, “an expensive lawsuit, filed possibly in response to his kind act, made Price seem more of an underdog.“

  When I met him at Gravity’s headquarters in mid-October, he wasn’t even supposed to be in Seattle. He’d been scheduled to join Planned Parenthood President Cecile Richards and General David Petraeus on a panel titled “Leading Under Pressure” at the Chicago Ideas Week festival. But Price had canceled at the last minute, saying he’d hit a wall of exhaustion. “I think I’m just standing in for a bunch of other people doing great stuff,” he said. “To me the responsibility is to be the best spokesperson I can.”

   

  As we talked about his wild six months, I brought up the lawsuit, asking if Price thought Gravity’s spending on the raises triggered his brother’s suit, as he’d implied. “I have no idea,” he slowly shrugged, looking right at me. “The quote in the Seattle Times from his attorney was, ‘It wasn’t only because of that.’?” He twisted his beard between two fingers, contemplating the statement by Lucas’s attorney, Greg Hollon. “That one singular quote in the paper is the only information I have about if they were connected or not.”

  And now, some 8 months after the story first broke, the truth about Price’s true motives emerges:

  It’s a poignant story, one that I almost wrote. Until I realized Price knew more than he was letting on. The lawsuit couldn’t have been prompted by the pay raise—if anything, it may have been the other way around. And his salary before the big announcement was unusually high. As I read through the court record and media reports, I began to see how Price was writing his own origin myth one interview at a time. With what he says is a $500,000 book deal, he’s solidifying his place as the next do-gooder businessman, joining the CEOs of bigger companies, such as Zappos’s Tony Hsieh and Whole Foods Market’s John Mackey. In the process, he’s surely become the only credit card processing executive to be feted by Esquire, courted by literary agents, and swooned at by women on social media who declared him “yum.” But how it all happened is a little more complicated.

  Actually it not that complicated. As it turns out, the wage hike for his employees and his own personal wage cut was merely a self-defense measure in response to the lawsuit that had been filed before, not after, his stunning announcement. A measure that was wrapped in an unprecedented and carefully constructed media campaign designed to make him the hero. Here’s Bloomberg crushing the progressive’s image of their own personal corporate Jesus:

  Two weeks after returning from the April media blitzkrieg in New York, Price told me, he was settling in at home to finally unwind. “I was going to watch my first soccer game since this had all happened,” he recalled. “My doorbell rang, and there was a legal courier. ‘Are you Dan Price?’ ‘Yes.’ ” Price said he was served with Lucas’s lawsuit. “I was shocked,” he said. “The soccer game got turned off pretty quickly.” It was during this recounting that Price told me how the comment from Lucas’s lawyer in the Seattle Times was the “only information I have about if they were connected or not.”

   

  The possible retaliatory nature of the suit only adds to the drama of Price’s wage hike. “This is all speculation on my part,” Pirkle said in late September, before explaining how, as minority shareholder, Lucas gets paid dividends from Gravity’s profits. “Those profits are obsolete when you raise the wages. His brother’s, like, ‘That’s my money.’ ”

   

  Pirkle suggested to me that the lawsuit could be part of a broader narrative about the purpose of business: “Is it to maximize shareholder returns? Or is it to best serve the customers and provide for employees?” Inc. hypothesized that Lucas filed the lawsuit after the pay increase “perhaps to pressure Dan to sell when Gravity was in the limelight, thus maximizing the value of Lucas’s share.”

  There is just one big problem with all those scenarios: as Weise discovered, the lawsuit predates the raise.

  Lucas did file the case two weeks after Price’s announcement, but according to court records, Price was served with the suit at his house on the afternoon of March 16—about two weeks before the fabled hike with his friend and almost a month before the wage increase announcement. Washington state allows litigants to serve a defendant before a suit is filed with the court. Hollon, Lucas’s attorney, says Price informed his brother of the pay hike with an e-mail on April 9, only five days before the New York Times and NBC descended on Seattle.(Pirkle said that in a later document, Lucas “specifically referenced” the wage hike as grounds for the case. Hollon responded that the May document added the pay increase as “one of the potential factual bases supporting the claims in the lawsuit” since “the wage program appeared to be a reaction by Dan to the lawsuit.”)

   

  

   

  The lawsuit is light on details, but it claims that Price “improperly used his majority control of the company” to overpay himself, in the process reducing what Lucas was due. “Daniel’s actions have been burdensome, harsh and wrongful, and have shown a lack of fair dealing toward Lucas,” the suit alleges. It asks for unspecified damages and that Price buy out Lucas’s interest in Gravity. Hollon said the lawsuit was the culmination of “years” of efforts to resolve Lucas’s concerns. Price “on several occasions suggested to Lucas that if Lucas didn’t like Dan’s actions regarding Lucas’s rights as a shareholder, Lucas should seek legal remedies,” Hollon wrote in an e-mail. “Prior to the lawsuit, Dan had made clear that he would only engage with Lucas through Lucas’s counsel.”

  Weise then asks the $70,000 question: “if the lawsuit wasn’t a reaction to the wage hike, could it have been the other way around? After all, Price announced his magnanimous act a month after his brother sued him for, in essence, being greedy. Lowering his pay could give Price negotiating leverage, too. “With profits, at least in the short term, shifted to salaries, there is little left over to buy out his brother,” the New York Times reported Price said.

  She confronts Price with this discovery:

  In a follow-up interview in mid-November, I pressed Price about the inconsistency. How could what he told me about being served two weeks after announcing the raise be true when the court records indicated otherwise?

   

  “Umm, I’m not, I have to look,” he said.

   

  The court document, I said, definitely says March 16.

   

  “I am only aware of the suit being initiated after the raise,” he replied.

   

  “The court record shows you being served on March 16 … at 1:25 p.m.,” I said. “And actually, your answer to it was dated April 3,” also before the pay hike.

   

  “I am only aware of the suit being initiated after the raise,” he repeated.

   

  I asked again how that could be, saying the declaration of service shows Price was served with the complaint, the summons, and other documents, “that you are a male, who is white, age 30, 5-feet-8-inches, medium height, dark hair.”

   

  He paused for 20 seconds. “Are you there?” he asked, then twice repeated his statement that he was only aware of the suit being initiated in late April. “I’d be happy to answer any other questions you may have,” he added.

  Any other questions, of course, except the one about the smoking gun which crushes his entire narrative of generous Robin Hood corporate CEO into pulp.

  We doubt any of the fawning media outlets that chased Price in April and subsequently will care to point out this unpleasant outlier to the convenient narrative he had created for himself.

  And while the date of the original lawsuit explains Price’s “generosity”, another secret may explain his desire for admiration and public adulation, one which if proven to be true, may quickly change Price’s public profile from one corporate saint into a personal demon. Here is Weise’s second revelation:

  Price’s life may get more complicated the week of Dec. 7, when TEDx plans to post online a public talk by his former wife, who changed her last name to Colón. She spoke on Oct. 28 at the University of Kentucky about the power of writing to overcome trauma. Colón stood on stage wearing cerulean blue and, without naming Price, read from a journal entry she says she wrote in May 2006 about her then-husband. “He got mad at me for ignoring him and grabbed me and shook me again,” she read. “He also threw me to the ground and got on top of me. He started punching me in the stomach and slapped me across the face. I was shaking so bad.” Later in the talk, Colón recalled once locking herself in her car, “afraid he was going to body-slam me into the ground again or waterboard me in our upstairs bathroom like he had done before.”

   

  I read those quotes to Price. “I’m just going to take a second because this is very surprising to me,” he said. He paused. “I appreciate and respect my former wife, and she played a very positive role in my life,” he said. “Out of respect for her, I wouldn’t feel comfortable responding to a supposed allegation she may have said coming from a Bloomberg Businessweek reporter when I have absolutely zero evidence of an allegation being made.” I told him that I wanted to be clear: I was giving him the chance to deny the claims. “My comment is very responsive,” he said. “I would be more than happy to provide a comment if and when I actually get the benefit of seeing what you are referencing.”

   

  About three hours later, Price called back. “There’s one more thing that I would like to add to my previous statement,” he said. “The events that you described never happened.”

   

  One aspect of Price’s saga is certain: Seventy employees at Gravity now earn far more than they did before. Was it altruism or a costly lawsuit that motivated it? If his book doesn’t provide answers, perhaps Lucas’s case, which goes to trial in May, will.

  And, Weise ignored to add because it is self-explanatory, if these allegations going to Price’s true motives, and his spousal abuse are proven correct, all those very generous wage hikes will prove quite transitory as Gravity Payment’s clients desert the company one by one, leading to the company’s collapse. We wonder if the generous CEO will then take money out of his own bank account to bankroll the insolvent company and provide the needed funding for payroll and keeping his remaining employees happy, or he will simply max out his own compensation in as the company crashes and burns?

  

  Much more in the full article from Bloomberg Businessweek 

  

  

  

  

  

• It's "All About The Dollar" For SocGen

  As we noted earlier when looking at the best performing assets of 2015, a curious picture has emerged: denominated in local currencies, there are quite a few assets that have generated substantial returns as the year draws to a close. However, in USD terms the picture is starkly different with the vast majority of USD-redenominated assets generating negative returns.

  As DB’s Jim Reid summarized, “very few global asset classes have gone up in Dollar terms this year. Russian equities (+15.6%) and the Nikkei (+11.8%) have been the notable outperformers while European credit is in double digit negative returns which is the case also for European sovereign bond markets. So in a world of a stronger dollar it’s been very difficult to generate positive dollar returns in 2016. With so many dollar investors at a global level this surely has to have had a big impact on the mood of 2015 and confidence.“

  

   

  It is not just risk assets, of course: as we first profiled back in February, the entire global economy, when denominated in dollars, will see a dramatic GDP contraction of over $2 trillion as a result of the strengthening dollar.

  This is a theme that SocGen’s Andrew Lapthorne has been covering extensively over the past several months, as covered most recently in “What Will Happen To Corporate Profits If The Fed Hikes In December.”

  He continues today, picking up on the theme of divergence in USD vs non-USD returns, saying that “the translation effect of the US dollar is having a big impact on overall performance. Quoted in almost any other currency 2015 looks fairly healthy, but this performance disappears when it is translated into US dollars. Eurozone investors may appear better off, given double-digit returns on many of the headline eurozone indices this year, but in reality this is largely down to the debasement of the currency, and after big US dollar gains in November, more than 4%, the euro is now down almost 13% YTD, and in US dollars eurozone equities are negative this year.“

  This is why, as the SocGen note is titled, it is “all about the US dollar” according to Lapthorne.

  He then says that in a world in which local-currency denominated asset growth is almost entirely driven by currency devaluation, “what matters next is whether these competitive devaluations can lead to volume growth and market share gains.”

  His answer is that so far, having moved first, “it is only Japan that has seen a meaningful boost to profits beyond simple translation effects. No doubt helping to explain the strong Nikkei performance this year, even in US dollars, and despite Japan falling back into recession. The Japanese have learned their lesson from the rapid yen appreciation in the 1990’s, but as we mentioned in a Quant Quickie a couple of weeks ago, the US is at risk of suffering the same fate.” That note can be found here.

  Lapthorne then notes the strange divergence which we pointed out earlier today when remarking on the drubbing in global commodities:

  Whilst most global sectors fell last month, the brunt of the selling was seen in the Oil E&P Industrials Metals and Mining sectors, driven lower by continuing disappointing data out of China and once again collapsing commodity prices. Oil, copper, iron ore and silver, to name just a few, were all down by 9% or more during November.

  However, one market emerged largely unscathed in November: “The exception to this global picture is in the US, where sector performance was a Pavlovian response to the much expected upcoming US rate rises (Utilities down and Basic Materials up). Global investors may be cyclically bearish, but US investors appear distracted by the historically cyclically positive message US rate rises might imply. We think this may prove a mistake.”

  Which is logical: after years of rewarding stocks for a weaker dollar, over the past year we have seen the market flip as the correlation has inverted and stocks rise with the dollar. Which is great if the Fed is right and the dollar is up for the right reasons, but is a huge gamble if the strong dollar merely reflects the unprecedented easing by all the other central banks, whose sole intention is so boost their own exports, corporate profitability and share of global trade in a zero sum space.

  Which is also the basis for Lapthorne’s warning: for now the market is hypnotized by the Fed’s inexplicable eagerness to hike rates even as the Manufacturing ISM tumbles below 50 and with Q4 GDP now projected to drop to just 1.4% annualized, and is convinced there is something “just around the corner” that is not obvious to market participants, but the Fed is aware of.

  Alas, that is almost certainly not the case, especially considering the Fed’s track record of “seeing behind corners” or even “contained” things in plain sight.

  And while we agree that US investors are largely oblivious to what everyone else is seeing, the question remains: what is the catalyst that will make them see. Perhaps the reality of Q4 earnings which will be a disaster should the dollar continue its rise, will finally reprice both lofty EPS expectations as well as PE multiples, something David Tepper warned about back in August before the ETFlash crash.

  Then again, perhaps not, because remember: once the Fed abort the rate hike cycle as it will certainly have to, and relents (with or without an accompanying stock crash) that QE4 and NIRP are next, then we merely go back to square one, where the market levitates courtesy of direct Fed intervention and the cycle begins from scratch. At that point there will be only one question left: does the Fed have enough credibility left to herd the various market algos into levitating asset prices for yet another QE season, or will that be it?

  

  

  

  

  

• A Look Inside Saudi Arabia's Elaborate U.S. Propaganda Machine

  Submitted by Mike Krieger via Liberty Blitzkrieg blog,

  Elements of the charm offensive include the launch of a pro-Saudi Arabia media portal operated by high-profile Republican campaign consultants; a special English-language website devoted to putting a positive spin on the latest developments in the Yemen war; glitzy dinners with American political and business elites; and a non-stop push to sway reporters and policymakers.

   

  That has been accompanied by a spending spree on American lobbyists with ties to the Washington establishment. The Saudi Arabian Embassy, as we’ve reported, now retains the brother of Hillary Clinton’s campaign chairman, the leader of one of the largest Republican Super PACs in the country, and a law firm with deep ties to the Obama administration. One of Jeb Bush’s top fundraisers, Ignacio Sanchez, is also lobbying for the Saudi Kingdom.

   

  In September, the Kingdom helped sponsor opulent galas for Washington’s business elite at the Ritz Carlton and the Andrew Mellon Auditorium. The events were attended by King Salman, along with the chief executives of General Electric and Lockheed Martin, the chairman of Marriott International, and prominent think tank officials.

   

  – From the Intercept article: Inside Saudi Arabia’s Campaign to Charm American Policymakers and Journalists

  So what do you do when you’re a barbaric monarchy with a justice system remarkably similar to ISIS, but at the same time want to remain very close ally of the U.S. government? You create a sophisticated propaganda network, naturally.

  This is precisely what the Kingdom of Saudi Arabia has done, and the Intercept’s Lee Fang shined some light into this very dark and slimy corner.

  From the Intercept:

  Soon after launching a brutal air and ground assault in Yemen, the Kingdom of Saudi Arabia began devoting significant resources to a sophisticated public relations blitz in Washington, D.C.

   

  The PR campaign is designed to maintain close ties with the U.S. even as the Saudi-led military incursion into the poorest Arab nation in the Middle East has killed nearly 6,000 people, almost half of them civilians.

   

  Elements of the charm offensive include the launch of a pro-Saudi Arabia media portal operated by high-profile Republican campaign consultants; a special English-language website devoted to putting a positive spin on the latest developments in the Yemen war; glitzy dinners with American political and business elites; and a non-stop push to sway reporters and policymakers.

   

  That has been accompanied by a spending spree on American lobbyists with ties to the Washington establishment. The Saudi Arabian Embassy, as we’ve reported, now retains the brother of Hillary Clinton’s campaign chairman, the leader of one of the largest Republican Super PACs in the country, and a law firm with deep ties to the Obama administration. One of Jeb Bush’s top fundraisers, Ignacio Sanchez, is also lobbying for the Saudi Kingdom.

   

  In September, the Kingdom helped sponsor opulent galas for Washington’s business elite at the Ritz Carlton and the Andrew Mellon Auditorium. The events were attended by King Salman, along with the chief executives of General Electric and Lockheed Martin, the chairman of Marriott International, and prominent think tank officials.

   

  Kingdom-backed nonprofits have secured positive press through a number of channels. For instance, on September 21, Hussein Ibish, a senior resident scholar at the Arab Gulf States Institute in Washington, a new think tank fully funded by the governments of Saudi Arabia and the United Arab Emirates, penned an opinion column in the New York Times heralding “A Saudi-American Reset.” In the piece, Ibish minimized “two years of perceived slights and supposed snubs” and insisted that “the new contours of a revitalized but evolving partnership between the United States and Saudi Arabia are beginning to take shape.”

  In what seems like a shameless lack of transparency, the New York Times ended the above mentioned op-ed with the byline below, failing to mention the fact that this think tank is fully funded by the Saudis and UAE, i.e., the fact that it was pure foreign propaganda printed by the New York Times.

  

  It should have read: “is a contributing opinion writer working on behalf of the governments of Saudi Arabia and the UAE,” but of course, it didn’t.

  The Saudi Embassy’s effort to shape media coverage is led by Qorvis, a consulting firm that has worked for the Saudi government since the months following the terrorist attacks on September 11, 2001. Qorvis’ recent disclosures under the Foreign Agents Registration Act show that it created an entire website — operationrenewalofhope.com — to promote the Saudi-led war in Yemen. It also “researched potential grassroots supporters in select states” and provided an ongoing effort to reach out to reporters concerning the Yemen war.

  Well of course the Saudis needed as much propaganda as possible following the 9/11 attacks, given the obvious links back to the Kingdom. Recall:

  The New York Post Reports – FBI is Covering Up Saudi Links to 9/11 Attack

  Must Watch Video – Congressman Thomas Massie Calls for Release of Secret 9/11 Documents Upon Reading Them

  Two Congressmen Push for Release of 28-Page Document Showing Saudi Involvement in 9/11

  In July, the Saudi Embassy announced the launch of Arabia Now, an “online hub for news related to the Kingdom,” according to a press release. Since then, the site has work to promote Saudi Arabia as a bastion for human rights and progress, with posts claiming that the Kingdom is the “most generous country in the world.” While Saudi Arabian war ships blocked humanitarian assistance to Yemen, the Arabia Now news hub claimed that “Saudi Arabia was the only country that responded to the humanitarian assistance appeal launched by the U.N. to help Yemen by extending a donation of $274 million.”

   

  Qorvis has contracted other firms to gauge public opinion, including Tuluna USA, an online survey company, and American Directions Group, a phone survey company founded by a pollster who previously worked for Bill Clinton.

   

  Perhaps not coincidentally, Saudi officials have regularly appeared on cable news programs and at Washington, D.C., think tank events to reassure American audiences that the Saudi-led campaign in Yemen is in U.S. interests.

  Here’s a user friendly graphic showing how some of this works.

  

  *  *  *

  For related articles, see:

  Saudi Arabia and ISIS – A Side by Side Comparison

  Another New Low – Saudi Arabia Threatens to Sue Twitter Users Who Compare it to ISIS

  Saudi Arabia Sentences Poet to Death for “Renouncing Islam”

  So Who’s Really Sponsoring ISIS? Turkey, Saudi Arabia, and Other U.S. “Allies”

  Saudi Arabia Bombs Second Yemeni Wedding in a Week – At Least 23 Dead

  Saudi Arabia Bombs Second Yemeni Wedding in a Week – At Least 23 Dead

  Saudi Arabia Forces the UN to Drop Humanitarian Inquiry Into Yemen Atrocities

  Not a Joke – Saudi Arabia Chosen to Head UN Human Rights Panel

  Saudi Arabia Prepares to Execute Teenager via “Crucifixion” for Political Dissent

  

  

  

  

  

• A Brief Rumination on the Coming Cashless Society

  Today, I hired an independent researcher to do some legal consulting for me.  We agreed on a $100 “detainer”.  Since I began checking out of the system in 2009, and mainly to avoid any more contact with the IRS, I stopped doing business with all banks.  I don’t have any bank accounts of any kind, no credit cards, and I don’t even have a debit card through services like PayPal because they’re all tied in to the same corrupt banking system, and the IRS can (and most likely will) find you or at least your money by data mining your banking records.  So to eliminate this attack vector I primarily operate with United States Notes (better known to the sheep as Federal Reserve Notes), i.e. cash.  So to pay the detainer should have been a simple matter of running over and depositing a $100 note into my researcher’s account at my local Chase Bank branch.  Nope.

  When I got there, the teller informed me that Chase does not accept cash deposits.  The funds had to be in the form of a check or they could do a debit or an advance on a debit/credit card.  I told her I thought that was a very silly policy and she gave me one of those, “Oh well, fuck you” smiles.  This was actually in the news last year, and Chase’s official policy is here.  The reason they give for this is: “We’re trying to do more to combat money laundering and other criminal activities”, which is banker euphemism for “We’re slowly phasing out cash from society to make it easier to control and manipulate all of you serfs MUHAHAHAHAHAHAHAHA!”  I inquired if Chase would accept a post office money order, and she replied in the affirmative.  Haha, bitch, the day is mine!

  In the years since I went all cash, I’ve learned a few tricks and “backdoors” to still get paid for the particular expertise I dispense for money and to also pay for services where a check is required.  Of course there are gift cards issued by Visa, MasterCard, American Express, etc., which act in most cases like normal credit cards.  But in fact once you register the card you have opened a bank account with the issuing bank.  The fact that you had to provide a Social Security Number to register the card should have clued you in (read the fine print on the bottom of the page here; note “Green Dot Bank … Member FDIC”).  You can use these cards for up to 2 weeks as a straight debit card without registering (at least that was the case when I experimented with a WalMart MoneyCard using the Green Dot Bank network).  After that, you won’t be able to use it until you register it (with a SSN) or else you can return it and have the balance refunded.  If you are going to use a gift card, I suggest getting one of the above mentioned and using it up within the registration grace period, or get a speficially non-reloadable gift card (edit: which do not require registration with SSN) that expires once it’s depleted (i.e. it’s more like actual cash, and if you lose it, you lost it).  However, unless I want to order something online or make a reservation that requires some sort of credit card, I prefer to stay away from the banks altogether and use US Postal Service Money Orders.

  First of all, the post office has an interesting history in the United States, and although the modern United States Postal Service is officially “an independent establishment of the executive branch” (see 39 U.S.C. § 201) it actually rests in its own jurisdiction.  I can’t get into the intricacies of what this all means (primarily because I haven’t researched it all out myself), but I do know that USPS Money Orders are not governed by the same laws that govern, say, national banks, or even money orders issued by independent operators.  For example, I can walk into a post office and purchase a money order up to a denomination of $2,000.00 for a fee of $1.60 (or up to $500.00 for $1.25).  I don’t have to present anything other than the order and the cash.  No ID is required.  The clerk takes the money and your fee, makes up the money order, and hands it back to you, blank except for the imprinted amount.  Whereas, if you were to purchase a money order from e.g. a grocery store, as of a few years ago you are now required to present ID, which is recorded in some fashion (to prevent fraud and thwart terrorism, of course).  In other words, it’s still tied in with the banking system, and subject to banking laws.

  As mentioned, the USPS money order is blank and it’s up to you to fill it out.  If you want you can just leave it blank and hold it indefinitely as cash; when you want to spend it you fill it out to yourself and cash it.  Or you can spend it as cash with anyone who will accept it (think precious metals dealers, people).  You can fill it out, or just hand it to them and let them fill it out, and get any change coming back in cash.  The best part is you don’t need a bank account to cash them; you can simply go to any post office, present it for payment (with ID), and you get handed back a pile of notes and coins.  Now, this isn’t always fullproof: sometimes the teller doesn’t have the cash at hand to cash out your entire money order if it’s particularly large, so you will either have to go at the end of the day when their coffers are filled or find a post office that does more volume and therefore will have more cash on hand.  It’s a pain when they don’t have enough money to cover the instrument; to me that’s fraud, or more specifically check-kiting (try using the “Oh well, sorry!” excuse yourself when you bounce a check and see what happens).  I’ve tried yelling at the staff and complaining to the Postmaster General, but there’s really not much you can do other than sue in court…an interesting proposition, and one I would like to research some other time when I don’t have so many fires already raging.  At any rate, it’s a reasonable trade-off for being free from the banksters and their shitty, almost arbitrary and capricious anonimity-assaulting rules.  Also, there’s never a fee to cash the money order, whereas most banks charge a $5-$10 fee for cashing a check drawn on the bank for non-account holders.

  So continuing my saga, off I went to the post office to exchange the piece of paper I had in my pocket for another piece of paper that Chase bank would be happy to accept (after having to wait in line for half an hour; ironically I had a $900 money order waiting for me at my mail pick-up but I wasn’t able to cash it on the spot because it was still too early in the day :\).  I then went back over to Chase and handed them the money order, my anonimity and freedom preserved, and my researcher paid.  My time wasted.

  I wanted to write about this in the same way I wrote about the shantytowns popping up in Stockton, California.  It’s one thing to talk about it, and in the case of the looming cashless society, to piss and moan over it, but when it actually arrives in the form of a small incremental move like the above, and it confronts you, it is prudent to take heed.  This is a harbinger of the cashless society that is slowly creeping over us.  The clock is ticking.  Take advantage of it while you can, because once it’s gone, so is another aspect of our freedom.  And unless an alternative currency not controlled by any particular government comes to the fore, or precious metals make a big comeback as currency, or barter returns to local communities as a big aspect of our local economies again, or perhaps some new currency spontaneously pops up in some part of the country or world that takes off organically, unless something replaces the relatively free currency we have presently, we will have lost forever a fundamental aspect of our freedom.  If even our petit spending money on things like a quick snack at the gas station on the way home or an eighth of weed from your local dealer is controlled by international banksters, how free can you really be?  If you don’t have the credits to even pay for a drink because the government cut you off for not being patriotic enough–if you don’t have the mark–what will you do?

  I am Chumbawamba.

  

  

  

  

• Artist's Impression Of Obama's World

  Don’t look now, but it’s right in front of your face…

   

  

   

  Source: Investors.com

  

  

  

  

  

• Iraqi PM Rejects US "Boots On Ground" As Shiite Militias Pledge To Kill US Soldiers

  There are probably a lot of lessons we can learn from the conflict in Syria. 

  We might, for instance, pause and reflect on the morality of subjecting millions of people to untold pain and suffering in pursuit of geopolitical expediency. Or we could make a serious effort to reevaluate a foreign policy that too often centers around bringing about regime change in far away lands without considering the ramifications and potential for blowback. 

  Of course that kind of deep self-reflection will never happen in Washington, but fortunately, there’s a far simpler lesson that requires very little in the way of high level thinking to understand. Here it is: arming and funding Islamic militants you just met is always a bad idea. 

  In the worst case scenario you lose control of them only to watch in horror as the Frankenstein you created escapes from the lab, rumbles out of the castle, and proceeds to terrorize and murder all the villagers. In the best case scenario, they do what you thought they were going to do (in this case fight Assad’s army) but they occasionally go off the rails and blow up a Russian search and rescue helicopter after executing one of Moscow’s pilots. 

  In Syria, the FSA falls into the “best case scenario” category but as we’ve been at pains to explain, arming them now makes even less sense than it did initially because, i) you risk starting a world war as they are using US-supplied weapons to fire on Iranian soldiers and Russian equipment, and, on a practical level, ii) they’re using US-supplied weapons to kill the same Iran-backed Shiite militiamen who are fighting with the Iraqi regulars just across the border. 

  Consider the following excerpts from various media outlets: 

  Shi’ite Muslim militiamen and Iraqi army forces launched a counter-offensive against Islamic State insurgents near Ramadi on Saturday, a militia spokesman said, aiming to reverse potentially devastating gains by the jihadi militants. – Reuters, May 23

   

  U.S. airstrikes targeting ISIS around Ramadi are proving “not very effective,” according to the head of the Iran-backed militias surrounding the conquered Iraqi city. “We expect more from the Americans,” Hadi al-Ameri told NBC News. “There are no real airstrikes against ISIS headquarters.” – NBC, June 23

   

  Iraqi forces and the Shiite militias fighting alongside them announced Friday that they had retaken the oil refinery at Baiji from Islamic State militants, in some of the first significant progress against the extremist group after months of stalled efforts. – New York Times, October 16

   

  Iraq’s official military doesn’t appear to be in any position to take on ISIS. Shiite militia groups have proved much more effective at fighting ISIS than Iraq’s official military, and it’s the Shiites who are taking the lead in the Iraqi government’s new campaign to retake Anbar. – Slate, May 26, 2015

  You get the idea. 

  Make no mistake, there are some very serious questions about these militias’ human rights record, but the point is that when it comes to fighting Sunni extremists, there’s no one better to have on your side than fearsome Shiite militiamen even if some of those militiamen were responsible for killing hundreds of US soldiers with copper-tipped IEDs during the Iraq occupation. 

  As we documented extensively in “Who Really Controls Iraq? Inside Iran’s Powerful Proxy Armies,” Tehran controls these fighters and thanks to their effectiveness on the battlefield, the militias effectively control the US-armed Iraqi regulars. As Reuters noted in October, “the Fifth Iraqi Army Division now reports to the militias’ chain of command, not to the military’s, according to several U.S. and coalition military officials. The division rarely communicates with the Defence Ministry’s joint operation command, from which Abadi and senior Iraqi officers monitor the war, the officials said.”

  Here’s a bit more color from the same investigative piece that should give you an idea of what’s going on in Iraq:

  Iraqi Prime Minister Haider al-Abadi, a Shi’ite, came to office just over a year ago backed by both the United States and Iran. He promised to rebuild the fragmented country he inherited from his predecessor, Nuri al-Maliki, who was widely accused of fueling sectarian divisions. Since then, though, even more power has shifted from the government to the militia leaders.

   

  Those leaders are friendly with Abadi. But the most influential describe themselves as loyal not only to Iraq but also to Iran’s supreme leader, Ayatollah Ali Khamenei. Three big militias – Amiri’s Badr Organisation, Asaib Ahl al-Haq and Kataib Hezbollah – use the Iranian Shi’ite cleric’s image on either their posters or websites. Badr officials describe their relationship with Iran as good for Iraq’s national interests.

  Iraq, for all intents and purposes, is now an Iranian colony both politically and militarily. 

  In the wake of the US invasion in 2003, Tehran was concerned that the Cheney Bush administration would move to invade Iran next. This, along with a desire to aid the Americans in fighting The Taliban in Afghanistan (who Iran now covertly supports in an effort to usurp ISIS influence), led the IRGC to forge a quasi-friendly relationship with The Pentagon. And then George Bush put Iran in his infamous “Axis of Evil.” From that point forward the Quds encouraged Iraq’s Shiite militias to target American troops, which goes a long way towards explaining why the US accuses Iran of being the world’s number one state sponsor of terror (of course that’s absurd, but hey, we didn’t say it, Washington did). 

  Fast forward to 2015 and the US has essentially comes to terms with the fact that Iran’s proxies are going to fight ISIS alongside the Iraqi regulars. It’s only annoying for Washington when those proxies say things like this: “the United States lacks the decisiveness and the readiness to supply weapons needed to eliminate militancy in the region.” But while it’s fine to taunt the US regarding Washington’s highly suspicious lack of commitment to the fight against ISIS in Iraq, Iran is not keen on seeing a sizeable US troop presence on its border (again) which is why it should come as no surprise to you that on the heels of Ash Carter’s announcement earlier today that the US is set to send SpecOps to Iraq, Kataib Hezbollah immediately threatened to attack them. Here’s Retuers: 

  “We will chase and fight any American force deployed in Iraq,” said Jafaar Hussaini, a spokesman for one of the Shi’ite armed groups, Kata’ib Hezbollah. “Any such American force will become a primary target for our group. We fought them before and we are ready to resume fighting.”

  Badr Organisation and Asaib Ahl al-Haq (mentioned above) weren’t far behind: 

  “All Iraqis look to (the Americans) as occupiers who are not trustworthy,” said Muen al-Kadhimi, a senior aide to the leader of the Badr Organisation.

  “The militias, grouped with volunteer fighters under a government-run umbrella, are seen as a bulwark in Iraq’s battle against Islamic State,” Reuters adds.

  Predictably, PM Abadi was out just hours later reiterating (he already said this once back in October) that Iraq does “not need foreign ground combat forces on Iraqi land.”

  Obviously, these pronouncements might as well have been issued directly from Tehran because that’s unquestionably who’s pulling the strings here, but this does set up an interesting scenario. Washington probably wasn’t looking for permission in the first place despite Carter’s lip service to Baghdad on Tuesday. The US will likely embed the Spec Ops with the Peshmerga via the KRG in Erbil. 

  The question then, is this: if the Iraqi regulars are now loyal to the Shiite militias and if Iran is pulling the strings in Baghdad, what will the relationship be between a US/Peshmerga effort to fight ISIS and an Iran/Iraqi effort? Furthermore, what happens if Russia begins bombing ISIS targets in Iraq? 

  Time will tell, but the big picture takeaway here is this: this war doesn’t end in Syria. 

  *  *  *

  Bonus: Visuals of Iraqi Shiite fighters

  

  

  

  

  

  

  

  

  

  

  

• Short-Termist America – Value-Extraction Has Replaced Value-Creation

  Submitted by Michael Lebowitz via 720Global.com,

  Buybacks Part 3: Washington’s Warning

  Stock buybacks are a conflict of interest which has been exposed primarily through extravagant levels of executive pay and income inequality. As an extension of previous articles on this topic, 720 Global digs even deeper to expose the truth behind the logic and rationale of corporate stock buybacks. 

  In his 1995 speech at Harvard University, Charlie Munger (Vice Chairman Berkshire Hathaway) walks through a multitude of causes for human misjudgment. Embedded throughout his speech is the core role incentives play in influencing human behavior.  One does not require a PhD in psychology to understand why corporate executives continue to expand stock buybacks at, counter?intuitively, record high stock valuations. The latest reminder of such incentives comes from The Center for Effective Government and Institute for Policy Studies. In a recent study they found that the retirement funds of the chief executives of the 100 largest corporations are worth on average just under $50 million, or a combined $4.9 billion.  This amount is equal to the aggregate retirement accounts of 41% of U.S. families.

  Stunning facts like that compel 720 Global to continue to raise awareness regarding the dangers buybacks impose not only on American public companies and their investors but also on the economic and social fabric of the nation. In part 1 of this series, “Buybacks: Connecting Dots to the F?Word”, 720 Global highlighted how executive leadership has elected to engage in uses of their corporate resources that benefit executive compensation at the expense of long?term shareholders, the company’s future success and ultimately the U.S. economy. Part 2, “Shorting the Buyback Contradiction”, examined the ways in which buybacks distort equity valuations and exposed the unknown risks being shouldered by investors.

  This third article in the series extends the analysis of the prior two articles.  It provides a more specific review of the ways in which corporations are manipulating their stock price and abusing the trust of investors to the direct benefit of corporate executives.

  Corporate America and American Values – The Backdrop

  Well before the Revolutionary War, commerce and trade in the American colonies was vibrant.  By the early 1700’s, the colonies under British rule had rapidly become one of the most productive and wealthiest economies in the world, providing Great Britain with an invaluable source of trade goods as well as an increasingly powerful tax base for revenue.  Naturally, those businesses ? farming, manufacturing, printing and journalism, education, import/export – have evolved into what we know today as the domestic corporate sector.    As corporate America grows stronger, more profitable and more powerful and influential, logic follows that this is a reflection of the durability and steadfastness of America.  That is as it has always been.

  These businesses, and their now global success are a manifestation of something immensely larger than that of the profits and material benefits they generate.    The foundation of this country was conceived, established, dedicated and founded by good, brave men whom we today endearingly and reverently refer to as our Founding Fathers.  By them, the United States of America was founded for a multitude of express purposes which cumulatively represent a set of moral ideals.  From these established ideals, more than any other country in the history of mankind, much happiness and success has been derived.    The fact that the United States of America was established as a republic, a nation based on the rule of law, amplifies the obligation of the population, especially leaders of all forms, in adhering to those moral ideals. 

  Reinforcing this concept in his first inaugural address to the population of the new republic, George Washington warned “…the propitious smiles of heaven can never be expected on a nation that disregards the eternal rules of order and right which heaven itself has ordained.”   And yet, for all of that foundation and obligation and reverence to which we owe our remarkable success, the traditional mechanisms by which we measure that success are failing.

  Executive Greed

  Today, corporate profits and U.S. stock markets, two of our broadest yardsticks for measuring economic success, are near record highs.  On those metrics, one might be tempted to suppose that the strength of America is reflected in the strength and success of its businesses.  And yet, corporate profitability and rising stock markets are not translating into widespread economic prosperity as shown in the graph below comparing stagnating hourly earnings versus the S&P 500.

  Wages Versus the S&P 500
  

  Vast swaths of the population in the United States are not enjoying the benefits of the so?called post?crisis recovery.  Meanwhile, the top executives of major corporations are prospering in a way never before seen.  This contrast between the rich becoming ultra?rich and the rest of the population stagnating at best, was a characteristic of the pre?depression “Roaring 20’s” as well. A report issued by the Economic Policy Institute on CEO pay highlights that in 2014 the CEO?to?worker compensation ratio was 303X compared with 58x in 1989 and 20X in 1965.    The exponential rise in executive compensation has occurred in both relative and absolute terms.  From 1978 to 2014, inflation?adjusted CEO compensation increased 997 percent, almost double the rise in stock market value. When compared with other highly paid workers (defined as those earning more than 99.9% of other wage earners), CEO compensation was 5.84 times greater.  The rate at which CEO compensation outpaced the top 0.1% of wage earners reflects the power of CEO’s to extract “concessions” rather than an outsized contribution to productivity.

  The composition of executive pay has gone from one predominately salary based with less than 15% stock and option rewards in the mid?1960’s to one heavily dependent on stock and option rewards averaging well over 80% in 2013.  These stock?based incentives make executives highly motivated to keep their stock price elevated at all costs.    The compensation structure in conjunction with the rise in pressure from Wall Street and investors to keep stock prices elevated arguably leads to short?term decision?making that ultimately does not afford proper consideration of the long?term problems those decisions create.

  One of the most prevalent ways in which executives can carry out such a compensation?maximizing scheme is through share buybacks.  Share buybacks as a percentage of corporate use of cash are at near?record levels and rising rapidly. In a market where all major indices and the majority of publicly?traded company shares are near all?time highs, the proper question is, why?   As Warren Buffett wrote in his 1999 letter to shareholders, “Managements, however, seem to follow this perverse activity (buy high, sell low) very cheerfully.”  As outlined in Part 1 on this topic, Connecting Dots to the F?Word, the three reasons CEO’s give to justify this action do not stand on their own.  The purpose of this article is to explore more deeply, as a point of emphasis, the backdrop which allows such activity to proliferate and to further expose the “chicanery” (Buffett’s word) being employed by corporate executives in continuing to engage in share buybacks in defiance of sound business practices.

  In 2007, companies in the S&P 500 returned over one?third of their cash, $635 billion, to shareholders through buybacks as shown below.  At the time, this played a meaningful role in helping to elevate equity market valuations into the teeth of the subsequent financial crisis when stocks fell by over 50%.  Now in 2015, share buybacks are expected to rise 18% on a year?over?year basis.  Like 2007, corporations will again spend nearly one?third of cash, over $600 billion, on buybacks. The growing popularity of buybacks is graphed below along with the disturbing trend in the percentage of cash invested for future growth. Similarly, stock valuations measured several different ways rival levels only seen with the exuberance of 1929, 2000, and 2007.

  Share Buybacks versus the Percentage of Cash Reinvested for Growth
  

  Naturally, the data appears disturbing but a recent report from Reuters puts an even finer point on the issue.  In an investigative article entitled The Cannibalized Company, Reuters states:

  “Almost 60 percent of the 3,297 publicly traded non?financial U.S. companies Reuters examined have bought back their shares since 2010.  In fiscal 2014, spending on buybacks and dividends surpassed the companies’ combined net income for the first time outside of a recessionary period, and continued to climb for the 613 companies that have already reported for fiscal 2015.  In the most recent reporting year, share purchases reached a record $520 billion.  Throw in the most recent year’s $365 billion in dividends, and the total amount returned to shareholders reaches $885 billion, more than the companies’ combined net income of $847 billion.”

  The premise behind the current executive pay structure argues that the talent associated with the strategic decision?making and leadership qualities required to successfully drive large organizations is unique, hard to find and, once found, critical to be retained.  In efforts to better align the incentives of corporate executives and the interests of the company, executive compensation has increasingly become tied to outcomes associated with stock price.   Award executives more stock, and, assuming they make good decisions for the growth of the company, the share price will rise and reward the executive and shareholders alike.

  Alternatively, what is happening is the compensation structure for CEO’s and senior executives has become so skewed towards stock?based incentives of such gargantuan size that it has become the predominant driver of corporate decision?making.  Companies eschew the idea of making longer?term investments through capital expenditures because it does not immediately help the measurement ratios upon which Wall Street bases “success”, and it may indeed hurt those ratios.    Of course, these are the same ratios upon which executive compensation depends, since Wall Street analyst recommendations drive share prices and share price drives executive compensation.    The result in one case is strategic decision?making that naturally neglects long?term commitments of capital into what Clayton Christensen calls “market?creating Innovations” in favor of “efficiency innovations”.    As described in Innovation, companies become increasingly dependent upon efficiency innovations and the balance between important long?term and short?term uses of capital is quickly lost causing economic harm.

  In another case, executives use precious capital, often borrowed, to conduct share repurchases precisely because it has the immediate effect of driving share prices higher.  As 2007 illustrated, this façade of “value” is short?lived because it does nothing to organically enhance the value of the company and hurts long?term prospects by diverting cash to a very expensive use. In this case, the perceived “talent” of leadership required in senior executives to successfully drive large organizations is fallacious and runs counter to the logic applied in their exorbitant pay structures.  It also disregards “the eternal rules of order” George Washington spoke of in his first inaugural address.

  The end result of either case is that corporate cash, earned or borrowed, is squandered for the self?serving purpose of maximizing executive compensation instead of being used for productive purposes.

  “Maximizing Shareholder Value”

  Several events have come together over the years to enable and encourage such behavior by executive leadership.    In the mid?1970’s, the concept of maximizing shareholder value was introduced by Jensen and Meckling, professors at the University of Rochester.  Thus began the era of myopia related to stock?based incentives for executives with no foresight as to the long?term implications of such an ill?conceived concept.    We see this effect repeatedly in policy construction within our government.  Politicians identify a problem and then set about crafting a bill that will address it without realistic consideration for either the immediate peripheral implications or the long?term unintended consequences.  What begins as a well?meaning, if not vote?attracting, proposal soon becomes a law that in 5 or 10 years mushrooms into a vast government program and deep financial burden offering little economic benefit.  

  In 1982, the Securities Exchange Commission created a rule that allowed companies to buy back their own shares.  Rule 10b?18 allows a company’s board of directors to authorize senior executives to repurchase up to a certain dollar amount of stock over a specified or open?ended period of time.    The company must publicly announce the program after which it may then proceed to repurchase their own shares on the open market without concern that the SEC will charge it with stock price manipulation.  There are a few guidelines within which the company must operate regarding repurchases but the oversight is structurally weak and only monitored quarterly.  Rule 10b?18 explicitly legalized stock market manipulation through open?market repurchases.

  The rule was radically divergent from the agency’s original mandate laid out in the Securities Exchange Act of 1934 which properly responded to the multitude of corrupt activities that fueled speculation and led to the 1929 stock market crash.    The adoption of Rule 10b?18 reflected the view of then commission chairman John Shad, former vice?chairman of E.F. Hutton and obvious Wall Street insider, that the risks of sweeping deregulation of securities markets were justifiable.   With the stated mission of the SEC in mind, “to protect investors, maintain fair, orderly, and efficient markets, and facilitate capital formation”, liberties currently afforded corporate executives through share buybacks are at odds with that mission.

  Taxpayers Subsidize Corporate Spending ? Buybacks Subsidize Executives

  The power and influence of corporate America is further on display in their lobbying efforts to extract public?sector funding for assistance in trade and research and development.   Despite trillions in accumulating public debt and on?going deficits, publicly?held companies with record profits, lobby for and receive assistance in funding pet projects to their benefit.  At the same time, instead of using their own cash to advance these projects, they engage in share buybacks which divert capital toward a highly self?serving purpose.   Although the public assistance of funding such projects occurs under the guise that U.S. corporations cannot remain competitive without the aid of federal funds, it is unclear why taxpayer funds should be used to subsidize the investment activities of corporate entities which at the same time are using their own capital to repurchase stock.  

  According to William Lazonick a professor at the University of Massachusetts at Lowell who cites the Center for American Progress, Exxon Mobil received $600 million per year in subsidies for oil exploration.  The energy giant spent approximately $21 billion a year on share buybacks while spending approximately zero dollars on alternative energy efforts.    Microsoft, GE and other companies lobbied the U.S. government to triple its investment in alternative energy research and subsidies to $16 billion per year.  Over the past ten years, Microsoft and GE spent about the same amount annually on share repurchases.

  The same thing happens in nanotechnology, pharmaceuticals and virtually every other business sector.    Powerful companies lobby congress for federal spending on what are certainly important issues that deserve research and development focus.    However, the companies themselves turn around and spend multiples of billions manipulating their stock price which boosts already egregious executive compensation.    Lazonick points out that Intel spent four times the budget of the National Nanotechnology Initiative, which receives federal funding, on buybacks in 2013.  According to the Wall Street Journal, Intel CEO Brian Krzanich received $10 million in compensation in 2013, less than 10% of which was base salary (Krzanich received a 20% pay increase in 2014).

  Major pharmaceutical companies such as Merck, Allergan, AbbVie and Pfizer generally argue that the profits from high priced healthcare drugs permit more research and development to be done in the United States.  Importantly, Lazonick points out that these firms coincidently enjoy tremendous benefits of favorable intellectual property rules and weak price regulation by doing their business in the US.  Yet in the 10 years between 2004 and 2013, Pfizer alone used over 70% of its profits for share buybacks.  The painfully high prices Americans pay for prescription drugs has far more to do with stock price manipulation and inflated executive compensation than the stated cost of conducting R&D in the United States.  That explanation is a smokescreen intended to deceive legislators, regulators and the public.  Pfizer CEO, Ian Read, was paid $23.2 million in 2014, nearly 70% of which was stock and option?based rewards.

  Conclusion

  The prophetic warnings of corruption of America’s moral ideals may have begun in 1789 with the words from America’s first President, but they have been routinely revisited throughout our history.  In 1961, Dwight Eisenhower also issued a dire warning in his farewell address to the nation.    In that address he pointed specifically to the military?industrial complex, a term he coined, but words which today have far broader application. 

  “…we must guard against the acquisition of unwarranted influence… The potential for the disastrous rise of misplaced power exists and will persist.   Only an alert and knowledgeable citizenry can compel the proper meshing of the huge industrial and military machinery of defense with our peaceful methods and goals, so that security and liberty may prosper together.”

  It is vital to give proper consideration to the improper liberties that are being taken by those with “unwarranted influence” and “misplaced power”.   Value extraction has replaced value creation in pursuit of short?term, self?serving benefits at the expense of long?term stability and durability of corporate America and therefore the country as a whole.  As citizens, our obligation is to be well?informed, cognizant, outspoken and to vote.  As investment managers, our role is to always protect the wealth of clients through a critical view of the actions of authorities with fair and rigorous questioning of intentions and incentives.  The words of men may temporarily suspend but they do not alter the laws of financial dynamics. The fundamentals always take precedence eventually.

  

  

  

  

  

• U.S. Total Debt Soars By $674 Billion In November

  When the US reached a debt ceiling deal in the beginning of November, it was common knowledge that there would be a debt accrual “catch up” to make up for lost time when the US was operating under emergency measures to avoid breach of the debt ceiling. And sure enough, when the accurate total debt number was released on November 2, this was indeed the case, when we learned that the US had added some $339 billion in debt during the “emergency measures” period.

  However, what is unclear is how in the remaining 4 weeks of November, the US managed to add another $335 billion in total debt, bringing the total increase for the month of November to a whopping $674 billion, and total US debt to a record $18.827 trillion.

  

   

  Also, just to preempt the question, the chart below shows the change in US debt under president Barack Obama: starting at $10.6 trillion on January 21, 2009, total debt is now up just over 77% under Obama’s tenure, to $18.8 trilion. At the current pace of growth, it may double by the time Hillary is sworn in as America’s next president.

  

  

  

  

  

  

• Despite LeBeau-gasms, Domestic Vehicle Sales Slide For 2nd Month In A Row, Miss By Most In 5 Months

  Well this is a little awkward. After a day of exuberant unsubstantiated auto sales proclamations that a) it’s not all subprime, b) 8-year credit terms do not pull forward demand, and c) it’s totally sustainable; anyone could have been forgiven for being excited about the total vehicle sales of 18.12mm (according to Wards’ data), just above expectations of 18.10mm and flat from October. However, Wards reported just 14.03mm domestic vehicles sold (missing expectations by the most since June) and dropping for the 2nd month in a row. Those darned facts do get in the way eh?

   

  Recessions happen at the funniest times eh?

  

   

  Domestic vehicle sales are up just 2.6% YoY… and that is as credit soars to this sector…

  

   

  Should we worry? Well it seems we will not be relying on China to save us?

  

   

   

  We are going to need more up and to the right of this…

  

   

  Charts: Bloomberg

  

  

  

  

  

• Millennials Increasingly Believe The American Dream "Is Not Really Alive"

  If you’re a millennial, you’d be forgiven for being disillusioned with the American dream. 

  After all, there’s a good chance you just found out that the college degree you paid $35,000 (or more) for isn’t worth much in today’s labor market. Even if you’re lucky enough to find a full-time job that doesn’t involve serving Jager shots at three in the morning, your wages aren’t likely to keep up with the soaring cost of living let alone be sufficient to service your mountainous student debt. 

  Meanwhile, you might have also discovered that the “economic recovery” your econ teachers told you about really never took place and that Ben Bernanke’s “courage” really didn’t do much of anything to improve the lot of the Middle Class, which you probably thought you were set to join within a month of graduation.

  In fact, statistics show there’s about a one in three chance that you’re back living in your parents’ basement, which means you get the privilege of eating dinner with the family every night and listening to your dad tell you how disgusted he is with the fact that he can’t get a promotion but his boss just bought a new Maserati thanks to a Fed-assisted tripling of the company’s stock price.

  No sir, we don’t blame you for being disgusted nor were we surprised to discover that compared to young Americans in 1986, you’re three times as likely to think the American dream is dead and buried.  

  As WaPo notes, “young workers today are significantly more pessimistic about the possibility of success in America than their counterparts were in 1986, according to a new Fusion 2016 Issues poll – a shift that appears to reflect lingering damage from the Great Recession and more than a decade of wage stagnation for typical workers.”

  

  More color on the methodology: 

  The Fusion poll replicated the questions from a Roper/Wall Street Journal poll of young Americans that was conducted in 1986, the year Mister Mister topped the pop charts and Bill Buckner’s error cost the Boston Red Sox a World Series title. Both polls posed a series of questions about the American Dream: what it meant to individuals, whether it actually existed and, if it did, how hard it was to attain.

   

  In the three decades between the surveys, pollsters found, share of young Americans overall who said the American Dream “is not really alive” grew sharply from 12 to 29 percent. Among white people, it nearly tripled from 10 percent to 29 percent. One in three white non-college graduates now say it is not alive, compared to one-fifth of white college graduates; the increase from 1986 was larger for non-graduates than for graduates.

  Of course maybe if you just wait long enough, the Bernanke QE “wealth effect” will eventually trickle down. Or better still, maybe lackluster revenue growth will miraculously pick up for American corporates, ending the necessity of using financial engineering to squeeze EPS beats out of topline misses thus sparking a frenzied hiring spree. 

  But above all, don’t rest on your laurels. You, like Ben, should have “the courage to act.”

  

  

  

  

  

  

• Brazil Releases Shocking GDP "Obituary": "It's Mutated Into An Outright Depression," Goldman Exclaims

  To be sure, we haven’t exactly been shy about characterizing Brazil’s economic malaise as more akin to a depression than a recession. Here are a few representative headlines:

  • Depression Tracker: Brazil Braces For Big Week Of Bad Data
  • Depression Tracker: Unemployment Soars In Latin America’s Most Important Economy
  • Brazil’s Economy Slides Into Depression, And Now Olympians Will Be Swimming In Feces

  The problem, you’re reminded, is that Brazil is in the midst of a dramatic economic downturn that’s left the country to suffer through the worst inflation-growth outcome (i.e. stagflation) in more than a decade. Unemployment and inflation are soaring (annual headline IPCA inflation at 10.28%, unemployment at 7.9% in August, up from just 4.7% a year earlier) while output is plunging (IBC-Br monthly real GDP indicator down 6.1% Y/Y in September) and the market is losing confidence in the government’s ability to end a political stalemate on the way to shoring up the fiscal books and hitting primary surplus targets. Last week’s arrest of prominent lawmaker Delcidio Amaral in connection with the ongoing Carwash investigation didn’t help.

  Thanks to the above mentioned IBC-Br monthly indicator (which showed an economy in “free fall” to quote Barclays) we already knew Q3 was going to be bad on the GDP front. But this is Brazil we’re talking about, which means that as bad as consensus is, there’s always the distinct possibility that the actual numbers will be far worse than expected and that’s exactly what happened on Tuesday. 

  Real GDP fell 1.7% Q/Q and 4.5% Y/Y while Q2’s already abysmal -1.9% contraction was revised down to -2.1%.

  

  All of those prints missed expectations and the headline number was worse than all but three estimates from the 44 economists Bloomberg surveyed.

  

  If you dig down a bit further you can begin to see why we’ve been so adamant about calling this a depression. Here’s Goldman with the summary:

  Private consumption has now declined for three consecutive quarters (at an average quarterly rate of -8.5% qoq sa, annualized), and investment spending for nine consecutive quarters (at an average rate of -10.0% qoq sa, annualized). Overall, gross fixed investment declined by a cumulative 21% from 2Q2013. The declining capital stock of the economy (declining capital-labor ratio) hurts productivity growth and limits even further potential GDP. The sharp contraction of real activity during 3Q was broad-based: both on the supply and final demand side. Final domestic demand weakened sharply during 3Q2015 (-1.7% qoq sa and -6.0% yoy) with private consumption down 1.5% qoq sa (-4.5% yoy) and gross fixed investment down 4.0% qoq sa (-15.0% yoy). Finally, on the supply side, we highlight that the large labor intensive services sector retrenched again at the margin (-1.0% qoq sa; -2.9% yoy).

  Yes, “the services sector retrenched again,” and as WSJ noted earlier, “Brazil’s service sector, including beauty salons, banks and realtors, employs more than any other sector in the country by a wide margin, and represents about 60% of GDP.” Here’s the full breakdown:

  

  “At first read, the report recalls an obituary. There is no room for any growth in the coming quarters. The situation is really, really bad,” according to Andre Perfeito, chief economist at Gradual Investimentos, who spoke to Bloomberg by phone. “It’s a substantial hit coming not only from investment, which has fallen nine quarters in a row, but this year the big change is the substantial drop in consumption. We have not seen such a string of bad numbers for consumption,” Carlos Kawall, chief economist at Banco Safra and former Treasury secretary added.

  

  This of course comes back to a worsening unemployment picture. Remember, employment fell 3.5% Y/Y and real wages slumped a whopping 7.0% in October. As Goldman put it, “the real wage bill of the economy shrank by a large 10.3% yoy in October; the largest decline since October 2003.” The unemployment rate hit 7.9% in August, up from just 4.7% a year ago.

  

  That means people like Rossini Santos, the 43-year old, unemployed steelworker with an $80,000 mortgage and a $17,000 Chevy Prizm note that Bloomberg profiled in October, will have a harder and harder time finding work and thus servicing their debt. “The idea that consumers might not have income to service debt in the years to follow I think is what terrifies them. Even if there is a recovery of sentiment, we believe the labor market will continue suffering throughout the next year, and that will hold down household consumption,” Barclays economist Bruno Rovai said. 

  Meanwhile, Copom is completely stuck. Inflation is soaring and will likely get worse to lagged FX pass through which means if anything, rates need to rise. As Daniel Weeks, chief economist at Garde Asset Management put in on Tuesday, “the negative GDP may influence BCB, but rising inflation will prevail.” That means that Brazil, much like some of its Andean neighbors will need to consider pro-cyclical policy measures – i.e. Copom will need to hike. 

  Bradesco BBI sees two hikes, one in January and one in March. “Although BCB kept Selic unchanged in last meeting, the dissent in the decision (two members voted for a 50 bps hike) and the change in the post-communique text (removing the phrase ‘keeping interest rates unchanged for a sufficient period’) are indicatives that the BCB may change its course of action soon,” the bank says, adding that “given soaring inflation expectations, it is now too much of a risk for the BCB to wait and see if the recession will eventually lead to lower inflation in 2016.”

  So with no counter-cyclical maneuverability, the economy (specifically investment, manufacturing, and the credit impulse) will continue to suffer mightily going forward. We’ll close with a quote from Goldman’s Alberto Ramos, Brazilian commentator par excellence:

  What started as a recession driven by the adjustment needs of an economy that accumulated large macro imbalances is now mutating into an outright economic depression given the deep contraction of domestic demand.

  

  

  

  

  

  

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• Seeking A Savior

  Submitted by Jeff Thomas via InternationalMan.com,

  It’s an unfortunate truth that, when people are worried about the future, they often put their faith in politicians to somehow make everything better.

  Politicians, of course, are famous for promising panaceas for whatever is troubling voters, and they even invent new troubles to worry about, presenting themselves as the only ones who can solve these woes.

  Not surprising then, that, over time, any nation may slowly deteriorate into a population of nebbishes who turn to their government to do their thinking for them and take responsibility for their futures.

  In the last year, the world has seen many elections in which the top spot (president, prime minister, premier, etc.) was contested. In Brazil, socialist President Dilma Rousseff was returned, but almost immediately ran into trouble over a failing economy, scandals, and corruption charges. In less than a year, her popularity sank to the lowest level for any Brazilian president on record.

  In the UK, conservative Prime Minister David Cameron was returned, which immediately triggered riots in London by the anti-austerity crowd. He will soon be facing increasingly angry voters of all stripes who are boiling over with the dramatically worsening immigration question. In addition, he’ll soon be facing a referendum on the UK’s membership in the EU – an eventuality he’s been postponing for quite some time.

  In Canada, voters have chosen to oust the conservatives and return to the golden promises of the Trudeaus. The Canadian dollar dropped immediately. Justin Trudeau plans a vast programme of public spending in the face of a declining economy, but hasn’t offered any explanation as to how this can be paid for.

  Argentina has just had its election. The departing Peronist, Cristina Fernández de Kirchner, has passed the baton (and a failing economy, rapidly declining peso, and civil unrest) to the more conservative Mauricio Macri.

  Do we see a pattern here? No, except in the sense that countries habitually put in a conservative for a while, tire of him, and replace him with a liberal, then tire of him, and replace him with a conservative.

  None of these leaders will be the solution to the problems of their nations. In fact, they are the problem. Each of them (and many others around the world) offered dramatic, unrealistic campaign promises for ever-increasing largesse from the government. Each will increase national debt to maintain a government that’s already drowning in debt, in order to fulfil their promises, with an understood endgame that, at some point, the economy hits the wall. Citizens with opposing views of the reason for such problems are boiling over, as it’s become clear that there’s no money in the till to pay for such economically suicidal policies. Yet, each year, the spending worsens and so do the economic conditions for the average citizen.

  And this is true whether we see Labour, Tory, Republican, Democrat, Democrata Progresista, or Federalista del Centro in power. At some point, it would be reasonable to expect the average voter to realise that it’s not only the opposition candidate that’s a danger, it’s also his own party’s candidate and, in fact, the entire political system.

  What’s interesting is that, in many countries, grumblings can be heard to this effect – that “they’re all corrupt” – yet, immediately after making such statements, the average voter returns to the support of his party’s candidate, as he is “the lesser of two evils.”

  And here we see a guiding principle of party politics. Do all you can to create the image of the opposing party as literally evil. Use the media to parrot that concept, on a daily basis. By so doing, it becomes unimportant who you run for office. Your party supporters do not vote for your candidate, they vote against the opposing party’s candidate. And that makes it possible to run a rutabaga for office and still win, if you can succeed in demonising the turnip the other party is running.

  In the U.S., political candidacy is practically a national sport. The presidential competition begins as soon as the previous election has ended. (Candidate Hillary Clinton began the “I might be running” charade before the sitting president had been sworn in, in 2013, for his second term.)

  In addition to the candidates pouring so much time into campaigning that those who  already hold public office abandon their responsibilities in order to focus on the campaign, hundreds of millions of dollars are poured into each campaign. In the current U.S. election race, we observe Mrs. Clinton, a candidate with a dark past who has been described by the majority of American voters as a liar, and as dishonest and untrustworthy – an astonishing revelation until an even more astonishing truth sinks in – that many of those who see her in that light plan to vote for her anyway, in order to stop a Republican – any Republican – from attaining office.

  And the Republican side is presently led by Donald Trump, a man famous for his quick temper, boastful comments, bullying presence, and egotistical will, in addition to having a long record of causing massive bankruptcies with his business projects.

  Yet, his supporters are equally rabid in their belief that he is desperately needed to counter the dreaded Mrs. Clinton.

  It’s hard to imagine that two candidates could be less qualified for public office. We might be forgiven if we conclude that there is no lesser of two evils in equations such as this one. There is only disaster in a red outfit versus disaster in a blue outfit.

  In 1796, the young U.S.A. chose between John Adams and Thomas Jefferson for president. Most Americans admired them both and it was a very close election. Both had been founding fathers and both contributed heavily to the cause of freedom that was so valued in the early days of the U.S.

  But, in those days, the average American recognised that his freedom depended upon a small government. As Mr. Jefferson rightly stated, “A government big enough to give you everything you want is a government big enough to take away everything that you have.”

  Indeed, the U.S. had come into being as a result of revolution against the government of King George of England, who had the temerity to raise the total tax level to about 2.5%.

  But countries do seem always to decline over time. No matter how well-intended the original concept, no matter how productive the people, countries decline, and for the same reasons. Governments (both liberal and conservative) constantly work to grow their own power and to extract as much wealth from their people as they can manage.

  As stated at the beginning of this article, “It’s an unfortunate truth that, when people are worried about the future, they often put their faith in politicians to somehow make everything better.” By doing so, they make their own destruction possible.

  But what’s one person to do? “You can’t fight City Hall,” as they say. However, in most countries, the U.S. included, it’s still legal to vote with your feet – to move to a different jurisdiction that has not gone so far into decline, where the taxation is low and the level of liberty is high. In any era, there are always jurisdictions that are freer than others. The present era is no exception. In seeking a saviour, we should not put our faith in any politician or group of politicians.

  If we have a saviour, he is the man in the mirror. If we are to be saved, we alone must do the research, make the plans, vote with our feet, and establish our own liberty.

  *  *  *

  Editor’s Note: The U.S. government is broke and bleeding money. Like most governments that get into financial trouble, we think American politicians will keep choosing the easy option…money printing on a massive scale.

  This has tremendous implications for your financial security. These politicians are playing with fire and inviting a currency catastrophe.

  Most people have no idea what really happens when a currency collapses, let alone how to prepare…

  How will you protect your savings in the event of a currency crisis? This just-released video will show you exactly how. Click here to watch it now.

  

  

  

  

  

• Are These The Tankers Bilal Erdogan Uses To Transport ISIS Oil?

  Regular readers are by now well acquainted with Bilal Erdogan, the son of Turkish autocrat Recep Tayyip Erdogan. Although Erdogan senior masquerades as President of a democratic society, he is in reality a despot who just weeks ago, capped off a four-month effort to nullify an undesirable ballot box outcome by scaring the electorate into throwing more support behind the ruling AKP in a do-over vote designed specifically to undermine the pro-Kurdish HDP, which put up a strong showing in the last round of elections, held in June. 

  As the world’s interest in Islamic State’s illicit oil trade has grown over the past 60 or so days, so too has the scrutiny on how the group gets its stolen crude to market. In the seven days since Turkey shot down a Russian Su-24 near the Syrian border, Moscow has done its best to focus the world’s collective attention on the connection between ISIS and Turkey. It’s common knowledge among those who pay attention to such things that Ankara is part of an alliance that includes Riyadh, Doha, and Washington whose collective goal is to fund and arm the Syrian opposition. What’s up for debate is the extent to which that alliance supports ISIS and, to a lesser extent, al-Nusra. 

  Earlier today, Vladimir Putin explicitly accused Ankara of attempting to protect ISIS oil routes by shooting down Russian warplanes which have destroyed hundreds of Islamic State oil trucks in November. 

  Erdogan of course denies the allegations, but as we’ve shown, it would be very easy for Turkish smugglers to commingle ISIS and KRG crude (which, by the way, is also technically illegal), effectively using Kurdish oil to mask Turkey’s participation in the Islamic State oil trade. 

  Some contend that Bilal Erdogan’s marine transport company BMZ Group (which owns a Maltese shipping company) is involved in trafficking ISIS oil (see our full account here).

  

  Here’s what Syrian Information Minister Omran al-Zoub said on Friday:

  “All of the oil was delivered to a company that belongs to the son of Recep [Tayyip] Erdogan. This is why Turkey became anxious when Russia began delivering airstrikes against the IS infrastructure and destroyed more than 500 trucks with oil already. This really got on Erdogan and his company’s nerves. They’re importing not only oil, but wheat and historic artefacts as well.”

  While we’ve yet to come across conclusive evidence of Bilal’s connection to ISIS, we would note that the Turkish port of Ceyhan is state-run and given Turkey’s extensive experience in smuggling KRG crude, it seems entirely fair to suggest that sneaking in 40,000 or so barrels of ISIS oil each day wouldn’t be that difficult a task. Indeed, given that Kurdish oil is, like ISIS crude, technically undocumented, Turkey will always have plausible deniability on its side (unless of course the oil is being moved into the country straight from Syria which is what Putin seems to be suggesting). 

  In any event, if Bilal Erdogan is in fact engaged in the trafficking of stolen crude (and take it from us, Baghdad will tell you that Kurdish crude sold independently of SOMO is every bit as illegal as Islamic State oil) it’s probably worth tracking BMZ Group’s fleet. Here’s a list of ships that Turkish or other regional media have at one time or another confirmed belong to Bilal: 

  Mecid Aslanov 

  

   Begim Aslanova 

  

  Poet Qabil 

  

  Armada Breeze  

  

  Shovket Alekperova 

  

  You can track them all, free of charge at MarineTraffic.com:

  

  Just don’t let Erdogan senior catch you monitoring his son’s fleet or you, like Can Dündar, editor in chief of Cumhuriyet, and Erdem Gül, the newspaper’s capital correspondent in Ankara, could end up sitting in a Turkish jail for 100 + 42 years. 

  

  

  

  

• Fourth Turning – Our Rendezvous With Destiny

  Submitted by Jim Quinn via The Burning Platform blog,

  In Part 1 of this article I discussed the catalyst spark which ignited this Fourth Turning and the seemingly delayed regeneracy. In Part 2 I pondered possible Grey Champion prophet generation leaders who could arise during the regeneracy. In Part 3 I focused on the economic channel of distress which is likely to be the primary driving force in the next phase of this Crisis. In Part 4 I assessed the social and cultural channels of distress dividing the nation. In Part 5 I examined the technological, ecological, political, military channels of distress likely to burst forth with the molten ingredients of this Fourth Turning, and finally in this final part, our rendezvous with destiny, with potential climaxes to this Winter of our discontent.

  We are now in the seventh year of this Fourth Turning. A famous quote from the seventh year of the last Fourth Turning portended the desperate, bloody and ultimately heroic trials and tribulations which awaited generations of our ancestors. What will be our rendezvous with destiny?

  “There is a mysterious cycle in human events. To some generations much is given. Of other generations much is expected. This generation of Americans has a rendezvous with destiny.” – Franklin Delano Roosevelt – June 27, 1936 – Philadelphia, PA

  

  Our Rendezvous With Destiny

  “The seasons of time offer no guarantees. For modern societies, no less than for all forms of life, transformative change is discontinuous. For what seems an eternity, history goes nowhere – and then it suddenly flings us forward across some vast chaos that defies any mortal effort to plan our way there. The Fourth Turning will try our souls – and the saecular rhythm tells us that much will depend on how we face up to that trial. The saeculum does not reveal whether the story will have a happy ending, but it does tell us how and when our choices will make a difference.”  – Strauss & Howe – The Fourth Turning

  

  The people have been permitting a small cadre of elitists, billionaire financiers, corporate chiefs, propagandist media moguls, and crooked politicians to make the choices dictating the path of our country since the 2008 dawn of this Fourth Turning. The choices they have made and continue to make have imperiled the world and guaranteed a far more calamitous outcome as we attempt to navigate through the trials and tribulations ahead. Their strategy to “save the country” by saving bankers, while selling the plan to the public as beneficial to all and essential to saving our economic system, has proven to be nothing more than the greatest wealth transfer scheme in human history.  The ruling class is deliberately blind to their own venality and capacity for evil.

  They commit evil acts, not for evil’s sake but to improve the world for their kind. All men have the capacity for evil, but only those with power and wealth have the ability to destroy the world in the name of their “progressive” ideology. The lust for power, immense hubris, arrogance towards the masses, and belief in utopian visions, by men portraying themselves as enlightened, have led to the deaths of millions in just the last century. The true reign of terror has yet to reveal itself, as this Fourth Turning will unleash the worst in humanity once the insipid and trivial are swept away by the cruel reality of life and death choices.

  We are managed by a totalitarian regime and willingly oblige their aspirations for power, control, limitless wealth, and control over the political, social, economic, and financial levers of our society, as long as we can still facebook, twitter, text, post selfies, and generally amuse ourselves to death. Orwell’s vision of a totalitarian regime where boot on the face control, repression, surveillance, torture, and endless war had failed to materialize in the U.S. over the 50 years after the publication of 1984. The vision of Aldous Huxley’s Brave New World proved more accurate and is still the dominant totalitarian game plan today. The invisible government manipulating the unseen mechanisms of society, forming the habits and opinions of the masses through propaganda and silence about truth, has efficiently convinced the masses to love their servitude.

  “A really efficient totalitarian state would be one in which the all-powerful executive of political bosses and their army of managers control a population of slaves who do not have to be coerced, because they love their servitude. To make them love it is the task assigned, in present-day totalitarian states, to ministries of propaganda, newspaper editors, and school teachers. Such propagandists accomplish their greatest triumphs, not by doing something, but by refraining from doing. Great is truth, but still greater, from a practical point of view, is silence about truth. By simply not mentioning certain subjects… totalitarian propagandists have influenced opinion much more effectively than they could have done by the most eloquent denunciations, the most compelling of logical rebuttals.” –  Aldous Huxley – 1946 revised foreword to Brave New World

  As the decade’s long debt fueled economic expansion petered out at the turn of this century, with average Americans experiencing an ongoing fifteen year recession, punctuated with multiple booms and busts created by the Wall Street owned Federal Reserve, a more Orwellian totalitarianism has begun to raise its ugly boot. As the exponential increase in debt reached its zenith and economic progress for the masses stalled, the ruling class embraced Orwell’s belief that once a society built upon hedonistic principles and “good times” loses its vitality, the ruling class would need to invoke government morality, patriotic fervor towards state mandated enemies, a quasi-religious belief in governmental omnipotence, and restrictions upon the freedoms and liberties documented in the U.S. Constitution.

  The 9/11 attacks marked the turning point for totalitarianism in America. Their lust for power can no longer be sustained by using suggestion to convince the masses to love their servitude, but will require the truncheon, military hardware, surveillance technology, more prisons, and physical intimidation of the masses to maintain the status quo. We are in the midst of experiencing the worst of Huxley and Orwell’s dystopian nightmares.

  Fourth Turnings are not finished portraits, but a canvas upon which the colors of history are painted. The specific events, timing, duration, and outcomes are not knowable or predictable in advance, but the reaction and mood of generational cohorts to the events are predictable and consistent throughout history. Anyone who denies the dramatic mood change in the country since 2008 and the deepening crisis mindset engulfing the world is either a member of the existing establishment or on their payroll. Denial and propaganda will not reverse the tide as a tsunami of consequences will sweep away the existing social order and replace it with something different. It may be better or worse, and our choices during the next decade will matter.

  Strauss & Howe pondered four possible outcomes to this Crisis:

  1. It could mark the end of man. It could be an omnicidal Armageddon, destroying everything, leaving nothing.
  2. It could mark the end of modernity. The Western saecular rhythm – which began in the mid-fifteenth century with the Renaissance – could come to an abrupt terminus.
  3. It could spare modernity but mark the end of our nation. It could close the book on the political constitution, popular culture, and moral standing that the word America has come to signify.
  4. It could simply mark the end of the Millennial Saeculum. Mankind, modernity, and America would all persevere. Afterward, there would be a new mood, a new High, and a new saeculum. America would be reborn. But, reborn, it would not be the same.

  None of the outcomes are pre-ordained. The outcome will be determined by the actions of human beings like you and me. Our choices, decisions, judgment, deeds, hesitations or inactions could impact the future course of history. Human beings are inherently flawed, susceptible to their emotions, greed, pride, arrogance, and hubris. They are prone to delusions, bouts of cognitive dissonance, herd like behavior, and a penchant for normalcy bias.

  They are also inherently kind, generous, courageous and capable of great feats. The future of our country has hung by a thread during the three previous Fourth Turnings, on the snow covered fields at Valley Forge, at the stone wall in Gettysburg, and on the blood soaked beaches in Normandy. The time will come when the future of our country will be determined by the actions of a few.

  One of the crucial problems we face is the inevitable fact positions of power in our society tend to be filled with psychopathic narcissists whose desire for control, ability to manipulate others into trusting them using charisma, lack of remorse or guilt for their lawless acts, and belief in their own infallibility, create a society with no moral boundaries, no truth, no hope, and no sense of right and wrong.

  The psychopaths occupy key positions in Washington D.C., on Wall Street, on Madison Ave., within the military, operating the Department of Homeland Security, running think tanks, in corporate board rooms. They count amongst them media moguls, politicians, central bankers, regulators, CEOs, generals, policemen, religious leaders, and shadowy billionaires, who are meticulous in planning their crimes, with contingency plans when their malevolent deeds come unraveled.

  The systematic pillaging of the world’s wealth by the chosen few is a highly organized strategy designed to offer few clues to the masses regarding its coordination, scope and malicious intent. The psychopathic ruling class is following a blueprint to enslave the masses in debt, while they fulfill their narcissistic fantasies of domination, control, power and wealth. The people are just pawns in their game of chess, disposable and interchangeable. These people give no pause in sacrificing the lives of millions to achieve their ambition of ruling the world.

  We now enter the most dangerous phase of this Fourth Turning. Whether the next financial implosion leads to war or the next war leads to a financial implosion, the consequences will be far reaching and destructive. I see the chances of a unified country choosing shared sacrifice to fight a common foe as almost nil. The eight year reign of Barack Obama drastically increased the divisiveness and mistrust within our borders and around the world.

  His failed presidency has left the nation significantly worse off economically, with trillions in new debt added, with more unfunded liability promises totaling tens of trillions added to the $200 trillion bill for future generations. Political, race, religious, generational and wealth divides have grown to cavernous levels, with virtually no chance of compromise or healing. The two leading candidates for the presidency, Hillary Clinton and Donald Trump, promise to divide the country even further if elected.

  I believe the Party realizes their game plan since 2008 has failed to revive the U.S. economy, exacerbated the failed socialist experiment in Europe, laid bare the complete and utter failure of quantitative easing in Japan, and as the globalization tide has receded revealed the epic levels of mal-investment in China. The thirty five year delusionary conviction that debt could sustain consumer societies perpetually is coming to its inevitable conclusion.

  As more and more debt has been required just to maintain a declining standard of living for the average household, the unsustainability of this paradigm has come into full view. It now appears the contingency plan of the Party is a global war to cull the herd, further enriching the arms dealers and the financiers of war. Politicians around the world have been tasked with stirring patriotic fervor amongst the masses against terrorists – domestic and foreign – and the new axis of evil – Russia and China.

  The world is already on the precipice of war, as the situation in Syria and the Ukraine deteriorates. The requirements of alliances and treaties would require a global war if a treaty member is “attacked” or a false flag event is staged to initiate hostilities. With the Chinese economy poised for a debt conflagration destined to be the world’s next Lehman moment, the spark which unleashes an inferno of debt going bad across the globe will lead to war.

  Once the Rubicon is crossed, there will be no turning back. With Europe already teetering under an unpayable debt burden, enormous unemployment, and now hordes of Muslims invading their lands from the Middle East; oil producing countries undergoing a profound negative economic shock from $40 oil; and countries dependent upon U.S. and European consumption to sustain their mal-investment racked economies; politicians and bankers see war as their last resort for maintaining the status quo.

  When the dominoes of debt begin to topple, a global depression will ensue, leading to an enormous surge in unemployment, skyrocketing budget deficits, intensifying currency wars, plunging global trade, and a final discrediting of central bankers and puppet politicians around the world. Civil unrest will unfold in urban enclaves across the U.S. and around the world. The police state will attempt to crush civil disturbances, but if they go too far, a backlash from heavily armed Americans will be in the offing.

  The militarization of local police will inflame the situation. If race riots in the urban areas spread to the more rural domain of white America, the animosity created during the Obama years would result in much bloodshed. The elites living in NYC, Washington D.C., and California will insist upon an overwhelming Federal response to the chaos. States occupied by more liberty minded citizens and governors may well resist Federal interference, setting in motion secession scenarios and adding fuel to the fire of civil disarray.

  In the midst of economic collapse, plunging stock markets, swelling unemployment rolls, surging home foreclosures, skyrocketing bad debt losses, avalanche of bankruptcies, and chaos in the streets, how will psychopaths controlling our political and financial systems react? Their immense egos, belief in their own brilliance, arrogance, disregard for the consequences of their actions, lack of empathy for mankind, and hubris will lead them to gamble it all on war.

  Any attempt to conscript young people to fight wars on behalf of corporations and bankers will potentially be met with armed resistance from people who have seen the truth, as the Deep State veil is pierced. That will leave the psychopaths with only the current volunteer soldiers, their high tech weaponry, cyber-warfare, and most alarmingly their nuclear arsenal. The toxic mixture of human malevolence, miscalculation, bad luck and technological sophistication could lead to Oppenheimer’s nightmare.

  “Now I am become Death, the destroyer of worlds.”

  

  Strauss & Howe pondered four possible big picture outcomes to this Fourth Turning. The first two are almost too horrendous to ponder, with the world destroyed in an Armageddon scenario or an end to modernity, with a complete collapse of science, culture, politics, and society. They are not the most likely scenarios, but their probability is certainly not zero. That leaves the remaining two likelihoods – the end of our nation in its current form or a successful resolution of the Crisis with a rebirth of the nation and a new High.

  The reason I cannot fathom a positive resolution of this Crisis is the deeply entrenched corruption and diseased institutions controlling the levers of society. The system cannot be reformed from within and must crash, with the existing social order replaced. There is no gallant leader poised to bring the country back to its former glory. The Roman Empire lasted twelve generations, the Soviet Union one generation, and I fear the American Empire will not survive until its fourth generation in its current form.

  So the question remains, what form will our nation take at the end of this Fourth Turning? Rome is still a city in Italy. The people who lived under the Soviet empire still live their lives today. The U.S. could become a drastically reduced nation state, no longer policing the world, with a lowered standard of living, less debt, less government, a currency based on the productive assets of the nation, an economy driven by savings and investment, small local banks that take deposits and lend money to businesses and people, and absolutely no Federal Reserve controlling the currency and interest rates of the country. A desperate public could also turn to a dictator who promises them even more safety and security, with the loss of all freedom and liberty. Or the country could break-up into a multitude of regional countries with like-minded values, economic interests, and beliefs.

  I don’t know what the future holds for my country, my family, or the world. I do know our individual choices over the coming decade will matter. I do know we are in a fight for the survival of humanity where good people must prevail or evil will triumph. Victory will require individual and communal courage. The fight will require perseverance, determination, foresight, intelligence, and a willingness to die for the ideas of liberty and freedom.

  Whether you lead or follow, the only way to bring the country back to its founding principles and restoration of the U.S. Constitution is to act with honesty, integrity, and honor. Leading by example rather than words, while setting high moral standards for your actions, will inspire others to do the same. It may not seem so at this moment, but the very survival of our country is at stake. There are no guarantees and believing God will always be on our side is wishful thinking. The glory or ruin of our country will be decided in the next decade and we will have a say in that outcome.

  “Eventually, all of America’s lesser problems will combine into one giant problem. The very survival of the society will feel at stake, as leaders lead and people follow. The emergent society may be something better, a nation that sustains its Framers’ visions with a robust new pride. Or it may be something unspeakably worse. The Fourth Turning will be a time of glory or ruin.

  History offers no guarantees. Obviously, things could go horribly wrong – the possibilities ranging from a nuclear exchange to incurable plagues, from terrorist anarchy to high-tech dictatorship. We should not assume that Providence will always exempt our nation from the irreversible tragedies that have overtaken so many others: not just temporary hardship, but debasement and total ruin. Losing in the next Fourth Turning could mean something incomparably worse. It could mean a lasting defeat from which our national innocence – perhaps even our nation – might never recover.” – Strauss & Howe – The Fourth Turning

  

  There is a time for everything, and a season for every activity under heaven:

  a time to be born and a time to die,

  a time to plant and a time to uproot,

  a time to kill and a time to heal,

  a time to tear down and a time to build,

  a time to weep and a time to laugh,

  a time to mourn and a time to dance,

  a time to scatter stones and a time to gather them,

  a time to embrace and a time to refrain,

  a time to search and a time to give up,

  a time to keep and a time to throw away,

  a time to tear and a time to mend,

  a time to be silent and a time to speak,

  a time to love and a time to hate,

  a time for war and a time for peace.

  (Ecclesiastes 3:1-8, NIV)

  

  

  

  

  

• Pedro Da Costa Has The Courage To Review Ben Bernanke's Memoir, Finds A Few Gaping Holes

  Pedro da Costa may no longer be asking Janet Yellen uncomfortable questions on behalf of the WSJ, but that doesn’t mean the Peterson Institute’s latest editorial fellow can’t opine on his favorite topic: central bankers.

  In the following review of Ben Bernanke’s memoir “The Courage To Act”, Pedro has done just that, and while his review of what is contained in the book is enlightening for those who are still waiting for the deflated, “fair value” priced copy, it is Pedro’s “courage to write” what Bernanke conveniently forgot to add in his memoir, that makes this review so much more memorable than the generic sycophantic tripe written by his “access journalism” peers.

  Yet the ongoing manipulation of key benchmark interest rates—which falls within the direct purview of the Fed—does not get a mention in the book. Neither do illegal foreclosures, the lack of transparency on Wall Street, banks’ concentrated political power, the revolving-door nexus of Wall Street and the regulatory world, or even the global banking system’s increasing vulnerability to financial crises (think Greece, China, Japan, Russia, Brazil, Turkey—and that’s just in the past year).

   

  Bernanke does accept some blame for having missed the signs of looming financial disaster on his watch. But he stops well shy of a mea culpa. He says he was merely echoing the conventional wisdom of the time: that the housing bubble wouldn’t burst spectacularly and that, even if it did, the economic damage would be limited.

  But at least Bernanke had the “courage” to cover everything else…

  * * *

  Originally posted on Book Forum, written by Pedro Nicolaci Da Costa

  Anatomy of a Meltdown

  Ben Bernanke’s Washington tell-all says too little, too late

  Former Federal Reserve chairman Ben Bernanke’s new book feels more like the first of many acts than an authoritative memoir. And the main body of the narrative remains, so far as financial history is concerned, very much a work in progress.

  Still, notwithstanding its provisional character, there’s no denying that The Courage to Act is a useful document. Bernanke was arguably the most powerful economic official in the world during the worst global financial crisis since the Great Depression. His direct account of that event, staid though it can be, is invaluable—both for the official record and for understanding how his thinking shifted during an eventful eight-year tenure atop the Fed.

  The memoir begins with an amusing glimpse into the notoriously shy and guarded Bernanke’s personal life, cataloguing his journey from a small-town boyhood in South Carolina through the Ivy League academic ranks and on to what he describes as his unlikely elevation to the head of the nation’s central bank. “I had studied monetary policy for years,” writes Bernanke, who as a longtime Princeton economics professor specialized in the study of the monetary causes of the Great Depression. “I had never expected to be part of the institution and contributing to policy decisions.” As he traces the odyssey leading to the inner sanctums of Washington power, Bernanke conquers his constitutional reserve long enough for the reader to get a feel for the folksy demeanor and obsessive baseball fandom that have endeared him within wonkish economic-policy circles.

  Yet this personal touch is less in evidence as the book progresses. Bernanke slips all too easily into inside-baseball macroeconomic jargon in his blow-by-blow policy chronology, and while this might be interesting to investors, scholars, and journalists who lived through the crisis, it fails to offer enough insight to make this a broadly compelling historical account.

  “I proposed that we leave the federal funds rate unchanged, while hedging our bets a little by continuing to acknowledge in our statement that ‘some inflation risks remained,’” he writes of one key policy call in 2006, early on in his tenure as Fed chairman. Not exactly fly-on-the-wall material—especially considering that full transcripts of meetings for that year were released in 2011. The book contains too many such passages.

  In Bernanke’s version of events, his reticence seems more than simply personal; the omissions from his narrative prove, at times, to be more telling than the stories he shares. This is particularly true when it comes to the prospect of increased financial regulation—a chronic blind spot of Bernanke’s as chairman and, not coincidentally, a shortcoming typical of the conventional economic models favored by the nation’s other senior economic policy makers.

  As he recounts how he sized up the challenges presented by the Fed post, Bernanke explains that, like many scholarly economists, he relished the chance to see his key intellectual concerns at play in real-world-policy settings. “I was interested in all of the work of the Board, including the regulation and supervision of banks. The big attraction, however, was the chance to be involved in U.S. monetary policy,” he admits.

  An intensive focus on monetary matters dominates The Courage to Act, as it did Bernanke’s chairmanship. To take one striking example, Bernanke never talks about criminality or fraud when it comes to the financial crisis, despite ample legal evidence—and countless Justice Department settlements—indicating that banks consistently pushed the boundaries of legality and often went well beyond them. (He did get a lot of attention recently for saying, in an interview with USA Today published the day of the book’s release, that there should have been more prosecutions.)

  Yet the ongoing manipulation of key benchmark interest rates—which falls within the direct purview of the Fed—does not get a mention in the book. Neither do illegal foreclosures, the lack of transparency on Wall Street, banks’ concentrated political power, the revolving-door nexus of Wall Street and the regulatory world, or even the global banking system’s increasing vulnerability to financial crises (think Greece, China, Japan, Russia, Brazil, Turkey—and that’s just in the past year).

  Bernanke does accept some blame for having missed the signs of looming financial disaster on his watch. But he stops well shy of a mea culpa. He says he was merely echoing the conventional wisdom of the time: that the housing bubble wouldn’t burst spectacularly and that, even if it did, the economic damage would be limited.

  In the great Washington tradition of blandly asserted deniability, Bernanke also rather fatalistically insists that the overlapping jurisdictions of multiple agencies—the Fed, the Office of the Comptroller of the Currency, the Securities and Exchange Commission, and others—all but ensured that no single body had ultimate responsibility for monitoring the entire financial system.

  Bernanke says he quietly but unsuccessfully favored a model that would have essentially handed all banking-regulation authority to the Fed, despite its widely reported precrisis failures. He was pushing back against ideas like Senate Banking Committee chairman Chris Dodd’s plan to strip the Fed of its regulatory authority entirely. “The Fed already possessed the bulk of the government’s expertise and experience needed to serve as the financial stability regulator,” Bernanke contends.

  That expertise had not helped the Fed foresee the crisis, much less prevent it. But once the scope of the meltdown finally dawned on Bernanke, he was in some ways the perfect man for the job. His research on the Great Depression, as well as on Japan’s troubles with economic stagnation and deflation—a vicious cycle of falling prices, wages, and business activity—gave him an ample tool kit, albeit a still largely untested one, with which to approach the problems.

  Indeed, Bernanke had given an inadvertently prescient speech in 2002 titled “Deflation: Making Sure ‘It’ Doesn’t Happen Here.” In it, he argued that central banks were not powerless to stimulate economic growth and employment, as had been widely presumed, in the event that official interest rates fell to zero. Instead, the Fed could purchase a range of government bonds to put downward pressure on longer-term interest rates, boosting other financial and credit markets in the process. The increased lending would help revive economic activity.

  And buy bonds he did. Starting in late 2008, the Fed began purchasing Treasury and mortgage bonds in earnest, in a series of “quantitative easing” programs designed to bring the financial system back to life and bolster a sputtering economic recovery. The final tally of buying, which took place in three rounds, wound up totaling in excess of $4.5 trillion, more than five times the Fed’s precrisis bond portfolio. During an emergency teleconference of the policy-setting Federal Open Market Committee on January 21, 2008, Bernanke didn’t mince words. “At this point we are facing, potentially, a broad-based crisis,” he told his colleagues. “We can no longer temporize. We have to address this crisis. We have to try to get it under control. If we can’t do that, then we are just going to lose control of the whole situation.” Yet despite forceful moves to secure the banking system, including the decision to keep official rates at zero for nearly seven years, the performance of the US economy continues to frustrate the Fed’s optimism about the future in almost systematic fashion.

  Bernanke, who now works as an adviser for the hedge fund Citadel and for Pimco, a giant bond fund based in California, might have hoped for a better set of economic indicators to greet the release of The Courage to Act. To his credit, the unemployment rate has fallen sharply to 5.1 percent, a far cry from its recession peak of 10 percent. However, there is evidence of underlying weakness in employment, including low workforce participation, a stubborn lack of wage growth, and high long-term joblessness. The economy’s growth rate remains lackluster, suggesting the expansion is still sluggish some six years after it began. True, the US economy looks stronger than many of its overseas counterparts, but that’s not saying much, given a global outlook that continues to deteriorate and threatens to once again shake US growth.

  The status quo is particularly worrying in the already lagging realm of financial regulation. The sense that Wall Street has gone back to business as usual is pervasive among investors and the public. Bernanke admits there was little appetite for regulation within the agencies charged with writing and enforcing the rules: “[Alan] Greenspan and senior Fed attorneys were reluctant as a matter of principle to aggressively use” the new authority they had acquired to stop “unfair or deceptive” lending practices during the housing boom, he writes.

  Washington’s persistent aversion to adopting tougher rules for finance could leave the country distinctly unprepared for another market shock. A recent Boston Fed conference found, discouragingly, that the current tools available to regulators to prevent and fight financial crises would likely fail. That’s hardly a ringing endorsement of years of hard-fought reform—or of Bernanke’s legacy. Nor is this glum appraisal out of line with Bernanke’s own confessed agnosticism about more robust regulatory enforcement. “Philosophically, I did not view myself as either strongly pro- or anti-regulation,” he writes. “As an economist, I instinctively trusted the markets.”

  The nation’s chief regulator is more emphatic about his general allegiances in the rarefied circles of financial power. One especially fond memory, of the Bank for International Settlements (BIS), is instructive: “We retired to the BIS dining room for long, frank conversations over gourmet four-course dinners (each course with its own wine). For generations, the world’s central bankers have formed a sort of club, of which I was now a member.”

  * * *

  And for those curious to learn more about the “central bankers’s sort of club”, the Bank of International Settlements, please read “Meet The Secretive Group That Runs The World“

  * * *

  Pedro Nicolaci da Costa is an editorial fellow at the Peterson Institute for International Economics. He has been writing about economics since 2001, and covered the Fed extensively before, during, and after the 2008 financial crisis.

  

  

  

  

  

• Here's How To Trigger A Bank Run

  Submitted by Tim Price via SovereignMan.com,

  On August 6, 1979, Paul Volcker as the new Chairman of the Federal Reserve was determined to eliminate the terribly high inflation that had taken hold of the system. And he succeeded.

  The Fed’s primary interest rate stood at 11% when Volcker entered office. By June 1981 he had hiked them all the way to 20%.

  Corporate America was not impressed. Indebted farmers blockaded his building.

  But the pain was relatively short-lived. And as Volcker’s victory over inflation became more apparent, markets applauded. As bond prices started to rise, stock prices joined them.

  Both credit and equity markets began a multi-decade bull run.

  The trend in interest rates for years has been in the other direction; rates in the US are now effectively zero, though Janet Yellen is widely expected to announce a modest tightening next month.

  Over here in Europe, zero has not marked the lower bound for rates. The European Central Bank’s deposit rate stands at negative 0.2%. And they’re widely expected to cut the deposit rate even further.

  These policies have consequences. One of those consequences is that government bond yields throughout Europe have gone negative.

  Government bond yields with durations up to two years are now negative in Switzerland. As well as Germany. Finland. The Netherlands. Austria. Belgium. Denmark. France. Ireland. Sweden. Italy. Spain.

  Regardless of how heavily and unsustainably indebted those governments are, bond investors in all of those countries are still buying bonds even though they are now guaranteed to lose money.

  But if this weren’t odd enough, the weirdness has spread from bonds to cash.

  From January, depositors in Alternative Bank Schweiz in Switzerland will earn negative 0.125% on bank deposits. Depositors with over 100,000 Swiss francs will earn negative 0.75%.

  If you wanted to trigger a bank run, this is certainly how you might go about it.

  First, drive interest rates down to zero. Then cut rates even more. At the same time, start talking about banning cash altogether.

  And if you’re in the euro zone, make sure you squander seven years doing precisely nothing to restructure your banking system after its near-death experience of 2008.

  What should the rational investor do in an environment of ongoing financial repression?

  To know the answer, we need to know whether central banks will be successful in their increasingly quixotic efforts.

  We think the ultimate outcome will be an inflationary mess on a scale perhaps unprecedented in financial history, but not, perhaps, before a deflationary crisis happens first.

  Either way, western market government bonds no longer offer any margin of safety, only the prospect of guaranteed loss. They have once again become certificates of confiscation.

  For us, the logical solution is to focus only on the highest quality businesses trading at the lowest possible multiples – which invalidates most western markets, notably those of the US, from consideration.

  And notwithstanding the price action of the last four years, we continue to see merit in precious metals.

  Think of gold, for example, not as a commodity (given that gold is rarely, if ever, consumed), but as a special type of bond.

  In the words of Charlie Morris, formerly of HSBC Global Asset Management, think of gold as an irredeemable bond that pays no interest, but has no credit risk, where the issuer is God or the universe itself.

  

  

  

  

  

• Number Of Millennials Living In Parents' Basement Climbs (Again); Weddings Blamed (Again)

  Three weeks ago, we noted with some alarm that the number of women age 18 to 34 living with their parents is now the highest since record keeping began more than seven decades ago. 

  According to a study by the Pew Research Center in Washington, 36.4% of young women have now moved back to the basement, so to speak. The culprit: weddings. No, really. From Bloomberg: 

  Eternal happiness can wait. Millennials are much less likely to be married than their parents were at their age, and marriage often serves as an impetus to move out. 

  

   

  Of course the real reason why 18-34 year-olds are moving home is because the US economic “recovery” is characterized by a labor market that, far from being a “robust” creator of breadwinner jobs, actually churns out bartenders and waiters. The sad thing is, between lackluster wage growth, crippling student debt, and bad decision making when it comes to picking a college major, some millennials are finding out that serving drinks is a far better way to make ends meet than taking a full-time job for a meager salary that all but guarantees you a spot among America’s growing peasantry.

  On Monday, we get still more evidence of the above, this time from the Commerce Department, who reports that 31.5% of 18-34 year-olds now live with their parents. As you can see from the following, this is one graph that is the definition of “up and to the right”:

  

  If that were a chart of some “key metric” a startup founder dreamed up with the help of a VC backer, you’d have yourself a billion dollar unicorn. Unfortnately it’s not. It’s an illustration of just how abysmal the US economic “recovery” truly is and it’s also a reflection of what happens when you pair an inexorable rise in the cost of education with a jobs market that’s a shadow of its pre-crisis self. 

  Next, have a look at the chart of 25-34 year-olds living with their parents:

  

  As you can see, that looks like the highest level on record. If we assume a student starts college at 18 or 19, and finishes in 4-5 years (which may be optimistic but should be a decent baseline), the 25-34 bracket should include quite a few graduates. If these young adults are moving home at a record pace, one has to believe that the labor market is anything but “robust.” 

  But not so fast says Jed Kolko, an independent economist and senior fellow at the Terner Center for Housing Innovation at the University of California, Berkeley. As WSJ notes, Kolko – like te Pew Research Center – believes this can all be explained by a lack of weddings. Here’s WSJ: 

  Mr. Kolko says that the rise in children living with their parents is largely related to the fact that people are marrying and having children later, not to the weak economy and housing market. Single people without children are more likely to continue living at home much later.

  Note that Kolko is asking you to make the following ridiculous assumption: if you aren’t married, you automatically want to live with your parents. Obviously, that’s absurd. 

  But one thing Kolko does get right is this: “What I think it means is that the boost to housing from young adults will come more slowly than people expect.”

  Indeed Jed. But not because unmarried people want to live in their parents’ basement until they find their soulmate. Rather, because soaring rents, student debt, and a lack of decent job opportunities have conspired to make independence and self-sufficiency a pipe dream for a third of the nation’s millennials. 

  

  Also, someone should tell the Commerce Department that there’s no reason to put out this type of abysmal data. A “double seasonal adjustment” could fix this right up.

  

  

  

  

  

• Paper Gold Dilution Hits 294x As Comex Registered Gold Drops To New All-Time Low

  One week ago, gold market observers were surprised when in the span of four days, gold held in the JPM Comex vault declined by nearly 50%, starting on November 16 when the 668,498 ounces held in the vault below 1 Chase Manhattan Plaza declined precipitously to just 347,899 ounces, a new all time low.

  Furthermore, as of the latest Comex activity update, on Friday the Registered gold held by JPM dropped another 2,802 ounces to a record low and virtually negligible 7,975 ounces, essentially equivalent to zero as shown in the chart below, even as JPM’s eligible gold has also been seeing a substantial decline in recent months.

  

   

  But while the decline of JPM gold has long been noted, it was the latest drop in total Comex registered gold which has again raised eyebrows, and which contrary to expectations it would be replenished either from external inflows or by conversion from Eligible both of which have not happened, has instead continued to decline. According to the latest data, total Registered gold dropped by another 11% overnight to just 134,877 ounces, just over 4 tonnes and another all time low…

  

  

   

  … and since the gold open interest remains largely unchanged, the physical gold coverage ratio, or the ratio of gold claims to Registered gold, has just hit an all time high of 294 ounces of paper for every ounces of physical.

  

  

  

  

  

  

• Sweden: "No Apartments, No Jobs, No Shopping Without A Gun"

  Submitted by Ingrid Carlqvist via The Gatestone Institute,

  • The Swedes see the welfare systems failing them. Swedes have had to get used to the government prioritizing refugees and migrants above native Swedes.

  • "There are no apartments, no jobs, we don't dare go shopping anymore [without a gun], but we're supposed to think everything's great. … Women and girls are raped by these non-European men, who come here claiming they are unaccompanied children, even though they are grown men. … You Cabinet Ministers live in your fancy residential neighborhoods, with only Swedish neighbors. It should be obligatory for all politicians to live for at least three months in an area consisting mostly of immigrants… [and] have to use public transport." — Laila, to the Prime Minister.

  • "Instead of torchlight processions against racism, we need a Prime Minister who speaks out against the violence… Unite everyone. … Do not make it a racism thing." — Anders, to the Prime Minister.

  • "In all honesty, I don't even feel they [government ministers] see the problems… There is no one in those meetings who can tell them what real life looks like." – Laila, on the response she received from the government.

  The week after the double murder at IKEA in Västerås, where a man from Eritrea who had been denied asylum grabbed some knives and stabbed Carola and Emil Herlin to death, letters and emails poured into the offices of Swedish Prime Minister (PM) Stefan Löfven. Angry, despondent and desperate Swedes have pled with the Social Democratic PM to stop filling the country with criminal migrants from the Third World or, they write, there is a serious risk of hatred running rampant in Sweden. One woman suggested that because the Swedish media will not address these issues, Löfven should start reading foreign newspapers, and wake up to the fact that Sweden is sinking fast.

  Carola Herlin, Director of the Moro Backe Health Center, was murdered on August 10, along with her son, in the IKEA store in Västerås, Sweden.

  During the last few decades, Swedes have had to get used to the government (left and right wing parties alike) prioritizing refugees and migrants above native Swedes. The high tax level (the average worker pays 42% income tax) was been accepted in the past, because people knew that if they got sick, or when they retired or otherwise needed government aid, they would get it.

  Now, Swedes see the welfare system failing them. More and more senior citizens fall into the "indigent" category; close to 800,000 of Sweden's 2.1 million retirees, despite having worked their whole lives, are forced to live on between 4,500 and 5,500 kronor ($545 – $665) a month. Meanwhile, seniors who immigrate to Sweden receive the so-called "elderly support subsidy" — usually a higher amount — even though they have never paid any taxes in Sweden.

  Worse, in 2013 the government decided that people staying in the country illegally have a right to virtually free health and dental care. So while the destitute Swedish senior citizen must choose between paying 100,000 kronor ($12,000) to get new teeth or living toothless, a person who does not even have the right to stay in Sweden can get his teeth fixed for 50 kronor ($6).

  The injustice, the housing shortage, the chaos surrounding refugee housing units and the sharp slide of Swedish students in PISA tests — all these changes have caused the Swedes to become disillusioned. The last straw was that Prime Minister Löfven had nothing to say about the murders at IKEA.

  Gatestone Institute contacted to the Swedish government, to obtain emails sent to the Prime Minister concerning the IKEA murders. According to the "principle of public access to official documents," all Swedes have the right to study public documents kept by authorities — with no questions asked about one's identity or purpose. The government, however, was clearly less than enthusiastic about sharing the emails: It took a full month of reminders and phone calls before they complied with the request.

  What follows are excerpts from emails sent from private citizens to Prime Minister Stefan Löfven:

  From Mattias, a social worker and father of four, "a dad who wants my kids to grow up in Sweden the way I had the good fortune of doing, without explosions, hand grenades, car fires, violence, rape and murder at IKEA":

  "Hi Stefan. I am a 43-year-old father of four, who is trying to explain to my children, ages 6-16, what is going on in Sweden. I am sad to say that you and your party close your eyes to what is happening in Sweden. All the things that are happening [are] due to the unchecked influx from abroad. You are creating a hidden hatred in Sweden. We are dissatisfied with the way immigration is handled in Sweden, from asylum housing to school issues. And it takes so long to get a job, many people give up before they even get close. Mattias"

  Marcus, 21, wrote:

  "Hi Stefan, I am one of the people who voted for you. I live in Helsingborg, still with my parents because there are no apartments available. I can see where I live that as soon as an old person moves out, eight foreigners immediately move in: they just bypass us young, Swedish people in line. With all that is going on in Sweden ­– rapes, robberies, the IKEA murders and so on — why aren't non-Swedes sent back to their countries when they commit crimes? Of course we should help refugees, but they should be the right kind of refugees. … I'm sorry to say this, Stefan, but the Sweden Democrats should be allowed to rule for four years and remove the people who do not abide by the laws, and who murder or destroy young women's lives. It is horrible, I have a job that pays poorly because there are no jobs. Sweden has more people than jobs."

  Peter wrote:

  "Esteemed Prime Minister. I am writing to you because I am very worried about the development in Swedish society. I am met daily by news of shootings, exploding hand grenades/bombs, beatings, rapes and murders. This is our Sweden, the country that, when you and I grew up, was considered one of the safest in the world.

   

  "You, in your role as Prime Minister, have a responsibility to protect everyone in the land, regardless of whether they were born here or not. Unfortunately, I can see that you are not taking your responsibility seriously. I follow the news daily, and despite our now having suffered another act of madness, this time against a mother and son at IKEA, I do not see any commitment from you? …

   

  "You should emphatically condemn the violent developments we see in this country, allocate resources to the police, customs and district attorneys to slow and fight back (not just build levees and overlook) criminal activity."

  Sebastian wrote:

  "Hi Stefan! After reading about the horrible deed at IKEA in Västerås, I am now wondering what you are going to do to make me feel safe going to stores and on the streets of Sweden. What changes will there be to make sure this never happens again? Will immigration really continue the same way?"

  Benny wrote:

  "Hi, I'm wondering, why is the government quiet about such an awful incident? The whole summer has been characterized by extreme violence, shootings, knifings and explosions. The government needs to take vigorous action so we can feel safe."

  Laila's subject line reads: "Is it supposed to be like this?"

  "Are we supposed to go outside without arming ourselves? Rape after rape occurs and no one is doing anything about it. I was born and raised in Vårby Gård, but seven years ago, we had to move because we couldn't take the dogs out in the evenings due to the non-Europeans driving on the sidewalks. If you didn't move out of the way, they would jump out of the car and hit you. If you called the police, they do nothing — in a suburb of Stockholm. When my brother told some of these men off, a rocket (the kind you use at New Year's) appeared in his mailbox. You can imagine how loud the blast was. Women and girls are raped by these non-European men, who come here claiming they are unaccompanied children, even though they are grown men….

   

  "It is easy to get weapons today, I wonder if that is what we Swedes need to do, arm ourselves to dare to go shopping. Well, now I am getting to what happened at a major department store: Two people were killed and not just killed, there is talk online of beheading.

   

  "The Prime Minister will not say a word, but resources are allocated to asylum housings, a slap in the face for the relatives who just had two of their kin slain. Swedish newspapers will not say a word, but fortunately, there are foreign newspapers that tell the truth. We Swedes can't change apartments, we live five people in three bedrooms. Two of us are unemployed, looking, looking and looking for work. The only option is employment agencies. I'm 50 years old, on part-time sick leave because of two chronic illnesses, I cannot run around from one place to another. But more and more asylum seekers keep coming in. There are no apartments, no jobs, we don't dare go shopping anymore, but we're supposed to think everything's great.

   

  "Unfortunately, I believe the Prime Minister needs to start reading foreign newspaper to find out that Sweden is going under. I found out that the mass immigration costs billions every year, and the only thing the immigrants do is smoke waterpipes in places like Vårby Gård. This is happening in other places too, of course. Now it's starting to spread; you will see that in the opinion polls, next time they are published. Soon, all Swedes will vote for the Sweden Democrats. They are getting more and more supporters every day.

   

  "You Cabinet Ministers do not live in the exposed areas, you live in your fancy residential neighborhoods, with only Swedish neighbors. It should be obligatory for all politicians to live for at least three months in an area consisting mostly of immigrants, the car should be taken from you so you'd have to use public transport. … After three months, you would see my point.

   

  "I am scared stiff of what is happening in this country. What will the government do about this?"

  Anders wrote:

  "Hi Stefan, why don't you, as our Prime Minister, react more against all the violence that is escalating in our country? [Such as] the double murder at IKEA in Västerås. Add to that the bombings and other things happening in Malmö. Instead of torchlight processions against racism, we need a Prime Minister who speaks out against the violence, who says that it's wrong no matter which ethnic group is behind it or at the receiving end of it.

   

  "Because all the people living in Sweden are Swedish, right? A torchlight procession against racism only highlights the fact that it's immigrants committing these crimes. What we need now is a clear signal from our popularly elected [officials] that violence needs to stop now. Sweden is supposed to be a haven away from violence.

   

  "I'm asking you as our Prime Minister, take a stand against the violence. Unite everyone in Sweden into one group and do not make it a racism thing."

  Some of the people received a reply from Carl-Johan Friman, of the Government Offices Communications Unit; others have not received any reply at all. A typical response goes:

  "Thank you for your email to Prime Minister Stefan Löfven. I've been asked to reply and confirm that your email has reached the Prime Minister's Office and is now available for the Prime Minister and his staff. It is of course not acceptable that people should be exposed to violence and criminal activities in their everyday life. Many efforts are made to counteract violence, and quite correctly, this needs to be done without pitting groups against each other. Thank you for taking the time to write and share your views, they are important in shaping government policies."

  Gatestone Institute contacted Laila, one of the people who emailed, and asked her if she was satisfied with the answer she got. Laila replied:

  "No, I'm not satisfied with the answer, because they didn't even respond to what I was talking about. In all honesty, I don't even feel they see the problems. They're talking about what it looks like when they have their meetings, but there's no one in those meetings who can tell them what real life looks like. It feels like the answer I got was just a bunch of nonsense.

   

  They understand that people are scared. They talk about demonstrating against racism; they seem to be completely lost. The politicians do not understand how things work in Swedish society, because they live in their safe, snug neighborhoods where things are quiet. But a lot of Swedes are forced to live in immigrant-heavy neighborhoods, because they cannot afford an apartment somewhere else."

  The anger at the government's non-reaction to the IKEA-murders also led to a demonstration at Sergels Torg, Stockholm's main public square, on September 15. Hundreds of protesters demanded the government's resignation, and held a minute of silence for the slain mother and son, Carola and Emil Herlin. The organizers plan to hold similar protests every month throughout Sweden.

  

  

  

  

  

• Turkey Arrests Generals Who Stopped Syria-Bound, Weapons-Laden, Spook Trucks

  If there’s a silver lining to last Tuesday’s downing of a Russian Su-24 warplane by two Turkish F-16s it’s that the world is now starting to scrutinize President Recep Tayyip Erdogan. Even to the uninitiated it seemed strange that a NATO member would shoot down a Russian fighter jet over an alleged 17 second violation of Turkish airspace. Why, one wonders, would the democratically elected leader of one of the world’s foremost up and coming emerging markets decide, out of the blue, to become the first member of the alliance to engage a Russian or Soviet aircraft in more than six decades? 

  The answer to that question lies in Ankara’s covert dealings with the various rebel groups fighting the Assad regime in Syria.

  Turkey’s support for some militias (the Turkmen fighters aligned with the FSA for instance) is not secret. However, there’s no shortage of speculation that Erdogan is also allied with less “moderate” forces including ISIS. The PKK for instance, has long accused the government of maintaining a cozy relationship with Islamic State and there are all manner of reasons to believe that Turkey has at various times facilitated the flow of fighters and weapons to ISIS (see here) and served as a critical link between the group’s lucrative oil operation and global crude markets (see here and here). Now, thanks to last week’s plane “incident”, this has been laid bare for the world to see and Erdogan is not happy about it. 

  Now that AKP has regained its political supremacy (thanks to a farce of an election Erdogan engineered after AKP lost its absolute majority in June), Ankara has renewed its crackdown on undesirable journalism. As we reported on Friday, Can Dündar, editor in chief of Cumhuriyet, and Erdem Gül, the newspaper’s capital correspondent in Ankara, were arrested last week on charges of spying and aiding and abetting terrorists. 

  

  In reality, Dündar and Gül exposed Turkish intelligence’s role in providing weapons to extremists operating across the border. Here’s WSJ with the summary: “The charges center on a Cumhuriyet report in May, including photos and video, suggesting Turkish intelligence was secretly ferrying weapons to extremist Syrian rebels. The article sparked a major furor in Turkey, which has long been accused by its critics of secretly aiding in the growth of Islamic State militants based in neighboring Syria.” Here’s the video: 

  “The footage shows gendarmerie and police officers opening crates on the back of the trucks which contain what newspaper Cumhuriyet described as weapons and ammunition,” Reuters reported at the time, adding that “witnesses and prosecutors have alleged that MIT helped deliver arms to parts of Syria under Islamist rebel control during late 2013 and early 2014, [according to] a prosecutor and court testimony from gendarmerie officers.”

  For his part, Erdogan claimed the trucks were carrying humanitarian aid for Turkmen groups (presumably the same FSA-aligned Turkmen groups who executed a Russian pilot last week). The President then hilariously accused a bevy of officers and prosecutors of being part of a “parallel state” (with ties to Fethullah Gülen). determined to bring down the government. 

  As Reuters went on to detail, the trucks were eventually allowed to pass after MIT officials threatened the police.“Don’t treat me like you have captured a terrorist,” one of the men told a gendarmerie officer who had handcuffed him.

  The contents of the crates: 1,000 mortar shells, hundreds of grenade launchers and more than 80,000 rounds of ammunition for light and heavy weapons. 

  Here’s where the trucks were intercepted:

  

  Given that the battle for Aleppo (which is still going on today with Iranian ground forces advancing on the city), was raging at the time the trucks were stopped, and given what we know about FSA’s ongoing presence in the city, it seems fairly obvious that the weapons were bound for the Free Syrian Army. Indeed, Erdogan hedged his “humanitarian aid for Turkmens” story, telling supporters over the weekend that “those who revealed the transfer made the world hear about these trucks by stopping them and checking what they were carrying. Then they said the government was sending weapons to terrorist groups [in Syria]. In so doing, they revealed all the humanitarian aid that was going to Bay?r-Bucak Turkmens. They also exposed those going to the FSA in that way.”

  Of course funneling money to the FSA is dangerous enough as we saw last week when the 1st coastal brigade destroyed a Russian search and rescue helicopter with a US-made TOW, but it’s not as though the FSA (they’re “moderates” don’t forget, despite the fact that they fight alongside al-Nusra) were alone in Aleppo when these MIT trucks were stopped. Here’s are two maps which show the ISIS presence in the city on 01/05/2014:

  

  

  Source: First Mile GEO

  As you can see, there’s no telling who these weapons were intended for which, presumably, is why the gendarmerie sought to stop the shipment. 

  Not satisfied with having imprisoned the reporters who broke the story, Erdogan moved on Monday to arrest the officers involved in the stop. Here’s the official story from state-run Anadolu Agency:

  A court in Istanbul has ordered the arrest of three senior army officers, including two generals on charges of espionage and leading a terrorist group in a case involving the search of Turkish intelligence trucks in 2014.

   

  The court made the ruling on Sunday.

   

  General Hamza Celepoglu was accused of forming and leading an armed terrorist organization and of trying to overthrow the Turkish government. General Ibrahim Aydin and a retired colonel, Burhanettin Cihangiroglu, were accused of forming and leading an armed terrorist organization as well as spying and trying to oust the Turkish government, according to Istanbul prosecutor Irfan Fidan.

   

  The three suspects were called to an Istanbul courthouse on Saturday as part of an investigation involving the search of trucks belonging to the Turkish intelligence (MIT) in 2014.

   

  In January of that year, several trucks were stopped by the local gendarmerie in southern Adana and Hatay provinces on the grounds that they were loaded with ammunition, despite a national security law forbidding such a search.

  So let’s just be clear about what’s going on here, because it would be a shame if the absurdity was lost on anyone. In January 2014, MIT loaded up some trucks with weapons bound for militant groups operating in northwestern Syria. Those trucks were stopped at the border by police who were subsequently threatened by intelligence agents who accompanied the drivers. Erdogan has now charged the officers with “forming and leading an armed terrorist organization,” when in fact they were doing the exact opposite. That is, they were trying to keep several truck loads of weapons from reaching armed terrorist organizations.

  As you can see, there are no limits on what Erdogan will do to suppress dissent and cover up Ankara’s role in implicitly supporting terrorism by arming militants in Syria.

  It’s worth noting that the FSA has become nothing more than a kind of catch-all excuse for flooding Syria with weapons. As al-Jazeera reported earlier this month, the group is beset with defections and “nowhere is [the dissatisfaction] more apparent than in Aleppo, where many FSA soldiers are leaving the group, citing inadequate pay, family obligations and poor conditions.” Still, the media manages to portray them as a well-organized group of battle-hardened, “moderate” warriors who have a very real chance at battling the Russians and Iranians to a stalemate (they’ve rejected Russia’s overtures regarding teaming up to fight ISIS) on the way to negotiating for a transition away from the Assad government. This characterization allows Washington and its regional allies to justify the hundreds of millions in guns, ammo, and funding that to this day flows into the country unimpeded. Whether or not all of that goes to the FSA or the Kurds or whether, like Erdogan’s MIT trucks, it all could be going to the very same groups who organize and execute attacks on Western civilians is an open question that will likely never be answered. 

  

  

  

  

• 2015: The Last Christmas In America

  Submitted by Charles Hugh-Smith of OfTwoMinds blog,

  The game of enabling more debt by lowering interest rates and loosening lending standards is coming to an end.

  If we define Christmas as consumer spending going up while earnings are going down, 2015 will be the last Christmas in America for a long time to come. In broad brush, Christmas (along with all other consumer spending) has been funded by financialization, i.e. debt and leverage, not by increased earnings.

  The primary financial trick that's propped up the "recovery" for seven years is piling more debt on stagnating incomes. How does this magic work? Lower interest rates.

  In a healthy economy, households earn more money (after adjusting for inflation, a.k.a. loss of purchasing power), and the increased earnings enable households to save, spend and borrow more.

  In an unhealthy, doomed-to-implode economy, earnings are declining, and central banks enable more borrowing by lowering interest rates to zero and loosening lending standards so anyone who can fog a mirror can buy a new pickup truck with a subprime auto loan.

  The problem with financialization is that it eventually runs out of oxygen. As earnings decline, eventually there's no more income to support more debt. And once debt stops expanding, the economy doesn't just stagnate, it implodes, because the entire ramshackle con game of financialization requires a steady increase in debt and leverage to keep from crashing.

  The trickery of substituting financialization for earned income–the trickery that fueled the last seven years of "recovery"–is exhausted.

  The incomes of even the most educated workers are going nowhere, while the earnings of the bottom 90% are sliding:

  

  Wages as a percentage of gross domestic product (GDP) have been declining for decades. Note the diminishing returns on financialization and asset bubbles that always bust: wages blip up in the bubble and then crash to new lows when the bubble bursts:

  

  Look at how debt has soared while GDP has essentially flatlined. This is diminishing returns writ large: we have to pile on ever-increasing mountains of debt just to keep GDP from going negative.

  

  This dependence on debt for "growth" leaves the economy exquisitely sensitive to any decline in debt growth. The slightest drop in debt growth in the Global Financial Meltdown almost collapsed the entire global economy:

  

  The essential fuel of "growth"–credit expansion–is rolling over:

  

  Even the vaunted prop under a soaring stock market, corporate profits, are rolling over as the stronger dollar and stagnating sales pressure profits:

  

  The game of enabling more debt by lowering interest rates and loosening lending standards is coming to an end. Debt is not a sustainable substitute for income, and households are increasingly finding themselves in two camps: those who can no longer afford to borrow and spend, and those who recognize that going in to debt to support spending is a fool's path to poverty and insolvency.

  Say good-bye to Christmas, America, and debt-based spending in general–except, of course, for the federal government, which can always borrow another couple trillion dollars on the backs of our grandchildren.

  

  

  

  

  

• ISIS: Oil as a Strategic Weapon

  

   

  By EconMatters

  I have to admit that I am a news junkie. So my TV was glued to CNN on the day of the Paris terrorist attack. During its coverage, one of the CNN commentators mentioned that ISIS makes about $2 million a day in oil revenue. That piqued my curiosity and decided to find out more about ISIS oil operation.

  
  

  Oil as a Strategic Weapon

  According to FT, ISIS oil strategy has been long in the making since the group emerged in Syria in 2013. The group saw oil as a funding source for their vision of an Islamic state, and identified it as fundamental to finance their ambition to create a caliphate. ISIS controls most of Syria’s oil fields where it created a foothold in 2013. Crude is the militant group’s biggest single source of revenue.

  Read: Obama Put Taiwan on ISIS Radar

  ISIS has derived its financial strength from being the monopoly oil producer in a huge captive market in Syria and Iraq. Despite a US-led international coalition to fight ISIS, FT describes a “minutely managed” sprawling ISIS operation akin to a national oil company in just two years with an estimated crude production of 34,000-40,000 barrels per day (bpd).

   

  $1.5 million a Day to Fund The Terrorist Group 

  The group sells most of its crude directly to independent traders at the wellhead for $20-$45 a barrel earning the group an average of $1.5 million a day. Without being able to export, ISIS brought hundreds of trucks and started to extract the oil and transport it. According to an FT interview of a local sheikh, an average of 150 trucks is filled daily with about $10,000 worth of oil per truck. Most traders can expect to make a profit of at least $10 per barrel.

   

  Son of Turkey’s President Is In on ISIS Oil?

  The arbitrage had the potential to go a lot more than $10 a barrel when oil prices were high. Russia has accused Turkey of buying ISIS oil (allegedly the son of Turkey’s President is involved, and also allegedly the U.S. is aware of it), reselling it to Japan and Israel for huge profits. Smugglers have been using boats, pumps, carrying on foot, by donkey or horse. Some see the oil production from ISIS as a contributing factor to the global oil glut pushing down oil prices.

  Read: Using the Wave Principle to Trade

  ISIS Adapts to Low Oil Prices

  However, the biggest threat to ISIS oil production has been the depletion of Syria’s aging oilfields despite the group’s efforts to recruit skilled oil workers. ISIS does not have the technology of major foreign oil companies to counter the production decline.

  ISIS has tried adapting to the new lower oil price environment by turning to oil midstream and downstream. FT and Aljazeera both reported that ISIS has recently expanded into refining and petrol stations. In ISIS-controlled territory, there’s no shortage of demand.

   

  Russia & China Eyeing Middle East While Obama ‘Pivots’ to Asia

  It is widely acknowledged that one of the reasons the international coalition against ISIS has not been effective is the reluctance of the coalition to target ISIS oil infrastructure (trucks, oilfields, pipelines) where there’s a large civilian presence, and for the potential environmental impact. Russia jumped in to aggressively target specifically ISIS oil operation and infrastructure aiming to cut off its funding source after ISIS took out a Russian plane. In essence, Russia is trying to push the U.S. aside and take a leadership role in dealing with the ISIS and Middle East chaos.

  Russia’s timing is impeccable just as the U.S. is ‘pivoting’ to Asia, while China is only too eager to help Russia with an eye on the Middle East energy assets for its future energy security. The alliance of China and Russia may have been weakened on a now fragile economic ground due to the slowing economy in China and low oil prices negatively impacting Russia.  However, the U.S. could be in serious trouble if the world starts trading oil in Reminibi instead of the U.S. dollar now that IMF has approved Chinese yuan as a main world currency.

   

  Read: Federal Reserve and Interest Rate Hike

  Coalition In-fighting

  Judging from the allegation that Turkey is buying ISIS oil, and that Turkey shot down a Russian Jet within a narrow 17-second window (some say the actual window is only 5 seconds), there is some serious in-fighting within the coalition against ISIS (perhaps that’s why Obama is desperate enough to drag Taiwan into the ‘Coalition’). One thing seems to always ring true in international politics: When it is about money or self-interests, countries seem more than willing to go that extra mile despite potential dire implications.  

  This could mean ISIS will keep its funding source with its oil making its way to all the intended and ‘unintended’ recipients like Japan, a significant U.S. ally. ISIS has so far demonstrated its ample capabilities in adapting and organizing its operation, this suggest there’s a long way to go in the fight against ISIS terrorists.

  

  

  

  

• Stocks End November With Nothing Despite Biggest Short-Squeeze In 6 Months

  Black Friday sales were crap (yes including online), and economic data this morning was dismal… and still stocks did not rally!!

   

  Trannies have given up their gains for the month and The S&P is practically unchanged – as the Small Cap squeeze is very evident…

  

   

  (November saw "Most Shorted" end up 0.25% – the best gain in 6 months)

  

   

  As Stocks fail once again to hold the October payrolls cliff-edge…

  

   

  But for November, Crude oil and Gold were the biggest losers, stocks eked out gains as the long-bond dropped modestly and EUR fell 4% against the USD…

  

   

  China's afternoon session rescue bid…

  

   

  Provided the pre-market ramp in futures for US markets, but the selling began as US opened…

  

   

  On the day, The fabled FANGs went red… (just remember Cramer said not to sell)

  

   

  And that weighed on all major indices (although Trannies were weak from the start as Crude gave up overnight ramp gains)…Small Caps broke a 5-day winning streak

  

   

   

  The USDollar oscillate in a narrow range around unchanged today (early JPY weakness reverted)…

  

   

  Even as the Offshore Yuan surged…

  

   

  Treasuries rallied after China closed and accelerated as US opened…

  

   

  Credit markets notably weak in November…

  

   

  Commodities were mixed today…

  

   

  With gold's best day in over a month…

  

   

  Crude surged overnight for no good reason whatsoever aidse from algos need to run stops above Friday's shortened close, then dumped it all as US opened…

  

   

  Charts: Bloomberg

  Bonus Chart: As @NanexLLC explains, 10% of all S&P 500 futures volume since midnight occurred between 15:59:50 and 16:00:10…

  

  

  

  

  

• New Smoking Gun: U.S. and UK KNEW Saddam Did NOT Possess WMDs

  We've reported again and again and again and again and again that everyone knew that Iraq didn’t have weapons of mass destruction (WMDs).

  Indeed, the architects of the Iraq war admitted that it was illegal … and really fought for oil (and Israel).

  Today, a new smoking gun has  been disclosed.  The Guardian notes:

  Tony Blair went to war in Iraq despite a report by South African experts with unique knowledge of the country that showed it did not possess weapons of mass destruction, according to a book published on Sunday.

   

  God, Spies and Lies, by South African journalist John Matisonn, describes how then president Thabo Mbeki tried in vain to convince both Blair and President George W Bush that toppling Saddam Hussein in 2003 would be a terrible mistake.

   

  Mbeki’s predecessor, Nelson Mandela, also tried to convince the American leader, but was left fuming that “President Bush doesn’t know how to think”.

   

  ***

   

  The claim was this week supported by Mbeki’s office, which confirmed that he pleaded with both leaders to heed the WMD experts and even offered to become their intermediary with Saddam in a bid to maintain peace.

   

  South Africa had a special insight into Iraq’s potential for WMD because the apartheid government’s own biological, chemical and nuclear weapons programme in the 1980s led the countries to collaborate. The programme was abandoned after the end of white minority rule in 1994 but the expert team, known as Project Coast, was put back together by Mbeki to investigate the US and UK assertion that Saddam had WMD – the central premise for mounting an invasion.

   

  Mbeki, who enjoyed positive relations with both Blair and Saddam, asked for the team to be granted access.

  “Saddam agreed, and gave the South African team the freedom to roam unfettered throughout Iraq,” writes Matisonn, who says he drew on sources in Whitehall and the South African cabinet. “They had access to UN intelligence on possible WMD sites. The US, UK and UN were kept informed of the mission and its progress.”

   

  The experts put their prior knowledge of the facilities to good use, Matisonn writes. “They already knew the terrain, because they had travelled there as welcome guests of Saddam when both countries were building WMD.”

   

  On their return, they reported that there were no WMDs in Iraq. “They knew where the sites in Iraq had been, and what they needed to look like. But there were now none in Iraq.”

   

  In January 2003, Mbeki, who succeeded Mandela as president, sent a team to Washington to explain the findings, but with little success. Mbeki himself then met Blair for three hours at Chequers on 1 February, the book relates.

   

  He warned that the wholesale removal of Saddam’s Ba’ath party could lead to a national resistance to the occupying coalition forces. But with huge military deployments already under way, Blair’s mind was clearly made up. When Frank Chikane, director-general in the president’s office, realised that the South Africans would be ignored, it was “one of the greatest shocks of my life”, he later wrote in a memoir.

   

  Matisonn adds: “Mandela, now retired, had tried as well. On Iraq, if not other issues, Mandela and Mbeki were on the same page. Mandela phoned the White House and asked for Bush. Bush fobbed him off to [Condoleezza] Rice. Undeterred, Mandela called former President Bush Sr, and Bush Sr called his son the president to advise him to take Mandela’s call. Mandela had no impact. He was so incensed he gave an uncomfortable comment to the cameras: ‘President Bush doesn’t know how to think,’ he said with visible anger.”

   

  ***

   

  Mbeki’s spokesman, Mukoni Ratshitanga, confirmed that Mbeki met Blair at Chequers to advise against the war and the UK’s involvement in it. Blair disagreed, Ratshitanga said, insisting that he would side with Bush.

   

  “President Mbeki informed the prime minister that the South African government was about to send its own experts to assist and encourage the Iraqis to extend full cooperation to the UN weapons inspector, Dr Hans Blix,” Ratshitanga said. “He urged the prime minister to await the report of the SA experts before making any final commitment about going to war against Iraq.

   

  ***

   

  Mbeki also had a phone conversation with Bush in 2003 and tried to discourage him from going to war, the spokesman said. “President Bush said he would rather not go to war but needed a clear and convincing signal that the Iraqis did not have WMDs to enable him to avoid the invasion of Iraq.

   

  “President Mbeki informed him about the report of the SA experts which by then had already been sent to the UN secretary general, Dr Hans Blix and the UN security council. He informed President Bush that the report of the SA experts said Iraq had no WMDs. President Bush said he did not know about the report but would obtain a copy from the US ambassador at the UN, New York.”

   

  It is not known whether Bush did obtain a copy of the report.

  Mbeki later contacted Blair to ask him to find out from the US president what would constitute a “convincing signal” from Saddam, promising that he would contact Saddam to persuade him to send such a signal, according to Ratshitanga. “President

   

  Mbeki understood from his sources and was convinced that Prime Minister Blair received his message as reported above, but did not convey it to President Bush.”

   

  Blair’s office did not deny the meeting with Mbeki or the specifics of what was said.

  But the U.S. and UK wanted war … not peace.  They even rejected an offer from Saddam Hussein to leave Iraq and allow in weapons inspectors.

  Obama and Clinton did the same thing in Libya and Syria.  They also falsely blamed those regimes of using WMDS or the like, and supported Islamic terrorists in both Libya and Syria.

  Related … Research Paper: ISIS-Turkey List

  

  

  

  

• President Obama's Latest ISIS Strategy Illustrated

  Seek protection from the great threat…

   

  

   

  Source: Investors.com

  

  

  

  

  

• The Lull Before The Storm – An Ideal Chance To Exit The Casino, Part 1

  Submitted by David Stockman via Contra Corner blog,

  Last night’s Asia action brought another warning that the global deflation cycle is accelerating. Iron ore broke below $40 per ton for the first time since the central banks kicked off the world’s credit based growth binge two decades ago; it’s now down 40% this year and 80% from its 2011-212 peak.

  

  As the man said, however, you ain’t seen nothin’ yet. That’s because the above chart is not merely reflective of  too much supply and capacity growth enthusiasm in the iron ore industry or even some kind of worldwide commodity super-cycle that has gone bust.

  Instead, the iron ore implosion is symptomatic of a much deeper and more destructive malady. Namely, it reflects the monumental malinvestment generated by two decades of rampant credit expansion and falsification of  debt and equity prices by the world’s convoy of money printing central banks.

  Since 1994 the aggregate balance sheet of the world’s central banks has expanded by 10X – rising from $2.1 trillion to $21 trillion over the period. This rise does not measure some kind of ordinary trend which temporarily got out of hand; it represents an outbreak of monetary insanity that is something totally new under the sun.

  What it means is that the Fed, ECB, BOJ, People’s Bank of China (PBOC) and the manifold lesser central banks bought $19 trillion of government bonds, corporate debt, ETFs and even individual equities and paid for it by hitting the electronic “print” button on their respective financial ledgers.

  This central bank balance sheet expansion, in fact, represented 70% of the world’s entire GDP at the time the print-fest began in 1994. Yet as an accounting matter this monumental expansion was inherently suspect .

  That’s because the asset side was mushroomed by already existing assets which had originally funded the purchase of real goods and services. By contrast, the equal and opposite liability side expansion consisted of newly bottled monetary credit conjured from thin air, representing nothing of tangible value, and most especially not savings from the prior production of real economic output.

  Stated differently,  the central banks substituted $19 trillion of fiat credit for $19 trillion of real savings from current income that would have otherwise been required to fund debt and equity issued by businesses, households and governments during the last two deades.

  Needless to say, this giant substitution drastically falsified the price of money and capital. It represented a big fat bid in the financial markets that drove cap rates to deeply sub-economic levels, meaning that bond yields were far too low and equity prices and PE ratios way too high.

  Had the world economy tried to issue trillions of new securities and loans in the absence of this massive central bank balance sheet expansion, interest rates would have soared and PE ratios would have weakened, thereby short-circuiting the reckless expansion of finance which actually occurred.

  In short, the torrid pace of central bank bond buying during the last 20 years has caused the global economy to became bloated with over-financialization.

  In the case of debt, for example, the expansion ratio was nearly 4X. That is, total worldwide public and private debt outstanding soared from $40 trillion to $225 trillion. This astounding $185 trillion gain compared to just a $50 trillion gain in GDP, meaning that the world’s leverage ratio has soared to unprecedented heights.

  

  The expansion of equity capital on the traded stock markets of the world showed the same trend. Global equity market cap rose by $60 trillion or at a 11% annual rate during the two decades through the May 2015 peak. That was more than double the 5.0% growth rate of nominal GDP, meaning that the implicit capitalization rate of world income was soaring even as the world economy was being bloated and deformed by the greatest credit bubble ever imagined.

  

  At the recent peak, therefore, worldwide finance stood at $300 trillion ($225 trillion of debt plus $75 trillion of market equity) compared to just $60 trillion ( $40 trillion of debt and $20 trillion of equity) in 1994. Needless to say, this 5X gain fueled, among other things, the greatest CapEx binge the world has ever seen.

  But is was not healthy, sustainable  CapEx because the underlying debt and equity which financed it – a 5X surge in listed company investment during this period – was drastically under-priced. Consequently, the world is now drowning in uneconomic, excess capacity along the entire food chain of final production – mining, bulk shipping, manufacturing, warehousing, containerships and air freight and downstream distribution.

  Consequently, the collapse of iron ore mining in Australia and shale drilling in North Dakota alike denote not just traditional commodity cycles in petroleum and steel, but the arrival of what will be a long-running CapEx depression that will shrink final demand for energy and steel products for years to come.

  

  Global Capex- Click to enlarge

   

  The chart below  purports to show a difficult outlook for iron ore prices in the next several years owing to an expected further reduction of demand, while supply is expected to grow by another 5% through 2017.

  But that is wishful mainstream thinking. In fact, world shipbuilding is coming to a screeching halt; industrial infrastructure building in Brazil, Turkey and throughout the EM economies is in freefall; and China’s credit Ponzi, which generated massive overinvestment in apartment buildings, industrial production and public infrastructure,is visibly toppling.

  Accordingly, global iron-ore demand is likely to plunge by 20%, not 2% as shown in the graph. Prices are therefore heading into the $20 per ton range, meaning massive bankruptcies in the industry and a multiplier effect among adjacent sectors.

  

  WSJ

  This implosion of demand cannot be remedied with another round of central bank money printing because the world is already at peak debt. Accordingly,  global corporate profit cycle is heading into a deep downturn, just as the equity markets go into a final spasm of levitation based on a handful of big cap stocks.

   

  

  

  

  

  

• Erdogan Says Will Resign If Oil Purchases From ISIS Proven After Putin Says Has "More Proof"

  “I’ve shown photos taken from space and from aircraft which clearly demonstrate the scale of the illegal trade in oil and petroleum products,” Vladimir Putin told reporters earlier this month on the sidelines of the G-20 summit in Antalya. Putin was of course referencing Islamic State’s illicit and highly lucrative oil trade, the ins and outs of which we’ve documented extensively over the past two weeks:

  • The Most Important Question About ISIS That Nobody Is Asking
  • Meet The Man Who Funds ISIS: Bilal Erdogan, The Son Of Turkey’s President
  • How Turkey Exports ISIS Oil To The World: The Scientific Evidence
  • ISIS Oil Trade Full Frontal: “Raqqa’s Rockefellers”, Bilal Erdogan, KRG Crude, And The Israel Connection

  Turkey’s move to shoot down a Russian Su-24 warplane near the Syrian border afforded the Russian President all the motivation and PR cover he needed to expose Ankara’s alleged role in the trafficking of illegal crude from Iraq and Syria and in the aftermath of last Tuesday’s “incident,” Putin lambasted Erdogan. “Oil from Islamic State is being shipped to Turkey,” Putin said while in Jordan for a meeting with King Abdullah. In case that wasn’t clear enough, Putin added this: “Islamic State gets cash by selling oil to Turkey.”

  To be sure, it’s impossible to track the path ISIS oil takes from extraction to market with any degree of precision. That said, it seems that Islamic State takes advantage of the same network of smugglers, traders, and shipping companies that the KRG uses to transport Kurdish crude from Kurdistan to the Turkish port of Ceyhan. From there, the oil makes its way to Israel and other markets (depending on which story you believe) and if anyone needs to be thrown off the trail along the way, there’s a ship-to-ship transfer trick that can be executed off the coast of Malta. The maneuver allegedly makes the cargoes more difficult to track. 

  Some believe Erdogan’s son Bilal – who owns a marine transport company called BMZ Group – is heavily involved in the trafficking of Kurdish and ISIS crude. Most of the ships BMZ owns are Malta-flagged. 

  In light of the above, some have speculated that Turkey shot down the Su-24 in retaliation for Russia’s bombing campaign that recently has destroyed over 1,000 ISIS oil trucks. Here’s what Syrian Information Minister Omran al-Zoub said on Friday:

  “All of the oil was delivered to a company that belongs to the son of Recep [Tayyip] Erdogan. This is why Turkey became anxious when Russia began delivering airstrikes against the IS infrastructure and destroyed more than 500 trucks with oil already. This really got on Erdogan and his company’s nerves. They’re importing not only oil, but wheat and historic artefacts as well.”

  Al-Zoub isn’t alone in his suspicions. In an interview with RT, Iraqi MP and former national security adviser, Mowaffak al Rubaie – who personally led Saddam to the gallows – said ISIS is selling around $100 million of stolen crude each month in Turkey. Here are some excerpts: 

  “In the last eight months ISIS has managed to sell … $800 million dollars worth of oil on the black market of Turkey. This is Iraqi oil and Syrian oil, carried by trucks from Iraq, from Syria through the borders to Turkey and sold …[at] less than 50 percent of the international oil price.”

   

  “Now this either get consumed inside, the crude is refined on Turkish territory by the Turkish refineries, and sold in the Turkish market. Or it goes to Jihan and then in the pipelines from Jihan to the Mediterranean and sold to the international market.”

   

  “Money and dollars generated by selling Iraqi and Syrian oil on the Turkish black market  is like the oxygen supply to ISIS and it’s operation,” he added. “Once you cut the oxygen then ISIS will suffocate.”

   

  “There isn’t a shadow of a doubt that the Turkish government knows about the oil smuggling operations. The merchants, the businessmen [are buying oil] in the black market in Turkey under the noses – under the auspices if you like – of the Turkish intelligence agency and the Turkish security apparatus.”

   

  “There are security officers who are sympathizing with ISIS in Turkey. They are allowing them to go from Istanbul to the borders and infiltrate … Syria and Iraq.”

   

  “There is no terrorist organization which can stand alone, without a neighboring country helping it – in this case Turkey.”

  That’s pretty unequivocal. But it gets better.

  On Monday, Putin was back at it, saying that Russia has obtained new information that further implicates Turkey in the Islamic State oil trade. “At the moment we have received additional information confirming that that oil from the deposits controlled by Islamic State militants enters Turkish territory on industrial scale,” Putin said on the sidelines of the climate change summit in Paris. “We have traced some located on the territory of the Turkish Republic and living in regions guarded by special security services and police that have used the visa-free regime to return to our territory, where we continue to fight them.”

  “We have every reason to believe that the decision to down our plane was guided by a desire to ensure security of this oil’s delivery routes to ports where they are shipped in tankers,” he added, taking it up another notch still. 

  As for Erdogan, well, he “can’t accept” the accusations which he calls “not moral”:

  • ERDOGAN: TURKEY CAN’T ACCEPT RUSSIA CLAIMS THAT IT BUYS IS OIL

  LATEST – Erdo?an: Russia’s claim that Turkey bought oil from Daesh is not ‘moral’, such claims have to be proved pic.twitter.com/PZka8MwzpL

  — DAILY SABAH (@DailySabah) November 30, 2015

  Hilariously, the man who just finished starting a civil war just so he could regain a few lost seats in Parliament and who would just as soon throw you in jail as look at you if he thinks you might be a threat to his government, now says he will resign if Putin (or anyone else) can present “proof”: “We are not that dishonest as to buy oil from terrorists. If it is proven that we have, in fact, done so, I will leave office. If there is any evidence, let them present it, we’ll consider [it].” 

  Hold your breath on that.

  And so, the Turkey connection has been exposed and in dramatic fashion. Unfortunately for Ankara, Erdogan can’t arrest Vladimir Putin like he can award winning journalists and honest police officers who, like Moscow, want to see the flow of money and weapons to Sunni militants in Syria cut off. 

  The real question is how NATO will react now that Turkey is quickly becoming a liability. Furthermore, you can be sure that the US, Saudi Arabia, and Qatar (who are all heavily invested in the Sunni extremist cause in Syria), are getting nervous. No one wants to see this blown wide open as that would mean the Western public getting wise to the fact that it is indeed anti-ISIS coalition governments that are funding and arming not only ISIS, but also al-Nusra and every other rebel group fighting to wrest control of the country from Assad. Worse, if it gets out that the reason the US has refrained from bombing ISIS oil trucks until now is due to the fact that Ankara and Washington had an understanding when it comes to the flow of illicit crude to Cehyan, the American public may just insist on indicting “some folks.” 

  Remember, when it comes to criminal conspiracies, the guy who gets caught first usually ends up getting cut loose. It will be interesing to see if Erdogan starts to get the cold shoulder from Ankara’s “allies” going forward.

  

  

  

  

  

• Which Stocks Are Cheap?

  Across 4,888 US listed stocks, only the micro-est of micro-caps remain (historically speaking) cheap… do you feel lucky?

   

  

  
  

  Source: Quantr.co

  

  

  

  

  

• Fashion Company SQBG Tries To Crush Shorts, Force Squeeze After Chairman Urges Investors To Pull Borrow

  Last Thursday, in a move which we had expected would happen, KaloBios new CEO Martin Shkreli gave shorts in KBIO a “thanksgiving present” when he announced he would stop lending out his 70% block of KBIO shares, thus making shorting virtually impossible and forcing a short squeeze, one which sent the stock up over 100% the next day.

  It appears the idea of withdrawing one’s borrow has spread to other troubled companies, and moments ago in a very surprising statement,  the Chairman of small-cap fashion company, Sequential Brands Group (SQBG), William Sweedler issued the following statement today “with respect to the recent volatility in the Company’s stock price”, by which we assume meant the 10% intraday slide in the company’s price.

  “Tengram Capital Partners, as the largest shareholder of the Company, has been closely monitoring the significant decline in the Company’s stock price and associated increase in trading volume.  We believe this decline in stock price and related increase in volume is being driven primarily by short sellers.  The Securities and Exchange Commission only permits this activity if the short sellers have access to shares that may be borrowed to cover their positions.  What you may not know is that you, as a stockholder of the Company, may be facilitating the ability of these short sellers to create these positions by permitting your shares to be borrowed. 

  The problem, however, is that unlike KBIO, Tengram owns a modest 16% of the company and hardly enough to cause a panic short covering burst in the stock, which according to Bloomberg has 9% of its float shorted.

  As a result the Chairman had no choice but to ask every other investor in the company to do the same, and force the kind of squeeze witnessed in KBIO (and of course Volkswagen):

  “Tengram has instructed its broker that it will not permit borrowing of any of its shares by short sellers who are only interested in reducing the value of the Company’s stock price for their short-term gain.  We urge each of you to contact your broker today and inform them that your shares may not be made available to be borrowed by short sellers.”

  In other words, the war against shorts takes on a new form, one where executives and investors are pulling borrow, making naked shorting virtually impossible, and hoping to technically trap shorts and force a short squeeze.

  It remains to be seen if they will succeed, although for now the SQBG price has returned back to opening levels…

  

  … although we are confident that as more and more companies try the “Shrekli” angle, many more squeezes among some of the most troubled public companies will become the norm, leading to even more pain for those who are short them, just as we predicted a week ago. At least until the SEC and Finra have something to say about this practice.

  

  

  

  

  

• How To Defeat ISIS (In 9 Simple Steps)

  Having fixed the greatest threat to the world – climate change – and following the deadly Paris attacks and numerous other violent incidents perpetrated by the terror group ISIS, many governments and populations worldwide are wondering how we can eliminate this threat. Here are some strategies to defeat the Islamic State…

  • Publish a long-form article detailing the challenges involved in fighting an enemy that does not value human life
  • Refuse to appear terrorized by this constant, worldwide threat of violence and death
  • Organize a coup, leaving the U.S. free to prop up the ISIS leader of their choice
  • Spend $1.7 trillion
  • Attempt to compromise with our adversary by meeting them halfway on their demand to spill the blood of all apostates
  • Stop flow of new ISIS recruits from West by encouraging disaffected youth to join violent extremist groups back home
  • Maybe draw them out to sea?
  • Simply coordinate with our allies on a comprehensive strategy that targets ISIS militants while limiting civilian casualties, while simultaneously addressing the longstanding socioeconomic struggles that drive young Arab men to embrace radicalism, reaching out to liberal and moderate factions within Syria, and addressing our own prejudices that galvanize support for terror around the Islamic world
  • Train and arm somebody else’s kids to go over there and shoot them

  Sound crazy?

  Source: The Onion

  

  

  

  

  

Digest powered by RSS Digest

• Paul Craig Roberts Rages At The "Arrogance, Hubris, & Stupidity" Of The US Government

  On the heels of the Chinese stock market plunging 5.5%, continued turmoil in the Middle East and the price of gold hitting 5 year lows, former U.S. Treasury official, Dr. Paul Craig Roberts told Eric King of King World News that Putin and the Russians are now dominating in Syria and the Middle East as the West destroys itself.

  Dr. Paul Craig Roberts:  “It could well be that this is going to work out so much in Russia’s favor that Putin will send a letter of thanks to the Turkish President and say, ‘Thank you very much.  You’ve done us a huge favor. (Laughter).  We lost a pilot and a naval marine but we sure have gained a lot.  That was only two deaths for winning a war.”…

   

  “So that looks to me like the most likely outcome.  The unintended consequence of this are so positive for Russia that it’s got Washington quaking and Europe wondering about the idiocy of being in NATO.”

   

  Eric King:  “What I’m hearing from you Russia is dominating in Syria.  The Russians have completely taken over and there’s really nothing Washington can do.”

   

  Paul Craig Roberts:  “No, except make a fool of itself by supporting ISIS.  We brought ISIS in there (to Syria) — everybody knows that.  Just the other day the former head the Pentagon’s Defense Intelligence Agency said on television that ‘Yes, we created ISIS and we used them as henchmen to overthrow governments.’ (Laughter).

   

  And the polls in Europe show that the people are on Russia’s side regarding the shooting down of their aircraft.  They don’t believe (the West’s) story at all.  So I think what you are seeing here is the arrogance, hubris, and stupidity of the United States government.  They are just handing every possible advantage over to the Russians.

   

  This American government is the most incompetent government that has ever walked the earth.  Those people don’t have any sense at all.  Just look at what they’ve done.  In 14 years they’ve destroyed 7 countries, killed millions of people, and displaced millions of people.  And where are those displaced people?  They are overrunning Europe.

   

  This is all because those Europeans were stupid enough to enable our wars.  Now the political parties in Europe are under tremendous pressure from these refugees and the populations who object to them, and from the rising dissident parties who are saying, ‘Look at what these people who you trusted have done.  They’ve changed your country.  It’s not Germany anymore — it’s Syria.’ (Laughter). 

   

  This is a disaster.  Only the stupid Americans could have produced such a disaster.  Does Putin need to do anything?  We’re doing it all for him.  So he doesn’t need to do anything.  He’s not going to attack anybody.  What does he need to attack anybody for?  The idiot Americans are destroying themselves and their allies.  This is an amazing fiasco.”

  And On Gold… Massive Government Corruption

  Eric King:  “Dr. Roberts, people are worried about World War III breaking out and yet we have the price of gold today hitting 5 1/2 year lows.  So I guess even though Washington has lost control in the Middle East, they still feel like they have to keep up appearances.”

   

  Paul Craig Roberts:  “Gold didn’t hit a low, it was artificially driven down by the bullion banks, who are agents of the Federal Reserve and acting on the Fed’s orders.  This is the way the Fed protects the dollar from losing value.  This has been going on in earnest since the fall of 2011.  We see the appearance at the most odd times of day and night, for no reason whatsoever, of massive short sale of paper contracts that cause the price of gold to move straight down.”

   

  Eric King:  “We saw that today in the gold market with roughly $2 billion of paper gold being sold into the market almost instantaneously.”

   

  Paul Craig Roberts:  “But it doesn’t mean anything about the value of gold.  It simply means that the Federal Reserve and the bullion banks have manipulated the market.  So that’s what’s going on.  This is the worst kind of criminality and the worst kind of corruption.  I, myself, wrote to the Commodity Futures Trading  Commission and asked them why they permitted this?  This is a violation of the law.  But nothing can be done because it’s the government that’s doing it and the government is not going to prosecute itself.

   

  So never say gold hit a new low because it didn’t.  It got driven down artificially by a corrupt government…"

  Read more here and listen to the full interview…

  

  

  

  

  

  

• Argentines Stumped By Mystery Trucks Loaded With $130 Million In "High Denomination" Bills

  Apparently taking a page out of the Spanish government's playbook, Argentines in the Santa Cruz region were surprised yesterday afternoon when at least five bright yellow armored trucks accompanied by heavily armed police paraded through the city. Just weeks after Kirchner's Peroniost government lost the election, and coming after five office fires (destroying banking and economic files from the current regime), local press reports the trucks loaded up with $130 million of banknotes at the airport and driven to banks in the region where outgoing President Kirchner's sister-in-law is governor. Amid comments by the central bank that there are no reserves left, and ongoing discussions of larger banknote denominations and (implied 50% devaluations), one could only speculate where the officially "business-as-usual" transfer of $100s of millions of banknotes will end up.

  

   

  As local press reported (via Google Translate)…

  The passage of these trucks through the city, road banks and other unspecified places, attracted wide attention of ordinary citizens who quickly settled in social networks, in the mystery of what was happening…

  Un amigo saco estas fotos ahora en Rio Gallegos, dcnas d camiones d caudales!!Los Kirchner se mudan? @CFKArgentina pic.twitter.com/Sy3ftETVuR

  — ANDY….MUJER (@andyhowez) November 25, 2015

  This time, however, the situation is more complex and has other more politically tinged.

   

  @radiomitre @Lanataenel13 @luisnovaresio río gallegos copado de camiones de caudales.una prueba más del vaciamiento pic.twitter.com/IfnLnTVtu1

  — MARIANO FERRARO (@MARIANOMFERRARO) November 25, 2015

   

  As The Bubble's Bianca Fernet reports,

  the money was intended for Santa Cruz’s new governor and outgoing President Cristina Fernández de Kirchner’s sister-in-law, Alicia Kirchner, as well as her Tierra del Fuego counterpart Rosana Bernton.

   

  The reason? The local informant alleges that it is to allow Alicia Kirchner’s government to pay salaries and end-of-year bonuses so as not to draw local attention to additional public spending. The province allegedly runs a massive deficit, and this cash from the outgoing national government would buy enough time to negotiate with the new government down the road.

   

  This is speculation. However, five armored vehicles suddenly driving from airports to banks warrants a better explanation than, “This is something routine we always do, you’ve just all somehow managed to never notice it 15 days before a government changeover.”

  This is one of the reasons why the national government refuses to make the transition before Decmber 10th, according to sources close to a national official, if these movements are not made ??now, then they will be blocked.

  Caravana de transporte de Caudales en Gallegos Santa Cruz 24 11 2015 pic.twitter.com/fy0T22OVxC

  — GUILLERMO FUSTER (@guillermofuster) November 25, 2015

  OPI Santa Cruz concluded,

  This "means that the machine does not stop," – referring to the printing of banknotes, which in turn feeds the vicious circle of devaluation and inflation, since by injecting more current without support, the currency depreciates.

  And of course the corruption continues.

  Perhaps this explains why President-elect Macri has this succinct statement last week…

  • ARGENTINA’S MACRI SAYS NO DOLLARS LEFT IN CENTRAL BANK

  As hyperinflation begins to run rampant, and as we detailed previously contrary to government figures, the Massachusetts Institute of Technology’s Billion Prices Project found that the price of essential foods has increased six-fold in the South American nation since 2008.

  

  Source: InflacioVerdara

  

  The Cristina Kirchner administration has ignored repeated requests by economists, banks, and other financial institutions to issue larger-denomination bills. Some 42 percent of Argentineans deemed it necessary in a 2014 survey by Argentina-based pollsters Poliarquía.

  However, President Kirchner chose to redesign existing notes instead. Earlier this year, the government introduced a new AR$50 bill depicting the Falkland Islands, an archipelago in the South Atlantic ocean subject to a lingering territorial dispute between Argentina and the United Kingdom.

   

  In 2012, Kirchner launched a AR$100 bill with the face of Eva Perón, the wife of former President Juan Perón and an iconic figure for Peronists. Most recently, the government updated the AR$10 note, adding security improvements and revamping the image of founding father and creator of the Argentinean flag Manuel Belgrano.

  The new designs, however, have done nothing for Argentineans’ increasingly bulky wallets.

  “Printing money out of control generates inflation, and that renders larger denomination bills necessary,” Iván Carrino, an economic analyst for IG and author of Cleptocracia, tells the PanAm Post. “Trading large sums has become an inconvenience.”

   

  In a country where real-estate transactions are normally done in cash, even buying a new car can be burdensome and potentially dangerous. Since a new vehicle costs no less than AR$100,000, buyers need to carry at least 1,000 bills, Carrino explains. “You need to take a bag with you.”

   

  According to the Central Bank of Argentina, two-thirds of the notes in circulation are AR$100 bills. ATMs quickly run out of smaller denomination notes as withdrawal rates increase. “Today, you go to an ATM, and they don’t have AR$50 or AR$20 notes anymore,” Carrino says.

   

  The Argentinean National Mint has been unable to cope with the public’s demand for cash, and the government has outsourced the printing of bills several times. This year, the government has contracted Chilean and Brazilian mints to print additional cash ahead of the holiday season, according to local media reports.

   

  Between January and August 15, 2015, the Central Bank printed 519.4 million AR$100 bills — 52 kilometers worth, if the bills were placed side by side.

   

  Argentineans know inflation all too well. Since the creation of the Central Bank in 1935, the country has only experienced five years of inflation between 0 and 2 percent, according to Nicolás Cachanosky, Denver Metropolitan State University assistant professor of economics.

  “Inflation is a consequence of money printing, and this leads to the necessity of larger denomination bills,” Carrino concludes.

  

  

  

  

  

• Chinese Stocks Tumble As Offshore Yuan Surges Most In 2 Months After Apparent PBOC Intervention

  Update – Chinese stocks continue to plunge…

  

   

  Aside from 3 very small adjustments, The PBOC has fixed the Yuan weaker for the last 20 days, driving the mid-line to 6.3962 – the weakest since August 28th.

  

   

  Which was followed bya massive intervention sending Offshore Yuan 0.35% higher and crushing the Onshore-Offshore spread…

  

   

  Just ridiculous that PBOC is intervening in CNH hours before IMF adds a "free market" Yuan to SDR

  — zerohedge (@zerohedge) November 30, 2015

   

  As Offshore Yuan strengtnens most in 2 months…

  

   

  After Chinese stocks collapsed on Friday, they are holding the losses for now as the biggest question remains just what the weighting will be for Yuan inclusion in The IMF's SDR basket (which looks set to be announced tomorrow – US time).

  

   

  Although none of this is likely to end well unless China unleashes something big…

  

   

  And metals continue to collapse…

  • *SGX ASIACLEAR IRON ORE FUTURES DROP 3.7% TO $39.29/TON

  And brokerages…

  • Haitong Securities -9.2% after being suspended Friday amid CSRC probe; Citic Securities -1.7%

  But the biggest question surrounds The IMF’s decision today (tomorrow) over yuan inclusion in SDR basket (and the actual currency weighting).

  IMF’s calculation, based on value of exports of goods & services, suggested a 14%-16% weighting in the $280 bln basket. The yuan fell to a three-month low on Nov. 27 on concern it may have only 10% share of the SDR as formula expected to change, analysts said.

   

  A 10% or less weighting will lead to selling, says RBC strategist Sue Trinh. Yuan fell 2.95% ytd, the biggest decline since 1994, as economy slowed and PBOC devalued the currency in Aug. PBOC could widen trading band to 3% or 4% after SDR entry, says Xu Yuehong, analyst at Bank of Communications.

  Market expectations:

  Eddie Cheung, Hong Kong-based FX strategist at Standard Chartered:

  5% of world FX reserves will be in RMB by 2020, with 1% allocated annually to the currency, or $85b of inflows each year; may support Chinese bonds

   

  USD/CNY at 6.50 by end-2015; 6.55 in 1Q 2016; 6.42 end-2016

   

  Likely weighting of 10% in SDR basket based on expectation IMF will change formula and cut export focus

  Khoon Goh, Singapore-based senior FX strategist at ANZ:

  As currency isn’t fully convertible, weight could be 10%

   

  Capital inflow to increase $230b over next 3-5 yrs, with allocation of yuan in global reserves rising to 4.0% from 1.1%

   

  China needs to make bond market and assets more accessible for foreign funds, which would also improve liquidity

   

  PBOC likely to intervene less frequently in 2016 compared to this year

   

  NOTE: Net capital outflow reached $731bln in the 10 mths to Oct.

  Xu Yuehong, Shanghai-based analyst at Bank of Communications:

  PBOC could widen yuan trading band to 3% or 4% after SDR entry

   

  Any near-term boost to yuan from SDR entry likely offset by strengthening dollar on bets Fed will raise rates

   

  PBOC will probably want to avoid sizable and sudden capital flows, so any loosening of controls, expansion of QFII quotas, will be very gradual

  Fiona Lim, Singapore-based senior FX analyst at MayBank:

  Yuan weighting in SDR basket is estimated at 13-14% according to 2010 calculation method

   

  After SDR entry, yuan may have moderate depreciation as PBOC eases with slowing economy, with the central bank intervening intermittently to smooth out volatility

   

  IMF may want China to further liberalize capital account, which would be negative for CNY given macroeconomic conditions
  Inflows will be gradual as the new basket will only take effect in Oct. 2016

  And finally, before everyone gets too excited – The history of yen internationalization offers a cautionary tale on hopes for the yuan.

  Japan’s experience suggests that a floating exchange rate, free cross-border flows and stable economic growth are all necessary for successful internationalization. The challenge for China will be hitting all three of those criteria.

   

  

   

  Currency internationalization comes in three stages. The first is use in trade settlement and financial transactions. Second is providing a safe asset for investment by non-residents. Third is to serve as an anchor for the regional and — ultimately — global market. In the 1980s and 1990s, the yen made rapid progress from stage one to stage two. Since then, it has stalled and even started to retrace its steps in some respects.

  Finally, why Chinese stocks may be persuaded to stay weaker for longer…

  

  To scare The Fed off again.

  

  

  

  

  

• It's Official: Chinese Buyers Have Left The U.S. Housing Market

  Overnight the NYT wrote a gargantuan, 3,800-word piece titled “Chinese Cash Floods U.S. Real Estate Market” discussing the impact of Chinese buyers on the US housing market. There are just two problems with the NYT’s herculean effort: i) it is 5 years late in covering a topic this website has discussed extensively since 2010, and ii) it is wrong.

  Recall that as we forecast in our take on a post-devaluation China in early September, with Beijing now actively cracking down on hot money outflows and instituting draconian capital controls, two things would happen: bitcoin – as China’s most recent preferred mechanism of circumventing capital controls – would surge (it did), and Chinese investment in offshore real estate would tumble.

  It has.

  Because while the NYT was writing an article titled “Chinese Cash Floods U.S. Real Estate Market” that should have been published in 2010, the WSJ came out with a far more accurate piece, titled the opposite of the NYT piece, i.e., “Chinese Pull Back From U.S. Property Investments” about how Chinese buyers are no longer the marginal buyer of high end US real estate.

  Here, just as we predicted, is a summary of the state of the US housing market and the one key support pillar which is no longer there.

  Capping a five-year real-estate binge, Chinese nationals surpassed Canadian snowbirds as the top foreign buyers of U.S. homes for the year that ended in March—the most recent annual data—scooping up everything from $500,000 condos in New Jersey to $3 million vacation homes in California to $13 million Manhattan condos.

   

  

   

  But in recent weeks, some Chinese buyers have started to pull back, scared off by China’s stock-market selloff, slowing economic growth, currency devaluation and tightened restrictions on capital outflows. On Friday, China’s benchmark stock index fell by 5.5%, its biggest daily slide since August, as Beijing authorities stepped up a crackdown on the securities industry.

   

  * * *

   

  Yang Bin, a 38-year-old businessman from Beijing, said the economic slowdown has stoked his desire to purchase a home in Silicon Valley. “I see many problems with Chinese universities, and the environment and air quality here aren’t very satisfying,” Mr. Yang said. With a budget of about $1 million, he said he wanted to buy a home that his now-8-year-old child would one day occupy. 

   

  For now, Mr. Yang is caught in the dilemma prompted by China’s economy, which, he said, “has increased my desire to buy a house in the U.S., but also requires me to wait and watch more carefully.”

  Winter is coming.

  “We are ready to embrace a winter for Chinese buyers in the next one year, two years,” said Daniel Chang, a New York City-based broker at Sotheby’s International Realty. Mr. Chang, who sells properties in the $2 million-to-$10 million range, said about half of the clients served by his team are Chinese.

  It also means the end of obnoxious, scripted “realty TV” shows about millionaire real estate agents .

  Christina Shaw, a Realtor with Re/Max Fine Homes in Newport Beach, Calif., said one client who gave her a budget of $10 million to buy two houses in the area was now looking to reduce his budget by about one-third.

  A butterfly flaps its wings in the Shanghai Composite and luxury home sales in the US tumble:

  Interest from Chinese buyers “went dark” for several weeks after stocks becan their sharp fall, said Tom Mitchell, president and chief operating officer of Tri Pointe Group, a home builder in Irvine, Calif. China’s main stock index, the Shanghai Composite Index, is down 38% since its June peak.

  If it seems like it was only two months ago when we wrote that “80% Of All New Home Buyers In Irvine Are Chinese“, it’s because that is the case. However, the Chinese buying frenzy is no longer present. “Foreign Chinese buyers make up about 30% of customers in a handful of the company’s developments in Orange County and the San Francisco area. Price increases there, he said, have prompted clients to “pause and think.””

  Chinese buyers are now officially spooked: Zhang Xin, chief executive of SOHO China Ltd., a real-estate developer, said last month she wouldn’t buy overseas real estate today because many cities abroad are too pricey.

  Some are hoping the lull in Chinese buying will be short-lived: “real estate consultants and brokers say the pullback likely is temporary. Many Chinese view U.S. real estate as not only a good investment but as a haven for savings. Some Chinese buyers also figure a U.S. address would make it easier for their children to enroll in an American college.”

  “In the very short term there will be some impact for people who don’t have a foreign income stream or who don’t have a bank account or funds in overseas banks,” said Frank Chen, executive director and head of research at property consultancy CBRE China. “But the outbound real-estate investment trend is likely to remain quite strong.”

  Perhaps. For now, however, the US luxury market is about to enter freefall, as the marginal buyer enters hibernation.

  Even a temporary pullback could hurt markets where Chinese buyers target some of the priciest American homes, often paying in cash. The average purchase price of existing homes in the U.S. by foreign home buyers in the year ended in March was nearly $500,000, nearly double the price for all buyers, according to the National Association of Realtors. One-third of Chinese purchases were concentrated in California for the year ended in March, according to the National Association of Realtors, trailed by Washington, D.C., with 8% of purchases, and New York, at 7%.

  Many are eager to spin this as good news:

  Some builders also could feel the effects. The chief executive of Walnut, Calif.-based Shea Homes, Bert Selva, told investors this month that the company has seen a “significant slowdown” in Chinese buyers in Orange County.

   

  “That buyer is really drying up. To be honest, I don’t think that’s a bad thing, because I think there was a lot of frenzy driven by that, pushing up prices a bit,” he said in a conference call.

  We doubt Bert will share the same sentiment about the collapse in his company’s revenues.

  Going back to the NYT being woefully inaccurate with its report, here is why they are, as we said, about 5 years late.

  Chinese residents began buying American homes in large numbers about five years ago, driven largely by growing wealth and a desire to safeguard savings against political instability, brokers and economists said.

   

  American homes looked like a bargain after the real-estate crash, drawing busloads of Chinese buyers to see properties in California and Manhattan. To many, it seemed “a gold mine everywhere,” said Calvin Lo, a real-estate agent at Berkshire Hathaway HomeServices in Southern California.

  Better make that bitcoin mine, because unless the Chinese find a way to smuggle billions using the only method left available, the luxury US housing market is looking at what may be unprecedented freefall.

  Chinese individuals are limited to annual overseas investments equal to about $50,000. For years, Chinese have surpassed that limit, in part, by funneling money through relatives and employees. In recent months, the government has made it tougher to transfer money abroad, said real-estate brokers in both countries.

   

  “It’s like barbarians at the gate,” said John Chang, a real-estate broker with Re/Max in New York City. Chinese families want to buy, he said, “but they just can’t get the money out.”

  Of course, those betting on a return to the US luxury market may be better off just buying the medium which the Chinese will use to funnel the required funds to the US – bitcoin, which a quick check shows has resumed its climb and has again jumped by about 20% in the past week alone.

  Finally, our condolences to the Fed: as Chinese buyers exit US luxury housing double time, watch as the bottom falls off the top in housing, and slowly at first then very fast drags the rest of the market lower, forcing the Fed to undo whatever tightening in monetary conditions it may have launched, or is contemplating.

  

  

  

  

  

• Newly-Completed Fukushima 'Containment' Wall Already "Slightly Leaning"

  Just weeks after re-starting the building of a giant ice-wall to contain groundwater leaking from the Fukushima nuclear plant, TEPCO has been forced to admit that a 780-meter protective wall built alongside the crippled power station (completed only last month and designed to prevent contaminated groundwater from seeping into the sea)  is already "slightly leaning." While this sounds a lot like being half-pregnant, TEPCO remains 'optimistic' that the wall will hold. But you can't say the government is not trying – in an effort to 'calm' the public, scientists have developed a special scanner to accurately measure the amount of radioactive material inside the bodies of young children… which is odd given just how "contained" Abe said it was.

  The 780-meter coastal wall along the damaged reactor of the Fukushima No. 1 nuclear power plant was built to stifle the flow of tainted water into the sea from 400 tons to 10 tons a day.

  The “impermeable” barrier has an underground section that reaches 30 meters deep. TEPCO officials have claimed that such a structure should reduce the amount of radioactive cesium and strontium flowing into the sea to one fortieth of previous levels, while the tritium levels should be reduced to one-fifteenth.

  But, as RT reports, the "impermeable sea wall" is leaning already…

  Completed only last month and designed to prevent contaminated groundwater from seeping into the sea, the wall is already “slightly leaning,” plant operator TEPCO has announced.

   

  TEPCO however remains optimistic and has said that the slight lean does not affect the wall’s ability to block radioactive water.

   

  The operator is now reinforcing the wall with steel pillars.

   

  Inspection into the construction was completed in late October and also discovered cracks along the perimeter of the wall in the embankment’s pavement.

   

  Officials have blamed rising groundwater levels for the cracks – and keep repairing them to make sure that rain does not increase the groundwater levels even further.

  And then there's this, as The BBC reports,

  It's nearly five years since the Japanese earthquake and tsunami that led to the Fukushima nuclear disaster but concerns about possible health problems – especially in children – are still high in many parents' minds.

   

  To reassure the public, scientists have developed a special scanner to accurately measure the amount of radioactive material inside the bodies of young children.

   

  Now the results of over 2,500 scans have just been released.

  So that's reassuring then.

  

  

  

  

  

• Turkey's Trump Card: Erdogan Can Cut Russia's Syrian Supply Line By Closing Bosphorus

  On Saturday, Russia unveiled a raft of economic sanctions against Turkey in retaliation for Ankara’s brazen move to shoot down an Su-24 warplane near the Syrian border. Charter flights to Turkey are now banned, Turkish imports will be curbed, visa-free travel is no more, Russian tourism companies are forbidden from selling travel packages that include a stay in Turkey, and Turkish firms will face restrictions on their economic activity. 

  “It’s not just Turkey that has economic interests, Russia too has economic interests in relation to Turkey,” Turkish PM Ahmet Davutoglu said on Saturday, adding that he hoped Putin would act in a “cool-headed” manner. 

  Russia does indeed have economic interests in Turkey. Ankara paid Gazprom some $10 billion last year and Turkey accounts for nearly a third of the company’s nat gas exports:

  

  But this is most assuredly a two way street. As we noted on Saturday, Turkey is heavily dependent on Russia for energy and souring relations will put a non-trivial dent in Ankara’s tourism revenues:

  

  

  As we discussed on Wednesday, the idea that Turkey can easily replace Russian gas may be a pipe dream (no pun intended) despite Erdogan’s grandstanding. Here’s how we explained the situation facing Ankara: 

  What analysts (and Erdogan) seem to be discounting here is that ties between Russia and Iran have strengthened materially over the past six months and Russia’s intervention in Syria will not be forgotten in Tehran. Throw in the fact that Russia and Iran are already in talks on a number of energy projects and it seems reasonable to suspect that if Iran believes Turkey is becoming too much of an impediment to the campaign in Syria, Tehran may just decide to drive a harder bargain when it comes to gas supplies. In short: if you’re Turkey, you don’t really want to put yourself in a position where your fallback plan in the event you anger your biggest energy supplier is to try and negotiate for more trade with that supplier’s closest geopolitical ally, especially when you are actively seeking to subvert both of their goals in a strategically important country. As WSJ put it on Wednesday, “diverting the energy trade wouldn’t be easy.”

  
  

  No, it most certainly would not “be easy”, and the big question going forward is this: is it realistic to believe, given what’s going on in Syria, that Iran will be willing to make it any easier? 

  Ultimately, it’s diffiult to say who has the stronger hand. Russia and Turkey – despite an otherwise tenuous relationship set against a history of confrontation (see The Czar vs. the Sultan from Foreign Policy) – have developed a lucrative trade partnership that neither side is particularly keen on scrapping. That said, the stakes are high and now that Moscow has hit back with sanctions, the ball is in Ankara’s court. 

  Despite bombastic rhetoric from Erdogan (whose tone has softened at bit over the last 48 or so hours), Turkey cannot shoot down another Russian warplane. If they do, they risk an outright military confrontation with Russia. So unless Erdogan intends to plunge NATO into an armed conflict with the Russians, he’ll need to find other ways to retailiate and refusing to buy from Gazprom probably isn’t the the first, best option from a practical point of view. 

  What Turkey could do, however, is close the the Bosphorus Strait which would effectively cut Russia’s supply line to Latakia.

  Russia’s biggest risk: Turkey shuts down Bosphorus to Russian ship transit

  — zerohedge (@zerohedge) November 28, 2015

  Here’s Sputnik:

  Tensions between Russia and Turkey over the downing of a Russian Su-24 bomber in Syria may challenge freedom of navigation through the Bosphorus Strait, a major pathway for Russian ships. However, a Turkish unilateral ban on the passage of Russian ships is unlikely since it would violate international law.

  
  

  In recent months, Russia’s heavy military equipment has been delivered to Syria mostly by sea, with the shortest route coming through the Bosphorus Strait and the Dardanelles.

   

  A sharp rise in tensions between Moscow and Ankara may challenge the delivery of Russian weapons and troops through the straits. If passage is prohibited for Russia there is still the way through the Gibraltar (which takes 13-14 days rather than four days through the Bosphorus) or by air.

  

  In peacetime, Turkey is obligated to allow naval warships safe passage regardless of what flag they fly. As Sputnik goes on to note however, “in times of war, the passage of warships shall be left entirely to the discretion of the Turkish government.” Although one Russian lawyer who spoke to RBK claims the Turks have no legal ground to block passage, it’s not difficult to imagine a scenario whereby Erdogan decides to push the issue. 

  Indeed, if Ankara can disrupt Moscow’s supply route to its forces in Syria, well then all the better for the FSA and all of the other proxy armies battling to hold onto territory near Aleppo in the face of the Russian and Iranian assault. 

  Of course such a move would raise serious questions regarding Turkey’s adherence to the 1936 Montreux Convention and would only serve to inflame tensions between Moscow and Ankara. We’ll be watching closely in the days and weeks ahead for evidence that Erdogan is impeding the progress of Russian vessels through the strait and in the meantime we’d remind you that Bilal Erodgan, the President’s son and patron saint of Islamic State’s multi-hundred million dollar oil enterprise, has a bird’s eye view of the drama (from Today’s Zaman, earlier this year): 

  President Recep Tayyip Erdo?an’s son Bilal Erdo?an has moved his shipping company’s office to a newly built four-story building with a Bosporus view in ?stanbul’s Beylerbeyi neighborhood.

   

  The Sözcü daily reported on Sunday that Bilal Erdo?an, a co-partner of a shipping company, has moved his office from Üsküdar to Beylerbeyi.

   

  According to the claims in the report, Bilal Erdo?an purchased three plots of land on Yal?boyu Street in Beylerbeyi and constructed a four-storey company office on it. The cost of the building is estimated to be TL 340 million. The new office has a view of the Bosporus. It also has a parking lot and a courtyard.

  

  

  

  

  

• "You Are Here"… And It Is A Scary Place

  Technically, the third quarter earnings season is not exactly over: 2% of companies are still left to report. Untechnically, it is, and with 98% of S&P500 companies now in the history books, 74% of the companies in the index have reported earnings above the mean estimate but 45%
  of the companies have reported sales above the mean estimate.

  But while gaming analyst estimates is the oldest trick in the book (and even so more than half of companies are failing to beat on sales), a truly dire picture is revealed when one steps back and looks at the data in historical basis.

  That is precisely what Ellington Management did recently in their note looking at the last stretch of the junk bubble. This is what they said.

  Corporations are now running out of steam in terms of their ability to generate earnings. As of Q2 2015, the year-over-year change in annual corporate earnings dropped to -$8.21 per share for the S&P 500 and to -$4.79 per share for the Russell 2000. The previous three times this metric fell that far into negative territory on the S&P 500 were Q1 1990, Q1 2001, and Q4 2007, coinciding with the start of each of the last three high yield default cycles. According to a recent article in The Economist, in the most recent quarter less than half of S&P 500 companies recorded increasing profit year-over-year.

  And here is Ellington’s chart showing where “You” are right now.

  

  And since it is not where you “are” that matters but where you “are headed”, the place is very scary indeed.

   

  

  

  

  

  

• Two Reasons The 'War On Terror' Will Always Fail

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

  If we want to get to a world where terrorism isn’t such a regular tragedy, governments need to start recognizing the fact that the so-called “War on Terror” is a self-fulfilling prophecy destined to foment one thing and one thing only: more terrorism.

  The Big Picture: The problem arising in the wake of the recent mass-murder event in Paris and the subsequent French bombing of the Islamic State (also a mass-murder event) is that the two acts (and hundreds like them) serve as justification for more of the same from the other side. They provide fuel for each other’s fire and the situation, not surprisingly, continues to metastasize.

  The great paradox at play is that as the West continues to attack the Islamic State, the organization’s appeal continues to grow among those who view the West as an adversary. Nobody knows exactly what causes radicalization but my best guess is that its appeal will continue to increase as the West continues to respond to violent events with exponentially more violence in turn. Such has been the trend thus far.

  Why Terrorism? Terrorism is likely to spawn from a number of things, such as a bankrupt ideology, a sense of injustice, and disenfranchisement with the status quo. Regardless of the exact origins in any particular case, there are two primary reasons that the “war on terror” will continue to fail (assuming the goal is to reduce the number of terrorist attacks and the rampant increase in radicalization). Reason #1: Western violence (the principal prescription for fighting terrorism) is also the primary motivation behind successful terrorist recruiting efforts. Reason #2: Western attempts to overthrow heads of state under the guise of fighting terrorism provide an incredible opportunity for terrorist organizations to take root in a more institutional fashion. Let’s discuss these two phenomena in more depth.

  Reason #1: Regardless of their origins, where terrorist movements gain the most strength is from the fact that they can point to objective injustices perpetrated by western nations (whether well intentioned or not). Violence begets more violence and Middle East bombing campaigns by Western countries are used to rally otherwise moderate people to nefarious causes. This is also one of the reasons terrorist movements are able to grow beyond an extremely small and fractured group of individuals.

  Bombing campaigns are a major contributing factor to radicalization, and the principal motivation Western democracies should be concerned about…because it is one of the few factors they have legitimate control over. The moment a bomb kills a single innocent person – man, woman, or child – it facilitates ten more terrorist sympathizers. What’s more is that even if the bomb kills actual terrorists, it’s still providing rampant material support against the cause of “fighting terrorism.” How many bombs has the United States dropped in the last fifteen years? Millions. In how many countries? Iraq, Afghanistan, Pakistan, Libya, Yemen, Somalia, Syria and probably a great number more that are largely classified operations.

  Seen in this light, is it really hard to understand why terrorist movements are growing and becoming more unified? It’s much easier for a terrorist to convince the average person to hate foreigners when foreigners are actively bombing their country, either through boots-on-the-ground invasions, drone warfare, or manned bombing campaigns.

  Reason #2: The second thing that facilitates terrorism is the active attempt to overthrow established governments with force. Despite the fact that Sadaam Hussein was a tyrant, Iraq was not a terrorist haven while he was in charge. He was certainly a criminal dictator, but he didn’t put up with terrorists. Compare this to the emerging reality in present day Iraq now that he’s gone. Or consider Libya. Muammar Qaddafi was also a tyrant, and now that he’s been removed (courtesy of a Western air campaign), his former country is a jihadist wonderland.

  The UN resolution designed strictly to “protect civilians” was used as an excuse to act as the rebels' Air Force. Should it surprise us that “good” rebels might be fighting alongside “bad” rebels? The entire campaign did little more than make a bad situation much worse.

  Next, consider Syria. Western governments, led by the United States, have been actively supporting militia groups trying to overthrow yet another head of state, Bashar Al-Assad. The hypocritical reality is that the militia groups in Syria are fighting in common caucus with the Islamic State against Assad (who somewhat legitimately calls them all “terrorists”) while simultaneously fighting against the Islamic State (and thus on the same team as Bashar Al-Assad himself). Is it really a mystery why the region is such an overwhelming disaster? The narrative of fighting terrorism is completely undermined by the obvious reality of ulterior geopolitical motivations.

  Conclusion: The truth is that the political war hawks in the United States aren’t solely interested in combatting terrorism (an otherwise legitimate concern). They’re also interested in forcefully removing those from power whom they don’t like (whether it means an aggressive war or not). If the two interests align: great. If not, they do their best to brainwash the public in hopes that the blatant hypocrisy of their position doesn’t outshine the international “villain” of choice.

  At present, the foe-du-jour is Bashar Al-Assad. Now Assad is clearly not a benevolent dictator, but what happens when he’s gone? Will the replacement be that much better?

  Do we have any right to choose a replacement to govern other people? Can you imagine if a foreign country was doing that in the United States? You may or may not like former President Bush and you may or may not like President Obama, but do you think it preferable to have a foreign country (e.g. Russia or China) undermine them with force? That’s absurd. And it would rally a whole bunch of Americans to fight against the common invader. Would it be legitimate if Russia or China subsequently labeled such people as terrorists? Of course not. It is no less absurd for America to behave in such a way. Contrary to the theoretically possible idea of actually fighting terrorists (which is largely impractical in reality due to the nature of terrorist ideology), overthrowing foreign governments is a completely illegitimate and imperial motivation. Until we accept this reality and get back to the legitimate defense of our own country, terrorism will continue to gain momentum.

  

  

  

  

  

• "Friend & Ally" Or "Barbaric Death Cult" – You Decide

  With a record 151 beheadings this year (and 55 more looming for sedition, poetry, and 'terrorist crimes') arguably "under the guise of counter-terrorism to settle political scores" US' friend and ally Saudi Arabia bears a striking resemblence to another Sharia law-abiding 'state'. As Liberty Blitzkrieg's Mike Krieger explains, while ISIS has actively sought exposure for their brutal punishments, Saudi Arabia has worked to keep evidence of their actions within the conservative kingdom.

  Just yesterday, we published an article highlighting the latest deranged idea floated by Saudi Arabia’s monarchs to sue Twitter users comparing the barbaric kingdom to ISIS.

   

  Today, we present to you a power graphic courtesy of Middle East Eye, which demonstrates precisely why the Saudis are so sensitive about the topic. Namely, because the accusations are true.

  From Middle East Eye:

  The Islamic State (IS) and Saudi Arabia prescribe near-identical punishments for a host of crimes, according to documents circulated by the militant group.

   

  IS published a list of crimes and their punishments on 16 December 2014 to serve “as an explanation and as a warning” to those living in territory under their control in large parts of Iraq and Syria.

   

  The document lists hadd crimes, which are considered to be “against the rights of God,” and includes fixed punishments for theft, adultery, slander and banditry.

   

  Crimes deemed hadd and their punishments are derived from the Quran and the hadith, the collected teachings and sayings of the Prophet Muhammad. However, with the exception of Saudi Arabia, and IS-controlled areas, they are rarely applied.

  

  Any questions?

  *  *  *

  Finally, as MiddleEastEye concludes, rather ironically…

  the West could – at some point in the future – have diplomatic relations with IS “simply because they [IS] are sitting on oil and are happy to sell it”.

   

  “It might happen given the pragmatism of the West and how willing it is to compromise on human rights,” she added.

  

  

  

  

  

• Half A Million Square Kilometers Of Heavy Smog Force Beijing To Issue "Orange Alert", Close Factories

  On Sunday, Beijing issued its highest smog alert of the year, upgrading it from the yellow of the past two days to orange, second only to red. According to local CCTV, heavy smog covered an area of half a million square kilometers around Beijing-Tianjin-Hebei region, as heavy air pollution hits 31 cities.

  Xinhua reports that the municipal weather center said humidity and a lack of wind would mean the smog will linger for another two days, before a cold front arrives on Wednesday.

  On Sunday, the reading for PM2.5, airborne particles smaller than 2.5 microns in diameter, hit 274 micrograms per cubic meter in most parts of the capital. Indicatively, the World Health Organization (WHO) considers only 25 micrograms to be a safe level.

  Beijing has recommended that residents minimize outdoor activities and urged people with respiratory diseases as well as the elderly to stay at home.

  It wasn’t just Beijing: moments ago Shanghai joined China’s capital in issuing an orange fog alert. The local government asked for heightened management of airports, highways and ferry terminals as heavy fog covered western and southern parts of the city, according to a website run by the Shanghai Meteorological Service said. Visibility is limiting visibility to 200 meters in Minhang, Songjiang, Qingpu, Baoshan, Jiading and Chongming areas, the website said. Orange is the 2nd-highest of 4-alert levels

  In March, four types of pollution alerts – blue, yellow, orange and red – were introduced by Beijing’s Environmental Protection Bureau. All factories are to be shut down during orange alerts. Heavy vehicles, such as construction trucks, are also completely banned during orange and red alerts. Furthermore, construction sites should stop the transportation of materials and waste while heavy-duty trucks are banned from the roads.

  In other words, the local economy shuts down.

  This is good and bad news: the bad news is that upcoming Chinese data will continue to be weak, which however will be blamed on the industrial shut down due to the surge in smog, and permabullish pundits will “excuse” the upcoming bout of weak data as being weather related, something the US meteoreconomists have become all too adept at. The good news, is that as every Pavlovian dog-cum-central bank experts knows by now, more economic weakness means more bets for central bank intervention, means higher stock prices.

  The municipal environment watchdogs have reinforced checks of discharge from coal-fired plants, outdoor barbecues and burning.

  And this is what China’s capital looked like this morning.

  #Smog covers area of 530,000 sqkm around Beijing-Tianjin-Hebei region, as heavy air pollution hits 31 cities pic.twitter.com/ckRUVdtU2N

  — CCTVNEWS (@cctvnews) November 29, 2015

  Beijing residents told to stay inside as smog levels soar https://t.co/T8on9sj4mk pic.twitter.com/xetuITah1w

  — Climate Change (@ClimateChangRR) November 28, 2015

  Hazardous smog levels engulf Beijing and northern China: locals warned to stay indoors https://t.co/9x1ZiGKSvG pic.twitter.com/GbALmdkx3p

  — George Chen (@george_chen) November 29, 2015

  RT george_chen: View from my hotel room: #Smog occupies Beijing.

  – Can you still see the CCTV headquarter buildi… pic.twitter.com/88z6Gp6bPz

  — Stormtrooper (@TheNutellaMan) November 28, 2015

  #Beijing issues orange alert for heavy #smog

  Read More : https://t.co/z1g8WOUF5N pic.twitter.com/CRbg5Fb9d7

  — New Straits Times (@NST_Online) November 29, 2015

  

  

  

  

• How Refugees Are Admitted Into The U.S.

  The United States’ effort to accept Syrian refugees seeking asylum has been the subject of much controversy over security concerns and the rigor of the vetting process. Here are the (satirical) steps involved in a refugee’s arrival in America…

  Step 1: Filled-out refugee application materials thrown onto large, unorganized pile of folders on desk at United States immigration headquarters

   

  Step 2: Applicants shown pictures of various U.S. landmarks and asked how violent they make them feel

   

  Step 3: Nonrefundable $45 credit check fee

   

  Step 4: Find safe place to wait out gunfire for next two years while application is processed

   

  Step 5: Tracking chips inserted into refugees’ forearms

   

  Step 6: Cry softly

   

  Step 7: Often regarded as the most arduous step of the process, refugees must successfully elicit some level of sympathy from the American populace

   

  Step 8: Age another year

   

  Step 9: Legally accepted refugees inserted onto list to receive government benefits, directly ahead of all of nation’s veterans

   

  Step 10: Accept grim but very real possibility of life in Billings, MT

   

  Step 11: Refugees given list of mosques under government watch they are allowed to attend

   

  Step 12: Enjoy full rights and privileges of something called “Adjust Status”

   

  Step 13: Fully assimilate by denying sanctuary to future waves of refugees from another part of the world

  Satire or Status Quo?

   

  Source: The Onion

  

  

  

  

  

• Iran's Ayatollah Pens Letter To Western Youth: "You Should Know That Terror Has Been Supported By Certain Great Powers"

  For those of a cynical persuasion, it’s difficult to ignore the similarities between Islamic State’s brand of puritanical Islam and Saudi Arabia’s propagation of Wahhabism. Put simply, indoctrinating the masses with an ultra orthodox ideal that breeds intolerance sows the seeds of extremism and on that score, Riyadh and Raqqa are really no different. Indeed, Kamel Daoud, a columnist for Quotidien d’Oran, and the author of “The Meursault Investigation” recently described the Saudis as “an ISIS that made it.” 

  Still, the US (and the international community in general) turns a blind eye to the problem and Washington counts Riyadh as one of its closest geopolitical allies. Indeed, The Pentagon and the CIA are now part of a Saudi-led effort to arm and fund Sunni extremists operating in Syria. In short, Washington and its regional allies (which include Qatar) are engaged in the perpetuation of the same type of terrorism that just this month left 130 people dead in France, killed dozens of innocent civilians in Beirut, and led to the explosion that brought down a Russian passenger plane over the Sinai Peninsula killing all 224 people on board. Now, those incidents will be trotted out as an excuse to demonize Muslims residing in Western countries when it was Western governments that created the problem in the first place by supporting Sunni extremists and using radicalized Muslims as a tool to effect regime change across the Mid-East. 

  Meanwhile, Shiite Iran is branded a pariah state by the US and is considered to be evil incarnate by Washington’s ally in Jerusalem. True, the Ayatollah doesn’t help matters by habitually whipping the populace into an anti-America frenzy, but at the end of the day, one would be hard pressed to make a convincing case that the US is on the right side when it comes to picking allies in the Mid-East.

  Indeed, it’s Tehran that’s proven to be the most effective (with the possible exception of the Kurds) at battling Islamic State and although it now appears that Iran may be funneling guns and money to the Taliban (a rather unlikely alliance made necessary by the rise of ISIS), it would behoove Washington to reassess its position in the region because as it stands, America is on the wrong side.

  It’s with that in mind that we bring you the following open letter from Ayatollah Khamenei addressed to the youth in Western countries. It’s presented without further comment.

  *  *  *

  To the Youth in Western Countries,

  The bitter events brought about by blind terrorism in France have once again, moved me to speak to you young people.  For me, it is unfortunate that such incidents would have to create the framework for a conversation, however the truth is that if painful matters do not create the grounds for finding solutions and mutual consultation, then the damage caused will be multiplied.

  The pain of any human being anywhere in the world causes sorrow for a fellow human being.  The sight of a child losing his life in the presence of his loved ones, a mother whose joy for her family turns into mourning, a husband who is rushing the lifeless body of his spouse to some place and the spectator who does not know whether he will be seeing the final scene of life- these are scenes that rouse the emotions and feelings of any human being.  Anyone who has benefited from affection and humanity is affected and disturbed by witnessing these scenes- whether it occurs in France or in Palestine or Iraq or Lebanon or Syria. 

  Without a doubt, the one-and-a-half billion Muslims also have these feelings and abhor and are revolted by the perpetrators and those responsible for these calamities. The issue, however, is that if today’s pain is not used to build a better and safer future, then it will just turn into bitter and fruitless memories. I genuinely believe that it is only you youth who by learning the lessons of today’s hardship, have the power to discover new means for building the future and who can be barriers in the misguided path that has brought the west to its current impasse.  

  Anyone who has benefited from affection and humanity is affected and disturbed by witnessing these scenes- whether it occurs in France or in Palestine or Iraq or Lebanon or Syria.  

  It is correct that today terrorism is our common worry.  However it is necessary for you to know that the insecurity and strain that you experienced during the recent events, differs from the pain that the people of Iraq, Yemen, Syria and Afghanistan have been experiencing for many years, in two significant ways.  First, the Islamic world has been the victim of terror and brutality to a larger extent territorially, to greater amount quantitatively and for a longer period in terms of time. Second, that unfortunately this violence has been supported by certain great powers through various methods and effective means. 

  Today, there are very few people who are uninformed about the role of the United States of America in creating, nurturing and arming al-Qaeda, the Taliban and their inauspicious successors.  Besides this direct support, the overt and well-known supporters of takfiri terrorism- despite having the most backward political systems- are standing arrayed as allies of the west while the most pioneering, brightest and most dynamic democrats in the region are suppressed mercilessly. The prejudiced response of the west to the awakening movement in the Islamic world is an illustrative example of the contradictory western policies.

  I genuinely believe that it is only you youth who by learning the lessons of today’s hardship can be barriers in the misguided path that has brought the west to its current impasse.  

  The other side of these contradictory policies is seen in supporting the state terrorism of Israel.  The oppressed people of Palestine have experienced the worst kind of terrorism for the last sixty years.  If the people of Europe have now taken refuge in their homes for a few days and refrain from being present in busy places- it is decades that a Palestinian family is not secure even in its own home from the Zionist regime’s death and destruction machinery. What kind of atrocious violence today is comparable to that of the settlement constructions of the Zionists regime?

  This regime- without ever being seriously and significantly censured by its influential allies or even by the so-called independent international organizations- everyday demolishes the homes of Palestinians and destroys their orchards and farms.  This is done without even giving them time to gather their belongings or agricultural products and usually it is done in front of the terrified and tear-filled eyes of women and children who witness the brutal beatings of their family members who in some cases are being dragged away to gruesome torture chambers.  In today’s world, do we know of any other violence on this scale and scope and for such an extended period of time?

  Shooting down a woman in the middle of the street for the crime of protesting against a soldier who is armed to the teeth- if this is not terrorism, what is? This barbarism, because it is being done by the armed forces of an occupying government, should not be called extremism? Or maybe only because these scenes have been seen repeatedly on television screens for sixty years, they should no longer stir our consciences.

  The military invasions of the Islamic world in recent years- with countless victims- are another example of the contradictory logic of the west. The assaulted countries, in addition to the human damage caused, have lost their economic and industrial infrastructure, their movement towards growth and development has been stopped or delayed and in some cases, has been thrown back decades.  Despite all this, they are rudely being asked not to see themselves as oppressed.  How can a country be turned into ruins, have its cities and towns covered in dust and then be told that it should please not view itself as oppressed? Instead of enticements to not understand and to not mention disasters, would not an honest apology be better?  The pain that the Islamic world has suffered in these years from the hypocrisy and duplicity of the invaders is not less than the pain from the material damage.

  Dear youth! I have the hope that you- now or in the future- can change this mentality corrupted by duplicity, a mentality whose highest skill is hiding long-term goals and adorning malevolent objectives.  In my opinion, the first step in creating security and peace is reforming this violence-breeding mentality.  Until double-standards dominate western policies, until terrorism- in the view of its powerful supporters- is divided into “good” and “bad” types, and until governmental interests are given precedence over human values and ethics, the roots of violence should not be searched for in other places.

  Unfortunately, these roots have taken hold in the depths of western political culture over the course of many years and they have caused a soft and silent invasion.  Many countries of the world take pride in their local and national cultures, cultures which through development and regeneration have soundly nurtured human societies for centuries.  The Islamic world is not an exception to this.  However in the current era, the western world with the use of advanced tools is insisting on the cloning and replication of its culture on a global scale.  I consider the imposition of western culture upon other peoples and the trivialization of independent cultures as a form of silent violence and extreme harmfulness. 

  Humiliating rich cultures and insulting the most honored parts of these, is occurring while the alternative culture being offered in no way has any qualification for being a replacement.  For example, the two elements of “aggression” and “moral promiscuity” which unfortunately have become the main elements of western culture, has even degraded the position and acceptability of its source region.      

  So now the question is: are we “sinners” for not wanting an aggressive, vulgar and fatuous culture? Are we to be blamed for blocking the flood of impropriety that is directed towards our youth in the shape of various forms of quasi-art?  I do not deny the importance and value of cultural interaction.  Whenever these interactions are conducted in natural circumstances and with respect for the receiving culture, they result in growth, development and richness.  On the contrary, inharmonious interactions have been unsuccessful and harmful impositions.

  We have to state with full regret that vile groups such as DAESH are the spawn of such ill-fated pairings with imported cultures.  If the matter was simply theological, we would have had to witness such phenomena before the colonialist era, yet history shows the contrary.  Authoritative historical records clearly show how colonialist confluence of extremist and rejected thoughts in the heart of a Bedouin tribe, planted the seed of extremism in this region.  How then is it possible that such garbage as DAESH comes out of one of the most ethical and humane religious schools who as part of its inner core, includes the notion that taking the life of one human being is equivalent to killing the whole humanity?

  One has to ask why people who are born in Europe and who have been intellectually and mentally nurtured in that environment are attracted to such groups?  Can we really believe that people with only one or two trips to war zones, suddenly become so extreme that they can riddle the bodies of their compatriots with bullets?  On this matter, we certainly cannot forget about the effects of a life nurtured in a pathologic culture in a corrupt environment borne out of violence.  On this matter, we need complete analyses, analyses that see the hidden and apparent corruptions.  Maybe a deep hate- planted in the years of economic and industrial growth and borne out of inequality and possibly legal and structural prejudice- created ideas that every few years appear in a sickening manner. 

  Any rushed and emotional reaction which would isolate, intimidate and create more anxiety for the Muslim communities living in Europe and America not only will not solve the problem but will increase the chasms and resentments.

  In any case, you are the ones that have to uncover the apparent layers of your own society and untie and disentangle the knots and resentments. Fissures have to be sealed, not deepened. Hasty reactions is a major mistake when fighting terrorism which only widens the chasms. Any rushed and emotional reaction which would isolate, intimidate and create more anxiety for the Muslim communities living in Europe and America- which are comprised of millions of active and responsible human beings- and which would deprive them of their basic rights more than has already happened and which would drive them away from society- not only will not solve the problem but will increase the chasms and resentments.

  Superficial measures and reactions, especially if they take legal forms, will do nothing but increase the current polarizations, open the way for future crises and will result in nothing else.   According to reports received, some countries in Europe have issued guidelines encouraging citizens to spy on Muslims.  This behavior is unjust and we all know that pursuing injustice has the characteristic of unwanted reversibility.  Besides, the Muslims do not deserve such ill-treatment.  For centuries, the western world has known Muslims well- the day that westerners were guests in Islamic lands and were attracted to the riches of their hosts and on another day when they were hosts and benefitted from the efforts and thoughts of Muslims- they generally experienced nothing but kindness and forbearance.

  Therefore I want you youth to lay the foundations for a correct and honorable interaction with the Islamic world based on correct understanding, deep insight and lessons learned from horrible experiences.  In such a case and in the not too distant future, you will witness the edifice built on these firm foundations which creates a shade of confidence and trust which cools the crown of its architect, a warmth of security and peace that it bequests on them and a blaze of hope in a bright future which illuminates the canvass of the earth.

  Sayyid Ali Khamenei

  8th of Azar, 1394 – 29th of Nov, 2015

  

  

  

  

  

• Fourth Turning – Politicians Driving The World Towards War

  Submitted by Jim Quinn via The Burning Platform blog,

  In Part 1 of this article I discussed the catalyst spark which ignited this Fourth Turning and the seemingly delayed regeneracy. In Part 2 I pondered possible Grey Champion prophet generation leaders who could arise during the regeneracy. In Part 3 I focused on the economic channel of distress which is likely to be the primary driving force in the next phase of this Crisis. In Part 4 I assessed the social and cultural channels of distress dividing the nation. In Part 5 I’ll examine the technological, ecological, political, and military channels of distress likely to burst forth with the molten ingredients of this Fourth Turning, and finally in Part 6 our rendezvous with destiny, with potential climaxes to this Winter of our discontent.

   

  Technological & Ecological Distress

  

  “Technological progress has merely provided us with more efficient means for going backwards.” – Aldous Huxley – Ends and Means

  The level of distress being produced by technology was probably underestimated by Strauss & Howe when they wrote their book in 1997. The internet, cell phones and e-commerce were still in their infancy, while cyber security was an unknown concept. Huxley would be shocked by how backwards we have “progressed” through the efficient distribution of iGadgets, creating millions of distracted, non-thinking, passive, easily pliable, willfully ignorant sheep who adore their technological servitude.

  A vast swath of the populace never reads a book and can’t go more than a few minutes without checking their iGadget to view the latest funny cat video, the latest update on Kim Kardashian’s ass, Bruce/Caitlyn Jenner’s courage, or Lamar Odom’s latest whorehouse escapade. Our country is drowning in a sea of irrelevance as our infinite craving for diversions and triviality overwhelms any thoughts of confronting our oppressors. The adoration of technology has degraded our ability to think and allowed the Deep State to control the masses by amusing them to death.

  The totalitarian Orwellian utilization of technology was exposed by a millennial with courage, intelligence, and love of his country – Edward Snowden. His revelations were very distressful to the felonious government apparatchiks who blatantly flaunt their disregard for the Fourth Amendment to the Constitution. The criminals at the NSA, fully supported by Obama and Congress, have made Big Brother look like an amateur, as they siphon up every phone call, text, email, and facebook entry made by each person in this country and for good measure the political leaders of our allies and enemies.

  The failure of Americans to be outraged at this traitorous offense against their right to privacy and ludicrous belief that Snowden is a criminal is distressful to the principles of liberty and freedom upon which this country was founded. Sacrificing freedom for security is a false trade-off, as we become less free, less secure, and less responsible for our own lives. The implications of allowing an all-powerful surveillance state to use your private communications against you are far reaching and a dire moment for humanity. The one method left for citizens to communicate without the government able to decipher their messages is encryption. The government is now attempting to gain a backdoor to encryption with the recent terrorist attacks in Paris as their rationale. Every real or imagined threat is used to grow the Deep State.

  They have failed thus far in controlling the internet, as it remains the only remaining avenue of free speech and truth, but they will stop at nothing in using the threat of terrorists to capture complete control over all communication outlets. Blaming Snowden for the complete and utter failure of the trillion dollar surveillance state to stop a bunch of amateur terrorists, living in France and using open cell phone communications, from killing 130 people divulges the desperate flailing of spineless incompetent government apparatchiks who are exceedingly good at taking away freedoms and astonishingly awful at ensuring safety and security .

  The sophistication and complexity of computers, code, and networks is only exceeded by the brilliance of hackers working on their own, for groups like Anonymous, or on behalf of governmental entities. Cyber-crime, cyber-attacks, cyber-warfare, and cyber-terrorism could be game breakers during this Fourth Turning. The trillions spent on high tech military hardware, aircraft carriers, missile systems, spy satellites, and computer systems could all be for naught if cyber warriors are able to disable these systems with computer code.

  Commerce at major retailers has already been disrupted by cyber criminals who have stolen millions of credit card holders’ data. The next world war could be determined by which side can successfully disable satellites and key missile systems of their foes. The hypocrisy of an outraged U.S. government when hackers from China, Russia and Iran hack into government computer systems is comical, as they opened Pandora’s Box by releasing the Stuxnet virus into the Iranian governmental computer systems. You live by the sword and you die by the sword, or in this case the computer virus.

  One of the most hyped channels of distress, and the one which humans have the least amount of control due to its complexity, is ecological distress. The extreme rhetoric surrounding the issue of global warming is deafening, and as with many issues during a Fourth Turning, there is no middle ground. The climatologists and scientists who depend upon the government for research grants allow their financial interests to dictate their findings. Whenever someone declares an issue as settled science, you know they are lying and pushing an agenda. Science is never settled. It requires constant questioning and exploration of new data.

  When terminology like global warming is proven to be false and scientists are caught faking their data, they just change the terminology to climate change and start over again. No one can argue the climate doesn’t change. It changes every day. Does the burning of fossil fuels impact the environment? I’m sure it does. So does cow flatulence and my breathing. So do the trees outside my window. So does solar activity. So does volcanic activity. The variables affecting our environment are limitless and no computer model can accurately predict the future with any reasonable degree of certainty. If computer models can’t accurately predict the path and intensity of storms within a 48 hour window, how could anyone believe forecasts a decade or two in the future?

  The facts do not stop the ideologues like Al Gore and nanny state government drones from declaring their position in-contestable. Anyone who dares challenge their facts, story-line or motivation is declared an ignorant right wing climate change denier. The vehement vitriolic fervor of the venomous environmental justice warriors is reminiscent of the angry pomposity of the bitter social justice warriors with their black lives matter, safe spaces, and feminazi agenda. They believe the louder and angrier they appear, the more likely the passive sheep will quiver and let them have their way.

  The goal is always more control, more taxes siphoned from the remaining productive few, and less free and honest debate about the issues. The critical thinking, rational, courageous few who refuse to cower from the malicious meanderings of these climate sociopaths are the last barrier to allowing some world organization to tax and regulate us to death. The absurdity of believing a carbon tax levied on Americans will save the planet is laughable, as China, India, South America, Africa and the rest of the developing world ignore global environmental mandates. The technocrats controlling the developed world need more money to keep their power and dominion over the masses, and climate taxation is their last remaining method.

  The planet has enough land mass to easily support the 7 billion existing people. The problem is the people are clustered into urban areas and the existing water and food sources are not distributed evenly among the population groupings. The hatred of free market capitalism in much of the world results in mis-allocation of resources and economic development, leaving large swaths of the planet living in abject poverty and starvation. Extreme poverty and hopelessness leads to the rise of dictators, extremist criminal groups, war and anarchy. Poverty is a driving force, along with Islamic religious extremism for the chaos in the Middle East, exacerbated by U.S. interventionism. As this Fourth Turning intensifies, the poverty, starvation, war and extremism will grow, adding fuel to the global wars.

  Just like there is no avoiding the harsh winter gales of a Fourth Turning, there is nothing that can be done to bypass the consequences floods, droughts, water shortages, pandemics, seismic events, tsunamis, solar flares, or other unanticipated ecological events. The climate will change. If a solar flare does significant damage to satellite systems and the electrical grid the pandemonium and helplessness of our energy dependent civilization would be laid bare immediately. A devastating earthquake in California would have far reaching economic consequences to an already bankrupt nation.

  The fear during the recent Ebola scare revealed how irrational the masses can act. Imagine the panic which would occur during a real pandemic. The Dust Bowl droughts during the 1930’s exacerbated the already terrible economic conditions. A worsening of the recent droughts in California and Pacific Southwest could have far reaching impacts on food and water supplies. No matter what ecological distress is experienced, the answer from politicians will be more government control, further straining the relationship between the people and their rulers. The people of this country are so divided, there is little chance for compromise solutions. Will this division result in our desolation?

  “Every kingdom divided against itself is brought to desolation; and every city or house divided against itself shall not stand.” – Matthew 12:25

  

   

  Political Distress

  

  “The average man will permit the oligarch, whether economic or political, to hide his real purposes from the scrutiny of his fellows and to withdraw his activities from effective control. Since it is impossible to count on enough moral goodwill among those who possess irresponsible power to sacrifice it for the good of the whole, it must be destroyed by coercive methods and these will always run the peril of introducing new forms of injustice in place of those abolished.” – Reinhold Niebuhr

  The channel encompassing the maximum level of distress at this stage in the Fourth Turning is the political arena. The initial trigger was the 2008 financial collapse, but the political actions prior to and since 2008 have been the driving force behind this ongoing Crisis. Politicians of both parties were bought off by financial interests to repeal the Glass Steagall Act, unleashing Wall Street to go on a ravenous greed driven bacchanal over the next decade, creating the worldwide financial implosion.

  The revolving door between Washington DC and Wall Street is self-evident, with Goldman Sachs providing Treasury Secretaries (Rubin, Paulson, Summers), Fed Presidents (Dudley, Harker, Kaplan, Kashkari), and hundreds of other White House and regulatory agency operatives, as they have engineered an infiltration, subversion and silent coup of the Federal government. Goldman was the single largest contributor to Obama’s campaign and is likewise, the largest contributor to Hillary Clinton. They buy off key Congressmen of both parties (McConnell, Schumer). That may explain why not one criminal banker was jailed after the crime of the century in 2008.

  The oligarchy controlling the levers of power behind the scenes of our political, economic, and financial systems use their immense wealth, control over the propaganda media outlets, dominion over the regulatory and judicial structures, and legislative authority to siphon off the wealth of the masses, while leaving a withering dying carcass in their wake. The political process has been bastardized as candidates, hand-picked by the vested interests, are sold to an increasingly uninformed and uninterested populace like a bar of soap. They are bought and paid for by special interests before they ever reach Washington. It’s a pay to play system, and the public aren’t playing. The traitorous actions taken by politicians and their banker co-conspirators at the start of this Fourth Turning divulges their true constituency. And it’s not you.

  Ben Bernanke and his Goldman cohort Paulson proceeded to save their Wall Street benefactors and throw grandma and the rest of Main Street USA under the bus. They poured trillions of taxpayer funds into the coffers of criminal banks who took excessive risks, committed massive mortgage fraud, and used derivatives of mass destruction to screw clients, pension plans, little old ladies and the country. When public outrage resulted in 90% of Americans coming out against TARP, Congress initially voted it down.

  Then Wall Street threw a hissy fit, Bernanke and Paulson lied to the country about the problem and threatened the spineless weasels slithering around the halls of Congress. Congress did as they were told (including presidential candidates Obama and McCain) by their real bosses and passed TARP. Paulson then used it in the opposite manner from which he sold it to the public. ZIRP, QE1, QE2, and QE3 have badly hurt senior citizens, savers, and middle class working families who have seen their real household income fall since 2007.

  The congressional approval rating of 11%, down from 40% in 2009, and presidential approval rating of 44%, down from 67% in 2009, reveal the disgust Americans currently have for their politician “leaders”. When the economy is doing well or when confronted with an attack from a foreign threat, the approval ratings of politicians jumps higher. The nonstop decline since 2009 exposes the much touted economic recovery to be a fraud. Average Americans know their standard of living continues to decline, despite the propaganda laden highly manipulated economic data shoveled by the government on a monthly basis. You would have to be brain dead or an Ivy League educated economist to believe the true unemployment rate in this country is 5.1%.

  The reason only 25% of Americans think the country is headed in the right direction is because its current economic trajectory is collapse. The Fed can print fiat and enrich their owners, and politicians can promise free shit to voters until the cows come home, but someone will have to pay the bill – and it’s a doozy. With an $18.7 trillion national debt, $200 trillion of unfunded welfare promises, $600 billion to $1 trillion deficits for as far as the eye can see, and no politician with the courage to tell the truth, Americans know deep down in their bones this farce can’t continue. With a rapidly aging population, there is no mathematical possibility those bills can be paid by the younger generations.

  The next financial earthquake will be far worse than the initial tremor in 2008, as bubbles in stocks, bonds, and real estate simultaneously pop, and the Fed already zero bound on interest rates. The retribution sought by the masses against those guilty of crimes against the nation could be bloody and swift. Our relatively peaceful society could go off the rails quickly.

  With less than a year until the next presidential election, we have the front runners on the Democrat side running on promises of more free shit to their constituents in the form of free college, a $15 minimum wage, equalization of pay for women, free healthcare, and a bevy of other goodies. We’ve got the front runners on the Republican side promising tax cuts, building walls after kicking 10 million illegal immigrants out of the country, repealing Obamacare without offering an alternative, and expanding the war on terrorism.

  All the major candidates are itching for war with Russia and China, while promising more spending on the military. All the major candidates will again be on the take from Wall Street. Not one major candidate has any intention of cutting spending or balancing the budget. They know voters will not elect anyone who promises them discomfort, pain, or shared sacrifice. One year from now we are likely to have either a lying, corrupt, criminal, socialist president or a bombastic, pompous blowhard reality TV president. In either case, they will reside in the White House during the most intense and likely bloody phase of the Fourth Turning.

   

  Military Distress

  

  “History offers even more sobering warnings: Armed confrontation usually occurs around the climax of Crisis. If there is confrontation, it is likely to lead to war. This could be any kind of war – class war, sectional war, war against global anarchists or terrorists, or superpower war. If there is war, it is likely to culminate in total war, fought until the losing side has been rendered nil – its will broken, territory taken, and leaders captured.” – Strauss & Howe – The Fourth Turning

  As we’ve witnessed throughout history, when the ruling class loses control of their domestic situation, economic turmoil ensues, they begin losing the support of the masses, and attempt to retain control by producing a foreign conflict to rally the people around the flag. War serves three vital purposes for the establishment. The politicians in power gain support, as the masses decide it would be unpatriotic to throw the bums out in the midst of a conflict. Secondly, the military industrial complex increases its power, generating obscene profits for its constituent arms dealers. Thirdly, the Wall Street cabal finances the conflicts, reaping more riches, and compensating the politicians waging the wars.

  The best wars from a government’s standpoint are wars against concepts – like terror or poverty. They can’t be won, so they go on forever. The government is free to invade or bomb any country they say are housing terrorists. The government can restrict all liberties, freedoms and Constitutional rights in the name of keeping us safe from terrorists. The concept can be utilized any time for any reason, without any proof required by the ruling class. The true terrorists are in Washington DC. They wear suits, hold hearings, give speeches, and accept bribes. These charlatans are terrorizing the world and the citizens of this country with their neo-con ambitions to rule the world.

  Linear thinkers expecting technology and human ingenuity to keep our country and the world on a path of progress are badly mistaken. They ignore the obvious escalation of global distress, as history suddenly hurls us towards some cosmic chaos that defies all rational predictive models. To those not blinded by ideology or captured by the vested interests, it is plainly evident the world has become more chaotic and dangerous in the last two years. The initial economic chaos created the atmosphere and political conditions which are now leading inevitably toward global war.

  American foreign policy, dictated by neo-cons of both parties, has purposely destabilized the Middle East and the Ukraine in an effort to keep the petro-dollar king and to ensure no regime in the Middle East could challenge Israel. As with most diabolically immoral plans, the unintended consequences will be far worse than the initial outcome. By overthrowing Hussein, Gaddafi, Mubarak, and attempting to overthrow Assad, the U.S. has unleashed thousands of Islamic fanatics and disaffected soldiers from the overthrown regimes to wreak havoc throughout the Middle East and now in Europe. Creating anarchy and chaos in countries previously living in peace under strongmen is blowing up in our faces.

  The provocation of Russia by overthrowing the democratically elected president of the Ukraine, and friend of Russia, began the war phase of this Fourth Turning. Putin then annexed Crimea and civil war waged in eastern Ukraine and an airliner was shot down by the Ukrainian government in an effort to blame Putin. The U.S. armed any Muslim willing to fight Assad, in their effort to overthrow his regime and allow Saudi Arabia and Qatar to build a gas pipeline to Europe, further weakening Russia.

  The latest terrorist threat to the world – ISIS – was created, funded, and armed by the U.S. The coordinated oversupply of oil had its purpose to destroy the economies of Russia, Iran, Argentina and Venezuela. The unanticipated deepening global recession has produced the unanticipated consequences of damaging the economy of Saudi Arabia, crushing the oil sands industry in Canada – pushing their economy into recession, and revealing the U.S. shale industry to be a debt enabled fraud – now in a slow motion collapse.

  The ongoing saber rattling between the U.S. and Russia over Syria and the Ukraine, along with the increasingly provocative actions taken by the U.S., Japan and China over the contested islands in the South China Sea, are setting the stage for a showdown no one anticipates or actually wants. But, psychopathic politicians feel driven to prove their manhood by using their military assets to bully opponents they know cannot fight back. The U.S. and their feeble minded NATO allies were sure they could overthrow Assad, just as they had done with Hussein and Gaddafi, because they have far more firepower and unlimited funds printed by their central bankers.

  Putin put a stop to those illusions, as he refused to let his only Mediterranean port fall under U.S. control. When Putin stepped into the Syrian conflict it immediately became apparent the U.S., Turkey, and the rest of NATO had no intention of defeating ISIS, as they allowed them to run refineries, ship oil to Turkey in thousands of tanker trucks and arm themselves with U.S. provided weapons. Continuous never ending conflict is good for American business.

  Even though the latest American created evil terrorist threat – ISIS – has been wreaking havoc throughout the Middle East, they were fighting Assad, so we weren’t going to eradicate them. Putin immediately began obliterating their command infrastructure, refineries, oil tankers, bridges, and other essentials an enemy uses to sustain them. This real war embarrassed the U.S., Turkey and NATO, while infuriating a desperate ISIS leadership.

  Now we’ve reached a tipping point, as the swirl of accusations, rhetoric, provocations, miscalculations, egos, hubris, and luck will combine to produce a combustible mixture which could erupt at any time. The Islamic radicals (ISIS, the supposed moderates, Turks, Iraqis, Egyptians, French, Belgians and Muslims across the world) have lashed out in response to their betrayal by the U.S. in allowing Putin to actually fight them, by blowing up a Russian airliner, slaughtering 130 people in France, killing dozens in Mali and Tunisia, while threatening similar attacks in the U.S.

  Hollande has thrown the French Constitution in the trash bin in his pathetic attempt to appear tough on terrorism so he doesn’t get ousted in the next election. Nothing like a bomb going off in Rockefeller Center or the Mall of America to get an already fearful American public in the Christmas spirit and deepening the recession the 99% are already experiencing. In this tense global atmosphere all that would be needed to set off a conflagration would be for someone to do something stupid. And Turkey just obliged.

  The shooting down of a Russian bomber over Syrian territory by Turkish F-16s, provided by U.S. arms dealers, and then the shooting down of a Russian rescue helicopter with a U.S. provided TOW missile by “moderate” Syrian rebels will have far reaching consequences. This was a deliberate unprovoked attack by Turkey as either retaliation for their cheap oil supplies being cut-off, a frantic attempt by Erdogen to boost his popularity before elections, or as instructed by those calling the shots in Washington D.C.

  Putin is unlikely to do anything rash, but this event has solidified the fact Russia is considered the true enemy of the West, not Islamic radicals or Syria. The next decade or so will see Russia, China and some lesser developing countries confront the West economically, through currency wars, commodity wars, and militarily through proxy wars in the Middle East and Eastern Europe, with all sides armed with nuclear weapons of mass destruction.

  This phase of the Fourth Turning seems surreal. History seems to be moving in slow motion. It reminds me of the eight months between Hitler’s invasion of Poland and his invasion of Belgium and France in May of 1940, referred to as the Phoney War. The Western allies had declared war on Germany, but no one did anything. Parisians and Londoners went about their business, eating at restaurants, going to plays, enjoying the spring sunshine, and blissfully unaware of the tragedy, bloodshed, and horror which was gathering like a swirling tempest just over the horizon.

  Americans today are blissfully distracted by their iGadgets, plotting out their holiday shopping strategies, leasing new cars, eating out, and buying advance tickets to the new Star Wars movie. They don’t see the wicked winter squalls ahead which will try their souls. We are experiencing the lull before the storms, but the storms are surely coming. The potential for catastrophe is high and burying our heads in the sand is not a strategy.

  “The risk of catastrophe will be very high. The nation could erupt into insurrection or civil violence, crack up geographically, or succumb to authoritarian rule. If there is a war, it is likely to be one of maximum risk and effort – in other words, a total war. Every Fourth Turning has registered an upward ratchet in the technology of destruction, and in mankind’s willingness to use it.” – Strauss & Howe – The Fourth Turning

      

  

  

  

  

  

• Obama Signs Defense Bill Authorizing $500 Million More In Aid To "Moderate" Syrian Rebels

  Earlier this year, The Pentagon had a plan. Apparently, someone in Centcom decided that there weren’t enough proxy armies battling for control of Syria and so, what the US needed to do was spend $500 million on a new “train and equip” program which, if all went according to plan, would result in the recruitment of more than 5,000 fearsome warriors by the end of 2015. 

  Of course the CIA and The Pentagon had already spent years arming, funding, and training Syrian rebels but as it turns out, most of them either proved to be wholly ineffective or else became terrorists. Although the CIA program was still operational, the Obama administration thought it would be advantageous to have (another) parallel program in place wherein “properly vetted” fighters would receive a steady stream of logistical support, training, and weapons. 

  

  What exactly this new crack squad was supposed to do is still largely unclear. The official line – of course – was that they would fight ISIS and presumably al-Nusra. That would be amusing enough if it were true. That is, the US is widely suspected of providing support to ISIS early on in the fight and the FSA (which is explicitly backed by the US and its regional allies) formed an alliance with al-Nusra long ago. In short, if the US really was training soldiers to fight ISIS and al-Nusra, the program represented an attempt on Washington’s part to clean up a mess of America’s own making by doing the exact same thing (i.e. arming insurgents) that created the mess in the first place. 

  

  Of course it’s unlikely that the program’s real goal was to fight Islamic State. After all, the US needs ISIS to continue the fight against Assad and indeed, at the time of the program’s inception, Russia wasn’t in Syria yet meaning there was still a very real possibility that Islamic State would eventually march on Damascus. It seems far more plausible that the new group of recruits were simply the latest effort on Washington’s part to field a reliable anti-Assad army that could be counted upon to continue to destabilize the regime and perpetuate American interests. 

  Well, not to put too fine a point on it, but the effort was a miserable failure. By the time summer rolled around, the US had only managed to recruit around a dozen or so fighters. The group’s commander and deputy commander were kidnapped by al-Nusra in late July and in September, Centcom chief Gen. Lloyd Austin told congress that only around “four or five” soldiers were still on the ground. “Let’s not kid ourselves, that’s a joke. This is just a total failure,” Sen. Kelly Ayotte (R-N.H.) and Sen. Jeff Sessions (R-Ala.) told Austin and Christine Wormuth, Undersecretary of Defense for Policy.

  Things only got worse a week later when The Pentagon admitted that the “four or five” fighters still operating under the program were forced to hand over six “pickup trucks” and an ammo cache to al-Qaeda in order to secure safe passage to who knows where. 

  Mercifully, the program was scrapped in early October.

  But that experience did not deter the US from providing weapons to groups deemed “moderate” by The Pentagon and CIA. In fact, after Russia and Iran ramped up their efforts to support Assad’s depleted forces, the US, Turkey, Saudi Arabia, and Qatar stepped up the weapons shipments to the FSA and other militants operating in Syria. The US, for instance, air dropped 50 tons of weapons into the middle of desert last month. The stash was supposedly intended for the brand new “Syrian Arab Coalition” which, as we outlined in side-splitting detail, is a largely fictional group the US made up in order to hide the fact that the weapons and ammo really went to the Kurdish YPG, an outcome that would be decisively unpalatable to Washington’s allies in Ankara. 

  Finally, in the latest example of what can go wrong when you provide weapons to militants, the FSA’s 1st Coastal Brigade used a US-supplied TOW to destroy a Russian search rescue helicopter last Tuesday in the wake of Turkey’s move to down a Russian Su-24 near the Syrian border.

  Obviously, all of these programs have been remarkably successful which is probably why President Obama has decided to approve some $800 million in additional aid to Syrian “moderates” and to the government in Kiev as part of the annual defense policy bill. Here’s RT:

  President Barack Obama has signed the Pentagon funding bill giving $800 million in aid to both “moderate rebels” in Syria and the Kiev regime. Obama also vowed to work around provisions blocking the closure of the Guantanamo Bay detention camp.

   

  Obama signed the National Defense Authorization Act (NDAA) of 2015 on the eve of Thanksgiving. He previously vetoed the $612 billion bill in a well-publicized ceremony in October, arguing that the lawmakers dodged the spending limits by shifting money into the warfighting slush fund.

   

  Although Congress then trimmed the bill down to $607 billion, the cuts did not affect the $300 million aid to the Ukrainian government, or the “zombie” surveillance blimp program that has cost nearly $3 billion so far. It also left almost $500 million dedicated to arming and training “moderate rebels” in Syria – a program the Pentagon had already abandoned.

  Amusingly, “the NDAA specifically prohibits any US aid going to the Islamic State of Iraq and Syria (ISIS), the Jabhat Al-Nusra Front, Al-Qaeda, the Khorasan Group, or any other violent extremist organization.” Obviously that’s a sick joke. As we saw last Monday, US-made TOWs make their way quickly to al-Nusra and what seems clear from the language in the bill is that Washington fully intends to continue to funnel arms to the FSA which is not only allied with al-Qaeda and who knows who else, but which is also now in the business of executing Russian pilots and blowing up search and rescue planes. 

  

  Meanwhile, the Pentagon can now send “anti-armor weapon systems, mortars, crew-served weapons and ammunition, grenade launchers and ammunition, and small arms and ammunition” to Ukraine to aid in the fight against Russian-backed separatists. 

  So there you have it America, your tax dollars hard at work funding proxy armies in Syria and a puppet government in Ukraine, as Washington struggles to preserve the last vestiges of US hegemony and Moscow fights to return the world to bipolarity. 

  *  *  *

  From the NDAA

  SEC. 1225. MATTERS RELATING TO SUPPORT FOR THE VETTED SYRIAN OPPOSITION.

  (a) REPORT ON POTENTIAL SUPPORT REQUIRED.— (1) IN GENERAL.—Not later than 90 days after the date of the enactment of this Act, the Secretary of Defense shall submit to the appropriate congressional committees a report setting forth a description of the military support the Secretary considers necessary to provide to recipients of assistance under section 1209 of the Carl Levin and Howard P. ‘‘Buck’’ McKeon

  National Defense Authorization Act for Fiscal Year 2015 (Public Law 113–291; 128 Stat. 3541) upon their return to Syria to ensure their ability to meet the intended purposes of such assistance.

  (2) COVERED POTENTIAL SUPPORT.—The support the Secretary may consider necessary to provide for purposes of the report required by paragraph (1) is the following:

  (A) Logistical support.

  (B) Defensive supportive fire.

  (C) Intelligence.

  (D) Medical support.

  (E) Any other support the Secretary considers appropriate for purposes of the report.

  (3) ELEMENTS.—The report required by paragraph (1) shall include the following:

  (A) For each type of support the Secretary considers necessary to provide as described in paragraph (1), a description of the actions to be taken by the Secretary to ensure that such support would not benefit any of the following:

  (i) The Islamic State of Iraq and Syria (ISIS), the Jabhat Al-Nusra Front, al-Qaeda, the Khorasan Group, or any other violent extremist organization

  (ii) The Syrian Arab Army or any group or organization supporting President Bashir Assad.

  (B) An estimate of the cost of providing such support.

  (b) STRATEGY FOR SYRIA.—

  (1) IN GENERAL.—Not later than 90 days after the date of the enactment of this Act, the Secretary of Defense shall, in coordination with the Secretary of State, submit to the appropriate congressional committees a strategy for Syria.

  (2) ELEMENTS.—The strategy required by paragraph (1) shall include the following:

  (A) A description of the means by which assistance provided to appropriately vetted elements of the Syrian opposition and other appropriately vetted Syrian groups and individuals will achieve the purposes set forth in section

  1209(a) of the Carl Levin and Howard P. ‘‘Buck’’McKeon National Defense Authorization Act for Fiscal Year 2015.

  (B) A description of the political and military objectives and end states for Syria.

  (C) A description of means by which the assistance will support the political and military objectives and end states for Syria.

  (D) An explanation of the manner in which the military campaign in Syria and Iraq is integrated.

  (c) APPROPRIATE CONGRESSIONAL COMMITTEES DEFINED.—In subsections (a) and (b), the term ‘‘appropriate congressional committees’’ has the meaning given that term in section 1209(e)(2) of the Carl Levin and Howard P. ‘‘Buck’’ McKeon National Defense

  Authorization Act for Fiscal Year 2015.

  (d) ADDITIONAL MATTERS FOR QUARTERLY PROGRESS REPORTS ON ASSISTANCE TO THE VETTED OPPOSITION.—

  (1) ADDITIONAL MATTERS.—Subsection (d) of section 1209 of the Carl Levin and Howard P. ‘‘Buck’’ McKeon National Defense Authorization Act for Fiscal Year 2015 is amended—

  (A) in paragraph (10), by striking ‘‘and’’ at the end;

  (B) in paragraph (11) by striking the period at the end and inserting a semicolon; and

  (C) by adding at the end the following new paragraphs:

  ‘‘(12) a description of support, if any, provided to appropriately vetted recipients pursuant to subsection (a) while those forces are located in Syria, including—

  ‘‘(A) logistics support;

  ‘‘(B) defense supporting fire;

  ‘‘(C) intelligence; and

  ‘‘(D) medical support; and

  ‘‘(13) a description of the number of appropriately vetted recipients located in Syria, the approximate locations in which they are operating, and the number of known casualties among such recipients.’’.

  (2) EFFECTIVE DATE.—The amendments made by paragraph

  (1) shall take effect on the date of the enactment of this Act, and shall apply with respect to quarterly reports submitted under subsection (d) of section 1209 of the Carl Levin and Howard P. ‘‘Buck’’ McKeon National Defense Authorization Act for Fiscal Year 2015 after that date.

  (e) INFORMATION ACCOMPANYING REPROGRAMMING REQUESTS.—

  Subsection (f) of such section is amended—

  (1) by striking ‘‘The Secretary of Defense’’ and inserting the following:

  ‘‘(1) IN GENERAL.—The Secretary of Defense’’; and (2) by adding at the end the following new paragraph:

  ‘‘(2) INFORMATION ACCOMPANYING REPROGRAMMING REQUESTS.—Each request under paragraph (1) shall include the following:

  ‘‘(A) The amount, type, and purpose of assistance to be funded pursuant to such request.

  ‘‘(B) The budget, implementation timeline with milestones, and anticipated delivery schedule for such assistance.’’

  

  

  

  

  

• Bush Vs. Obama – The Cartoon

  Speak softly and carry a big stick?

   

  

   

  Source: Townhall.com

  

  

  

  

  

• 14,000 Refugees Due For Deportation From Sweden Have Vanished: "We Simply Do Not Know Where They Are"

  As part of the just concluded “cash for refugees” deal between the EU Turkey, the FT adds that not only will migrants whose asylum applications are rejected be sent back to Turkey but that this “crackdown on irregular migration would be complemented by a parallel programme offering a legal route to Europe, resettling up to 500,000 Syrian refugees directly from Turkey, Lebanon or Jordan.”

  The FT adds that, as expected, “if such an EU-wide scheme were made mandatory it would be flatly opposed by many eastern European countries. To avoid the proposals being blocked, Brussels and Berlin are exploring a “voluntary” scheme with 10 countries willing to take refugees. It is unclear whether other Schengen members would be asked to contribute to the costs of resettlement.”

  But before crossing that particular bridge, which will sow even further anger, mistrust and antagonism spread among the member countries of the European “Union”, a bigger question is just how will Europe track down and sequester those refugees that pose the biggest threat in the eyes of authorities, those who are already slated for deportation.

  As the following case study from Sweden proves, having once entered Europe, Europe may have problems trying to track down the hundreds of thousands of refugees having already found their way to the continent.

  As Sweden’s Afton Bladet reports, over half of all the illegal migrants slated for deportation in Sweden have mysteriously disappeared. 

  The National Border Police Section reports that of the 21,748 individuals due to be sent home after their asylum applications were turned down, a whopping 14,140 have simply vanished off the police radar. Around a third, or the remaining 7,608, still live and are accounted for in the Swedish Migration Board’s premises or have indicated an address for their own homes. It is not clear if anyone has actually tried following up on said home address to see how many have simply made one up.

  

  Based on a translation of the Swedish report by Breitbart, some are expected to have left the country secretly, “but the majority are thought to still be in Sweden, having fallen through the cracks of the comprehensive welfare state.“

  The local cops is brutally honest: “We simply do not know where they are”, said Patrik Engstrom, a spokesman for the local police.

  

  This is not the first time refugees have vanished from official supervision: one month ago we reported that roughly 4,000 asylum-seekers who had initially been accomodated by the German state of Lower Saxony had “mysteriously disappeared.” To our knowledge they have still not been found.

  Ever the egalitarian paradise, Sweden was as concerned about labor abuse as the current whereabouts of the refugees, and Afton Bladet noted that a number of unscrupulous employers in the country have taken advantage of the invisible migrants, using them as cheap labour off the books, with no wages tax to pay or minimum wage to heed.

  The reported goes on to note that while at the start of 2015 the migration bureau was responsible for deporting migrants who failed to gain a visa, the rising tide of migration created new challenges and the job was transferred to the Police in October. The task of deportations was handed over to police because the migration board considered that as the situation deteriorated, “coercion would be necessary” to get migrants to leave. Yet through a severe lack of manpower, resources, and political mandate to take proper action the police have proven unable to handle the job.

  Now, even the police is proving helpless at managing the process: “a police spokesman said they simply did not have enough officers, having been ordered this month to become border police as well, enacting government policy to check passports and papers.”

  “We have failed because too much of our resources go to reintroduce border controls at internal borders” Patrik Engstrom adds.

  Hamstrung by government policy, the border checks have also been a failure, making no significant reduction in the number of migrants crossing into the country daily. Officers were only permitted to make spot checks at the border, and were forbidden to profile individuals on the basis of their ethnicity, language spoken, or skin colour, making effective control impossible.

  Finally, even in cases where the police manage to find illegals and send them home, nations such as Afghanistan, Iran, Somalia, Eritrea, Lebanon, Morocco and Libya don’t accept their own people back in many cases.

  In other words, Europe has unleashed the refugee genie without much thought for the consequences. And now that the “consequences” have arrived and Europe is scrambling to put the genie back into the bottle, to its amazement it has realized that the genie has mostly vanished.

  

  

  

  

  

• Black Friday Total Sales Crash 10% (Despite Rise In Online Spend)

  We can hear the mainstream media now – "Great News Everyone!! The American consumer is back" – online sales on Black Friday rose 10% to $1.7 billion which ComScore says shows "strong spending." The only problem is – which we suspect will be oddly missing from the mainstream narrative, as ShopperTrak reports total sales on Black Friday crashed 10% to $10.4 billion. While blame has been placed on early opening on Thanksgiving, that is false too since spending on that day also plunged 10%. So, the sales news is unequivocally bad – which is hardly surprising given the collapse in consumer confidence.

   

  So to clarify… (via The Guardian)

  

  Total sales in the US on Black Friday fell 10% to $10.4bn this year, down from $11.6bn in 2014, according to research firm ShopperTrak.  

  The decline in sales on the traditional busiest shopping day of the year has been blamed on shops opening the day before. But this year, sales on Thanksgiving also dropped, and by the same percentage, to $1.8bn.

   

  A big reason for the decline is increased online shopping, as Americans hunt down deals on their smartphones, tablets and computers.

  So, fewer customers ventured out for the traditional busiest shopping day of the year, while online retailers saw sales jump… (via Comscore)

  

  Black Friday (November 27) followed with an even stronger spending day with $1.66 billion in desktop online sales, up 10 percent from Black Friday 2014.

   

  “While the holiday season opened a little softer than anticipated, Thanksgiving and Black Friday both posted strong online spending totals that surpassed $1 billion on desktop computers and grew at the rate we had expected,” said comScore chairman emeritus Gian Fulgoni. “This is also the second straight year that Thanksgiving has established itself as one of the more important online buying days, while Black Friday continues to gain in importance online with each passing year. Looking ahead to Cyber Monday, we expect to see upwards of $2.5 billion in desktop spending as people return to their work computers after Thanksgiving weekend and use some of their down time to continue their holiday gift buying, but without other family members looking over their shoulders.”

  So to clarify total sales collapsed by $1.2 billion (even as online sales rose by $150 million)… but everything will be awesome once Americans get back to work and start using their work computers to buy buy buy….

  *  *  *

  So, for those with difficulty with reading and math…

  

   

  The National Retail Federation just held their post-Black Friday conference call to clarify evewrything…

  • *NRF: MANY NUMBERS THIS YEAR CAN'T BE COMPARED WITH PAST YEARS (unless the numbers are better in which case they're awesome)
  • *NRF: METHODOLOGY OF THIS YEAR'S SURVEY CHANGED DRAMATICALLY (so we should ignore it?)
  • *NRF CHIEF ECONOMIST: THERE ARE SOME `SPEED BUMPS' IN ECONOMY (weather?)
  • *RETAILERS STARTED PROMOTING HEAVILY DAY AFTER HALLOWEEN: NRF (bye bye margins)
  • *NATL RETAIL FEDERATION SAYS CONSUMER FUNDAMENTALS VERY STRONG (but you just said "speed bumps")
  • *NRF: SLOWER JOB GROWTH DURING SUMMER COULD IMPACT SPENDING (but you just said fundamentals were very strong?)

  

  

  

  

  

• Inside The ISIS Propaganda Machine: An Up-Close Look At A Militant Media Strategy

  “I’ve grown used to IS ultraviolence, but this video was different. Different because, at my office desk, the place where I conduct all my research, I have a photograph of myself with my now-wife, dad and step-mum taken at that very same Palmyran theatre almost five years ago.”

  That’s a quote from Charlie Winter, Senior Researcher at the Quilliam Foundation, which describes itself as “the world’s first counter-extremism think tank, set up to address the unique challenges of citizenship, identity, and belonging in a globalized world.”

  The reference is to a video ISIS released over the summer depicting a mass execution at Palmyra’s Roman Theatre. The most chilling thing about this particular Islamic State murder montage: the executioners are all children. 

  

  

  

  The clip represented yet another attempt on the group’s part to one-up itself on the way to creating a vast catalogue of ultra-violent propaganda videos that have both shocked and captivated the Western public.

  “Jihadi John” introduced the world to Islamic State’s brand of barbarism by beheading Westerners on camera with a bowie knife. The brutality quickly escalated and before long, the group released footage of a Jordanian pilot being burned alive in a cage. After that, ISIS proceeded to bombard social media with a steady stream of increasingly cartoonish execution videos including one clip that depicts four men being packed into a Toyota Corolla which is then destroyed at close range with an RPG, and a particularly gruesome effort involving three gasoline-doused captives being hung upside down from a swingset before being set alight.

  But Islamic State’s media arm doesn’t confine itself to producing real-life Quentin Tarantino clips. As we documented in “Austrian Economics Is Now Equivalent To Terrorism Thanks To Latest Islamic State ‘Gold Standard’ Propaganda Clip,” the group’s videos run the gamut from history lessons to proselytizing to recruitment drives. Indeed, Islamic State is exceptionally media savvy and the group’s ability to attract fighters from all corners of the globe owes much to the propaganda arm. Just last week for instance, ISIS released an exceptionally well executed clip wherein the narrator touches on everything from geography, to racism, to veteran suicide rates before denouncing secularism and telling the US, Russia, and everyone else to “bring it on.”

  There are of course serious questions as to who exactly is responsible for the Hollywood specials that emanate from the Al Hayat media arm, and although he didn’t discover any evidence that John McCain has a director’s chair on ISIS sets or that the desert landscapes in the Jihadi John clips are in fact rendered on a green screen, Charlie Winter (quoted above) did manage to collect quite a bit of useful information about Islamic State propaganda in the course of conducting extensive research on how the group crafts its message.  

  *  *  *

  From Fishing and Ultraviolence, by Charlie Winter, as originally published by BBC

  We know that ideologically driven supporters of IS are attracted and gratified by its militaristic and ultraviolent propaganda, but what about the rest?

  What about the thousands of civilian men, women and girls that leave their homes for the so-called IS caliphate?

  for the entire 30 days of the month of Shawwal – which, according to IS’s own calendar, began on 17 July and finished on 15 August – I spent two hours a day going through its Arabic-language support network on Twitter with a fine-tooth comb, navigating between its various forms of propaganda, using combinations of the group’s countless designated hashtags as keys.

  What I found was shocking, but not because of its brutality.

  In just 30 days, IS’s official propagandists created and disseminated 1,146 separate units of propaganda.

  Photo essays, videos, audio statements, radio bulletins, text round-ups, magazines, posters, pamphlets, theological treatises – the list goes on.

  Radio bulletins and text round-ups were released in six languages – Russian, Turkish, Arabic, Kurdish, French and English. After grouping the different language versions of the same item together there were 892 units in total.

  

  All of it was uniformly presented and incredibly well-executed, down to the finest details.

  [..]

  More often than not, it was the idea of utopia that was being stressed – social justice, economy, religious “purity” and the constant expansion of the “caliphate”.

  

  Aside from these broad, superficial observations, the content was so voluminous and subject to change that there were no easy characterisations.

  For example, on a relatively normal day, the 23rd of Shawwal, there was a total of 50 distinct pieces of propaganda.

  […]

  Thirty two of the 50 showed off civilian activities – a plastering workshop in Mosul, newspapers being distributed in Fallujah, pavements laid in Tal’afar, telephone lines fixed in Qayara, cigarettes confiscated and burned in Sharqat, and even camels being herded in Bir al-Qasab.

  

  From the offset, the lack of brutality was striking. I knew from past research that IS’s brand went much further than shedding the blood of its enemies, but there was a complete absence of it in the first few days of Shawwal.

  In retrospect, this makes sense.

  Coming immediately after the holy month of Ramadan, Shawwal begins with a day of celebration, Eid al-Fitr.

  Predictably, IS wanted to show this off.

  

  The propagandists made great play of the alms-distribution among the needy in Syria and Libya, and spent a huge amount of time documenting celebratory prayers and the general “ambiences” of the festivities.

  Kids played on fairground rides, toys and sweets were handed out among orphans, fighters at the front lines sang, drank tea and laughed together.

  

  At one point, a programme was even produced by IS’s official radio station, al-Bayan, in which “random” passers-by were quizzed about their Eid experiences (which were, of course, invariably euphoric).

  

  Photo essays depicting melon agriculture, handicrafts and industry, wildlife, cigarette confiscations and street cleaning were disseminated on an almost like-for-like basis alongside sets of images showing balaclava-wearing IS fighters firing mortars into the distance, defiling large piles of dead “enemies” and gloating over booty.

  Contrary to the countless reports that had emerged in July claiming that IS was toning down its brutality, the spectre of ultraviolence was never far off.

  Only five days into Shawwal a video was released in which an pro-Assad soldier was shot in the back and cast off a cliff in Syria’s Hama province.

  Four days later footage emerged depicting the consecutive beheading of three “spies” in Iraq. And, shortly after that, a video showed a group of “enemies” of IS in Afghanistan being tied up and murdered – killed by the buried explosives they had been forced to sit on.

  The further the month progressed, the clearer the motivations behind IS’s killing became.

  A warning was being sent out, but not to the international community. The intended target audience for these videos were the potential dissenters living in IS-held territories.

  They were being told that they face a zero-sum game – stay on side, and enjoy the IS utopia, or assist the enemy and die in awful cruelty.

  Not a single day passed without the immense cogs of the IS propaganda machine churning out another batch of releases. Consistently, the constituent parts of each batch meant little when taken in isolation.

  However, taken together, they presented a comprehensive snapshot of life under the group with something for everyone.

  *  *  *

  Yes, “something for everyone.” Like grapes? Join the harvest in Raqqa. Enjoy a nice dip in the pool on days when the desert sun and sweltering heat are unbearable? Go for a swim with friends and family in Mosul. Are your kids bored? ISIS has bouncy castles for that. Need to blow off some steam? Just throw on your all black executioner garb, head up to a fog-covered mountain side on your matching horse, and execute some “spies.”

  

  

  There’s much more in the full BBC article (linked above) but for those who want a still more granular look, Winter’s research is the basis for a longer paper entitled “Documenting The Virtual ‘Caliphate’.” These are Winter’s ten conclusions: 

  1. The volume of output produced by Islamic State far exceeds most estimates, which have been, until now, necessarily conservative. Disseminating an average of 38.2 unique propaganda events a day from all corners of the Islamic State ‘caliphate’, this is an exceptionally sophisticated information operation campaign, the success of which lies in the twin pillars of quantity and quality. Given this scale and dedication, negative measures like censorship are bound to fail.
  2. While there is broad consistency in the Islamic State narrative, it changes on a day-to-day basis according to on-the-ground prioritiesfor the group. Composed of 6 non-discrete parts – mercy, belonging, brutality, victimhood, war and utopia – the ‘caliphate’ brand is constantly shifting. 
  3. Constituting just 3.48% of the Shawwal dataset, the themes of mercy, belonging and brutality are dwarfed by the latter three narratives in terms of prominence. This is a marked shift from past propaganda norms and is indicative of changes in tactical outreach for Islamic State. 
  4. Over half of all the propaganda was focused on depicting civilian life in Islamic State-held territories. The spectre of ultraviolence was ever-present, but the preponderant focus on the ‘caliphate’ utopia demonstrates the priorities of the group’s media strategists. 
  5. Economic activity, social events, abundant wildlife, unwavering law and order, and pro-active, pristine ‘religious’ fervour form the foundations of Islamic State’s civilian appeal. In this way, the group attracts supporters based on ideological and political appeal.
  6. Besides civilian life, the propagandists go to great lengths to portray their military, variously depicting it in stasis or during offensives. There are few occasions upon which its defensive war is documented, something that makes sense given the need to perpetuate the aura of supremacy and momentum. 
  7. A large proportion of military-themed events is devoted to showing Islamic State’s war of attrition, with mortars and rockets being fired towards an unseen enemy. Given the locations from which many of these reports emerge, as well as the fact that the aftermath of such strikes is rarely, if ever documented, it is conceivable that these low-risk attacks are falsely choreographed to perpetuate a sense of Islamic State’s constantly being ‘on the offensive’.
  8. Islamic State still markets itself with brutality. However, the intended audiences for its ultraviolence are decidedly more regional than they have been in days gone by. Indeed, it seems that fostering international infamy is now secondary to intimidating its population, in order to discourage rebellion and dissent. Of course, this is very much subject to change. 
  9. The quantity, quality and variation of Islamic State propaganda in just one month far outweighs the quantity, quality and variation of any attempts, state or non-state, to challenge the group. All current efforts must be scaled up to achieve meaningful progress in this war. 
  10. The global desire to find a panacea counter-narrative to undermine the Islamic State brand is misplaced. Categorically, there is no such thing. Those engaged in the information war on the ‘caliphate’ must take a leaf out of the group’s own media strategy book and prioritise quantity, quality, variation, adaptability and differentiation. Most importantly, though, it must be based upon an alternative, not counter, narrative

  Here’s a look at some of the more granular data which breaks the propaganda output down by topic and medium: 

  

  And here’s a breakdown that shows which offices are the most prolific among what is apparently a sprawling network operating across the caliphate:

   

  Before you ask, there were no statistics for the Langley office. 

  Finally, here’s Winter’s effort to develop an org chart for the entire ISIS media production complex which he says spans at least a dozen countries:  

  

  So for those looking to make sense of the myriad logos that appear at the beginning of the videos, the main production units are the al-Furqan, al-I’tisam and Ajnad Foundations and the al-Hayat Media Center. Al-Hayat produced last week’s special effects-laden, four-minute extravaganza (mentioned above). 

  Needless to say, it would be almost impossible to track who all is involved in the funding and dissemination of ISIS propaganda given the dizzying array of discrete production units shown above. We have little doubt that an investigation into each of the individual entities shown in the org chart would reveal some very interesting connections to state sponsors across the Sunni world.

  Ultimately, we would agree with Winter that Islamic State’s propaganda machine is probably more dangerous for its ability to paint a pleasant picture of life in the “caliphate” than for its capacity to shock the Western public with wanton displays of brutality.

  That said, perhaps the larger question here is this: how is it that a movement with only 30,000 estimated fighters who have supposedly been the target of intense US airstrikes and counter-terrorism ops for 14 months is able to control and govern cities with populations that number in the millions virtually unimpeded? Remember, Saddam had around 400,000 troops and his army held up for about three weeks in the face of a “serious” effort by the US.

  

  

  

  

• Paris Is Prologue

  Submitted by Worth Wray via EvergreenGavekal.com,

  “Europe only succeeds if we work together.”
  ~ Angela Merkel, Chancellor of Germany since 2005

  SUMMARY

  • The recent attacks in Paris evoke strong emotions for many people, but investors need to look through those feelings to the short, medium, and long-term implications. I believe Paris may mark an important turning point for Europe and the global business cycle… but for different reasons than you may think.
  • The immediate impact on France’s economy will be minor and short-lived as long as it proves to be an isolated incident. There are significant downside risks to economic growth if terror attacks in Europe become the new normal.
  • Europe’s Muslim population faces an unemployment rate around 50% compared to the EU average of 10% and xenophobia is rising after the Paris attacks. From that perspective, Europe is becoming a breeding ground for radical Islam.
  • As refugees flock to Europe from Middle East, the foundations of modern Europe are breaking down. Walls, fences, and security checkpoints are going up all over the continent and countries are becoming more isolated from one another.
  • While Angela Merkel’s leadership has proven invaluable in preserving the Euro Area over the last decade, her position on accepting refugees is incredibly unpopular in Germany and across Europe. Her political weakness in the wake of the Paris attacks now puts the European establishment at greater risk just as anti-establishment parties are on the rise and a number of political crises are emerging in Spain, Portugal, and Greece.
  • With no politically palatable option for restoring stability in Syria and Iraq, there is no end in sight for Europe’s refugee crisis. And if there is no end in sight for Europe’s refugee crisis, the xenophobic shift toward anti-establishment parties can only escalate from this point forward.
  • The European Central Bank has no choice but to extend and expand quantitative easing. This will weigh on the euro (likely bringing EUR/USD from $1.06 today to well below $0.90) at the same time the Federal Reserve is driving the US dollar higher.
  • The main investment takeaway here is that more policy divergence is on the way between the United States and the rest of the world, meaning a stronger US dollar, lower commodity prices (although energy prices could spike on Middle East instability), and another wave of panic for emerging markets. It also means more pressure on Japan to follow suit in an escalating currency war and on China to allow a market-driven fall in its currency.
  • There is a chance that the slow disintegration of Europe will drive more capital onto US shores, boosting valuations and fueling a blow-off top in the US equity market; but beware global shocks and take any rally as a chance to get defensive.

  FOR WHAT IT’S WORTH –  PARIS IS PROLOGUE

  In the aftermath of the Paris attacks, most of the comments I’ve seen from journalists, politicians, and economists have been extremely emotional – and for good reason.

  130 people are dead, more than 350 are wounded, and roughly 50 are still fighting for their lives after the worst terrorist attack in French history.

  The tragedy in Paris brings back memories of the Charlie Hebdo murders in January 2015, the Mumbai attacks in 2008, the Madrid train bombing in 2004, and the attacks on New York and Washing-ton DC in 2001. These horrible, traumatic events still evoke sadness, fear, anger, and defiance among free people who refuse to bow to extremists like the Islamic State.

  

  At a time like this, it’s natural to get caught up in the moment… and yet, as an economist and an investment strategist, it’s my job to help you look past such emotions to start making sense of the chaos.

  I can’t offer you any special insight into the mind of Islamist fanatics or explain why bad things happen to good people. But I can help you start thinking about what these tragic events mean for the world economy and for your portfolio in the coming weeks, months, and years.

  For what it’s worth, I believe that we may look back on Paris as a major turning point for Europe and the global business cycle as a whole… but for different reasons than you may think.

  

  THE IMMEDIATE IMPACT ON FRANCE’S ECONOMY WILL BE MINOR AND SHORT-LIVED…

  As Bloomberg’s Simon Kennedy explained last week, advanced economies often experience temporary slowdowns in the wake of terror attacks, but they tend to bounce back pretty quickly. In fact, studies have shown that the relationship between economic growth and isolated terrorist attacks is almost statistically insignificant in economies as large and diversified as France.

  Parisians will likely spend less for a while, opting for quiet dinners at home rather than raucous nights out on the Champs-Élysées. Tourists will cancel or delay their travel plans. Business people will opt for teleconferences over in-person meetings. Investment will slump and trade will stall as France tightens its border security, but probably not enough to alter the overall trend in economic growth.

  

  … UNLESS THESE KINDS OF TERROR ATTACKS CONTINUE

  The one caveat is that the November 13 attack must prove to be an isolated incident. While advanced economies tend to bounce back relatively quickly from one-time terror events, research from the International Monetary Fund and Moody’s Investor Service shows that persistent violence can drag significantly on business and consumer sentiment while raising government borrowing costs.

  From that perspective, a clash of cultures and ideologies is the last thing that France – or the rest of Europe – needs as economic growth continues to stagnate and deflation looms large.

  And yet, further attacks are more than possible.

  Not only do Europe’s Muslim communities account for a significant share of the population in key countries like France (7.5%), the Netherlands (6.0%), Belgium (5.9%), Germany (5.8%), Austria (5.4%), Greece (5.3%), and Italy (3.7%), they also account for a disproportionate share of the economic hardship with unemployment rates well above 50%. [By comparison, Muslims account for just 2.1% of the population in the United States.]

    

  With no meaningful economic improvement in sight, the spike in xenophobic sentiment that we are seeing in the wake of the Paris attacks is creating the ideal conditions for ISIS to engage angry, disenfranchised young people who feel like outsiders in their own societies… and that’s before we even consider the massive influx of Syrian and Iraqi refugees.

  

  EUROPEAN UNITY IS DISINTEGRATING AS GOVERNMENTS REASSERT THEIR NATIONAL BORDERS

  As geopolitical expert Ian Bremmer warned just days before the Paris attacks, Europe’s escalating refugee crisis is one of the greatest threats to global economic stability today.

  Out of roughly five million Syrian and Iraqi refugees, only 6% have arrived thus far. “A lot more are coming and the ability of the Europeans to integrate these people is virtually nil.” The risk, as Ian outlined it, is that it would be impossible to distinguish between people fleeing from terror and the terrorists themselves.

  

  In the likely event of another “Charlie Hebdo type incident,” Ian worried that a severe backlash against Germany’s call for countries across Europe to accept their share of incoming refugees would jeopardize “the one thing that the markets have been able to completely count on [since the 2008 financial crisis]… Angela Merkel’s leadership.”

    

  Now he says “the social fabric of what it means to be [European] is unraveling in front of our eyes.”

  

  Over the past year, calls for tighter border security have been getting louder as Arab asylum seekers poured into continental Europe. Even before the Paris attacks, countries like Poland, Hungary, Slovenia, Slovakia, the Netherlands, Austria, and Germany (which despite enforcing its borders is accepting 800,000 refugees a year) started to install precautionary walls, fences, and/or border checks in an attempt to stem (or at least regulate) the tide of Arab asylum-seekers.

  Heightened national security may not seem like a big deal to onlookers in America, but this marks a major breakdown in the 26 country “Schengen Area.” Aside from crippling the concept of European unity, it threatens to start re-imposing economic costs which had been painstakingly reduced over decades of continental integration. Just imagine what would happen to interstate trade if truck drivers and commuters had to pass through time-intensive security checks at every state line.

  

  After Paris, these fears of territorial disintegration are becoming even more real. Instead of allowing people and goods to move freely across Europe’s “internal borders,” passport and security checks are going up all over the continent. As we are now seeing in France, the odds of emergency border controls becoming permanent are uncomfortably high considering that the EU still has no way of securing its external borders.

  As Open Europe’s Raoul Ruparel notes, it’s an enormous blow to the European political establishment that could soon prompt voters to question the benefits of remaining in the Eurozone and/or the European Union at all.

  What’s more, Angela Merkel’s popularity is rapidly eroding – both in Germany and across Europe – which leaves the entire European experiment at great risk just as Marine Le Pen (France’s self-described Madame Frexit) and others like her are surging in the polls.

  

  UNTIL STABILITY IS RESTORED IN SYRIA & IRAQ, EUROPE’S REFUGEE CRISIS WILL ONLY GET WORSE

  The problem is that there can be no end in sight for Europe’s refugee crisis until ISIS is eliminated – along with Syria’s war criminal president, Bashar al-Assad – and some kind of stability is restored to the region.

  That’s a remarkably tall order for the economically weak and politically fragile European Union that cannot even manage to secure its continental borders… especially when pan-European public support is mixed on a bombing campaign, opposed to putting boots on the ground, and absolutely against a decades long effort to rebuild an Arab country while Eurozone countries are still crumbling.

  While it’s possible that Russia will supply a portion of the necessary ground troops, we also have to think that Mr. Putin’s goals in the region starkly contrast with those of his prospective European allies.

  With Russia now in a position where it needs to stir up geopolitical risk to support its energy sector at virtually any cost, Putin’s gain would likely be Europe’s loss on multiple fronts (i.e. higher energy prices and continued Middle East instability) instead of resolving the refugee crisis. Moreover, since ISIS controls the resource poor portion of Iraq, it’s unlikely that a specifically ISIS-targeted mission will lead to a spike in oil prices… suggesting that Russia’s entry into an anti-ISIS mission may just be an excuse to start a larger ground campaign in the Middle East alongside its main regional ally, Iran.

  [As I am editing this paper ahead of the Thanksgiving holiday, news has just broken that Turkey has shot down a Russian warplane. There’s no time to get into the details here, but you have to wonder if NATO (of which Turkey is a member) is about to be tested. I can only hope, but am not completely confident, that the longstanding alliance between North American and European governments will hold up better than Schengen (which, if you, recall is the agreement under which people have moved freely across Europe’s internal borders for the past thirty years.]

  Unfortunately, there really isn’t a silver lining here for Europe. France, Russia, and the European Union can try to stamp out ISIS, but can’t subdue Islamic extremism without first restoring stability to the Middle East. Europe can accept more refugees, but at the cost of even higher unemployment among the unassimilated Muslim population and elevated risks of more jihadis radicalized from local and immigrant populations.

  The implications here are obvious, although uncomfortable to admit. With no politically palatable option for restoring stability to Syria and Iraq, there is no end in sight for Europe’s refugee crisis. And if there is no end in sight for Europe’s refugee crisis, the xenophobic shift within Europe toward anti-establishment parties can only escalate from this point forward.

  A united Europe has very little hope of addressing these challenges. A fragmented Europe has almost no chance. Both scenarios likely lead to crisis.

  THE EUROPEAN CENTRAL BANK HAS NO CHOICE BUT TO EXTEND & EXPAND QUANTITATIVE EASING

  As you may have already realized, Paris is something of a worst case scenario for the fragile 19 member Euro-area.

  Though Mario Draghi and his colleagues at the European Central Bank have held financial risks at bay since 2012 with theatrical commitments, negative interest rates, and monthly asset purchases, the politics of separation have continued to mature in countries with inadequate growth, high unemployment, and creditor-imposed fiscal austerity.

  

  Now, with inflation expectations at risk of breaking down, QE potentially set to expire in September 2016, credit risks starting to creep back into longer-dated government borrowing costs, and a series of potentially toxic political crises emerging in Spain, Portugal, and Greece, the central bank has no choice but to extend and expand its ongoing QE program.

  This will weigh heavily on the euro (likely bringing the EUR/USD from $1.06 today to well below $0.90) at the same time the Federal Reserve is driving the US dollar higher.

  The main investment takeaway here is that more policy divergence is on the way, meaning a stronger US dollar, lower commodity prices (although energy prices could spike on Middle East instability), and another wave of panic for emerging markets that are now collectively large enough to drag the global economy into recession. It also means more pressure on Japan to follow suit and on China to allow a market-driven fall in its currency.

  There is a chance that the slow disintegration of Europe will drive more capital onto US shores, boosting valuations and fueling a blow-off top in the US equity market; but beware global shocks and take any rally as a chance to get defensive.

  With Europe’s troubles escalating to not just one, but a series of potentially unmanageable crisis points in the next several years, the ECB will have to do “whatever it takes” and hope it can preserve the single currency area long enough for cooler heads to prevail.

  

  Perversely, that means we can expect a bit of a pick-up in European economic activity in the coming quarters – particularly in Germany which will benefit from a dramatically weaker euro – but don’t get too comfortable.

  Paris is just a prologue to the real European crisis.

  

  

  

  

  

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• How A Secretive Elite Created The EU To Build A World Government

  Authored by Professor Alan Sked – original founder of UKIP, via The Telegraph,

  Voters in Britain's referendum need to understand that the European Union was about building a federal superstate from day one

  As the debate over the forthcoming EU referendum gears up, it would be wise perhaps to remember how Britain was led into membership in the first place. It seems to me that most people have little idea why one of the victors of the Second World War should have become almost desperate to join this "club". That's a shame, because answering that question is key to understanding why the EU has gone so wrong.

  Most students seem to think that Britain was in dire economic straits, and that the European Economic Community – as it was then called – provided an economic engine which could revitalise our economy. Others seem to believe that after the Second World War Britain needed to recast her geopolitical position away from empire, and towards a more realistic one at the heart of Europe. Neither of these arguments, however, makes any sense at all.

  The EEC in the 1960s and 1970s was in no position to regenerate anyone’s economy. It spent most of its meagre resources on agriculture and fisheries and had no means or policies to generate economic growth.

  When growth did happen, it did not come from the EU. From Ludwig Erhard's supply-side reforms in West Germany in 1948 to Thatcher's privatisation of nationalised industry in the Eighties, European growth came from reforms introduced by individual countries which were were copied elsewhere. EU policy has always been either irrelevant or positively detrimental (as was the case with the euro).

  Nor did British growth ever really lag behind Europe's. Sometimes it surged ahead. In the 1950s Western Europe had a growth rate of 3.5 per cent; in the 1960s, it was 4.5 per cent. But in 1959, when Harold Macmillan took office, the real annual growth rate of British GDP, according to the Office of National Statistics, was almost 6 per cent. It was again almost 6 per cent when de Gaulle vetoed our first application to join the EEC in 1963.

  In 1973, when we entered the EEC, our annual national growth rate in real terms was a record 7.4 per cent. The present Chancellor would die for such figures. So the economic basket-case argument doesn’t work.

  What about geopolitics? What argument in the cold light of hindsight could have been so compelling as to make us kick our Second-World-War Commonwealth allies in the teeth to join a combination of Belgium, the Netherlands, Luxembourg, France, Germany and Italy?

  Four of these countries held no international weight whatsoever. Germany was occupied and divided. France, meanwhile, had lost one colonial war in Vietnam and another in Algeria. De Gaulle had come to power to save the country from civil war. Most realists must surely have regarded these states as a bunch of losers. De Gaulle, himself a supreme realist, pointed out that Britain had democratic political institutions, world trade links, cheap food from the Commonwealth, and was a global power. Why would it want to enter the EEC?

  

  The answer is that Harold Macmillan and his closest advisers were part of an intellectual tradition that saw the salvation of the world in some form of world government based on regional federations. He was also a close acquaintance of Jean Monnet, who believed the same. It was therefore Macmillan who became the representative of the European federalist movement in the British cabinet.

  In a speech in the House of Commons he even advocated a European Coal and Steel Community (ECSC) before the real thing had been announced. He later arranged for a Treaty of Association to be signed between the UK and the ECSC, and it was he who ensured that a British representative was sent to the Brussels negotiations following the Messina Conference, which gave birth to the EEC.

  In the late 1950s he pushed negotiations concerning a European Free Trade Association towards membership of the EEC. Then, when General de Gaulle began to turn the EEC into a less federalist body, he took the risk of submitting a full British membership application in the hope of frustrating Gaullist ambitions.

  His aim, in alliance with US and European proponents of a federalist world order, was to frustrate the emerging Franco-German alliance which was seen as one of French and German nationalism.

  

  The French statesman Jean Monnet, (1888 – 1979), who in 1956 was appointed president of the Action Committee for the United States of Europe

  Monnet met secretly with Heath and Macmillan on innumerable occasions to facilitate British entry. Indeed, he was informed before the British Parliament of the terms in which the British approach to Europe would be framed.

  Despite advice from the Lord Chancellor, Lord Kilmuir, that membership would mean the end of British parliamentary sovereignty, Macmillan deliberately misled the House of Commons — and practically everyone else, from Commonwealth statesmen to cabinet colleagues and the public — that merely minor commercial negotiations were involved. He even tried to deceive de Gaulle that he was an anti-federalist and a close friend who would arrange for France, like Britain, to receive Polaris missiles from the Americans. De Gaulle saw completely through him and vetoed the British bid to enter.

  Macmillan left Edward Heath to take matters forward, and Heath, along with Douglas Hurd, arranged — according to the Monnet papers — for the Tory Party to become a (secret) corporate member of Monnet’s Action Committee for a United States of Europe.

  According to Monnet’s chief aide and biographer, Francois Duchene, both the Labour and Liberal Parties later did the same. Meanwhile the Earl of Gosford, one of Macmillan’s foreign policy ministers in the House of Lords, actually informed the House that the aim of the government’s foreign policy was world government.

  Monnet’s Action Committee was also given financial backing by the CIA and the US State Department. The Anglo-American establishment was now committed to the creation of a federal United States of Europe.

  Today, this is still the case. Powerful international lobbies are already at work attempting to prove that any return to democratic self-government on the part of Britain will spell doom. American officials have already been primed to state that such a Britain would be excluded from any free trade deal with the USA and that the world needs the TTIP trade treaty which is predicated on the survival of the EU.

  Fortunately, Republican candidates in the USA are becoming Eurosceptics and magazines there like The National Interest are publishing the case for Brexit. The international coalition behind Macmillan and Heath will find things a lot more difficult this time round — especially given the obvious difficulties of the Eurozone, the failure of EU migration policy and the lack of any coherent EU security policy.

  Most importantly, having been fooled once, the British public will be much more difficult to fool again.

  

  

  

  

  

• The Bitcoin Universe Explained

  As evidenced by the Greek, Chinese, and now Argentine 'jumps', the world remains increasingly aware of the inevitable worth of fiat currencies and fears the desperate acts of governments as the react to that reality (and is looking for alternatives).

  

   

  This infographic explains the wide ranges of the Bitcoin universe, accompanied with quotes from some of its best-known business leaders.

   

  

  Courtesy of: Visual Capitalist

   

  So from miners to merchants, the Bitcoin universe continues to expand dramatically as we noted previously, "There are more people in the world who need a currency they can trust, than there are people in the world who can trust their currency."

  

  

  

  

  

• Guest Post: A Hybrid War To Break The Balkans?

  Submitted by Andrew Korybko via OrientalReview.org,

  In the spirit of the New Cold War and following on its success in snuffing out South Stream, the US has prioritized its efforts in obstructing Russia’s Balkan Stream pipeline, and for the most part, they’ve regretfully succeeded for the time being. The first challenge came from the May 2015 Color Revolution attempt in Macedonia, which thankfully was repulsed by the country’s patriotic citizenry. Next up on the destabilization agenda was the political turmoil that threatened to take hold of Greece in the run-up and aftermath of the austerity referendum, the idea being that if Tsipras were deposed, then Balkan Stream would be replaced with the US-friendly Eastring project. Once more, the Balkans proved resilient and the American plot was defeated, but it was the third and most directly antagonist maneuver that snipped the project in the bud and placed it on indefinite standby.

  ‘Lucky’ Number Three:

  The climactic action happened on 24 November when Turkey shot down a Russian anti-terrorist bomber operating over the Syrian skies, and the nascent project became a victim of the predictable chain reaction of political deterioration between both sides. Given how obvious it was that energy cooperation would be one of the casualties of simmering Russian-Turkish tensions, it stands to reason that the US purposely egged Turkey on in order to provoke this domino reaction and scuttle Balkan Stream. Be that as it may (and it surely looks convincing enough to be the case), it doesn’t mean that the project is truly canceled, as it’s more strategically accurate to describe it as temporarily shelved. Russia understandably doesn’t want to enhance the position of a state that’s proven itself to be so blatantly aggressive against it, but this feeling extends only towards the present government and in the current context. It’s certainly conceivable that a fundamental shift in Turkey’s position (however unlikely that may appear in the short-term) could lead to a détente of sorts that resurrects the Balkan Stream, but a more probable scenario would be if the disaffected masses and/or distraught military representatives overthrew the government.

  Turkish Reversal?:

  Both of these possibilities aren’t that improbable when one takes note of the growing resentment to Erdogan’s rule and the precarious position he’s placed the armed forces in. It’s well-known how dissatisfied a significantly growing mass of Turks have become (especially amidst an ever-growing Kurdish Insurgency), but what’s less discussed is the strategically disadvantageous situation facing the military right now. As the author wrote about in October, the Turkish forces are spread thin between their anti-Kurdish operations in the broad southeast, securing the heartland from ISIL and extreme left-wing terrorist attacks, occasional interventions in Northern Iraq, and remaining on alert along the Syrian border. This state of affairs is already almost too much for any military to handle, and one of the last things that its responsible leaders need right now is to balance against an imaginary and completely unnecessary Russian ‘threat’ cooked up by Erdogan. This pressure might prove to be too much for them, and in the interests of national security and properly fulfilling their constitutional role in safeguarding the territorial integrity of the state, they might band together in overthrowing him in spite of the systemic changes he’s enacted in the past decade to defend against such an event.

  The Path Forward:

  There’s a very real chance that Balkan Stream will be unfrozen and the project allowed to move forward one day, as it’s too strategically important for Russia, and even Turkey, to be kept on the backburner indefinitely. It’s entirely possible that an internal political change will take place in Turkey, be it in the mindset of the current leadership or more likely with the installment of a new revolutionary/coup government, meaning that it’s much too premature for Russia or the US to give up on their respective policies towards Balkan Stream. Therefore, both Great Powers are proceeding forward with a sort of geopolitical insurance strategy, and in each case, it’s centered on China’s Balkan Silk Road. From the American perspective, the US needs to continue unabated with the destabilization of the Balkans, since even if the Russian project is successfully stopped, then it still needs to do the same thing to China’s. So long as the Balkan Silk Road continues to be built, then Russia will retain a multipolar magnet through its premier strategic partner on which it can concentrate the influence that it’s cultivated thus far. In the event that Balkan Stream is unfrozen, then Russia can immediately jump back into the mix as if it never left and rejoin strategic forces with its Chinese ally like it originally planned, and this nightmare scenario is why the US is resorting to Hybrid War in its desperate bid to destroy the Balkan Silk Road.

  

   

  As has already been similarly mentioned, the Russian approach is to focus more on the economic, military, and political diversifications that were supposed to accompany the energy-based physical infrastructure it was planning to build. Instead of the gas pipeline forming the spine of a New Balkans, it looks as though the Balkan Silk Road high-speed rail will take this role instead, but either way, there’s a multipolar megaproject that acts as a magnet for Russian influence. In the present configuration, Russia has relatively less influence in directly deciding the course of the infrastructure’s construction, but at the same time, it becomes indispensable to China. Beijing has close to no preexisting ties with the Balkans outside of purely economic relations (and even those are relatively new), so Russia’s privileged involvement in supporting the project and investing along the Balkan Silk Road route (which was supposed to run parallel with the Balkan Stream and bring in the said investment anyhow) helps to reinforce regional and local support for it by presenting a friendly and familiar face that decision makers are already accustomed to working with. It’s not to suggest that China can’t build the project on its own or that there isn’t legitimate support in the Balkans for such an initiative, but that Russia’s front-row participation in it reassures the local elite that a civilizationally similar and ultra-influential partner is there alongside them and is also placing visibly high stakes in the process out of a show of confidence in its hopeful success.

  Beijing Is The Balkans’ Last Hope

  It’s thus far been established that the Russian-Chinese Strategic Partnership intended to revolutionize the European continent with an infusion of multipolar influence along the Balkan Corridor, which was supposed to support Balkan Stream and the Balkan Silk Road. Regretfully, however, the US has temporarily succeeded in putting the brakes on Balkan Stream, thus meaning that the Balkan Silk Road is the only presently viable multipolar megaproject envisioned to run through the region. On that account, it’s China, not Russia, which is carrying the torch of multipolarity through the Balkans, although Beijing is of course partially depending on Russia’s established influence there to help secure their shared geostrategic objective and assist in making it a reality. At any rate, the Balkan Silk Road is arguably more important than the Balkan Stream for the time being, and as such, it’s worthy to pay extra attention to its strategic details in order to better grasp why it represents the Balkans’ last multipolar hope.

  Institutional Foundation:

  The concept for the Balkan Silk Road was a couple of years in the making, and it owes its genesis to China’s One Belt One Road (“New Silk Road”) policy of constructing worldwide connective infrastructure. This endeavor was thought up in order to solve the dual problems of creating opportunities for Chinese outbound investment and complementarily assisting geostrategic regions in their liberating quest to achieve multipolarity. Relating to the area under study, the Balkan Silk Road is the regional manifestation of this ideal, and it’s actually part of China’s broader engagement with the Central and Eastern European countries.

  The format for their multilateral interaction was formalized in 2012 under the first-ever China and Central and Eastern European Countries (China-CEEC) Summit in Warsaw, and the event two years later in Belgrade produced the idea for a Budapest-Belgrade-Skopje-Athens high-speed rail project (the author’s colloquial description of which is the Balkan Silk Road) aimed at deepening both sides’ economic interconnection. The 2015 Summit in Suzhou produced a medium-term agenda for 2015-2020, which among other things, proposes the creation of a joint financing firm to supply credit and investment funds for this and other projects. It also officially described the Balkan Silk Road as being the “China-Eurasia Land-Sea Express Line” and suggested that it be integrated into the New Eurasian Land Bridge Economic Corridor sometime in the future, implying that Beijing would like to see the countries cooperative more pragmatically with Russia (first and foremost in this case, Poland). Importantly, Xinhua reported that the participants agreed to complete the Budapest-Belgrade stage of the project by 2017.

  Strategic Context:

  What all of this means is that China has accelerated its diplomatic, economic, and institutional relations with Central and Eastern Europe in the space of only a couple of years, astoundingly becoming a premier player in a region located almost half the world away from it and partially a formal component of the unipolar bloc. This can be explained solely by China’s attractive economic appeal to the CEEC that transcends all sorts of political boundaries, as well as to the complementary ambition that the East Asian supergiant has in deepening its presence worldwide. Together, these two factors combine into a formidable component of China’s grand strategy, which strives to use inescapable economic lures in leading its partners (especially those representing the unipolar world) along the path of tangible geopolitical change over a generational period. To refer back to the Balkan Silk Road, this represents Beijing’s primary vehicle in achieving its long-term strategy, and the geo-economic rationale for how this is anticipated to function will be explained in the below section. Before proceeding however, it’s relevant to recall what was referenced earlier about the US’ hegemonic imperatives, since this explains why the US is so fearful of China’s economic engagement with Europe that it plans to go as far as concocting destructive Hybrid Wars to stop it.

  Geo-Economic Underpinnings:

  The geo-economic justification for the Balkan Silk Road is evident, and it can be easily explained by examining the larger Central and Eastern European area that it’s envisioned to connect. The Southeastern European peninsula directly segues into each of these two regions, and the Hungarian hub of Budapest is geographically located in the center of this broad space. As it presently stands, there’s no reliable north-south corridor linking Hungary and the markets around it (namely Germany and Poland) to the Greek Mediterranean ports, thus meaning that Chinese maritime trade with these leading economies must physically circumnavigate the breadth of the entire European peninsula. The Balkan Silk Road changes all of that and cuts out days of unnecessary shipping time by bringing Central and Eastern European goods to the Greek port of Piraeus and within convenient reach of Suez-crossing Chinese vessels. This saves on time and money, thus making the route more profitable and efficient for all parties involved.

  In the future, the Central and Eastern European economies could ship their goods through Russia en route to China via the Eurasian Land Bridge, but while that might be beneficial from the perspective of producer-to-consumer relations, it’s hardly advantageous for resellers who plan on re-exporting the said goods elsewhere in the world. To take advantage of the dynamic economic developments currently underway in East Africa and South Asia (be it in selling to those markets or in physically building up a presence there), it’s best for either party’s entrepreneurial actors to connect with one another at a maritime node that enables them to efficiently and quickly load or offload their predetermined transshipped goods. Geo-economically speaking, there’s no better place for this than Piraeus, as it’s the closest European mainland port to the Suez Canal which needs to be traversed in order to access the aforementioned destinations, with or without any transshipping involved (i.e. if EU entrepreneurs decide to directly export their goods there and not use a Chinese middleman).

  In order to connect to Piraeus, the high-speed rail corridor known as the Balkan Silk Road is an infrastructural prerequisite, and its successful completion would lead to a significant sum of European trade being profitably redirected towards China and other booming non-Western locations like India and Ethiopia. The US fears losing its position as the EU’s top trading partner, knowing that the slippery strategic slope that could soon follow might lead to the rapid unraveling of its hegemonic control. Viewed from the reverse perspective, the Balkan Silk Road is the EU’s last hope for ever having a multipolar future independent of total American control, which is why it’s so geopolitically necessary for Russia and China to see the project completed. The inevitable New Cold War clash that this represents and the extraordinarily high stakes that are involved mean that the Balkans will remain one of the main flashpoints in this dangerous proxy struggle, despite the hierarchical switch of its multipolar protagonists.

  

  

  

  

  

• Threats

  With the global climate talks in Paris set to begin this week, perhaps the ‘real threat’ will re-emerge…

   

  

   

  Source: Investors.com

  

  

  

  

  

• Fourth Turning – Social & Cultural Distress Dividing The Nation

  Submitted by Jim Quinn via The Burning Platform blog,

  I wrote the first three parts of this article back in September and planned to finish it in early October, but life intervened and truthfully I don’t think I was ready to confront how bad things will likely get as this Fourth Turning moves into the violent, chaotic war stage just over the horizon.

  The developments in the Middle East, Europe, U.S., China and across the globe in the last months have confirmed my belief war drums are beating louder, global war beckons, and much bloodshed will be the result. Fourth Turnings proceed at their own pace within the 20 to 25 year crisis framework, but there is one guarantee – they never de-intensify as they progress. Just as Winter gets colder, stormier and more bitter as you proceed from December through February, Fourth Turnings get nastier, grimmer, more perilous, with our way of life hanging in the balance.

  In Part 1 of this article I discussed the catalyst spark which ignited this Fourth Turning and the seemingly delayed regeneracy. In Part 2 I pondered possible Grey Champion prophet generation leaders who could arise during the regeneracy. In Part 3 I focused on the economic channel of distress which is likely to be the primary driving force in the next phase of this Crisis. In Part 4 I will assess the social and cultural channels of distress dividing the nation, Part 5 the technological, ecological, political, military channels of distress likely to burst forth with the molten ingredients of this Fourth Turning, and finally in Part 6 our rendezvous with destiny, with potential climaxes to this Winter of our discontent.

  

  The road ahead will be distressful for everyone living in the U.S., as we experience the horrors of war, economic collapse, civil chaos, political upheaval, and the tearing of society’s social fabric. The pain and suffering being experienced across the globe today will not bypass the people of the United States. Winter has arrived and lethal storms are gathering in the distance. Don’t think you can escape. You can prepare, but this Crisis will reshape our society for better or worse, and you cannot sidestep the consequences or cruel environment we must survive.

  “Reflect on what happens when a terrible winter blizzard strikes. You hear the weather warning but probably fail to act on it. The sky darkens. Then the storm hits with full fury, and the air is a howling whiteness. One by one, your links to the machine age break down. Electricity flickers out, cutting off the TV. Batteries fade, cutting off the radio. Phones go dead. Roads become impossible, and cars get stuck. Food supplies dwindle. Day to day vestiges of modern civilization – bank machines, mutual funds, mass retailers, computers, satellites, airplanes, governments – all recede into irrelevance. Picture yourself and your loved ones in the midst of a howling blizzard that lasts several years. Think about what you would need, who could help you, and why your fate might matter to anybody other than yourself. That is how to plan for a saecular winter. Don’t think you can escape the Fourth Turning. History warns that a Crisis will reshape the basic social and economic environment that you now take for granted.” – Strauss & Howe – The Fourth Turning

  Social Distress

  The vast and growing Grand Canyon sized gap between the haves and have nots, and the societal implications of an elitist uber-wealthy minority capturing the levers of our economic, financial, and political systems, using that control to further enrich themselves at the expense of the isolated working class, can be clearly understood by following the dialogue between three billionaires chatting on stage at a conference thrown by a convicted Wall Street criminal.

  Sheryl Sandberg: “Yeah, so let’s follow up on a bunch of the things we were talking about. Let’s start with income inequality.”

  Hank Paulson: “Ok, well.. income inequality. I think this is something we’ve all thought about. You know I was working on that topic when I was still at Goldman Sachs..”

  Robert Rubin: “In which direction? You were working on increasing it.”

  Hank Paulson then bursts out laughing: “Yeah! We were making it wider!”

  

  Paulson and Rubin spent vast portions of their lives working for the vampire squid on the face of America – Goldman Sachs. This firm represents everything wrong with our social order, as they use all means (legal or illegal) to enrich themselves, whether it be back stabbing clients, double crossing partners, eviscerating vulnerable competitors, robbing the poor, rigging markets, buying influence, placing executives in the highest levels of government, or screwing the taxpayer when their risky gambles blow up the world. Paulson and Rubin are the perfect representatives of the .1% ruling class who protect their interests and the interests of their crony capitalist colleagues at all costs. They truly believe they are shrewder, more astute, cleverer, deserving of the billions they have absconded through rigging the markets, should be running the country behind the scenes, and merit the worship of the lowly peasantry.

  The gap between the richest 1% and the bottom 90% has never been wider in history. The previous largest gap occurred in 1929, at the start of the last Fourth Turning. When the real median household income hasn’t advanced in the last 26 years and men’s real wages are where they were in 1971, while CEOs of S&P 500 companies make 331 times their workers and Wall Street hedge fund managers make billions while paying no taxes, you have building anger, disillusionment and calls for retribution.

  Some people are waking up to the fact the Ben Bernanke led Federal Reserve and the Hank Paulson/Tim Geithner led Treasury saved their buddies on Wall Street while throwing the people on Main Street under the bus. When Wall Street’s leveraged risk bets pay off, they reap all the riches – as is happening today. When their colossal wagers go bad, the propaganda about systematic failure is rolled out and the American people are stuck with the losses. The goal has always been to revive the stock market and make sure the Wall Street banks continue to generate billions in profits, while leaving the taxpayer on the hook for their failed bets.

  

  The OWS and Tea Party were both grass roots initiated movements as a societal response to the distress created by Wall Street and their government crony cohorts. The Wall Street banks colluded with DHS and captured politicians of both parties to crush OWS and subvert the Tea Party. The Deep State’s success in squashing dissent from what they considered the lowly peasants has only been temporarily papered over by the $10 trillion of debt issued to keep the masses sedated, deluded and ignorant about the true nature of the ongoing crisis. The storyline about the 1% is misleading, as many people in the 1% are small business owners, doctors, and professional workers. The true story is the exponential wealth increase of the .1% over the last 35 years as the financialization of the economy has enriched psychopathic, highly educated men who produce nothing but misery, debt, and ultimately social unrest.

  

  Decomposing the 1% reveals the top .1% increasing their share of the national wealth from less than 9% in 1980 to over 21% today. These are the corporate CEO’s buying back their company stock at all-time highs in order to boost their stock based compensation, Wall Street executives who committed the largest control fraud in world history while unabashedly flaunting laws & regulations, hedge fund managers who manipulate and rig the markets while paying no taxes on their billion dollar profits, and billionaire cronies who profit from the military industrial complex and sick care complex by paying off politicians to write laws in their favor and funnel government contracts to them. The sacking and pillaging of the nation’s wealth by psychopaths who are never satisfied with their current vast level of riches, power and control, exposes itself in the tremendous recovery on Wall Street and the ongoing depression on Main Street.

  A simmering rage is bubbling below the surface as 20% of American households rely on food stamps to survive, the percentage of Americans in the labor force stands at a four decade low, real household income remains stagnant at 1988 levels, corporate profits have reached record levels while corporations continue to fire Americans – shipping their jobs overseas, and the six mega-corporations representing the mainstream media cover up the truth, mislead the public with propaganda, while celebrating the .1% as saviors of our economy. There is nothing more volatile to societal stability than millions of unemployed men, growing angry and resentful towards the ruling class for their lot in life.

  

  The vast gulf between the haves and have nots will fuel further violence between the classes, as our fraying society is already seething with anger between races, religions, political parties, and genders. The increasingly brutal police state, militarization of local police forces, shaking down of citizens through fines, and unlawful surveillance of our electronic communications, will lead to a backlash against police.

  The Black Lives Matter movement, begun after a number of police brutality incidents against black men, has been hijacked by politically motived race baiters and is exacerbating tensions between blacks and whites. The false storyline perpetuated by the media disregards the fact blacks, who represent 13% of the population, commit 22% of all violent crimes and 93% of black shooting victims are shot by other blacks. The white population, abiding by laws, is getting sick of being blamed for the gun violence and lawlessness in liberal ghetto bastions like Chicago, Detroit, Baltimore, St. Louis and Philadelphia.

  Cultural Distress

  

  Even though the vast majority of gun related crimes happen in urban ghettos and the much publicized mass shootings are committed by mentally deranged young men on psychotropic drugs, liberal control freak politicians use scare tactics and misinformation in their effort to grab the guns of law abiding Americans living in rural regions. It is the elitist hypocrite politicians living on the coasts, protected by armed guards, who want to eviscerate the 2^nd Amendment, and think it is fine for the 4^th Amendment to be disregarded by police thugs across the land. Disarming the citizenry is essential to implementing a dictatorial regime. The race wars have intensified, as the Black Lives Matter meme has spread to college campuses in Missouri and in the hallowed Ivy League at Yale and Princeton.

  The bullying tactics of the pampered participation trophy generation of entitled millennials, being misled by social justice warrior ideologues, is fueling a backlash by older generations who studied, worked hard, obtained useful college degrees, repaid their student loans, and didn’t use race, gender, or micro-aggressions as excuses when they failed. College campuses, which once championed free speech and free thought, have now become bastions of censorship, left wing ideology, suppression of opinion, shouting down of dissent, thought control, and subduing the rights of the majority for the benefit of an outraged minority who resort to violent rhetoric to achieve their outcomes.

  Institutions of higher education have become nothing more than glorified daycare centers for kids who never grew up, learned personal responsibility, or developed critical thinking skills. The feckless college faculty and administrators have allowed financial considerations to override learning, as the curriculum has been dumbed down to meet the degraded capabilities of their high self-esteem/low intelligence students. The reality of an increasingly brutal economic environment and high likelihood of war is about to crash headlong into the coddled, pampered, parent protected, iGadget, facebook worlds of millions of millennials.

  They will be nothing but cannon fodder for the Deep State unless they develop a backbone, start thinking critically about what is happening in this world, start dealing with reality, stop trusting the government to save them, and make a stand against the corporate fascist tyranny consuming our nation. The Peter Pan Syndrome, where people with the body of an adult but the mind of a child, increasingly dominate the landscape, as a larger number of supposed adults exhibit emotionally immature behaviors. The self-neutering of young men is the result of twelve years of feminist social engineering in government controlled public schools. The wussificiation is complete.

  The combination of social justice warriors, pushing agendas completely out of step with mainstream Americans, and a dying legacy media providing infotainment disguised as news, fuels further cultural distress from coast to coast. With liberalism rampant and dominant on the coasts and conservatism governing the heartland, the cultural divide in the country is a gaping chasm. Average Americans trying to live their lives, pay their bills, and raise families have no strong opinions about gay marriage, men dressing like women, or other deviant behavior performed by consenting adults in the privacy of their own households. But when the liberal media, social justice warriors, and Hollywood elites shove the “right” to gay marriage, the crucifying of people for their religious beliefs, the “courage” of a man pretending to be a woman, and the glorification of abhorrent behavior, down the throats of Americans trying to mind their own business, an unforeseen backlash is inevitable.

  The war on the traditional family unit, white males, societal norms, common decency, and community standards has gone too far and the pushback from common decent middle class folks has begun. It is a proven fact that households with married parents are on average wealthier, raise kids who do better in school, can withstand economic setbacks better, and have been the backbone of this country since its inception. The feminist belief that women can raise children without men has proven to be a disaster.

  With the percentage of married households plunging from over 70% in 1970 to under 50% today, an ominous tipping point has been reached. Rather than address this truly disastrous problem, the radical feminists and race baiters carry on their culture wars. The social justice warriors, prodded by the liberal media and agenda driven ideologues, are offended by free speech, white people, men, married couples, religious freedom, having to repay loans, gun owners, capitalism, carbon dioxide, meat, yoga and anyone who dares to disagree with their antagonistic, bombastic, vacuous nonsense.

  Shockingly, they aren’t offended by the tattooed, pierced freaks roaming the streets, angry because no one will hire them. They aren’t offended by the millions of willfully ignorant, low class army of lazy Obama voters who feel entitled to free housing, free medical care, free food, free phones, and free education at the expense of the working middle class. They aren’t offended by the 70% of black babies born out of wedlock and black men shirking their responsibilities as fathers. They aren’t offended by the rampant criminality and murder rates in the Democrat controlled urban ghettos, created by the welfare policies implemented over the last 50 years.

  They aren’t offended by 93% of black murders being committed by blacks. They aren’t offended by a president droning wedding parties and bombing hospitals, while fighting undeclared wars in foreign lands. They aren’t offended by the widespread Medicare, SSDI, and food stamp fraud, costing taxpayers billions per year. Normal people living normal lives are sick and tired of the hypocritical, hollow horseshit rubbed in their faces by a dying legacy media and agenda driven social networks on a daily basis. The foolishness and lunacy of these feckless feeble minded warriors against normalcy will be exposed when confronted by the harsh reality of a Fourth Turning.

  The rise of Donald Trump and Ben Carson in the early polls for Republican presidential candidate is being fueled by a rising anger and discontent with the corporate media promoting offensive social agendas, the flaunting of the Constitution by a president ruling by executive order, a GOP establishment corrupted by power and unanswerable to their constituents, the disinterest of politicians in both parties in securing our porous southern borders from foreign invasion by illegal hordes. Now the repercussions of Obama ignoring the threats of Islamic extremism and allowing tens of thousands of undocumented Syrian refugees to flood into the country immediately overwhelming our insolvent welfare system and refusing to assimilate into our culture as they worship at mosques where they are taught to hate everything about American culture, is further fueling a political backlash.

  As Aldous Huxley realized six decades ago, the truth is unimportant to those controlling the “free” press and shallow distractions will keep the masses occupied while the controllers achieve their goals.

  “In regard to propaganda the early advocates of universal literacy and a free press envisaged only two possibilities: the propaganda might be true, or it might be false. They did not foresee what in fact has happened, above all in our Western capitalist democracies — the development of a vast mass communications industry, concerned in the main neither with the true nor the false, but with the unreal, the more or less totally irrelevant. In a word, they failed to take into account man’s almost infinite appetite for distractions.” – Aldous Huxley, 1958, in the article The Capitalist Free Press

  The media will use their standard propaganda techniques of showing crying women and children to tug at the heartstrings of a naïve, unaware populace to allow refugees from a conflict created by the U.S. in Syria to come into our country. You know the tired rhetoric – give us your tired, your poor, your huddled masses yearning to breathe free. But this is a Fourth Turning where the harsh reality crashes headlong into rhetoric, memes, and storylines.

  Whether the U.S. government is responsible or not for creating the wave of Islamic radicals practicing their warped religious beliefs across the globe by committing murder against innocent people, the fact remains that only Muslims are waging this war against non-believers. There are no Catholics, Baptists, Lutherans, Jews, Buddhists, or atheists spreading their religious beliefs by committing acts of terror or waging war. A religious war is brewing and the consequences will be far reaching and bloody for those practicing Islam. There may be only a small minority of radical jihadists, but the silence of the majority speaks volumes to non-Muslims around the world.

  As this Fourth Turning continues to intensify, the bowing down to political correctness and agendas of social justice warrior bigots by traditional minded Americans is going to stop. The pushback may be violent, as the aggressive tactics of these free speech hating fascists is met with armed confrontation they aren’t anticipating. These “warriors” aren’t exactly the Hero generation who did the heavy lifting during the last Fourth Turning. Privileged, entitled, ignorant millennials bullying weak kneed college professors and milquetoast administrators on the campuses of liberal arts colleges isn’t exactly storming the beaches of Normandy or battling through the jungles on Guadalcanal.

  When confronted with Americans who have seen their standard of living falling for the last twenty five years and are sick and tired of hearing drivel about white privilege, black lives matter, safe spaces, gay and transgender “rights”, micro-aggressions, rape culture, misogyny, $15 minimum wage, and a myriad of other offenses against feminism, these easily offended “warriors” will piss their pants. These trivialities will seem so quaint when they are confronted with an angry guy with a gun on the streets or when they are told to report for duty as we wage war with Russia and China. The foolishness of the culture wars will become strikingly apparent when economic collapse and life or death choices confront our special snowflake generation.

  

  

  

  

  

  

• If Black Friday Was A Movie

  Put aside 4 minutes of your day to poke some fun at America’s leading religion: Consumerism.

   

   

  h/t Liberty Blitzkrieg

  

  

  

  

  

• Can The Oil Industry Really Handle This Much Debt?

  Submitted by Ekaterina Pokrovskaya via Oilprice.com,

  As the crude industry has been wrestling with low oil prices that declined by over 50 percent since its highest close at $107 a barrel in 2014, many exploration and production companies worldwide and in the U.S., in particular, have faced large shortfalls in revenue and cash flow deficits forcing them to cut down on capital expenditures, drilling and forego investments in new development projects.

  High debt levels taken on by the U.S. oil producers in the past to increase production while oil prices soared, have come back to haunt oil and gas companies, as some of the debt is due to mature by the end of this year, and in 2016. Times are tough for U.S. shale oil producers: Some may not make it, especially given that this month, lenders are to reassess E&P companies’ loans conditions based on their assets value in relation to the incurred debt.

  

   

  Throughout the oil price upturn that lasted until the middle of 2014, companies sold shares and assets and borrowed cash to increase production and add to their reserves. According to the data compiled by FactSet, shared with the Financial Times, the aggregate net debt of U.S. oil and gas production companies more than doubled from $81 billion at the end of 2010 to $169 billion by this June

  In the first half of 2015, U.S. shale producers reported a cash shortfall of more than $30 billion. The U.S. independent oil and gas producers’ capital expenditures exceeded their cash from operations by a deficit of over $37 billion for 2014.

  In July – September 2015, after a couple months of a rebound, a further slump in crude futures prices fluctuated between $39-47/bbl, thus putting more strain on the oil-and-gas producers, and making them feel an even tighter squeeze.

  As The Wall Street Journal reported in August, Exxon Mobil Corp. and Chevron Corp. stated they were cutting stock-buyback programs, while Linn Energy LLC announced it would stop paying dividends to its shareholders. Meanwhile, several small U.S. oil and gas producers have filed for chapter 11 bankruptcy protection this year. Companies with persistently negative free cash flow fall into the trap of borrowing, as they have to incur more debt to repay what they have already borrowed before. This makes such companies vulnerable to default and bankruptcy.

  As shared by Edward Morse, Citigroup Global Head of Commodities Research with Oilprice.com, smaller independent U.S. E&P companies are in the worst position now: they are already highly leveraged and are trying to use increased leverage while having to bear high debt pressure.

  “They also are in the worst cash flow positions of all of the E&P firms per barrel of liquids production relative to the larger and even the mid-cap firms. However, they also tend to account for a much smaller share of overall production. For example, the large North American E&P companies produce around 5.0-million b/d of oil; mid-sized firms produce just short of 1-m b/d. But the small and smallest U.S. E&Ps combined produce only 500-k b/d, 100k b/d of which comes from the smallest U.S. firms,” stated Morse .

  The chart from the U.S. Energy Information Administration below, based on second-quarter results from 44 U.S. oil-and-gas companies, demonstrates the rising share of the companies’ operating cash flow used to service debt.

  For the previous four quarters from July 1, 2014 to June 30, 2015, 83 percent of these companies' operating cash had been spent on debt repayments, the highest since at least 2012.

  

  Source: U.S. Energy Information Administration, based on Evaluate Energy
  Note: Each quarter represents a rolling four-quarter sum.

  Debt Worries for Small Companies

  According to Forbes, among U.S. E&P companies ranking high on the verge of bankruptcy are Goodrich Petroleum (GDP), Swift Energy (SFY), Energy XXI (EXXI), Halcon Resources (HK) among others. “These companies have all lost more than 90 percent of their market value since 2014, are larded up with too much debt, and would be lucky to survive the bust,” Forbes wrote.

  According to FINRA data cited by Forbes, the yield of Goodrich’s issue of 2012 bonds for U.S. $275 million jumped up to 58.66 percent from 8.88 percent during trade sessions this August. The Goodrich’s stock that previously sold at $29 in June 2014 traded at 88 cents. The company has a high leverage ratio (debt to EBITDA): in the first half of 2015, the company’s revenues amounted to U.S. $50 million while its interest expense on servicing of a long-term loan of U.S. $622 million was $27 million.

  Energy XXI (EXXI) is snowed under in $4.6 billion in debt. As Forbes reported, the company was negotiating terms for extending maturities on their bonds with creditors; it also managed to find an investor who bought another U.S. $650 million worth of debt from EXXI.

  Another company staggering under a heavy debt load is Swift Energy (SFY). According to Forbes, Swift’s equity market capitalization is $27 million against long-term debt of $1.1 billion. As The Wall Street Journal reported in July, the company was trying to find an investor to come up with funds to repay loans by issuing a $640 million bond.

  Halcon Resources (HK) is also on the brink of insolvency. 40 percent of Halcon Resource’s revenues this year have been expended on making interest payments on its U.S. $3.7 billion debt. The company did two equity-for-debt swaps earlier this year, and sold more debt for U.S. $700 million, Forbes reported.

  As Virendra Chauhan, Oil Analyst at Energy Aspects discussed with Oilprice.com, the smaller independent U.S. producers are the ones taking the most risk, particularly the ones that have been outspending cash flows quarter-on-quarter for the better part of the last three years. “The debt maturities vary, but the key factor is an over 50 percent fall in oil prices. Whilst costs have come down, they are no way near 50 percent; and so the reliance on external funding, be it through, debt, equity, asset sales or by other means, has increased, which is certainly impacting investor sentiment,” he said.

  Hedges Expiring

  Although quite a few U.S. shale oil producers have reported substantial increases in their productivity per well drilled, the amount of rigs drilling for oil in the U.S. has dropped by 59 percent since its peak in October 2014, according to the EIA data shared by the Financial Times.

  In the Eagle Ford shale of South Texas, the volume of oil produced from new wells for every operational rig, has risen by 42 per cent over the past year, from 556 barrels per rig per day to 792, EIA reported.

  “Profitability and returns in the U.S. tight oil space is a moving target – many producers claim to be profitable and generate healthy returns, yet their cash flow situation has shown no signs of improving,” pointed out Chauhan. According to the analyst, producers in the Permian are likely to be better positioned than in other areas, as this basin is the least developed of the three major basins, and Pioneer Resources (PXD), which has the largest acreage in the basin is 75 percent hedged for this year with a floor of $67 and a ceiling price of $77 per barrel.

  According to the IHS Energy North American E&P Peer Group Analysis Report, the weighted-average hedged prices for 2016 are $69.04 per barrel of oil and $3.83 per thousand cubic feet (MCF) of gas. The midsize E&Ps have hedged 26 percent of estimated 2016 total production. Financially distressed companies with low hedge protection and high risk in 2016 include SandRidge Energy and Ultra Petroleum.

  “The small North American E&Ps have hedged 25 percent of estimated 2016 total production and continue to have the weakest balance sheets. With high debt and little hedging, EXCO Resources and Comstock Resources are at risk of serious liquidity issues if low prices prevail,” stated Paul O’Donnell, principal equity analyst at IHS Energy and author of the report.

  Liquidity Problems

  Many investment banks and financial services companies are already facing losses on substantial investments in E&P companies, as they have committed hundreds of millions of dollars to lend to energy companies on top of the loans provided to them at the time when oil prices were surging.

  Among such investment funds taking a hit on their positions in the financially distressed E&P companies listed above (Goodrich Petroleum Co. Energy XXI Ltd, Swift Energy, etc.) are Franklin Resources Inc., Oaktree Capital Group LLC, Lazard Ltd and others.

  Financial experts and analysts point out that some E&P companies have managed to refinance their debt, however, it becomes increasingly more difficult for them to do so as their stock and bonds lose value and the high yield return they have to offer to lenders to get financing is higher than in any other business sector.

  According to Marketwatch, the energy industry Liquidity Stress subindex has pointed to a high-risk debt weighing on U.S. E&P companies, as it surged up to 16.9 percent in September from 12.7 percent in August, the highest level since it reached 19.2 percent six years ago in July 2009.

  As Chauhan of Energy Aspects pointed out, it is fair to say that most oil and gas companies are not generating free cash flow at current oil prices, as these prices are below full-cycle costs for most regions in the world, with the exception of the Middle East, which is the lowest cost producer globally.

  Larger Companies Faring Better

  “The IOC’s are likely to be better positioned during a downturn because they have higher credit ratings and therefore are more accessible to debt markets. They also have a hedge built into their business because they will benefit from downstream profitability from improved margins,” the analyst added.

  As Paul O’Donnell shared in the IHS report, only six percent of the large North American E&P production volume for 2016 production has been hedged, as these companies have stronger balance sheets to withstand the low prices. “No oil-weighted large E&Ps have any significant hedging in place for 2016”, O’Donnell said.

  According to Morse, the large North American E&P companies should be able to survive and thrive, given their high production base and their free cash flows as a cover for liquids production.

  “They have roughly three times the cash flow coverage as the smaller companies in terms of cash flow per barrel of oil, and they are still increasing production as a group,” commented the Head of Commodity Research.

  According to Ernst & Young U.S. Oil and Gas Reserves Study 2015, the total capital expenditures of 50 largest U.S. oil-and-gas companies reached $200.2 billion in 2014.

  As the study reveals, some of the large E&Ps’ capital expenditures in 2014 were:

  

   

  O’Donnell of IHS expects capital spending for the North American E&P group to drop 25 percent in the second-half 2015, as compared with the first-half of 2015, from approximately $60 billion to $45 billion.

  As cited by Natural Gas Intelligence in September, “according to EIA, U.S. oil and gas E&Ps had reduced their capex budgets by $38 billion in 2Q2015 (to about $95 billion) compared to the preceding second quarter (about $130 billion), "the difference between cash from operations and capex was almost zero in 2Q2015."

  *  *  *

  As Energy Intelligence concluded:

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

   

  "I could see a wave of defaults and bankruptcies on the scale of the telecoms, which triggered the 2001 recession."

   

  

  

  

  

  

• Obama Says "Enough Is Enough," Urges Gun Restrictions After Deadly Planned Parenthood Standoff

  Another 'mass' shooting, and another outraged statement from President Obama proclaiming "enough is enough." With 9 injured, and 2 police officers and 1 civilian dead after the dreadful standoff at a Planned Parenthood office in Colorado Springs, the President took the opportunity to explain "we have to do something about the easy accessibility of weapons of war on our streets to people who have no business wielding them. Period." Of course, any discussion of the shooter's mental health, the violent polarization towards and politicization of abortion among an increasingly micro-aggressive America were conveniently ignored.

  As Reuters reports, expressing what has become regularly repeated frustration on the issue, President Barack Obama said on Saturday the United States needs to "do something" to make it harder for criminals to get guns after a shooting in Colorado killed three people and injured nine.

  In Friday's shooting, an assailant opened fire at a Planned Parenthood clinic, a center that provides health services including abortions, in Colorado Springs.

   

  It was the latest in a long series of U.S. mass shootings during Obama's seven years in office. He has called the December 2012 shooting at Sandy Hook elementary school in Newtown, Connecticut, his toughest day as president.

   

  Obama said it was too soon to know the Colorado Springs shooter's "so-called motive" but said the tragedy was more evidence pointing to the need to reform firearms laws.

   

  "This is not normal," said Obama, who has become increasingly forthright in urging gun control measures when he makes statements after such events. "We can’t let it become normal."

   

  Obama tried to tighten up gun laws after the Newtown shootings, but met resistance in the U.S. Congress, including from some of his fellow Democrats, and failed to push a measure through.

   

  After another deadly shooting at an Oregon community college last month, Obama said White House lawyers would pore through existing laws to look for new ways he could use his executive powers to enforce regulations.

   

  One of those options would require more gun dealers to get a license to sell guns, which would lead to more background checks on buyers.

   

  The White House had drafted a proposal on that issue in 2013, but was concerned it could be challenged in court. Administration officials are now hopeful they can find a way to advance the plan.

   

  Obama has also pledged to elevate the issue of gun laws during his remaining time in office, and has denounced lawmakers for bowing to pressure from the powerful National Rifle Association lobby group.

  Finally we thought this 'meme' provided some context…

  

  

  

  

  

  

• Europe's Black Weekend

  Submitted Raul Ilargi Maiejer via The Automatic Earth blog,

  How black would you like your Thanksgiving Friday slash weekend? Many Americans don’t even appreciate the term, or the events, at all anymore (or so they say), but the idea of getting what you don’t need, or want, on the cheap, will still prove irresistible. But then, when all of your desires have been fulfilled, food wise and gadget wise, and you’re still feeling empty, maybe we can help and offer a sweeping redefinition of the term Black Friday.

  Since we live in times that see many other things on the verge of being sweepingly redefined, too, and imminently so, perhaps that’s only fitting. How about this, for starters? Black enough for you?

  Six Migrant Children Drown On Way To Greece

  Turkish state media say six children have drowned when boats carrying migrants to Greece sank in two incidents off the Turkish coast. A wooden boat smuggling some 20 people to the island of Kos capsized in bad weather off the Aegean resort of Bodrum early on Friday. The state-run Anadolu Agency says most of the migrants made it to shore with the help of rescuers, but two sisters aged 4 and 1 drowned. Their nationalities were not immediately known. The agency says a second boat carrying as many as 55 migrants from Syria and Afghanistan sank hours later off the town of Ayvacik, further north. Four Afghan children drowned in that incident, Anadolu reported. Ayvacik is a main crossing point for migrants trying to reach the island of Lesvos.

  Or have we already all gotten too blasé about those dead babies by now? They’ve been washing up on those beaches for half a year or so, after all. How about those who survive the seas, and then get stuck behind a razor wire fence halfway to their preferred destinations?

  Remember the men who had sewn their lips shut? Not even that is enough for more than a few hours of media attention anymore. Not nearly as much as being suspected of terrorism; that sells much better than desperation. So, presumably, will being in the way of goods of ‘important’ companies like Sony and HP’s goods reaching their destination, even if you can’t reach yours. Life is all about priorities.

  Migrants At FYROM Border Crossing Block Trains

  A protest by migrants on Greece’s border with the Former Yugoslav Republic of Macedonia (FYROM) is putting railway operator Trainose at risk of losing major international clients. Migrants have over the last few days been protesting FYROM’s decision not to let them cross from Greece. Many migrants have camped on the railway lines connecting the two countries, which means that no trains have come in or out of Greece for the last week. This means that the freight Trainose is responsible for carrying has not been able to reach its destinations. The railway company serves major international clients such as Hewlett Packard and Sony.

  Is there a better way to sum it up than this sign at the Greece/FYROM (Macedonia) border? We doubt it.

  

  Or perhaps there is a better way after all. The absolute cluelessness of Europe’s ‘leaders’. Here’s a brilliant example of the gap between them and the real world:

  Refugee Influx Threatens Fall Of EU, Warns Dutch PM

  The EU risks suffering the same fate as the Roman empire if it does not regain control of its borders and stop the “massive influx” of refugees from the Middle East and central Asia, the Dutch prime minister has warned. Mark Rutte, whose government assumes the EU’s rotating presidency in January, said southern EU countries had yet to implement policies agreed to stem the flow [..] Mr Rutte said Greece, where more than 700,000 have landed this year, might have to increase its “reception capacity” to at least 100,000. Athens has so far committed to about half that, insisting that it does not want to become a giant refugee camp.

   

  “As we all know from the Roman empire, big empires go down if the borders are not well-protected”, said Mr Rutte in an interview with a group of international newspapers. “So we really have an imperative that it is handled.” [..] Mr Rutte said the EU needed to act quickly to stem the migrant flow, adding that he was optimistic that Sunday’s summit in Brussels between President Recep Tayyip Erdogan of Turkey and EU leaders would help ease conditions by providing €3 billion to improve refugee camps in Turkey and disrupting the “business model” of human smugglers channelling migrants in boats to Greece.

  It’s all still about ‘stemming the flow’. Actually, it’s more about that by the day, and that’s precisely because ‘stemming the flow’ doesn’t work. The idea is that the Greeks do more .. yeah, what exactly? Tell dinghies loaded with desperate refugee families, half of whom suffer from hypothermia, that they should turn around? What, to get back to Turkey? So Turkey can send them back to Syria?

  That’s just nonsense, of course, the product of malfunctioning neurons. Then again, there’s too much of those going around Europe to mention. The above quote is more remarkable for a few other things. First, to claim that the Roman empire went down because it didn’t protect its borders is so contentious no serious historian would want to claim it as his/her own.

  And that’s without asking how the Romans should have implemented that protection. Second, say we take Mr. Rutte’s assertion at face value, then the only peoples those borders should have been protected from, the ones who actually sacked Rome, were the Barbarians. Rutte, ergo, compares the Syrian refugees to Barbarians. And that doesn’t look all that smart.

  And now that the article mentions Erdogan, and the €3 billion he’s been promised by Europe, as well as the fast track route into EU membership, let’s see what he has to contribute to Black Weekend.

  First off, he had two prominent journalists arrested on espionage and related charges for publishing an article way back in May about his own secret service people smuggling arms across Turkey’s border with Syria. And Brussels is going to reward this interpretation of ‘freedom of the press’ with €3 billion?

  Then of course he had a Russian jet shot down this week, maybe just as a patsy to the US -or others-, maybe to avenge Russian bombs falling on transports such as that conducted by those same secret services, or oil deliveries from ISIS managed by his son. That’s Erdogan’s Thanksgiving Turkey: Arms out, oil in.

  What should be clear is that shooting down a Russian plane, and under questionable pretext to boot, is not done. Whether you do it to please someone else or just yourself. Turkey will lose a lot more than those €3 billion in tourism and trade with Russia once Putin gets on Erdogan’s case for real (and Russia will not forgive this no matter what other policies need attention), so Brussels can figure out where the money will go. Russian tourism in Turkey alone brings in $2.7 billion a year. And it’s been halted.

  Turkey claims it gave 10 warnings to a plane that might have been in its airspace for 17 seconds (a highly contested claim), only to shoot it in Syrian airspace?! It claims it hadn’t recognized the plane as being Russian? Since they apparently fire at anything that moves, what do we think would have happened if this had been an American plane? Or a French one? There doesn’t seem to be anything Turkey has said about the incident that rings true.

  But then, that’s the case for so many things so many people say. In the meantime, our morality -let alone the high ground- is washing up on Greek beaches with those babies whose lives our societies don’t deem worth saving, the lives we judge to be not worthy of living.

  Our honesty, our sense of fairness, our decency, basically all things that various prophets have proclaimed are the most important qualities in life, are washing up lifeless on cold deserted patches of sand. And ‘we’ are seeking to further vilify Russia and tempt it into acts we ‘must’ respond to. We are aligning ourselves to that end with Erdogan and Saudi Arabia, the main supporters of those we claim in public to be at war with.

  Here’s how this works: If the end justifies the means, and we make sure there never is an end to this, then arms will continue to be traded, profits will continue to be made, and lies will be told till no-one can tell up from down, since all means are justified until the end of time.

  That this leaves us morally utterly rudderless then becomes just another one of those justified means. Anything goes.

  

  

  

  

  

• ISIS Oil Trade Full Frontal: "Raqqa's Rockefellers", Bilal Erdogan, KRG Crude, And The Israel Connection

  “Effectively, we have been financially discriminated against for a long time. By early 2014, when we did not receive the budget, we decided we need to start thinking about independent oil sales” —  Ashti Hawrami, Kurdistan’s minister for natural resources

  In June of 2014, the SCF Altai (an oil tanker) arrived at Ashkelon port. Hours later, the first shipment of Kurdish pipeline oil was being unloaded in Israel. “Securing the first sale of oil from its independent pipeline is crucial for the Kurdish Regional Government (KRG) as it seeks greater financial independence from war-torn Iraq,” Reuters noted at the time, adding that “the new export route to the Turkish port of Ceyhan, designed to bypass Baghdad’s federal pipeline system, has created a bitter dispute over oil sale rights between the central government and the Kurds.”

  A week earlier, the SCF Altai received the Kurdish oil in a ship-to-ship transfer from the The United Emblem off the coast of Malta. The United Emblem loaded the crude at Ceyhan where a pipeline connects the Turkish port to Kurdistan. 

  The Kurds’ move to sell crude independent of Baghdad stems from a long-running budget dispute. Without delving too far into the details, Erbil is entitled to 17% of Iraqi oil revenue and in return, the KRG is supposed to transfer some 550,000 bpd to SOMO (Iraq’s state-run oil company). Almost immediately after the deal was struck late last year, Baghdad claimed the Kurds weren’t keeping up their end of the bargain and so, only a fraction of the allocated budget was sent to Erbil during the first five months of the year. 

  This was simply a continuation of a protracted disagreement between Erbil and Baghdad over how much of the state’s crude revenue should flow to the KRG. For its part, Iraq has threatened to sue anyone that buys independently produced Kurdish oil. For instance, when The United Kalavrvta – which left Ceyhan last June – prepared to dock in Galveston, Texas a month later, a SOMO official told Reuters that Iraq’s foreign legal team was “watching closely the movement of the vessel and [was] ready to target any potential buyer regardless of their nationality.”

  You get the idea. Erbil wants a bigger piece of the pie, Baghdad doesn’t want to give it to them, and so some time ago, the KRG decided to simply cut the Iraqi government out and export crude on its own. The dispute is ongoing. 

  

  (at an Erbil oil refinery, the Kurds stand guard)

  Ok, so why are we telling you this? Recall that over the past several weeks, we’ve spent quite a bit of time documenting Islamic State’s lucrative black market oil trade. Earlier this month, Vladimir Putin detailed the scope of the operation in meetings with his G20 colleagues. “I’ve shown photos taken from space and from aircraft which clearly demonstrate the scale of the illegal trade in oil and petroleum products,” he told journalists on the sidelines of the G20 summit in Antalya. The very same day, the US destroyed some 116 ISIS oil trucks, an effort that was widely publicized in the Western media. In the two weeks since, Moscow and Washington have vaporized a combined 1,300 ISIS oil transport vehicles. 

  No one knows why it took the US 14 months to strike the convoys. The official line is that The Pentagon was concerned about “collateral damage”, but  we doubt that’s the reason (for a detailed discussion of this, see here). Well now that the mainstream media have been forced to take a closer look at Islamic State’s main source of revenue (the group makes nearly a half billion a year in the illicit oil trade), we decided to take a closer look at exactly who is facilitating the transport of the stolen crude and where it ultimately ends up because you can be sure that the story you get from the major wires will be colored by a slavish tendency to avoid any and all “inconvenient” revelations. This is the fourth in a series of articles on the subject and we encourage you to review the first three: 

  • The Most Important Question About ISIS That Nobody Is Asking
  • Meet The Man Who Funds ISIS: Bilal Erdogan, The Son Of Turkey’s President
  • How Turkey Exports ISIS Oil To The World: The Scientific Evidence

  On Friday we highlighted an academic study by George Kiourktsoglou and Dr Alec D Coutroubis who took a look at tanker rates at Ceyhan around siginifant oil-related events involving ISIS. Here’s what the researchers found: 

  

  In their words, “it seems that whenever the Islamic State is fighting in the vicinity of an area hosting oil assets, the 13 exports from Ceyhan promptly spike. This may be attributed to an extra boost given to crude oil smuggling with the aim of immediately generating additional funds, badly needed for the supply of ammunition and military equipment.”

  Now you can begin to see the connection. Ceyhan is the port from which Kurdish oil (technically “illegal” to let Baghdad tell it) is transported, and as Kiourktsoglou and Coutroubis note, “the quantities of crude oil that are being exported to the terminal in Ceyhan exceed the mark of one million barrels per day and given that ISIS has never been able to trade daily more than 45,000 barrels of oil, it becomes evident that the detection of similar quantities of smuggled crude cannot take place through stock-accounting methods.” In other words, if ISIS oil was being shipped from Ceyhan, it would essentially be invisible.

  Here’s where things get interesting. A few weeks ago, Reuters released an exclusive report detailing how Erbil hides its crude shipments from Baghdad. Here are some of the details: 

  Most customers were scared of touching it with Baghdad threatening to sue any buyer. Large oil companies – including Exxon Mobil and BP – have billions of dollars worth of joint projects with Baghdad.

   

  Some buyers took tankers to Ashkelon, Israel, where it was loaded into storage facilities to be resold later to buyers in Europe. Kurdish oil was also sold offshore Malta via ship-to-ship transfers helping disguise the final buyers and thus protect them from threats from Iraqi state firm SOMO.

   

  It was a high stakes game. A ship would dock off Malta waiting for another to arrive to take a cargo to a final destination. Sometimes two ships would be sent – one sailing off empty and another full – to complicate cargo tracking.

   

  “Everyone suddenly became a ship tracking expert. So we had to raise our game too … But one thing was proven correct – when oil is out, it flows,” said Hawrami.

  Ok, so a scheme involving ship-to-ship transfers off the coast of Malta was used to get Kurdish crude to places like Israel. “Israeli refineries and oil companies imported more than 19m barrels of Kurdish oil between the beginning of May and August 11, according to shipping data, trading sources and satellite tanker tracking,” FT reported last week. “That is the equivalent of about 77 per cent of average Israeli demand, which runs at roughly 240,000 barrels per day. More than a third of all of the northern Iraqi exports, which are shipped from Turkey’s Mediterranean port of Ceyhan, went to Israel over the period.”

  At this juncture, we begin to get an idea of what’s going on here. Kurdish oil is already technically illegal and Turkey is happy to facilitate its trip to foreign buyers via Ceyhan. What better way for ISIS to get its own oil to market than by moving it through a port that already deals in suspect crude? Al-Araby al-Jadeed (a London-based media outlet owned by the Qatari Fadaat Media) claims to have obtained a wealth of information about the route to Ceyhan from an unnamed colonel in the Iraqi Intelligence Services. Here’s their account: 

  The information was verified by Kurdish security officials, employees at the Ibrahim Khalil border crossing between Turkey and Iraqi Kurdistan, and an official at one of three oil companies that deal in IS-smuggled oil.

   

  The Iraqi colonel, who along with US investigators is working on a way to stop terrorist finance streams, told al-Araby about the stages that the smuggled oil goes through from the points of extraction in Iraqi oil fields to its destination – notably including the port of Ashdod, Israel.

   

  “After the oil is extracted and loaded, the oil tankers leave Nineveh province and head north to the city of Zakho, 88km north of Mosul,” the colonel said. Zakho is a Kurdish city in Iraqi Kurdistan, right on the border with Turkey.

   

  “After IS oil lorries arrive in Zakho – normally 70 to 100 of them at a time – they are met by oil smuggling mafias, a mix of Syrian and Iraqi Kurds, in addition to some Turks and Iranians,” the colonel continued.

   

  “The person in charge of the oil shipment sells the oil to the highest bidder,” the colonel added. Competition between organised gangs has reached fever pitch, and the assassination of mafia leaders has become commonplace.

   

  The highest bidder pays between 10 and 25 percent of the oil’s value in cash – US dollars – and the remainder is paid later, according to the colonel.

   

  The drivers hand over their vehicles to other drivers who carry permits and papers to cross the border into Turkey with the shipment, the Iraqi intelligence officer said. The original drivers are given empty lorries to drive back to IS-controlled areas. 

   

  Once in Turkey, the lorries continue to the town of Silopi, where the oil is delivered to a person who goes by the aliases of Dr Farid, Hajji Farid and Uncle Farid.

   

  Uncle Farid is an Israeli-Greek dual national in his fifties. He is usually accompanied by two strong-built men in a black Jeep Cherokee.

   

  Once inside Turkey, IS oil is indistinguishable from oil sold by the Kurdistan Regional Government, as both are sold as “illegal”, “source unknown” or “unlicensed” oil.

   

  The companies that buy the KRG oil also buy IS-smuggled oil, according to the colonel. 

  Now obviously that’s a remarkable degree of detail, but regardless of whether you believe in “Uncle Farid” and his black Jeep Cherokee, the main point is that there are smuggling routes into Turkey and once the oil is across the border, it might as well be Kurdish crude because after all, it’s all “illegal”, “unlicensed” product anyway, just as we said above. 

  Next, Al-Araby al-Jadeed says a handful of oil companies (which they decline to identify) ship the oil from the Turkish ports of Mersin, Dortyol and Ceyhan to Israel. 

  

  Here’s the alleged route:

  

  While the graphic shows the crude going directly from Ceyhan to Ashdod, it’s worth asking whether ISIS crude is also “laundered” (as it were) through the same Malta connection utilized by those smuggling “illegal” Kurdish crude (which also ends up in Israel). We ask that because as it turns out, Bilal Erdogan owns a Maltese shipping company. “The BMZ Group, a company owned by President Recep Tayyip Erdogan’s son Bilal alongside other family members, has purchased two tankers in the last two months at a total cost of $36 million,” Today’s Zaman reported in September. “The tankers, which will be registered to the Oil Transportation & Shipping company in October — an affiliate of the BMZ Group set up in Malta — were previously rented to the Palmali Denizcilik company for 10 years.”

  Here’s a look at recent port data from Ceyhan and Ashdod via Fleetmon.com (Malta-flagged oil vessels are highlighted).

  Ceyhan

  

  

  Ashdod

  

  

  To be sure, all of this is circumstantial and there’s all kinds of ambiguity here, but it seems entirely possible that Erdogan is knowingly trafficking in ISIS crude given what we know about Ankara’s dealings with illegal Kurdish oil. Consider this from al-Monitor: 

  Details of the energy deals struck between Turkey and the KRG remain sketchy amid claims that Erdogan and his close circle are financially benefiting from them. According to Tolga Tanis, the Washington correspondent for the mass circulation daily Hurriyet who investigated the claims, Powertrans, the company that was granted an exclusive license to carry and trade Kurdish oil by Erdogan’s Cabinet in 2011, is run by his son-in-law Berat Albayrak. It didn’t take long for the notoriously litigious Erdogan to file defamation charges against Tanis.

   

  Several Iraqi Kurdish officials who refused to be identified by name confirmed that Ahmet Calik, a businessman with close ties to Erdogan, had been granted the tender to carry Kurdish oil via overland by trucks to Turkey.

  In other words, Erdogan is already moving illicit crude from the KRG (with whom Ankara is friendly by the way, despite the fact that they are Kurds) via a son-in-law and in large quantities. What’s to say he isn’t moving ISIS crude via the same networks through his son Bilal? Or perhaps through his other son Burak who Today’s Zaman reminds us “also owns a fleet of ships [and] was featured in a report by the Sözcü daily in 2014 [when his] vessel Safran 1 was anchored in Israel’s port of Ashdod.” Here’s a picture circulated on social media that purports to show Bilal Erdogan with ISIS commanders (because we do try at all times to be unbiased, we should also note that the men shown below could just be three regular guys with beards with no connection to any black flag-waving desert bandits):

  Recep Tayip Erdogan’s son “BILAL ERDOGAN” with his ISIS brothers #StopTurkeySuppportOfISIS pic.twitter.com/5IBfXeFo9w

  — Dilxaz Sofiyan (@Dilxazsofi) September 20, 2014

  Russian media claims the men are “ISIS leaders who it is [thought] participated in massacres in Syria’s Homs and Rojava, the Kurdish name for Syrian Kurdistan or Western Kurdistan.”

  

  

  One person who definitely thinks the Erdogans are trafficking in ISIS oil is Syrian Information Minister Omran al-Zoubi who said the following on Friday: 

  “All of the oil was delivered to a company that belongs to the son of Recep [Tayyip] Erdogan. This is why Turkey became anxious when Russia began delivering airstrikes against the IS infrastructure and destroyed more than 500 trucks with oil already. This really got on Erdogan and his company’s nerves. They’re importing not only oil, but wheat and historic artefacts as well.”

  And then there’s Iraq’s former National Security Adviser Mowaffak al-Rubaie who posted the following to his Facebook page on Saturday: 

  “First and foremost, the Turks help the militants sell stolen Iraqi and Syrian oil for $20 a barrel, which is half the market price.” 

  Meanwhile, the US is preparing for an all-out ISIS oil propaganda war. As WSJ reported on Wednesday, “the Treasury [has] accused a Syrian-born businessman, George Haswani, who his a dual Syrian-Russian citizen, of using his firm, HESCO Engineering and Construction Co., for facilitating oil trades between the Assad regime and Islamic State.” Why Assad would buy oil from a group that uses the cash at its disposal to wage war against Damascus is an open question especially when one considers that Assad’s closest allies (Russia and Iran) are major oil producers. Of course between all the shady middlemen and double dealing, there’s really no telling.

  Ultimately we’ll probably never know the whole story, but what we do know (and again, most of the evidence is either circumstantial, anecdotal, of largely qualitative) seems to suggest that in addition to providing guns and money to the FSA and al-Nusra, Turkey may well be responsible for facilitating Islamic State’s $400+ million per year oil enterprise. And as for end customers, consider the following bit from Al-Araby al-Jadeed:

  According to a European official at an international oil company who met with al-Araby in a Gulf capital, Israel refines the oil only “once or twice” because it does not have advanced refineries. It exports the oil to Mediterranean countries – where the oil “gains a semi-legitimate status” – for $30 to $35 a barrel.

   

  “The oil is sold within a day or two to a number of private companies, while the majority goes to an Italian refinery owned by one of the largest shareholders in an Italian football club [name removed] where the oil is refined and used locally,” added the European oil official.

   

  “Israel has in one way or another become the main marketer of IS oil. Without them, most IS-produced oil would have remained going between Iraq, Syria and Turkey. Even the three companies would not receive the oil if they did not have a buyer in Israel,” said the industry official.

  Finally, you’ll note that this is all an effort to answer what we called “the most important question about ISIS that no one is asking” – namely, “who are the middlemen?” As we noted more than a week ago, “we do know who they may be: the same names that were quite prominent in the market in September when Glencore had its first, and certainly not last, near death experience: the Glencores, the Vitols, the Trafiguras, the Nobels, the Mercurias of the world.” Consider that, and consider what Reuters says about the trade in illicit KRG oil: “Market sources have said several trading houses including Trafigura and Vitol have dealt with Kurdish oil. Both Trafigura and Vitol declined to comment on their role in oil sales.”

  Similarly, FT notes that “both Vitol and Trafigura had paid the KRG in advance for the oil, under so-called ‘pre-pay’ deals, helping Erbil to bridge its budget gaps.”

  Indeed, when Kurdistan went looking for an advisor to assist in the effort to circumvent Baghdad, the KRG chose “Murtaza Lakhani, who worked for Glencore in Iraq in the 2000s, to assist finding ships.”

  “He knew exactly who would and who wouldn’t deal with us. He opened the doors to us and identified willing shipping companies to work with us,” Ashti Hawrami (quoted above) said.

  Indeed. And given everything said above about the commingling of illegal KRG crude and illicit ISIS oil shipments, it’s probably a foregone conclusion that these same firms are assisting in transport arrangements for Islamic State.

  

  

  

  

• Submerging Markets

  Via Dana Lyons' Tumblr,

  After failed breakouts earlier in the year, the charts of the Asian Tiger Cub markets suggest more trouble may lie ahead.

  We’ve mentioned several times how price action often times can “predict” the news. That is, the chart of a particular security, index or market may suggest a likely path for prices – bullish or bearish – long before any news comes out and is assigned as the ex post facto cause of the move. Therefore, scanning the charts of various markets can, at times, give us a head’s up on a potential source of positive or negative “news” before the market hits the mainstream radar. Such may be the case currently in the Asian Tiger Cub markets – in a negative way.

  In August, we revealed the extensive damage being done in the stock markets of the Asian “Tiger Cubs”, i.e., Indonesia, Malaysia, the Philippines and Thailand. That wasn’t the case earlier in the year as we indicated in that post:

  We posted several pieces early in the year on the various emerging markets…as they began the year in promising fashion. While Malaysia was the laggard of the group, Indonesia and the Philippines experienced nice looking breakouts while Thailand appeared poised to do the same. We even suggested that they looked to be in the running early on for “stock market of the year”.

  In that August post, introduced the Asian Tiger Cub Composite, an equal-weight composite of the 4 markets. We wrote:

  Similar to its components, the Composite started the year out strongly. In late January, the Composite broke above its previous high closing levels from 2013 and 2014 and into all-time high territory. While the breakout looked promising, it did not stick. After reaching its peak in early April, the Composite failed to hold above the previous highs. Recently, it has accelerated its move to the downside. As of today, the Composite is down about 15% from its April highs and sitting at an 18-month low.

  We did note that the individual country markets were approaching longer-term potential support areas that could produce a bounce. Indeed the markets bounced soon afterward.

  As it is often said (including, by us), a lot can be determined by judging the “quality” of a bounce. That is, if prices recover robustly and quickly, odds are good that the decline was perhaps a counter-trend move and has run its course. However, if the recovery is a shallow one that fails to approach the prior highs, odds are good that it is the bounce that is counter-trend and that further declines are likely to come. In our view, the latter would be an appropriate description of the bounce in the Asian Tiger Cubs since August.

  Here is the updated chart of the Asian Tiger Cub Composite.

   

  

   

  As the chart shows, after the failed breakout to all-time highs earlier in the year, the Composite broke its post-2009 UP trendline in August, preceding a precipitous decline. Unlike some other markets around the globe, the Composite’s bounce since has been feeble, at best, barely recovering a quarter of the decline. This suggests that the breakdown was a significant event and further declines are likely ahead, eventually.

  A look at the individual countries reveals, not surprisingly, a similar picture. After breaking out to all-time highs earlier in the year, the Indonesian JSX Index was unable to hold above its prior peaks. Subsequently, the index broke its post-2009 UP trendline in August, also preceding a precipitous decline. Its bounce too has been lackluster.

   

  

   

  Likewise, the Philippines PSE Composite suffered a failed breakout to all-time highs earlier in the year, followed by a break of its post-2009 UP trendline in August. Its bounce since has been especially weak.

   

  

   

  Next we see the Thailand SET Index., The SET failed to break out to all-time highs earlier in the year, instead rejected by highs from 2013 and the mid-1990′s. It also has since broken its post-2009 UP trendline. Its weak bounce since is on par with that of the Philippines.

   

  

   

  Lastly, the Malaysia KLCI Composite may be a bit more positive or negative depending on the perspective. The KLCI was able to break out to new highs back in 2012. However, after a nice run, it dropped back down in 2014, breaking below its post-2009 UP trendline. Even worse, during the August decline, the composite broke its post-1998 UP trendline, on a log scale. The only positive here is that it was able, for now, to hold its 2012 breakout levels. We say “for now” because it too has mounted only a weak bounce thus far.

   

  

   

  As you can see, the stock markets of those countries known as the Asian Tiger Cubs suffered extensive damage in the August global equity decline. Each has broken at least its post-2009 uptrend. Potentially making matters worse, the breakdowns come after several of the markets broke out to all-time highs earlier in the year. Just as troubling is the fact that their respective recoveries have been relatively anemic. While there may be room to move a bit higher in the near-term, these recent developments suggest that greater eventual declines are likely ahead for these markets.

  If that comes to pass, expect to hear news waves coming from that region of the world. Whether such news will be related to slow economic growth, China-related concerns, currency issues, etc., we don’t know. But that is the point. The region is well under the radar at the moment in terms of potential trouble spots. However, the charts may suggest otherwise.

  *  *  *

  More from Dana Lyons, JLFMI and My401kPro.

  

  

  

  

  

• How Green Energy Really Works

  After this week's vaporization of $29 billion of liabilities ($230 million of which was owed to the US Taxpayer) amid Abengoa's bankruptcy (Spain's 'Solyndra'), we thought it worth reminding the world's greater fools just how "green" energy works…

   

  

   

  As Pater Tenebrarum noted, oh so eloquently,

  Businesses that cannot possibly survive without subsidies are ipso facto not economically viable. In spite of all the high-minded pronouncements about the “need to save the planet” and how this valiant effort can allegedly be “combined with economic growth”, their existence serves primarily one function: to distribute money looted from taxpayers and consumers to assorted cronies of the political class, who in turn provide the latter with kickbacks. That is all there is to it.

   

  Surely no-one is so naïve as to believe that modern-day politicians, whose horizon and time preferences never stretch beyond the next election date, are really concerned about what might happen to the planet a century hence (not to mention that the entire “climate change” religion seems to be little more than an elaborate hoax). With Abengoa’s bankruptcy we are once again presented with a bill that serves as a stark reminder how much scarce capital has been wasted on such schemes.

   

  Ultimately it is little more than a modern form of highway robbery, clad in highly effective propaganda. Many people feel guilty about “consumerism”, believing that it must be true that prosperity and progress are somehow sinful. In reality, environmentalism has long become the home of a great many authoritarian leftists after they lost their former sugar daddy in Moscow in 1990.

   

  They are trying – very successfully it saddens us to admit – to undermine free market capitalism by appealing to people’s sense of guilt and their innate need to receive absolution for their sins. And they have of course found out that their new sugar daddy is much better than their old one, as there is far more wealth ready to be looted and everybody involved is quite happy to get a cut. Occasionally reality has a habit of interfering, but that won’t stop them, at least not yet.

  It is high time that the victims wake up to these scams and begin opposing them.

  

  

  

  

  

• The Unintended Consequences Of 'Lift-Off' In A World Of Excess Reserves

  Submitted by Eugen von Bohm-Bawerk via Bawerk.net,

  Barring a disastrous NFP print this coming Friday the US Federal Reserve will change the target range for the Federal Reserve (Fed) Bank’s Funds rate from the current level of zero – 25bp to 25 – 50bp on December 16^th.  The Fed will effectively raise the overnight interbank rate of interest to around 30bp from an average of only 12bp in 2015. Ironically, that will be seven years, to the day, when the Fed first lowered rates to the current band.

  During the period of ZIRP madness, the Fed’s balance sheet ballooned 6.2 times its pre-Lehman size to allow the central bank to add monetary “stimuli” even at the zero lower bound. Consequently the financial system got stuffed with more cash than they knew what to do with; commercial banks thus ended up funding the very same assets they sold to the central bank through excess reserves held as deposits with the Federal Reserve bank itself

  

  Source:  Board of Governors of the Federal Reserve System – H.4, Federal Reserve Bank of St. Louis, Bawerk.net

  Historically the Fed would meet their targeted interest rate in the interbank market by conducting open market operations, id est buying and selling securities on the margin from designated primary dealer banks to affect available reserves and hence the rate of interest. As a side note, in this "market' demand will indeed create its own supply. "Market signals" emanating from banks eager to expand their balance sheet will put pressure on interest rates, and hence prompt the Fed to buy securities in order to add reserves in order for them to maintain rates at their "appropriate" level. This Keynesian creation is thus the only "market" that actually operates according to Keynesian principles; whereby demand dictates the level of supply.

  We digress. In a new world where reserve supply is already excessive as witnessed by the 2.5 trillion dollar in the chart above, conventional tools to manage interest rates are no longer applicable.

  The Fed has thus come up with new ways to lift rates in a world of reserve oversupply. According to “Policy Normalization Principles and Plans” dated September 2014 the main conduit that will be used by the Fed to transmit their target range of interest rates to financial markets will be the interest paid on excessive reserves (IOER). In this respect it is worth noting that through the Financial Services Regulatory Relief Act of 2006 (Section 201) the Fed was granted the right to pay interest on bank reserves; long before QE policies had created unprecedented amounts of excessive reserves. While the Fed’s newfound authority did not take effect until October 2011 (section 203), the Emergency Economic Stabilization Act of 2008 section 128 effectively brought that forward to October 1^st 2008. Never let a good crisis go to waste.

  The idea behind the IOER is simple; if the Fed pay banks a rate equal to their target rate for the Fed Funds on their excessive reserves there is no incentive to take risk in short dated money markets so long as the Fed can match the going market rate. Reserves will thus stay put and the Fed can lift rates without unleashing a tsunami of liquidity into already frothy markets; or so the theory goes.

  In practice, it is much more complicated. The scope of Fed’s policy interventions over the last eight years has been so extensive and spread far beyond the Primary Dealer nexus. Money funds in particular sits on piles of liquidity and these cannot access the IOER as only FDIC-insured depository institutions have direct recourse to the Fed and hence IOER only applies to a small group of financial institutions.

  It is therefore highly unlikely that market rates will respond as the Fed moves its target rate upwards; in this case, the FOMC will have lost all control.

  The solution is obvious as the Fed could simply reduce its balance sheet back to pre-crisis levels and remove all excess reserves thereby reestablishing the old practice of managing short term rates through open market operations. With the US Government running a deficit, Fed drawdowns would constitute net supply in the treasury market as the US Treasury would have to issue bonds to repay the Fed. All new issuance would have to be carried by the private market. In addition, most reserve managers are currently selling treasuries, not buying. A dramatic re-pricing of US bonds would occur, flows would move rapidly out of equities and high yield corporates to take advantage of the relative favorable pricing of US treasuries. In addition, by ceasing to reinvest the excess reserve problem would compound several time over; see Why the Fed will change its exit strategy…again for more details.

  This is clearly not a viable strategy for a bankrupt government so the only option for the Fed is to find ways to lift rates with excess reserves still in the system. The proposed solution is to broaden the Fed’s reach by also including non-bank entities. A move that essentially turns the Fed into an all-encompassing market maker.  Technical speaking they will offer a fixed rate, full allotment overnight reverse repurchase (RRP) agreements with a range of financial institutions, such as money market funds (MMF), government sponsored enterprises (GSEs) and banks.

  The Fed started testing the RRP scheme in September 2013 to make sure they are able to control rates within a relatively narrow band. Results so far indicate that the Fed is able to move the band as they want to. During the period of testing we see market rates react to changes in the O/N RRP rate; suggesting rates can be moved up despite excess reserves.

  

  Source: Federal Reserve Bank of New York, Bloomberg, Bawerk.net

  However, this does not mean the strategy is risk-free. On the contrary, we could see dramatic financial flows when the current cap of $300bn turns into full allotment. Unsurprisingly large money market funds are the main beneficiaries of the RRP and as can be seen from the next chart, they are by far the largest user of the Fed’s new tool. Also note that at quarter end, when banks window dress their balance sheets for regulatory purposes, money market funds need to park more money in the RRP, periodically exceeding the statutory limit set by the Fed.

  

  Source: Federal Reserve Bank of New York, Bawerk.net                                                                                         * note that counterparty breakdown is published with a lag

  Since the system is flooded with excess cash, money market funds probably hold large deposits with major banks, which in turn funds the Fed’s large holdings of bonds. In other words, banks are arbitraging the fact that MMFs can only get the going market rate for their investments, while banks receive the higher 25BP IOER rate. Banks thus hold a massive deposit base far exceeding the loan and leases provided to the mainstream economy as shown in the chart below. The imbalance between deposits and loans is essentially the excess reserves problem.

  

  Source:  Board of Governors of the Federal Reserve System – H.8, Bawerk.net

  Before we move on it is important to note that banks, which cannot use their excess reserves outside the banking system itself, probably collateralizes it to fund their own positions vis-a-vis non-bank entities. To what extent excess reserve collateral are then re-hypothecated is unknown to us, but we would not be surprised if they were significant.

  What we do know is that sudden changes in these flows could have unknown, and probably large, implications for the way the financial system is currently funded.

  When money market funds get the chance to move all their deposits with banks into the RRP they will obviously take it, or at a minimum bargain banks for higher rates on deposits, which in turn depresses banks’ IOER / RRP arbitrage.

  Assuming banks outstanding $1.6 trillion liability of large time deposits are susceptible to relatively sudden move into the RRP by MMFs, we get the following before/after picture of how the Fed funds its bond portfolio

  

  Source:  Board of Governors of the Federal Reserve System – H.4 & H.8, Federal Reserve Bank of New York, Bawerk.net

  Today the Fed funds its bond portfolio with excess reserves held by banks. The banks fund these by deposits, of which money market funds probably hold the largest single part.

  If the RRP goes into full allotment money market funds will be eager to move money into it. In other words, the money market funds could relatively quickly withdraw their deposits and move them into RRPs. This will neither change the amount of reserves nor the overall size of the Fed’s balance sheet, but it will change the composition. From being funded by banks excess reserves prior to full allotment, it will be funded by RRPs, predominantly through the money market funds after full allotment.

  Banks would then need to reduce their market exposure to the extent they post excess reserves as collateral with unknown, but potential significant effect on collateral chains and by extension financial markets. With RRP pledged bonds barred from re-hypothecation, collateral chains will not be equally lengthened on the money market side of the equation. We are therefore looking at a net reduction in collateral availability for repo markets.

  In the short run this will probably lead to  dramatic and unexpected change in financial flows. Over the longer run, a much-overlooked problem emerges. Assuming Fed balance sheet drawdown will be around half the pace of natural redemptions through maturity the excess reserve problem will persist for many years to come. Further assuming they will raise rates, very slowly to around 400 basis points, then more than $200bn of "capital" will have entered the financial system. This can be leveraged around 10 times in a fully loaned banking system, which equates to a massive $2 trillion dollars. In other words, the excess reserve problem will be impossible to correct without causing a major financial upheaval at some level.

  Note that it does not matter who the ultimate holder of reserves are. If they move over to the money market funds, the interest will be paid through the RRP which will have to move in tandem (albeit with a small discount) to the IOER.

  

  Source: Board of Governors of the Federal Reserve System – H.8, Bawerk.net

  

  

  

  

  

• Russia Retaliates: Putin Reveals Sanctions Against Turkey

  While many in The West had hoped for a "see, we told you so" strongman military response from Vladimir Putin, it appears the Russian leader has, for now, taken a more practical approach. The wide-ranging sanctions unleashed on Turkey (by its 2nd largest trade partner) include a ban on Turkish workers (with estimates that 90,000 will be fired by Jan 1 2016), restrictions on imported goods and services provided by Turkey, and scraps visa-free travel and bans charter flights (implicitly hurting a major part of Turkey's domestic industry). Finally, Putin calls for "strengthening of port control and monitoring to ensure transport safety," hinting at the fears many have voiced over whether Turkey shutting the Bosphorous in an escalation would be seen as an act of war.

  As Interfax reports,

  Russian President Vladimir Putin has signed a decree "On measures to ensure Russian national security and to protect Russian citizens from criminal and other unlawful actions and the application of special economic measures with respect to the Turkish Republic," the Kremlin press office said on Saturday.

   

  The decree introduces temporary ban or restrictions on import by Russia of certain types of goods, whose country of origin is Turkey, which are stipulated in the list determined by the Russian government (except the good imported for personal use in an amount permitted by the law of the Eurasian Economic Union).

   

  The decree also bans or restricts organizations, which fall under the Turkish jurisdiction, from providing certain types of services in Russia, which are stipulated in the list determined by the Russian government.

   

  In addition, employers and contractors of services which are not stipulated in the list determined by the Russian government, are banned, starting from January 1, 2016, from employing Turkish citizens who were not employed or contracted by such employers and contractors as at December 31, 2015.

  *  *  *

  Here's why this will hurt Turkey (and its now non-independent central bank)…

  

  

   

  Full Kremlin statement of actions…

  The decree on measures to ensure Russia's national security and protection of Russian citizens from criminal and other illegal activities and the application of special economic measures against Turkey

  Vladimir Putin signed a decree "On measures to ensure the national security of the Russian Federation and the protection of Russian citizens from criminal and other illegal activities and the use of special economic measures against the Republic of Turkey."

  November 28th, 2015 20:15
  The text of the document:

  In order to protect national security and national interests of the Russian Federation to protect Russian citizens from criminal and other illegal acts, and in accordance with the federal law of 30 December 2006 ? 281-FZ "On special economic measures" and on 28 December 2010 ? 390-FZ "On security" decree:

  1. The authorities of the Russian Federation, federal government agencies, local authorities, legal entities, formed under the laws of the Russian Federation, organizations and individuals under the jurisdiction of the Russian Federation, in its work to proceed from the fact that in the Russian Federation input time:

  a) prohibition or restriction of foreign economic operations involving import into the Russian Federation of certain goods whose country of origin is the Republic of Turkey, on a list established by the Government of the Russian Federation (except for goods imported for personal use to the extent permitted by law of the Eurasian Economic Union);

   

  b) the prohibition or restriction for organizations under the jurisdiction of the Republic of Turkey on the implementation of (provision) of certain types of work (services) in the territory of the Russian Federation on a list established by the Government of the Russian Federation;

   

  c) prohibition for employers, customers of works (services) are not included in the list determined by the Government of the Russian Federation, to attract to January 1, 2016 in order to work, works (services) of workers citizens of the Republic of Turkey who are not labor and (or) civil-legal relations with these employers, customers of works (services) as of December 31, 2015

  2. Pause from 1 January 2016 in accordance with the Federal Law of July 15, 1995 ? 101-FZ "On international treaties of the Russian Federation", and paragraph 1 of Article 10 of the Agreement between the Government of the Russian Federation and the Government of the Republic of Turkey on the terms of mutual trips of citizens the Russian Federation and citizens of the Republic of Turkey on May 12, 2010 action of the Agreement in respect of the journeys undertaken by citizens of the Turkish Republic, which are the owners of foreign passport, except citizens of the Republic of Turkey, who have a temporary residence permit or a residence permit on the territory of the Russian Federation and citizens of the Republic of Turkey sent to work in diplomatic missions and consular offices of the Republic of Turkey on the territory of the Russian Federation in possession of valid official and special passports, and their families.

  3. The Ministry of Foreign Affairs of the Russian Federation in the established order the Republic of Turkey to send a notice of partial suspension of the Agreement, named in paragraph 2 of this Decree.

  4. To establish that the tour operators and travel agents should refrain from implementing the citizens of the Russian Federation of the tourist product, include a visit to the Turkish Republic.

  5. The Government of the Russian Federation:

  a) define lists of goods, works (services) provided by subparagraphs "a" and "b" of paragraph 1 of this Decree;

   

  b) to determine the list of employers, customers of works (services) provided by subparagraph "c" of paragraph 1 of this Decree;

   

  c) to define the list of contracts concluded with organizations under the jurisdiction of the Republic of Turkey for the supply of goods (works, services) in respect of which special economic measures provided for in this Decree shall not apply;

   

  d) adopt measures for the following:

  • a ban on charter air transportation between the Russian Federation and the Republic of Turkey;
  • strengthening of control over the activities of the Turkish road transport on the territory of the Russian Federation in order to ensure safety;
  • strengthening of port control and monitoring to ensure transport safety Russian waters of sea ports in the Black Sea region, including the prevention of illegal residence and movement, and other marine vessels in the waters of Russian sea ports;

  e) if necessary, make proposals to amend the period of validity or the nature of the special economic and other measures provided for by this Decree.

  6. This Decree shall enter into force on the date of its publication and is valid until they cancel the special economic and other measures.

  

  

  

  

  

• Which Assets Have Priced In A Chinese Economic Collapse? Barclays Explains

  On August 11, the day Beijing shocked the world by devaluing the yuan, a whole host of commentators suggested that the move was designed to bolster China’s bid for SDR inclusion. 

  To be sure, the timing would have been right. On at least two separate occasions in August the wires lit up with reports that the IMF was leaning towards making the RMB the fifth currency in the basket and with the official decision due in November, some believed China was simply trying to seal the deal by making it seem as though the market would play a greater role in determining the exchange rate going forward. 

  Of course that’s all nonsense. First, the market doesn’t play a greater role in the new FX regime. In fact, the market’s role is reduced. Previously, the PBoC manipulated the fix to control the spot, but now, the central bank manipulates the spot to control the fix and manipulating the spot means heavy-handed intervention. 

  Second, China’s deval has far more to do with a desperate attempt to boost the flagging export-driven economy. 

  Sure, the official headline GDP print can be whatever a bunch of Politburo central planners want it to be, but the reality (as measured by the Li Keqiang Index and by private economists outside of the bulge bracket) is that growth is nowhere near 7% and indeed, it might very well be that in times of rapidly declining commodity prices, China’s inability to accurately measure the deflator means real output would be materially overstated even if the NBS were putting out accurate figures otherwise. 

  The point here is that China’s hard landing has just begun and the 3% August deval was just the opening salvo in what will likely be a far larger effort to drive the yuan lower (remember, when Beijing burns through its reserves to support the yuan and close the onshore/offshore gap it doesn’t mean that China has changed its mind on devaluation – it simply means the deval will be conducted on the PBoC’s terms, not the market’s) and thereby boost the export-led economy. The country’s acute overcapacity problem combined with lackluster global demand and depressed trade (in relation to which China is both the proximate cause and a victim) mean that things are likely to get far worse before they get better and we’re starting to see the ripple effects in the country’s onshore bond market where defaults are becoming increasingly common as the country approaches its dreaded Minsky Moment. 

  So if we assume that China’s hard landing can and will get hard-er-er, it’s worth asking which assets and currencies have priced in a further deceleration in the world’s engine of global growth and trade. Here’s Barclays with more on what’s expensive and what’s cheap vis-a-vis  persistent deterioration in the Chinese growth story. 

  *  *  *

  From Barclays

  The underperformance of China-sensitive assets raises the question of whether they are already pricing in weaker activity. We compare asset performance over the last year to that implied by slower China growth and the controls; these residuals help us assess whether China-linked assets are reflecting the weaker growth backdrop. We complement this analysis with various valuation frameworks that help us gauge what may be priced into assets, given the risks to Chinese growth. Our analysis shows that EM equities and some commodity price residuals are currently very positive, suggesting the slowing in Chinese activity over the past year is not fully priced (Figure 4). Within equities, EM countries are most expensive relative to the Chinese cycle. The residuals for some of the usual beneficiaries of China’s growth, such as LatAm, Korea and Chinese equities, are very positive, suggesting the bounce in these assets following the August sell-off was overdone. In FX, the most interesting finding is that most Chinasensitive currencies appear cheap, especially commodity currencies and high beta EM. Notably cheap currencies are those of oil producers (the RUB, MYR and COP). The BRL and TRY are examples of currencies that are weak due to domestic issues. The high-beta IDR bounced back strongly at the beginning of Q4 and now looks expensive. The INR also has a positive residual because of idiosyncratic factors. In commodities, Brent looks cheap to the China cycle, while gold and copper are expensive. 

  In fixed income markets (Figure 5), US yields are higher and Europe and Japan yields are lower than what Chinese activity, US 2y yields and the VIX would predict. The negative deviation in Europe suggests that ECB easing expectations are the main reason for the gap. Similarly, Japanese yields are also lower than predicted, but to a lesser extent. US 5y yields are higher than predicted, as the Fed is set to hike as other central banks are still easing. While US nominal rates are higher than predicted, inflation expectations are lower, suggesting US real yields are relatively attractive. In credit markets, corporate spreads are in line with predicted, though elevated HY spreads reflect oil exposure. EM corporate and sovereign spreads are in line with our model results. Residuals for US IG spreads are also close to zero. On the other hand, US HY spreads are much higher relative to the model predictions, likely reflecting oil and commodity exposure. Finally, US MBS spreads are slightly tighter than predicted.

  

  We analyze the sensitivities for over 100 assets and present a summary of our findings in Figure 6. Many China-sensitive assets are vulnerable to renewed losses, as they have performed better than our model predictions. These include copper, gold, EM equities (local terms), IDR and EM corporate credit. Such assets are not necessarily cheap, either, and in some cases are still expensive based on various valuation measures. Real copper and gold prices are still well above pre-super cycle averages, and many China-sensitive currencies are still over- or fairly valued (CNY, AUD, NZD, SGD, RUB, etc). 

  EM equity valuations are relatively cheap, but the headwind from slower China growth is notable and EM FX is still an overhang. EM corporate credit versus US IG relative spreads are back to average levels, suggesting China risks are not fully priced. However, a number of high yielding EM currencies have already been hard hit and valuations are already cheap for idiosyncratic reasons (BRL, MYR, COP, ZAR). DM equities and credit are less sensitive to China, but we find that energy and materials credit spreads have risen by much more than earnings yields.

  

  

  

  

  

  

• Meet Captagon: The Drug Of Choice For Today's Anxious Jihadist

  Submitted by Michaela Whitton via TheAntiMedia.org,

  Dubbed the “jihadist’s drug,” Captagon is rapidly flooding the Middle East and is said to be fueling the bloody conflict in Syria. French media recently reported that the Paris attackers may have taken the drug.

  Last weekend, Turkish anti-narcotics police seized 11 million Captagon pills in a haul that weighed almost two tonnes. It was set to ship to Gulf countries. Widely banned since the mid-eighties, the pills provide a cheap and long-lasting high and are highly addictive. They also have the potential to cause psychosis and brain damage.

  The production of the drug, which keeps fighters awake over long periods of time, is said to be providing income for all factions involved in the Syrian war.

  During the last year, shipments of Captagon have been seized on the way to the West Bank, Jordan, Sudan, Syria and the Gulf. In October, Anti-Media reported on a Saudi prince who was arrested for trying to smuggle two tons of the drug onto a plane.

  As Syria has been engulfed in war, smugglers of the little-known, highly addictive pills have been forced to find alternate routes through Lebanon.

  Lebanese journalist Radwan Mortada has spent 10 years investigating crime, corruption, and the war in Syria. In his documentary for Journeyman Pictures, The Drug Fueling Conflict in Syria, Mortada follows the Captagon trail, from users on the battlefields to traffickers on Lebanese smuggling routes to the kingpins at the top of the supply chain.

   

  “There was no fear anymore”

  Since the Syrian war began, police in the region have continued to seize record-breaking numbers of the pills. Lebanon’s biggest haul to date was a whopping 50 million tablets with a street value of $300 million, weighing over 4 tonnes, en route to Dubai.

  In Mortada’s documentary, men in Beirut are shown crushing the pills and chopping them into lines. They describe the effects as “better than cocaine” and “really strong and like morphine — for really strong pains.” Their experience points to why Captagon has become the drug of choice for some Syrian fighters.

  “There was no fear anymore after I took Captagon,” one ex-fighter said.

  “It stops you feeling anything, you know? It makes you numb, numb,” said another, who described the first time he took the drug as making him feel physically fit.

  “If there were 10 people in front of you, you could catch them and kill them. You’re awake all the time,” he said.

  Since 2013, Captagon smuggling in Lebanon has skyrocketed. The Syrian war has not only pushed smuggling through the country, but has allowed gangs to set up makeshift Captagon factories in the country itself.

  Mortada’s documentary is the first time an illegal factory has ever been filmed. It shows the pills being packaged and disguised in packets of tissues. Factory workers reveal that they use vegetables, bread, and hair gel for smuggling in Lebanon’s home-grown Captagon trade.

  Shia militant group Hezbollah—currently fighting in Syria for the Assad regime—has also been accused of being involved in the trade after two factories were discovered on its premises.

  “Standing on their feet”

  On the surface, Abu Zeus looks just like a wealthy businessman, but he has been funding Captagon factories for years. He fled Syria when the war began and now resides in Europe. It took Mortada months to persuade him to be interviewed.

  Described as being at the top of the supply chain, Abu Zeus boasts on camera of a $6 million profit last year from trading the small pills. The Syrian brigades that have publicly named him as a benefactor number in the thousands, according to Mortada.

  Opposed to both the regime and jihadist groups, Abu Zeus brags of keeping the secular groups in Syria “standing on their feet.’’ He boasts of ‘supporting’ around 12,000 armed men.

  He claims the Saudis love the drug because of the country’s alcohol ban and admits that selling to them has made him a great deal of money. He’s adamant that his drug profits counter the money from Saudi Arabia that he believes is funding jihadist groups and destroying Syria:

  “The truth is that the country that exports terrorism to the Middle East and the protector of terrorism is Saudi Arabia,” he said.

  He continued: “The fight is not a revolution anymore, it is a fight between seculars and Salafists — a fight between countries.”

  Going some way towards explaining why Captagon is tailor-made for the battlefield—and why some have come to rely on the drug after five years of fighting—another fighter described the drug’s effects. He was frank:

  “You don’t have any problems. You don’t even thinking about sleeping or leaving the checkpoint. It gives you great courage and power,” he said.

  

  

  

  

  

• Violence Erupts In Turkey After Prominent Lawyer Is Assassinated On Live TV

  A day after Turkey arrested two journalists for their report exposing Erdogan’s weapons deliveries to “extremist groups” in Syria, confirming that no dissent to the president’s foreign policy would be allowed, today a new riot has erupted in Istanbul following the dramatic murder in broad daylight of Tahir Elci, the president of the Turkish bar association in southeastern Diyarbakir province, who was shot dead by unidentified gunmen while giving a public speech.

  A campaigner for Kurdish rights, Elci had been criticized in Turkey for saying the banned Kurdistan
  Workers Party (PKK) was not a terrorist organization, as the government
  describes it. He had, however, denounced PKK violence. He was facing trial over his comments, which had infuriated state prosecutors. A Turkish prosecutor last month demanded up to seven and a half years of prison tme for Elci on the grounds of “making propaganda of a terror organization” after remarks he made supporting the PKK.

  Just before being gunned down, Elci called for peace and the silencing of all guns.

  Öldürülen Tahir Elçi, bas?n aç?klamas?nda: “Sava?lar çat??malar silahlar operasyonlar bu alandan uzak olsun diyoruz” pic.twitter.com/vAiSF0xgi7

  — 140journos (@140journos) November 28, 2015

  Moments later TV footage showed a shoot out breaking out and plain clothes police repeatedly shooting at a figure running past them towards Elci.  He was then seen lying on the ground with blood apparently streaming from his head. He was later pronounced dead from gunshot to the head. A policeman was also killed in the gunfight.

   

   

  The killing which was captured on tape, took place while Tahir Elci was making a statement to the media.

  “The moment the statement ended, the crowd was sprayed with bullets,” Reuters cited Omer Tastan, a local official from the pro-Kurdish HDP party, as saying. “A single bullet struck Elci in the head,” he said, adding that 11 people had also been injured in the incident.

  In other words, a hit meant to take out the pro-Kurdish lawyer, staged as an attack by the very people he was defending.

  According to the state Anadolu news agency, it was Kurdish insurgents that opened fire, killing Elci, as well as a police officer, and injuring three other people, among them correspondents of the leading Turkish media organizations – the Anatolia and Dogan news agencies

  That, however,  appears to be just more state propaganda, because as journalists were quick to point out, Elci not only was a pro-Kurd activist but defended the “Terrorist” PKK, which is Erdogan’s political nemesis.

  #Turkish President #Erdogan just claimed Tahir #Elci‘s killing was work of #PKK, despite fact that Elci was pro-#Kurd activst & defended PKK

  — William Whiteman (@willmwhiteman) November 28, 2015

  Then Erdogan himself chimed in, saying “I have just learnt that Bar Association President Mr. Tahir Elçi died and a policeman was martyred,” President Recep Tayyip Erdogan said at a meeting in the northwestern province of Bal?kesir. “This incident shows how Turkey is right in its determined stance in fighting terrorism.” The irony is that according to the official narrative, Elci was somehow assassinated by the same people whom he was defending, which, needless to say, makes very little sense.

  According to Today Szaman, in a video clip of the incident taken by the Dogan News Agency, men hiding behind the minaret of a nearby mosque started firing at Elci and people standing with him. “A person ran towards Tahir Elci, fired with one hand and then started to run away. Then fighting started,” Dogan news agency reporter Felat Bozarslan said.

  The US Embassy expressed shock over Elci’s death, calling him a “courageous defender of human rights. Our condolences go to his family, that of the policeman killed and to all of Turkey. A terrible loss,” the embassy said on Twitter.

  Two policemen and a reporter of the state-run Anadolu news agency were injured in the gunfire, along with an unknown number of civilians, Dogan news agency said. One of the policeman was in critical condition, it said.

  Turkey’s People’s Democratic Party (HDP) condemned Elci’s killing which it described as an “planned assassination” and called a protest in Istanbul in a written statement.

  “In the place left by Tahir Elci, thousands more Tahir Elcis will carry on the work in the struggle for law and justice,” it said. Noting that Elçi had been targeted by the ruling Justice and Development Party (AK Party) and its media, the statement called on political parties, civil society and professional groups to “raise their voices” in protest. Metin Feyzioglu, head of the Turkish Bar Association (TBB), said he and members of the executive board of the TBB will be heading to Diyarbakir, inviting all executives of local bar associations across Turkey to join.

  16:41 #?stanbul #?stiklalCaddesi, #Diyarbak?r‘da öldürülen #TahirElçi için yürüyü? düzenleniyor. ????: Ali Asker Çakmak pic.twitter.com/dX36JxDqNy

  — 140journos (@140journos) November 28, 2015

  “This bullet has been fired at not only our brother but at Turkey as a whole. We need to show that our unity will not be undermined and this heinous attack will not succeed,” said Feyzioglu.

  And so the tension across Turkey rises even more, only this time it has nothing to do with the country’s ruinous foreign politics and everything to do with Erdogan’s relentless attempt to crackdown on all domestic political adversaries.

  Meanwhile, as summoned, at least 2000 people gathered in central Istanbul in Turkey late on Ssaturday, to protest the killing of Elci According to RT, one of the few media organizations covering today’s political violence in Turkey, police used water cannon and tear gas, ordering protesters to disperse, RT’s William Whiteman reported from the scene. He himself and an RT cameraman were also teargased during the clashes, the reporter added.

  #Diyarbak?r #Da?kap?‘daki #TahirElçi eylemine polis müdahalesi gerçekle?ti. @mahmutoral_ pic.twitter.com/QqccPQxiiM

  — 140journos (@140journos) November 28, 2015

  Protesters grew more and more angry with the police who were “being incredibly heavy-handed,” Whiteman reported, adding that people were chanting slogans accusing President Erdogan of being a “thief” and a “killer.”

  Helicopters have been heard flying low over the area, and the “violent” protests are continuing into the night.

  #Istanbul: Police repression w/ water cannon & tear gas during protests of the murder of #TahirElci. v/ @dokuz8haber pic.twitter.com/ep57evgVFW

  — ?ynd?cal??? (@syndicalisms) November 28, 2015

  #Turkey: Police repression in Istanbul during protests of the murder of #TahirElci, pro-Kurdish lawyer. @140journos pic.twitter.com/ET05c8N3DP

  — ?ynd?cal??? (@syndicalisms) November 28, 2015

  16:54 #?stanbul #Beyo?lu #Galatasaray, Polis ekipleri, TOMA ile #TahirElçi eylemine müdahale ediyor. @karataszeyno pic.twitter.com/e4FMaaFWjt

  — 140journos (@140journos) November 28, 2015

  #TahirElçi‘nin öldürülmesi sonras? saat 17’de #Galatasaray Meydan?’na eylem ça?r?s? yap?lm??t?. pic.twitter.com/KZ1cHwAWvD

  — 140journos (@140journos) November 28, 2015

  17:02 #TahirElçi protestosuna müdahalenin ard?ndan, polis #?stiklalCaddesi‘nde barikat olu?turdu. @karataszeyno pic.twitter.com/sHpThQrqsj

  — 140journos (@140journos) November 28, 2015

  17:11 #?stanbul, #TahirElçi eylemi için Galatasaray Meydan?’na ç?kmak isteyen gruplara müdahale sürüyor. @tahresrak pic.twitter.com/wmNRwOPapU

  — 140journos (@140journos) November 28, 2015

  19:01 ?stanbul #Kad?köy, Sayg? duru?uyla #TahirElçi, #Ankara ve #Suruç‘ta hayat?n? kaybedenler an?l?yor. @yarinhaber pic.twitter.com/3ro1K4XltT

  — 140journos (@140journos) November 28, 2015

  

  

  

  

  

• Shanghai Futures Exchange Appeals To Sellers: "Please Be Rational"

  While it is nowhere close to Japan’s legendary advice to bond investors what they should do in case of a financial collapse (“please do not worry“), overnight the Shanghai Futures exchange, which has seen unprecedented declines in the prices of commodities transacted on it…

  

   

  … so much so that the entire Chinese economy is now threatened by an unprecedented default wave if prices do not rebound, had some sage words of advice of its own.

  From the SFE:

  

   

  Translated:

  Members,

   

  Complex and volatile economic and financial situations in China and abroad are adding uncertainty to market. Members should remind investors to be prudent in judging market information and to be rational with investment decisions to maintain a smoothly running market.

  Translating the translation:

  “dear investors, please stop selling and be rational, or else you too will be branded “malicious sellers” and disappear forever.”

  And just in case you missed it, “after arresting hundreds of stock traders, China cracks down on “malicious” metals sellers next.”

  Coming to every banana republic near you, where only prices matter to central planners.

  

  

  

  

  

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

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

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

  

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

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

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

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

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

  Turkey’s role in facilitating the sale of Islamic State oil has been the subject of some debate for quite a while. From “NATO is harbouring the Islamic State: Why France’s brave new war on ISIS is a sick joke, and an insult to the victims of the Paris attacks“, by Nafeez Ahmed:

  “Turkey has played a key role in facilitating the life-blood of ISIS’ expansion: black market oil sales. Senior political and intelligence sources in Turkey and Iraq confirm that Turkish authorities have actively facilitated ISIS oil sales through the country. Last summer, Mehmet Ali Ediboglu, an MP from the main opposition, the Republican People’s Party, estimated the quantity of ISIS oil sales in Turkey at about $800 million—that was over a year ago. By now, this implies that Turkey has facilitated over $1 billion worth of black market ISIS oil sales to date.”

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

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

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

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

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

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

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

  

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

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

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

  *  *  *

  From “ISIS Gateway To Global Crude Oil Markets“

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

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

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

  
  

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

  

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

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

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

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

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

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

  

   

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

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

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

  *  *  *

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

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

  

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

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

  

  

  

  

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• Taxation As A Severe Insult

  Submitted by Tibor Machan via Acting-Man.com,

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

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

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

   

  

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

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

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

   

  

  Government – enforced compassion

   

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

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

  Why?  Who are these people?

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

   

  

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

   

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

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

   

  

  A well-worn ritual…

  *  *  *

  Addendum: Bernie Sanders Has Already Won

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

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

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

   

  

  Solar permit application process for businesses – click to enlarge.

   

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

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

   

  

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

  

  

  

  

  

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

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

  The summary:

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

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

  Debt Bomb Ticking for US Shale

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

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

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

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

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

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

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

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

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

  

  

  

  

  

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

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

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

  
  You will find more statistics at Statista

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

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

   

  Source: The Burning Platform

  

  

  

  

  

• Mark Dice Confronts America's Zombie Shoppers

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

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

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

  

  

  

  

  

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

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

  The first videos trickle in:

   

  And yet, this year there may be a shift.

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

  Some other notable findings:

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

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

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

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

   

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

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

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

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

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

  — Brian Sozzi (@BrianSozzi) November 27, 2015

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

  — Brian Sozzi (@BrianSozzi) November 27, 2015

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

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

  — Brian Sozzi (@BrianSozzi) November 27, 2015

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

  — Amanda Weindel (@AmandaWeindel) November 27, 2015

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

  — Brian Sozzi (@BrianSozzi) November 27, 2015

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

  — Brian Sozzi (@BrianSozzi) November 27, 2015

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

  — Brian Sozzi (@BrianSozzi) November 27, 2015

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

  — Brian Sozzi (@BrianSozzi) November 27, 2015

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

  Store opened 6 hours ago…

  $AAPL #BlackFriday

  — Brian Sozzi (@BrianSozzi) November 27, 2015

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

  — Brian Sozzi (@BrianSozzi) November 27, 2015

  JC Penney women’s shoe department

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

  — Brian Sozzi (@BrianSozzi) November 27, 2015

  

  

  

  

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

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

  Why not gold?

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

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

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

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

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

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

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

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

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

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

  

  

  

  

  

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

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

  

  As The FT reports,

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

   

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

   

  …

   

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

   

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

   

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

  *  *  *

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

  

   

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

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

   

  

   

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

   

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

   

  This goes on for a 1,000 days.

   

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

   

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

   

  This is a black swan event — for the turkey.

   

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

   

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

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

  

  

  

  

  

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

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

   

  

  As Perfil reports (via Google Translate)

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

   

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

   

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

   

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

   

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

   

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

   

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

   

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

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

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

   

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

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

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

   

   

  

   

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

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

  

  

  

  

  

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

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

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

  

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

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

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

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

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

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

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

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

  ?

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

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

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

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

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

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

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

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

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

  

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

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

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

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

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

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

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

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

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

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

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

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

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

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

   

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

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

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

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

  * * *

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

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

  

  

  

  

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

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

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

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

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

  

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

  

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

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

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

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

   

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

   

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

   

  
  

   

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

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

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

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

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

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

  

  

  

  

  

• How The Scots Welcome 'Visitors'

  William Wallace would be proud…

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

  

  

  

  

  

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

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

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

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

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

  

  

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

  

  

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

  

  

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

   

  

  

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

  

  

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

  

  

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

  
  

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

  

  
  

  

  

  

  

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

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

  

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

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

   

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

   

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

   

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

   

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

   

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

   

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

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

  

  

  

  

  

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

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

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

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

  

   

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

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

  No really, that’s the title.
  

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

  Winter is Coming

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

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

  

  Why Weather Matters

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

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

  

  Weather and Growth

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

  

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

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

  

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

  The Weather “Tell”

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

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

  

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

  Weather and the Payrolls Report

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

  

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

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

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

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

  

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

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

  * * *

  Yes, Goldman really spent a few days writing this.

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

  

  

  

  

  

  

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

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

  Having suddenly lost control of the stock market again…

  

   

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

  

   

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

  Which led to demands for a bailout…

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

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

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

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

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

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

  *  *  *

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

  

   

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

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

  

   

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

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

   

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

   

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

  *  *  *

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

  

  

  

  

  

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

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

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

  

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

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

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

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

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

  Turkey’s role in facilitating the sale of Islamic State oil has been the subject of some debate for quite a while. From “NATO is harbouring the Islamic State: Why France’s brave new war on ISIS is a sick joke, and an insult to the victims of the Paris attacks“, by Nafeez Ahmed:

  “Turkey has played a key role in facilitating the life-blood of ISIS’ expansion: black market oil sales. Senior political and intelligence sources in Turkey and Iraq confirm that Turkish authorities have actively facilitated ISIS oil sales through the country. Last summer, Mehmet Ali Ediboglu, an MP from the main opposition, the Republican People’s Party, estimated the quantity of ISIS oil sales in Turkey at about $800 million—that was over a year ago. By now, this implies that Turkey has facilitated over $1 billion worth of black market ISIS oil sales to date.”

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

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

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

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

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

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

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

  

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

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

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

  *  *  *

  From “ISIS Gateway To Global Crude Oil Markets“

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

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

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

  
  

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

  

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

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

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

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

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

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

  

   

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

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

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

  *  *  *

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

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

  

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

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

  

  

  

  

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

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

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

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

   

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

   

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

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

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

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

   

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

   

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

   

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

   

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

   

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

   

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

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

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

   

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

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

  1. CRUEL, INHUMAN AND DEGRADING PUNISHMENT

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

  2. SPIKE IN EXECUTIONS

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

  3. CRACKDOWN ON ACTIVISTS

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

  4. NO SPACE FOR DISSENT

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

  5. SYSTEMATIC DISCRIMINATION AGAINST WOMEN

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

  6. ROUTINE TORTURE IN CUSTODY

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

  7. ARBITRARY ARREST AND DETENTIONS

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

  8. ENTRENCHED RELIGIOUS DISCRIMINATION

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

  9. MASS DEPORTATION OF MIGRANT WORKERS

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

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

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

  

  

  

  

  

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

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

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

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

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

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

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

  Live webcast:

  

  

  

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

  — Springs Police (@CSPDPIO) November 27, 2015

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

  — The Gazette (@csgazette) November 27, 2015

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

  — Mike Violette (@fopviolette) November 27, 2015

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

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

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

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

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

  — Kody Fisher (@KodyFisherFOX21) November 27, 2015

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

  — The Gazette (@csgazette) November 27, 2015

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

  — Kody Fisher (@KodyFisherFOX21) November 27, 2015

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

  — Mike Brooks (@tvdetective) November 27, 2015

  

  

  

  

  

• 2015: The Year Of The American Identity Crisis

  Via SeanKerrigan.com,

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

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

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

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

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

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

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

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

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

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

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

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

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