- Nassim Taleb Sums Up America's Election In 17 "Black Swan" Words
Sometimes, less is more, and in infamous “Black Swan” philosopher Nassim Taleb’s case, summing up the chaos that is enveloping America, and its forthcoming election was as simple as the following:
“The *establishment* composed of journos, BS-Vending talking heads with well-formulated verbs, bureaucrato-cronies, lobbyists-in training, New Yorker-reading semi-intellectuals, image-conscious empty suits, Washington rent-seekers and other “well thinking” members of the vocal elites are not getting the point about what is happening and the sterility of their arguments.”
To which he appended the following 17 perfectly succinct words:
“People are not voting for Trump (or Sanders). People are just voting, finally, to destroy the establishment.”
- This Election Is The Biggest Threat To The US Aristocracy (Biggest Opportunity For Voters) Since At Least 1932
Authored by Eric Zuesse,
The historical significance of the 2016 U.S. Presidential contest isn’t yet generally recognized. Consider the evidence regarding this historical significance, in the links that will be provided here, and from which the argument here is constructed:
For the first time ever, a Republican campaign ad against Hillary Clinton is entirely truthful about her and focuses on the most important issue facing voters:
For the first time since 1932, an American Presidential campaign presents an opportunity for the public to overthrow the aristocracy.
And, for the first time in U.S. history, a realistic possibility exists that the voters’ choice between the two Parties’ Presidential nominees might turn out to be between two enemies of the aristocracy: Bernie Sanders versus Donald Trump.
However, if it turns out instead to be between Trump v. Clinton, then what will be the aristocratic backing of each?
On Clinton’s side will be Wall Street — and this includes the ‘shadow banks’ (the non-“bank” sellers of what Bill Clinton and the Republicans caused to become unregulated credit derivatives), from which Hillary Clinton is also receiving donations, and from which the Clinton Foundation is supported and overseen — along with other Clinton funders).
Clearly, this is the first Presidential contest since 1932 in which the interests of the aristocracy versus the interests of the public will be presented to the voters, for them to decide which of the two sides they’re actually on.
And, if the election turns out to be between Trump versus Sanders, then this will be the first U.S. Presidential election ever in which both of the major-Party nominees will have committed themselves to policies (Trump clearly on foreign affairs, Sanders clearly on domestic affairs) that the aristocracy vigorously oppose, and that presents a severe threat to the aristocrats' continued rule of the country.
* * *
Investigative historian Eric Zuesse is the author, most recently, of They’re Not Even Close: The Democratic vs. Republican Economic Records, 1910-2010, and of CHRIST’S VENTRILOQUISTS: The Event that Created Christianity.
- Visualizing The Militarization Of The Middle East
The global arms trade is huge.
While it’s hard to pin down an exact value of arms transfers, VisualCapitalist's Jeff Desjardins notes the Stockholm International Peace Research Institute estimates that the number was at least $76 billion in 2013, with the caveat that it is likely higher.
The volume of transfers have been trending upwards now for roughly 15 years.
Volume of Arms Transfers
Courtesy of: SIPRIBut where are these arms going?
The answer, as VisualCapitalist's Jeff Desjardins explains, is that they are increasingly going to militarize the Middle East, which has increased imports of arms by 61% in 2011-2015, compared to the previous five year period.
The Syrian Civil War now entering its sixth year, and it’s clear that conflict is stopping no time soon in the Middle East. As a result of this and the various proxy wars, complicated relationships, and a continuing threat from ISIS, neighboring countries in the region have loaded up on arms.
That’s why Saudi Arabia, Qatar, and the UAE have increased imports of arms by 275%, 279%, and 35% respectively compared to the 2006-2010 time period. Saudi Arabia is now the second largest importer of arms in the world.
Rounding out the Top 20 largest arms importers are other countries in the general region, such as the UAE, Turkey, Pakistan, Algeria, Egypt, India, and Iraq:
Courtesy of: SIPRIHow are these arms flowing to these countries?
Here’s a diagram showing the top three suppliers to each of the biggest arm importers:
Original graphics by: MEE and AFP
- We are Going Higher in the SP 500 Index (Video)
By EconMatters
The extra 22 Billion in USD terms is going to find its way to US based Risk Assets via carry trades from European stimulus Measures. 2060 is the next upside target for the S&P 500 Index, we will have pullbacks and retracements along the way, but we should be considerably higher over the next 6 weeks in Risk On Assets like equities. I anticipate ultimately putting in a new high sometime over the next 6 months conservatively in the S&P 500, i.e., think in terms of the 2150 area, with a more aggressive upside target of the nice round number of 2200 in the Election Year.
Don`t focus on Energy company earnings as they are going to be awful, keep in mind money has to be stored somewhere, and now an extra $22 Billion a Month needs to find a home in financial markets.
If you are short the market you need a likely catalyst that is new for your cause, your best case outside an unforeseen Geopolitical or Natural Disaster event would be a spike in wages that leads the Bond Market to bust through 2.40% and 2.65% Yield levels on the 10-Year US Treasury Bond, and ultimately blow through the 3% line in the sand where the Bond Market is susceptible to crash scenarios from a price standpoint.
If we are wrong in this analysis the likely reason is that we are stuck on the latest move in a “Trader`s Market” expecting continuation, and in fact we are one move behind, i.e., the shorts expecting more continuation to the downside at the lows of the year in Risk Assets. The shorts were one move behind, still stuck on the last move, and missed where the markets were going on the next move.
This doesn`t matter as we are Traders and will have forecast models from a theoretical standpoint, but ultimately the markets dictate from a price action standpoint where we should be aligned from a Capital allocation standpoint. However, Investors who are not as fast, flexible and become entrenched in directional bias could wish they sold this rally, if indeed this is the “last move” and we are headed lower into second quarter earning`s season.
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- Daylight Saving Time: A Government Annoyance
Submitted by James Alexander Webb via The Mises Institute,
On March 13 Americans will, in their tolerant nature, acquiesce once again to a government initiated (and hardly popular) loss of one hour, and the setting of clocks out of sync with our planet’s celestial rhythm.
After an earlier (unpopular) 1918 trial of Daylight Saving Time and its later repeal in 1919, it was re-enacted nationwide under Nixon under the “Emergency Daylight Saving Time Energy Conservation Act of 1973.” It’s now a relic of inappropriate interventions of the early seventies that included wage-price controls and the 55 mph speed limit. It represents what we don’t need. Consider some of the reasons for repeal:
Nature: It unbalances what is naturally harmonious. High noon should be when the sun reaches its apex, or as near as this can be, given the use of time zones.
Sleep Cycles: The (circadian) sleep cycle need not be disrupted twice a year, even if accomplished by a show of hands. In truth, the legislative process should be called out for its shortsighted habit of running roughshod over established peaceable social order. Here it smacks of social engineering with a disregard for workers, not to speak of an insensitivity to children losing sleep in the adjustment.
As reported at telegram.com “The Fatal Accident Reporting System found a 17 percent increase in traffic fatalities on the Monday after the shift.” This article cited findings in a University of Colorado at Boulder study of an increase in fatal motor vehicle accidents the first six days after the clocks spring ahead. This study suggests that the time change may even increase the risk of stroke.
Freedom: If those in a workplace agree to change their hours of work they are free to do so. Such “emergency” legislation imposed by the Federal government, on the other hand — however minor they seem — mandate conformity at the expense of basic freedoms.
Efficiency: Moreover, with the advent of LED-lights, the old cost-of-lighting argument has faded, especially because the start of the day has already been advanced about one hour as mentioned above. In fact, with more air-conditioning, the bias is for increased use of electric power under the time-shift, as people come home earlier in the hot season and turn up their air-conditioning.
Inconvenience: One has the annoyance of twice a year resetting clocks. This may take only 10 minutes, but over a 60-year span it’s 20 hours.
We all know what it feels like to arrive at work on time to find that everyone else had dutifully changed their clocks, so that we turn out to be one hour late.
There are real-world effects on major industries as well. Train and transport schedules cannot be easily adjusted. Amtrak, for instance, idles trains (and passengers) for one hour to keep on schedule in the fall and then tries to make up an hour in the spring by hurrying. More hourly work schedules need adjustment now that more businesses are open 24-7.
Affrontery: Perhaps worst of all is the fact is that there is no gain whatsoever in the number of minutes of sunlight in a day. It is hence presumptuous to maintain that the culture and habits of the people, as expressed by their arrangements and choices, were in error before the change. The benefit of the doubt should logically rest with conventional time.
Principle: Resetting clocks and watches not once but twice a year, is less a compromise of effort than of principle. It contributes to the habituation of interference by the state. We already prostrate ourselves filling out 1040 forms that tax the sale of our labor, including a required signature in disregard of the Fifth Amendment protection against self-incrimination. If we ever want to undo such an affront to freedom, annoying impositions such as time-shifting are a good place to start.
Sunset Old Laws: Thomas Jefferson suggested an automatic sunset provision for legislation: “… every law, naturally expires at the end of nineteen years.” In an April 2016 Reason article by Veronique de Rugy: “What Government Can Learn from Moore’s Law,” is suggested a sunset provision (that could be retroactive) in all Federal statutes and regulations to require an updated renewal within two years. Even better, might be a required supermajority for renewal. In Jefferson’s day, by the way, clocks were known as “regulators,” but such regulation stemmed not from legislation, but from social convention that produced efficient governing without the state.
As with a plethora of interventions some may be minor inconveniences, but like time-shifting, they share in a disrespect for the principle of simply leaving people alone. Mandated time shifting affects everyone while standard time imposes on no one.
- "This Will End Badly" Grant Williams Warns "The Probability Of War Is Increasing"
"The problem that many people have is that they think that 2008 was ‘the event’ and that it cleared the brush and we’re back to a sustainable path," but, as TTMYGH's Grant Williams explains to MacroVoices' Erik Townsend, "nothing could be further from the truth."
What is more troublesome is that, as Williams exclaims, "the glue that binds all of this together, unfortunately for everybody, is faith in central bankers," and 'Laws of Nature' dictate that "this will end very badly, but end it will."
And most worryingly, for everyone, "wars are, unfortunately, a very convenient solution to a lot of the problems that governments face."
Erik and Grant's conversation is must-view as they discuss:
- The likelihood of a US recession
- The unsustainability of global credit growth
- The continuing erosion of faith in central bankers
- The response to negative interest rates in Japan
- The excesses promised by politicians to citizens of Western Democracies
- "The Consequences of Economic Peace"
- Big Cyles, Kondratieff Waves, The Laws of Nature
- The similarity between current times and the lead up to WWI
- Thinking about outcomes we'd rather not and assigning probabilities accordingly
Full discussion below (via MacroVoices.com):
Highlights include:
19:30 – “The problem that many people have is that they think that 2008 was ‘the event’ and that it cleared the brush and we’re back to a sustainable path, but nothing could be further from the truth.”
20:05 – “The glue that binds all of this together, unfortunately for everybody, is faith in central bankers.”
20:30 – “I think when you look at it and you look at the chances of these guys being able to fix this, they are very slim indeed.”
20:50 – “To have something as ephemeral as confidence in a group of academics holding the world financial system up is a terrifying prospect to me, because we don’t when when it will evaporate, or what might trigger it, but it could be tomorrow, it could be in three years…”
23:55 – “The Laws of Nature dictate that this will end very badly, but end it will. In the meantime you extend and pretend.”
26:45 – “At these points in time there is always a conflict somewhere between two global powers, and we’re seeing the embers of that.”
28:20 – “You cannot rule out the possibility of war… Sometimes the probability may be at fractions of a percent, but I think it’s more than that right now and it’s something people need to be very much aware of. And the more the economic pressure ratchets up on these governments…the more there is a need for a solution, and wars are, unfortunately, a very convenient solution to a lot of the problems that governments face.”
29:00 – “As the pressure increases, that level of probability (of war) increases significantly, and the possibility for a miscalculation ratchets up every single day.”Finally, here is TTMYGH.com's Grant Williams' latest (and scariest) presentation – "Duck Test" – if it looks like a 'duck', quacks like a 'duck', and smells like a 'duck', it must be a… recession…
- Deutsche Bank: Negative Rates Confirm The Failure Of Globalization
Negative interest rates may or may not be a thing of the past (many thought that the ECB had learned its lesson, and then Vitor Constancio wrote a blog post showing that the ECB hasn't learned a damn thing), but the confusion about their significance remains. Here is Deutsche Bank's Dominic Konstam explaining how, among many other things including why Europe will need to "tax" cash before this final Keynesian experiment is finally over, negative rates are merely the logical failure of globalization.
Misconceptions about negative rates
Understanding how negative rates may or may not help economic growth is much more complex than most central bankers and investors probably appreciate. Ultimately the confusion resides around differences in view on the theory of money. In a classical world, money supply multiplied by a constant velocity of circulation equates to nominal growth. In a Keynesian world, velocity is not necessarily constant – specifically for Keynes, there is a money demand function (liquidity preference) and therefore a theory of interest that allows for a liquidity trap whereby increasing money supply does not lead to higher nominal growth as the increase in money is hoarded. The interest rate (or inverse of the price of bonds) becomes sticky because at low rates, for infinitesimal expectations of any further rise in bond prices and a further fall in interest rates, demand for money tends to infinity. In Gesell’s world money supply itself becomes inversely correlated with velocity of circulation due to money characteristics being superior to goods (or commodities). There are costs to storage that money does not have and so interest on money capital sets a bar to interest on real capital that produces goods. This is similar to Keynes’ concept of the marginal efficiency of capital schedule being separate from the interest rate. For Gesell the product of money and velocity is effective demand (nominal growth) but because of money capital’s superiority to real capital, if money supply expands it comes at the expense of velocity. The new money supply is hoarded because as interest rates fall, expected returns on capital also fall through oversupply – for economic agents goods remain unattractive to money. The demand for money thus rises as velocity slows. This is simply a deflation spiral, consumers delaying purchases of goods, hoarding money, expecting further falls in goods prices before they are willing to part with their money.
For an economy that suffers from deficient demand, lowering interest rates doesn’t work if it simply lowers expected returns on real capital through oversupply. The shale boom in the US is blamed on cheap money. As Gesell also argued, where Marx was wrong but Proudhon was right, is that to destroy capitalism you don’t need workers to strike and close the capitalists’ factories; instead the workers should organize and build another factory next to the capitalists. The means of the production are nothing more than capitalized labor. Oversupply destroys capitalism in a natural way. In this way the demise of positive interest rates may be nothing more than the global economy reacting to a chronic oversupply of goods through the impact of globalization including the opening up of formerly closed economies as well as ongoing technological progress.
Of course raising rates isn’t a solution. If effective demand is deficient due to money hoarding of new money supply and a decline in velocity when goods supply is expanding, in a rising rate environment, demand is deficient with money supply itself falling regardless of any change in velocity. Interest on real capital may rise, even with goods prices stable eventually recovering but at the cost of huge unemployment and social distress. The difference can be thought of as the aggregate demand curve shifting inwards relative to supply and supply still exceeding demand when monetary conditions are too tight versus a falling interest environment whereby the aggregate supply curve moves out relative to demand such that the curves don’t intersect at prices above zero – the latter reflecting an implied rising real money interest rate.
In a Keynesian world of deficient demand, the burden is on fiscal policy to restore demand. Monetary policy simply won’t work if there is a liquidity trap and demand for cash is infinite. Interest rates cannot be reduced any further to stimulate demand. (In Gesell’s terminology the product of velocity and money supply i.e. effective demand keeps falling). In Gesell’s world money itself needs to be taxed to prevent hoarding and to equalize the worth of money to goods. If cash is taxed (and he suggested at the annual tax rate might be 5.2 percent, according to Keynes) then velocity is stabilized, demand for money falls and goods demand recovers. The tendency to oversupply however in an economy unfettered by “privilege” effectively implies that interest rates in equilibrium may converge to zero. Taxing of money specifically is to deal with an ex ante effective demand deficiency.
Europe’s long time obsession with negative rates, to quote our present day Fischer, is fair but misleading in the context of how negative interest rates are being applied. The combination of penalty rates on banks’ excess reserves and QE is designed at one level to expand private sector credit. This if anything will promote supply of goods. If supply creates its own demand and/or if Keynesian investment accelerator models are valid, then they may well be successful in restoring a Keynesian deficient demand problem.
This is essentially the same as saying there is no liquidity trap. (If we think of the inverse bond price on the vertical axis as being a private sector asset price, then a large price rise can be achieved for a relatively small amount of money expansion). But it presupposes that there is deficient loan demand due to high money capital interest rates rather than due to too low real capital expected returns. The risk is that QE itself is simply new money being hoarded on the demand side so that money velocity falls and effective demand remains weak. Falling interest rates may well promote new loan demand and increase supply but only in a deflationary spiral of further falls in expected capital returns and the perceived need for still lower money interest rates. If Gesell is correct, it is essential to tax money itself which means not just retail deposits but cash in circulation. Then velocity would stabilize with effective demand as households would be willing to own goods rather than money. It is conceivable that the Europeans are heading in this direction and maybe it will be worse before it gets better. Or maybe there is still time for the Keynesian mechanism to prove that we are not in a liquidity trap.
* * *
Here is our far simpler explanation of what Konstam just said, and why DB would much prefer more QE over NIRP: QE takes away the liquidity preference choice out of the hands of the consumers, and puts it into the hands of central bankers, who through asset purchases push up asset prices even if it does so by explicitly devaluing the currency of price measurement; it also means that the failure of NIRP is – by definition – a failure of central banking, and if and when the central bank backstop of any (make that all) asset class – i.e., Q.E., is pulled away, that asset (make that all) will crash. The only asset that does not have a central bank backstop (in fact, central banks are actively pushing it lower)? Gold.
- The Status Quo Plan – Convince The American Public To Accept Serfdom
Submitted by Mike Krieger via Liberty Blitzkrieg blog,
Earlier today we came across a fantastic article published at Naked Capitalism by a writer known as Gaius Publius.
Yves Smith introduces the piece with the following poignant passage:
Let us not forget that the “things are going to get worse for you” story also conveniently diverts attention from the degree of rent extraction and looting that is taking place. US corporate profit share of GDP has been at record levels, depending on how you compute if, of 10% of 12% of GDP, when no less than Warren Buffett deemed a profit share of over 6% of GDP as unsustainably high as of the early 2000s. That higher profit share is the direct result of workers getting a far lower share of GDP growth than in any post-war expansion. So the increased hardships that ordinary people face is not inevitable, but is to a significant degree due to the ruling classes taking vastly more than their historical share out of greed and short-sightedness.
Now here are some excerpts from the Gaius Publicis piece:
If you think of the country as in decline, as most people do, and you think the cause is the predatory behavior of the big-money elites, as most people do, then you must know you have only two choices — acceptance and resistance.
Why do neo-liberal Democrats, like the Clinton campaign, not want you to have big ideas, like single-payer health care? Because having big ideas is resistance to the bipartisan consensus that runs the country, and they want to stave off that resistance.
But that’s a negative goal, and there’s more. They not only have to stave off your resistance. They have to manage your acceptance of their managed decline in the nation’s wealth and good fortune.
Again: The goal of the neo-liberal consensus is to manage the decline, and manage your acceptance of it.
Corey Robin says when Clinton tells the truth, believe her:
“Amid all the accusations that Hillary Clinton is not an honest or authentic politician, that she’s an endless shape-shifter who says whatever works to get her to the next primary, it’s important not to lose sight of the one truth she’s been telling, and will continue to tell, the voters: things will not get better. Ever. At first, I thought this was just an electoral ploy against Sanders: don’t listen to the guy promising the moon. No such thing as a free lunch and all that. But it goes deeper. The American ruling class has been trying to figure out for years, if not decades, how to manage decline, how to get Americans to get used to diminished expectations, how to adapt to the notion that life for the next generation will be worse than for the previous generation, and now, how to accept (as Alex Gourevitch reminded me tonight) low to zero growth rates as the new economic normal. Clinton’s campaign message isn’t just for Bernie voters; it’s for everyone. Expect little, deserve less, ask for nothing. When the leading candidate of the more left of the two parties is saying that – and getting the majority of its voters to embrace that message – the work of the American ruling class is done.”
In Germany after WWI, austerity imposed by outsiders created the conditions for fascism to grow. We knew this. We were even taught this in school. And we certainly know just how good that is for women and minorities.
But in America (and Britain), that austerity is being imposed by our own leaders, and most effectively by leaders of the Democratic Party (and Labour Party) — the supposed “left” party, the party that was understood to support working people.
Clinton, like all of the DLC, talks like this “new economy” of decline is something that just happened, like it’s a natural force. They do not admit that it was a political decision to break the power of ordinary working people and put it back into the hands of the aristocracy. They pat us on the head and tell us they will try not to make it as bad as the Republicans will, but it will happen and there is nothing to be done about it.
And they actively divide us by making personal and tribal differences into the main show of the public political arena (only 7% of Americans claim never to have used birth control, so how is it a “Democrat” thing?) while behaving like the really big decisions that are wrecking our lives are none of our business. (Bank bailouts that were opposed 200-1 in calls to the White House from the public! Stopping the prosecutions of fraudulent banksters! HAMP instead of real home-owner relief! Secret TPP talks, for godssakes!)
As a woman and person of funny-color, I know who is being callous and insensitive toward me, and it isn’t Bernie Sanders.
Perfectly put.
Indeed, the American public has two clear choices: Fight back, or accept serfdom.
What’s it gonna be?
- Why Oil Producers Don't Believe The Oil Rally: Credit Suisse Explains
For the past month, the price of oil has soared by a 50% on no fundamental catalyst; in fact, the “fundamental” situation has gotten progressively worse with the record oil inventory glut increasing by the day even as US crude oil production posted a modest rebound in the past week after two months of declines, while the much touted OPEC/non-OPEC oil production freeze has yet to be discussed, let alone implemented.
With or without a valid catalyst, however, the short squeeze price action has drastically changed not only investor psychology, but that of the IEA as well, which on Friday announced that oil may have bottomed (if the agency’s predictive track record is any indication, oil is about to crash).
But while traders, algos and CNBC guest “commodity experts” may be certain that oil will never drop to $27 again, someone else is not at all convinced that oil prices will not drop again: oil producers themselves.
We first noted this earlier this week,since January, the spread between Brent for delivery on the 2020 end of the curve and crude for prompt supply has dropped by nearly $8 to around $10.71 a barrel. “Brent’s flattening contango since January comes as many producers want to cash in immediately on recent price rises. They’ve been heavily selling 2017/2018 and beyond, and it shows that they don’t quite trust the higher spot prices yet,” said one crude futures trader.
“This means that even the producers don’t really expect a strong price rally until well into 2017 or later,” he said. The companies that explore for oil and pump it out of the ground have been locking in price gains by selling off future output as a financial hedge, pulling down prices for those contracts, said sources with some of the producers and traders who had been counterparty to deals.
And now, courtesy of Credit Suisse James Wicklund’s wonderful “Things We’ve Learned This Week” summary of key events in the oil space in the last 7 days, is an explanation of just this:
Locking It In. Since January, the spread between spot Brent prices and 2020 Brent prices has dropped nearly $8.00 to $10.71 per barrel, indicating selling in 2017, 2018, and 2019 futures contracts. According to Reuters, the majority of selling has come from E&Ps looking to lock in prices to hedge against a repeat of last year’s second half commodity price route. At the same time, the hedges indicate a lack of confidence that the current commodity rally will continue.
However, as long as the momentum-cashing algos are bidding oil up, the majors will be delighted to hedge at ever higher prices; which incidentally means that Saudi Arabia’s plan to put as many marginal producers out of business in the fastest possible time, has just been delayed by another 9-12 months. Whether this means that Saudi plans for a production “freeze” have also just been swept away, remains to be seen as soon as that so overhyped OPEC meeting takes place, if ever.
* * *
As a bonus, here are several of Wicklund’s other key event highlights from the past week:
- Near Record. Despite significantly reduced activity in North America, 2015 was the second-largest year in terms of total proppant volumes supplied as frac sand, ceramic proppant, and resin-coated proppant producers supplied 55mm tons to the oil and gas industry. Frac sand accounted for over 92% of the 2015 market, whereas ceramic proppant and resin-coated proppant volumes fell to their lowest levels since 2010. The resilience of proppant volumes was the result of increased proppant intensity per well. Unfortunately for proppant producers, prices fell off a cliff in 2015 due to excess market supply.
- Talking Politics. During Sunday’s Democratic Presidential debate, fracking was a hot topic between Sen. Bernie Sanders and Sec. Hillary Clinton. Clinton has, in general, historically supported fracking. Clinton changed her stance noting, “[b]y the time we get through all of my conditions, I do not think there will be many places in America where fracking will continue to take place.” Sanders took a more adamant stance, calling for an all-out ban against fracking on federal lands.
- North Sea Production Holding Firm. North Sea crude supply is expected to average 2.22mm boe/d during April, up from March’s 2.17 mm boe/d and its highest level in four years. If April’s estimate is met, crude oil supply out of the North Sea will have exceeded 2 mm boe/d for 8 consecutive months.
- Flood Gates Opening? In late 2015, the National Iranian Oil Company (NIOC) unveiled 49 development projects to be offered to local and foreign investors under the new Iran Petroleum Contract (IPC). The 29 oil and 20 gas projects offer a wide array of development opportunities, ranging from brownfield projects on mature onshore and offshore fields, recently developed fields, to very large greenfield projects. Government officials project that the removal of sanctions on Iran may trigger at least $50B a year in foreign investment to finance a rebound in an economy hit by the oil slump.
- Infusion. We have been paying close attention to E&P equity raises over the past few weeks, looking specifically at the size and proceeds of the deals. So far in 2016, NAM E&Ps have raised $9.3B in equity, down from $16.0B for full-year 2015. Proceeds are similar to 2015 as E&Ps proceeds are going to pay down debt and, in some cases, fund capex.
- A Rigged And Rotten System
Submitted by Bill Bonner of Bonner & Partners (annotated by Acting-Man.com's Pater Tenebrarum),
Feeding Like Leeches
The poor Republicans! A Washington Post story wonders if the party could “break in two.” Party stalwarts are threatening to desert to Hillary. And a Texas newspaper worries that the GOP could be “on the verge of extinction.”
Aaaaaaand… it’s gone!
Not much to report from Wall Street lately. The Dow is still teetering on the 17,000 level… like a school bus on the edge of a bridge. Several readers wrote in to complain about our fact-ish item: that $176,000 was the cost of “salaries” for the typical third-grade classroom.
The figure came from Conspiracies of the Ruling Class, a new book by Lawrence Lindsey, the director the National Economic Council during the G.W. Bush administration. The title was so provocative, we picked it up.
The idea of a “conspiracy” at the top of U.S. politics… and a “ruling class” in what is supposed to be a republic… suggested that the author, a Republican insider, had lost his party membership… or his mind. We opened it eagerly… hoping it was the former, not the latter.
Perhaps Lindsey – anticipating the neocons who are abandoning the GOP banner for the Deep State favorite, Hillary Clinton – had stolen a march on them… and gone over to the Democrats. Lindsey’s point, insofar as the education numbers are concerned, was that the typical third-grade teacher doesn’t get a salary of $176,000. Nowhere close.
Instead, the money goes into salaries for administrators, “educators,” and all the assorted zombies now feeding like leeches on the public school system.
Lawrence Lindsey, former director of the National Economic Council, comes rolling by.
Rigged and Rotten
You could look at the entire system in the same way. You’d find zombies hiding in every corner and crevice – from the National Labor Relations Board… to the Federal Bureau of Prisons… to Pentagon procurement… to the Food and Drug Administration… to the Securities and Exchange Commission.
The whole shebang is rigged and rotten – including the financial system. The typical voter doesn’t understand why or how. Who does? But he feels it. Something is wrong; he knows it. And more and more, he wants to say so.
So far, the most effective voices for this discontent are Donald Trump and Bernie Sanders – neither of whom has much truck with the GOP’s traditional principles. Consider a report yesterday in Investor’s Business Daily.
“Small Businesses Are Hitting the Brakes on Wages and Benefits,” reads the headline. The article that follows gives the results of a poll of small business owners. Generally, they are not feeling their oats. Instead, they are putting a “chill” on hiring and capital expansion projects.
The NFIB small business optimism index is once again rolling over after having barely recovered from the demise of the housing bubble. Few charts illustrate better how the centrally planned fiat money-based cronyism of modern regulatory “democracy” is becoming an unbearable burden on what little is left of free market capitalism. Its assorted rackets are siphoning more and more real wealth away from genuine wealth creators into the pockets of cronies and zombies – click to enlarge.
This attitude is now being blamed for the surprisingly weak wage data that came out earlier this week. More people are working – according to the official reports – but doing less overtime and earning less money. The survey also revealed the following detail:
“Another factor for weaker wages: In addition to weaker sales, a net 4% reported lower selling prices, the worst in more than five years.”
Lower prices leave businesses with lower margins. And less desire to hire. This is part of the dreary picture that faces young people today… and it’s why they, too, may be turning against the GOP and its “establishment” candidates.
Generation Stagnation
From Red Alert Politics, an online publication for conservatives, comes the following report:
“A 30-year-old millennial earns roughly the same as what a 30-year-old earned 30 years ago, according to a new study from the Center for American Progress. The wage stagnation is demoralizing when the differences are vast. Millennials today “are 50% more likely to have finished college and that they work in an economy that is 70% more productive,” but a weak recovery and a shift in the labor market has kept starting salaries low, the report notes. The median compensation for 30-year-old workers in 1984 was $18.99 per hour. By 2004, it had moved up to $20.63 hourly, but declined to $19.32 hourly by 2014.”
Stagnation nation: median real household incomes by age bracket. People in 15-35 year age group have made zero progress in almost half a century – click to enlarge.
The Atlantic added further detail:
“In retail, wholesale, leisure, and hospitality – which together employ more than one quarter of this age group [between 25 and 34] – real wages have fallen more than 10% since 2007. To be clear, this doesn’t mean that most of this cohort are seeing their pay slashed, year after year. Instead it suggests that wage growth is failing to keep up with inflation, and that, as twenty-somethings pass into their thirties, they are earning less than their older peers did before the recession.”
Count on a progressive think tank like the Center for American Progress to provide claptrap “solutions” – including increasing “private sector unionism.” Bernie’s got answers, too – raising taxes on the rich and providing free education and free health care.
But the poor GOP – and its leading man, Trump – has no answers at all, not even crackpot ones. Mr. Trump is a deal maker. A negotiator par excellence. But who are you going to negotiate with to get the economy moving in the right direction?
We saw him on TV last night. The more we see him, the more we like him… and the surer we are that Americans are doomed. “The world is ripping us off,” he said; who “the world” is and how it rips us off is unclear.
Successful nightmare dispensers
Part of the Problem
Old-school Republicans would have had answers. But you’d have to go back a long time to find them.
“Try some real money for a change,” they would have said. “And, oh yes, balance the budget, too.”
But today’s Republicans are usually part of the problem, not the solution. They have been bought by the Deep State. Now, they offer much the same nonsense as the Democrats: tax, spend, borrow, regulate, bomb, imprison. In that regard, the last Bush administration was probably the worst in modern U.S. history.
The GOP is in disarray. It doesn’t believe its own core ideas. Neither does its standard bearer, Trump, or the voters. When we picked up Lindsey’s book, we hoped he might put some light on the subject. Or at least a kick in the derriere to the Republican leadership.
“They lost the plot,” he might have said. “They set up the Deep State to take over. No wonder their candidates aren’t winning!” Instead, he loses the plot himself. It’s all the fault of the liberals, Obama, the Clintons… and even Franklin Roosevelt, he suggests. In such a target-rich environment, it is a shame to waste the ammunition on the dead.
Here is an “old school” Republican – a species that has all but died out: Senator Robert A. Taft of Ohio, here depicted in 1952 during his bid for the nomination. He was the ideological opposite of today’s neo-”conservatives”. In favor of a sane foreign and domestic policy, often denounced as an “isolationist” because he didn’t want the country to wage costly and unnecessary wars of aggression.
- North America's Most Expensive Housing Markets
Courtesy of Point2Homes
When the average home price in San Francisco went over the $1 million threshold in the first half of 2015, it was pretty obvious for most people that the Bay city secured the top position as the most expensive housing market in the U.S. This is exactly what happened. According to records released at the end of last year, San Francisco is the superstar housing market not only in the U.S., but for the entire North America as well.
But what may really surprise some people when looking at the top 15 list of the most expensive housing markets in North America is seeing Vancouver — the third most expensive city in the world — down in the 6th position, behind a less expected entry … Brooklyn, N.Y.! The reason for this is the same one which pushed Toronto out of the top 10 list and to #11: a weaker Canadian dollar. And guess who comes right after Toronto? Well, it’s Queens, N.Y.
#1. San Francisco, CA
Median home sale price (Dec. 2015): $1,085,000 USD
With sky-high home prices becoming the norm in San Francisco, many are wondering how long people are going to be able to afford buying a home here, especially since the condo market is not significantly cheaper than the detached-home segment.
#2. Manhattan, NY
Median home sale price (Dec. 2015): $1,059,000 USD
According to real estate data powerhouse PropertyShark, at the end of 2015, the median home sale price in Manhattan went over $1 million for the first time. And if you take into account that in 3 Manhattan neighborhoods prices jumped over $3 million as well, then this news is expected.
#3. San Jose, CA
Median home sale price (Dec. 2015): $700,000 USD
The state of California has another strong representative in list of the top most expensive housing markets in North America. And not just on this continent. With $700,000 the median home sale price, San Jose also ranks very high on the list of most unaffordable cities in the world, according to Demographia’s housing index.
#4. Brooklyn, NY
Median home sale price (Dec. 2015): $620,000 USD
Said to be following in Manhattan’s footsteps, Brooklyn has seen home prices break all previous records in 2015. It’s a surprising entry into our list and its high median price reflects a peaking luxury market which has attracted a growing number of foreign investors.
#5. Los Angeles, CA
Median home sale price (Dec. 2015): $565,000 USD
In the second and third quarters of 2015, Los Angeles saw home prices soar to levels last seen before the onset of the financial crisis. The fourth quarter, however, remained flat, leaving real estate experts looking ahead to the warm months for sales to pick up again.
On the other hand, rentals in Los Angeles haven’t slowed down. They continue to climb all over town.
#6. Vancouver, B.C. (Canada)
Median home sale price (Dec. 2015): $549,783 USD / $760,900 CAD
The main culprit of Vancouver’s low position in our list is the Canadian dollar. The fact that it lost strength against the US dollar made the Canadian real estate properties a much more affordable asset for American home buyers. Now an average home in Vancouver (including condos) will cost Americans just a little over $500,000 USD, which is half of what they pay now for a home in San Francisco. However, the benchmark for a single-family home was, at the end of 2015, at record-levels — $1,226,300 CAD, which still means a jaw-breaking $911,240 USD.
#7. Seattle, WA
Median home sale price (Dec. 2015): $538,500
The tech boom Seattle has been seeing in the last years has taken its toll on home prices, which have been following a rising trend. Although the year-over-year growth is somewhere around 13%, real estate professionals expect the city to be the next Silicon Valley or New York in the next 5 years.
#8. Washington, D.C.
Median home sale price (Dec. 2015): $510,838 USD
Home prices grew exponentially in Washington D.C. especially between 2012 and 2014, when other cities were registering decreases. Although the pressure has eased a bit in certain markets, central neighborhoods continue to see prices sky-rocket.
#9. San Diego, CA
Median home sale price (Dec. 2015): $510,000 USD
Almost tieing with Washington D.C., San Diego is still more affordable than other counties in California, most notably Orange County and LA County. Home prices have been rising in the past years, leaving some experts wondering if the city hasn’t reached a bubble.
#10. Boston, MA
Median home sale price (Dec. 2015): $451,250 USD
Boston had several things to show off for 2015: 4 of its neighborhoods were included on the list of the hottest neighborhoods in the nation, plus the number of sales and the median home price continued to register increases compared to 2014.
#11. Toronto, ON (Canada)
Median home sale price (Dec. 2015): $443,064 USD/ $613,200 CAD
Despite its low position in our list this year, the Toronto housing market is still the second hottest in Canada, after Vancouver, and one of the most active markets in the world. The recent boom in condo development placed Toronto ahead of any other city in the world in terms of numbers of new recorded building permits.
- War On Terror Turns Inward – NSA Surveillance Will Be Used Against American Citizens
Submitted by Mike Krieger via Liberty Blitzkrieg blog,
In time of actual war, great discretionary powers are constantly given to the Executive Magistrate. Constant apprehension of War, has the same tendency to render the head too large for the body. A standing military force, with an overgrown Executive will not long be safe companions to liberty. The means of defence against foreign danger, have been always the instruments of tyranny at home. Among the Romans it was a standing maxim to excite a war, whenever a revolt was apprehended. Throughout all Europe, the armies kept up under the pretext of defending, have enslaved the people.
– James Madison, Founding Father and 4th President of these United States
Our founding fathers studied power structures over the millennia and knew exactly what they were doing when solidifying the Bill of Rights into the U.S. Constitution. All it took was a couple hundred years, an extraordinarily ignorant and apathetic American public, and a major terror attack to roll back this multi-generational gift.
For many years, I and countless others have been screaming from the rooftops that a society should never trade civil liberties for security. Life on earth has always been dangerous for us humans, and what has historically separated free and noble civilizations from stunted tyrannies is a willingness to acknowledge such a precarious existence while at the same time demanding and defending one’s dignity and liberty. In the aftermath of the attacks of 9/11 (seemingly carried out by U.S. ally Saudi Arabia), the American public has demonstrated no such strength of character or historical maturity, thus allowing a corrupt, deceptive and lawless government to run roughshod over freedom with very little resistance.
Well now the chickens are coming home to roost. The tyrannical powers granted to government in order to stop foreign terrorists are rapidly being turned inward against an ever servile and apathetic American public.
As Radley Balko at the Washington Post notes:
A while back, we noted a report showing that the “sneak-and-peek” provision of the Patriot Act that was alleged to be used only in national security and terrorism investigations has overwhelmingly been used in narcotics cases. Now the New York Times reports that National Security Agency data will be shared with other intelligence agencies like the FBI without first applying any screens for privacy. The ACLU of Massachusetts blog Privacy SOS explains why this is important:
What does this rule change mean for you? In short, domestic law enforcement officials now have access to huge troves of American communications, obtained without warrants, that they can use to put people in cages. FBI agents don’t need to have any “national security” related reason to plug your name, email address, phone number, or other “selector” into the NSA’s gargantuan data trove. They can simply poke around in your private information in the course of totally routine investigations. And if they find something that suggests, say, involvement in illegal drug activity, they can send that information to local or state police. That means information the NSA collects for purposes of so-called “national security” will be used by police to lock up ordinary Americans for routine crimes. And we don’t have to guess who’s going to suffer this unconstitutional indignity the most brutally. It’ll be Black, Brown, poor, immigrant, Muslim, and dissident Americans: the same people who are always targeted by law enforcement for extra “special” attention.
This basically formalizes what was already happening under the radar. We’ve known for a couple of years now that the Drug Enforcement Administration and the IRS were getting information from the NSA. Because that information was obtained without a warrant, the agencies were instructed to engage in “parallel construction” when explaining to courts and defense attorneys how the information had been obtained. If you think parallel construction just sounds like a bureaucratically sterilized way of saying big stinking lie, well, you wouldn’t be alone. And it certainly isn’t the only time that that national security apparatus has let law enforcement agencies benefit from policies that are supposed to be reserved for terrorism investigations in order to get around the Fourth Amendment, then instructed those law enforcement agencies to misdirect, fudge and outright lie about how they obtained incriminating information — see the Stingray debacle. This isn’t just a few rogue agents. The lying has been a matter of policy. We’re now learning that the feds had these agreements with police agencies all over the country, affecting thousands of cases.
This parallel construction concept is extraordinarily important, and most people are completely unaware of its meaning and usage. To get up to speed, see last year’s post:
How the DEA Uses “Parallel Construction” to Hide Unconstitutional Investigations
Of course, this is just one example of how the “war on terror” is slowly but surely transitioning into a “war on the citizenry.” A war that will only intensify as the public mood toward the status quo deteriorates further.
For example, we recently learned a little bit about how military drones are being used on U.S. soil for domestic non-terrorism related purposes. USA Today reports:
The Pentagon has deployed drones to spy over U.S. territory for non-military missions over the past decade, but the flights have been rare and lawful, according to a new report.
The Pentagon has publicly posted at least a partial list of the drone missions that have flown in non-military airspace over the United States and explains the use of the aircraft. The site lists nine missions flown between 2011 and 2016, largely to assist with search and rescue, floods, fires or National Guard exercises.
But the policy said that any use of military drones for civil authorities had to be approved by the Secretary of Defense or someone delegated by the secretary. The report found that defense secretaries have never delegated that responsibility.
While use thus far apparently has been measured, this is always how it starts. The following paragraphs should make it clear where it’s headed.
The report quoted a military law review article that said “the appetite to use them (spy drones) in the domestic environment to collect airborne imagery continues to grow, as does Congressional and media interest in their deployment.”
Military units that operate drones told the inspector general they would like more opportunities to fly them on domestic missions if for no other reason than to give pilots more experience to improve their skills, the report said. “Multiple units told us that as forces using the UAS capabilities continue to draw down overseas, opportunities for UAS realistic training and use have decreased,” the report said.
Unless there’s significant pushback to the use of military drones domestically, the practice is likely to expand and expand and expand until you can’t go out for a coffee without a camera dangling above your head.
- Greenspan Explains The Fed's Miserable Track Record: "We Didn't Forecast Better Because We Can't"
On March 11, the National Archives announced its first opening of Financial Crisis Inquiry Commission (FCIC) records, along with a detailed 1,400-page online finding aid (yes, just the index is 1,400 pages). The records which are available via DropBox, seek to identify the causes of the 2008 financial crisis.
Among the numerous materials are interviews with key players in Washington and on Wall Street, from Warren Buffett to Alan Greenspan. The documents also include minutes of commission meetings and internal deliberations concerning the causes of the financial crisis.
While we admit we have yet to read the several hundred thousand pages released yesterday, here is what has so far emerged as of the better punchlines within the data dump, and it comes courtesy of the man who many believe is responsible not only for the second global great depression (which needs trillions in central bank liquidity to be swept under the rug every day), but for the “bubble-bust-bigger bubble” cycle that was unleashed with Greenspan’s Great Moderation.
Here is Allan Greenspan meeting with Dixie Noonan et al on March 31, 2010:
This is a reason why the Board is getting an unfair rap on this stuff. We didn’t forecast better than anyone else; we regulated banks that got in trouble like anyone else. Could we have done better? Yes, if we could forecast better. But we can’t. This is why I’m very uncomfortable with the idea of a systemic regulator, because they can’t forecast better.
This comes from the person in charge of the most powerful central bank in the world; a world which now is reliant exclusively on central bankers for its day to day pretend existence.
Good luck to all.
- Caption Contest: When Kerry Met Sally
US Secretary of State John Kerry met with Saudi Arabia’s King Salman today, describing the world’s foremost human rights abuser and alleged funder of ‘terrorism’ as “an enduring historic partner and ally.”
Productive meeting with His Majesty King Salman earlier today. #SaudiArabia is an enduring, historic partner & ally. pic.twitter.com/IXrJl3nQuO
— John Kerry (@JohnKerry) March 11, 2016
Is it just us, or does John Kerry look like he is about to break into tears?
- About That Miraculous Recovery Of The Post-ECB-Plunge
Deja-vu all over again…
And what happened next?
Trade accordingly…
- Court Decision Could Accelerate Oil And Gas Bankruptcies
Submitted by Dave Forest via OilPrice.com,
Oil and gas data experts Evaluate Energy showed yesterday that U.S. E&Ps took a huge hit in 2015. With the value of total proved reserves in the sector declining by an astounding $515 billion dollars.
The chart below shows just how great the damage is, compared to reserves valuations the last few years.
Factors like that have caused an increasing number of high-profile E&Ps to file for bankruptcy in America. And a critical court decision this week could mean even more coming.
That ruling came Tuesday in the bankruptcy proceedings of Sabine Oil & Gas, detailed by Energy Law360. Where a New York judge ruled that bankruptcy allows Sabine to cancel contracts it holds with midstream firms on the company’s petroleum licenses in Texas.
Here’s why this is a sea change for oil and gas law.
Sabine held three separate contracts with pipeline firms in Texas, for the transport and sale of oil and gas that the company produced. These contracts came with clauses like “deliver or pay” features — where Sabine was obligated to send minimum volumes of production through the pipeline, or pay financial penalties to the pipeline operators.
Such contracts could have been a stumbling block in bankruptcy — requiring the company to deliver production or cash at a time when its operations have slowed or stopped. And so Sabine had challenged in bankruptcy court to have the agreements nixed.
And the judge in the case agreed. Ruling that the midstream contracts are not “running with the land” — in essence, saying that the contracts are not inextricably tied to the land assets that underlie Sabine.
The decision opens the door for Sabine to sever the contracts as it restructures in bankruptcy. A strategy that other E&Ps immediately jumped on — with bankrupt producer Magnum Hunter Resources yesterday striking a deal to cancel four midstream contracts as it restructures.
With the case giving producers a greater financial incentive to declare bankruptcy, we could see such filings increase. Obviously posing a risk for equity holders — and also for midstream companies, which could see a rising amount of contract business disappear in the bankruptcy courts.
Watch for more cases of canceled contracts emerging. And possible write-downs and loss of income at midstream firms as a result.
- Inflation is Already Here… Gold Knows It… So Does the Fed
Since 2007, the world’s Central Banks have collectively put more than $14 trillion into the financial system since 2008. To put that number into perspective, it’s equal to roughly 17% of global GDP.
This kind of money printing is literally unheard of in modern history. And it has set the stage for a roaring wave of inflation to hit the financial system. Indeed, the first signs are already showing up… not in the “official” Government data (which is bogus) but in how those who run businesses around the globe are acting.
Most people believe that when inflation hits, prices have to go higher. This is true, but higher prices can be manifested in multiple ways. Firms usually do not simply raise prices in nominal terms because it would hurt sales.
Instead, companies resort to a number of strategies to maintain profit margins without hurting their sales. One of them is to simply leave part of a package EMPTY, thereby selling LESS product for the SAME price (a hidden price hike).
Food manufacturers, like the politicians currently debating health reform, may have a solution to the obesity crisis: Feed Americans a lot of hot air. But this heated air is not just a figure of speech for packaged goods companies including Ralcorp Holdings' (RAH) Post Foods and PepsiCo (PEP) subsidiaries Frito-Lay and Quaker.
In many packaged products, as much as 50% of the contents is just empty space, an investigation by Consumer Reports reveals. And we consumers are buying that nothingness every day.
Source: Daily Finance
Another tactic corporation use is to simply sell smaller packages for the SAME price (another means of selling less for MORE= a price hike).
U.S. Companies Shrink Packages as Food Prices Rise
Large food companies have recently announced that they will raise the prices they charge grocery retailers for commodities-based products. For example, a chocolate bar will cost more soon: Hershey last week announced a 10% increase for most of its confectionery goods.
Of course, straightforward price hikes could cause consumers to buy less of those products or to choose less costly store brands. So in many cases, food companies are trying a different tactic: Keeping the price of an item the same while decreasing the amount of food in the package. The company recoups the costs of the rise in commodities and hopes consumers don't notice that they're getting less of the product for the same price.
Source: Daily Finance
However, perhaps the most scandalous policy employed by companies looking to engage in stealth price hikes is to swap out higher quality ingredients for lower quality/ lower cost alternatives. One big name coffee maker was caught doing this just a few years ago.
Reuters is reporting that many of America's major brands have been quietly tweaking their coffee blends. While most coffee companies consider their blends trade secrets, and are loath to disclose exactly what goes into them, both circumstantial and direct evidence suggests they're now substituting lower-grade Robusta beans for some of their pricier Arabica, and degrading the quality of our coffee…
At least one coffee roaster has admitted it. In November, Massimo Zanetti USA, which roasts for both Chock full o'Nuts and Hills Bros., publicly confirmed upping its Robusta usage by 25% this year.
Why the switcheroo? Prepare to not be shocked. The answer is: price.
Last year, a shortage of Arabica caused prices of the premium bean to spike as high as $3 a pound — $2 more than what a pound of Robusta would cost. This compares to a five-year historical trend of Arabica costing closer to 70 cents more than Robusta. In recent weeks, the trend has reversed, with Arabica prices falling to just a 62-cent premium over Robusta.
Source: Daily Finance
In simple terms, inflation is already around us, though it’s not yet showing up in LITERAL price hikes. Instead, we’re all paying MORE for LESS. And it’s only a matter of time before the situation really gets out of control.
Indeed, Core Inflation is already above 2%…at a time when prices of most basic goods are at 19-year lows. Any move higher in Oil and other commodities will only PUSH core inflation higher.
The Fed is cornered. Inflation is back. And Gold and Gold-related investments will be exploding higher in the coming weeks.
We just published a Special Investment Report concerning a secret back-door play on Gold that gives you access to 25 million ounces of Gold that the market is currently valuing at just $273 per ounce.
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Best Regards
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Chief Market Strategist
Phoenix Capital Research
- Caught On Tape: Secret Service Agents Storm Stage To Protect Donald Trump
Shortly after beginning his speech at a rally in Dayton, Ohio, Donald Trump was rapidly surrounded by Secret Service agents after an audience member grew increasingly raucous to the point of Trump appearing to duck at hearing a noise. Trump did not leave the stage and carried on with his speech, adding "I was ready for him, but it's much easier if the cops do it, don’t we agree?" This comes after last night's violent protests (which Soros-funded MoveOn.org have taken credit for) and this morning's misinformation about the cancellation of the Ohio rally.
Trump's anxiety is understandable after last night's violence, and expectations of further protests to come, as Infowars reports, Ilya Sheyman, a failed Illinois contender for Congress and the executive director of MoveOn.org Political Action, has taken credit for the violence at a cancelled Trump event last night in Chicago.
He promised similar violence and disruption will occur at future Trump political events leading up to the election.
“Mr. Trump and the Republican leaders who support him and his hate-filled rhetoric should be on notice after tonight’s events,” on the George Soros funded MoveOn web page. “To all of those who took to the streets of Chicago, we say thank you for standing up and saying enough is enough. To Donald Trump, and the GOP, we say, welcome to the general election.”
The violent demonstration in Chicago on Friday may represent a precursor to the sort of activity the organization will engage in as it tries to “shut down” its political enemies and elect either Hillary Clinton or Bernie Sanders.
On Friday night many of the protesters shouted “Bernie!” and held placards announcing their support for the socialist Democrat.
The group acts as a front for wealthy Democrats. It was founded with the help of the financier George Soros who donated $1.46 million to get the organization rolling. Linda Pritzker of the Hyatt hotel family gave the group a $4 million donation.
The "promise" of violence? Sounds like domestic terrorism? Or is that only when "the other" side do it?
Of course, the media is implicitly opining that this is all his own doing, which made us consider the alternative – Imagine if someone attacked President Obama and the media proclaimed it was Obama's own fault?
So far it seems 45,000 people in Dayton and Cleveland were ready to peacefully listen to what Trump had to say…
Just finished my second speech. 20K in Dayton & 25K in Cleveland- perfectly behaved crowd. Thanks- I love you, Ohio! pic.twitter.com/IDmwG5FQsw
— Donald J. Trump (@realDonaldTrump) March 12, 2016
- The Year Of The Red Monkey: Volatility Reigns Supreme
Submitte dby Charles Hugh-Smith via PeakProsperity.com,
In the lunar calendar that started February 8, this is the Year of the Red Monkey.
I found this description of the Red Monkey quite apt:
"According to Chinese Five Elements Horoscopes, Monkey contains Metal and Water. Metal is connected to gold. Water is connected to wisdom and danger. Therefore, we will deal with more financial events in the year of the Monkey. Monkey is a smart, naughty, wily and vigilant animal. If you want to have good return for your money investment, then you need to outsmart the Monkey. Metal is also connected to the Wind. That implies the status of events will be changing very quickly. Think twice before you leap when making changes for your finance, career, business relationship and people relationship."
(Source)
In other words, the financial world will be volatile. And few will have the agility and wile to outsmart the market-monkey.
For those who don’t believe in astrological forecasts, there are plenty of other reasons to anticipate sustained volatility in 2016 that strips certainty and cash from bulls and bear alike.
What’s the Source of Volatility?
Why are global markets now so volatile? The basic answer is as obvious as it is officially verboten: the global growth story is unraveling, and central banks and governments are desperate to re-ignite stagnating growth.
When solid evidence of flagging trade, sales and profits surfaces, markets drop. When central banks and states talk up monetary and fiscal stimulus, markets leap higher, as seven years of stimulus programs have rewarded those who “buy the dips.”
The relatively brief downturns and quick recoveries of the past seven years have led many to believe that this tug of war will resolve itself one way or the other in a few months. But the past seven years may not be a good guide to the next year or two: volatility might persist, month after month, with no clear resolution.
Indeed, the past 25 years may not be a good guide to the next few years, as there are no analogous periods of sustained volatility in recent history. Rather, the current period shares characteristics with each crisis and crash of the past 25 years, but combines all these causal factors in one overlapping series. This makes the present volatility unique.
Another causal factor is also unique to this era: after seven long years of zero interest rate policy (ZIRP), central banks have started pursuing an unprecedented policy of financial repression: negative interest rates (NIRP), in effect punishing savers for holding capital.
The uncertainties generated by these policies are fueling rapid cycling between selling and buying in both human and machine (trading bots) participants. Money managers fear losing capital in a crash, but are forced to seek yield in a zero or negative interest world.
No wonder volatility will reign supreme for some time to come: never before have all these causal factors been mixed together in a toxic brew of over-indebtedness, impaired collateral, faltering growth, collapsing commodity valuations, zero interest rates and currency devaluations.
The question everyone seeks to answer is simple: is the global economy sliding into recession? If so, it’s smart to sell all risk assets such as stocks and emerging-market currencies before the herd panics and triggers a crash.
Triggers of Recession
The classic recession is the result of the ebb and flow of credit in the business cycle: in the expansion phase, credit blossoms as households borrow money to buy autos, homes, etc., and businesses borrow more to expand production, retail outlets, etc.
The “animal spirits” of heady expansion inevitably exceed prudent limits, and credit is eventually extended to marginal borrowers and marginal investments. As marginal borrowers default and risky bets sour, loans must be written off and the expansion of credit ceases: households and enterprises pay down debt (deleverage) and cut expenses, causing sales, profits and employment to slump.
Once the deleveraging has cleared the economy of impaired collateral, mal-investments and unsustainable debt loads, credit once again begins to expand as cheap assets and new opportunities present themselves to creditworthy borrowers.
A variety of crises can trigger a reversal of risk-on “animal spirits” to fear-based risk-off prudence. One classic trigger is a liquidity crisis: as euphoria shifts to caution, lenders are wary of rolling existing risky debt into new loans. Firms that owe the principal on existing debt find themselves short of cash and unable to access new credit, i.e. liquidity. These vulnerable firms founder, launching a panic in which assets are sold to raise cash and marginal lenders and borrowers alike become insolvent.
In the status quo narrative, central banks arose to eliminate liquidity crises: when credit dries up, your friendly central bank stands ready to issue unlimited credit to banks, enabling the banks to roll over existing debt and fund cash-poor enterprises.
These liquidity-driven panics are typically short-term events, as the washout is violent and brief, much like a thunderstorm. But asset bubbles/collateral crises are more like hurricanes—slow-moving storms that shred the bubble assets over months or even years.
In a credit-fueled asset bubble, the asset prices have been pushed to the moon by easy credit extended to marginal borrowers and speculators—participants who would have been unable to buy assets in more prudent eras.
All this new debt is based on collateral: if a house is valued at $250,000 and the mortgage is $200,000, the $250,000 market value is the collateral supporting the mortgage. The difference between the debt and the market value—$50,000—is the owner’s collateral, and the lender’s cushion against any future decline in value.
If the house soars in a bubble to $500,000, a lender might extend a $450,000 mortgage on the property. Once the house value falls back to $250,000, the collateral is woefully inadequate: if the owner defaults, the lender is facing a $200,000 loss on the eventual sale of the asset.
This is the “balance sheet” recession: the balance sheets of households and enterprises are crippled by heavy debt loads and non-performing debt.
Understandably, lenders are reluctant to book these horrendous losses, as they render highly leveraged lenders insolvent. Borrowers may be reluctant to declare bankruptcy, and governments fear the decline in property values and taxes.
Those with the most to lose share a common purpose: mask the collapse of collateral and delay the day of reckoning, i.e. the booking of the losses. There are a number of ways to accomplish this: allow banks to maintain an unrealistic value on the property, i.e. “mark to fantasy,” or roll the mortgage over into a new larger loan that enables the owner to use new debt to make token payments on the new mortgage, and so on.
These stalling tactics drag out the process of writing down bad debt and liquidating impaired assets. As a result, participants can never be confident that asset values have truly been washed out.
A third trigger of recession is an external shock that saps confidence by raising costs or introducing uncertainty. Energy shortages, widespread natural disasters and war are examples of external shocks.
The Great Stagnation
A fourth and relatively new kind of recession is the “stagflation” or “Great Stagnation” type of recession that may not even qualify technically as a recession (the classic definition of recession is two quarters of negative growth). An economy that expands by a meager .2% year after year escapes the technical definition of recession, but it is mired in stagnation—a stagnation that can be accompanied by inflation in “stagflation” or by mild deflation/near-zero inflation.
Great Stagnations are deadly to the status quo of debt-dependent growth because without expansion of assets, revenues, profits and payrolls, credit cannot expand except if it is extended to marginal borrowers and mal-investments—precisely the type of risky borrowers that default and trigger a classic business-cycle recession of falling asset values, mass defaults and the resulting insolvency of overleveraged lenders, enterprises and households.
Since voters famously vote their pocketbooks, politicians presiding over deep recessions tend to get voted out of office. As a result, the political establishment is absolutely loathe to allow the cleansing of impaired debt and failed gambles that is necessary to establish a new foundation for prudent borrowing and healthy expansion.
Now that the global engine of rapid growth in credit, trade and asset valuations—China—has ceased to expand, the global economy is now mired in a Great Stagnation. For many regions, the Great Stagnation started in 2008 and has never really ended.
The problem is governments and central banks attempted to force an exit from the Great Stagnation by inflating asset bubbles—bubbles that were intended to restore confidence and the “animal spirits” that fuel more borrowing, investing and spending.
But these asset bubbles failed to lift household incomes or generate employment; as a result, the asset bubbles are teetering precariously on more promises of fiscal and monetary stimulus.
Unfortunately for those who own these bubble-assets, the returns on fiscal and monetary stimulus have rapidly diminished: China, for example, has created a stupendous $1 trillion in new credit in the past two months, and has very little in sustainable income/employment growth to show for this explosive expansion of debt. (Source)
No wonder markets are volatile: everything that worked for seven years is no longer working, but the promises of more stimulus are generating hope that the asset bubbles won’t burst.
In Part 2: Outsmarting The Monkey, we look at capital flows and controls, and consider what average investors might do to protect themselves from volatility.
The mischievous red monkey's purpose is to make this time as difficult as possible for investors to preserve their wealth. Fortunes have already been lost in the first few months of this year, and he's just getting started.
Click here to read Part 2 of this report (free executive summary, enrollment required for full access)
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