Jun 16

Today’s News 16th June 2017

  • Is Kashmir The Trigger For Nuclear War?

    Authored by Brian Cloughley via The Strategic Culture Foundation,

    The disputed of territory of Kashmir, lying in the north of the sub-continent between India and Pakistan, does not often feature in the world news media, but recently the little-known yet most sensitive region has received attention, not only because of boundary clashes between the armies of India and Pakistan but because there have been some dramatic incidents in the Indian-administered region. Tension is rising, as indicated by comments from politicians and media in both countries, which have been swinging from casual abuse to extremes of frenzied condemnation.

    The Vishva Hindu Parishad (VHP) in India is a right-wing, religiously-based ultra-nationalist political party with a large following which actively supports the ruling Bharatiya Janata Party, which bases its policies on the aspirations of a strongly nationalistic community. The leader of the VHP, Acharya Dharmendra, declared in a speech on June 2 that «India should drop a nuclear bomb on Pakistan for creating tension at the border. It is a rogue nation and India must teach that country a lesson. It is important for peace in the Indian subcontinent».

    So far as can be determined, no Pakistani politician has yet made such a statement, publicly, at least, but the feeling in Pakistan as regards the use of nuclear weapons is much the same as in India: very many citizens of both countries believe that nuclear weapons just make a bigger bang. This is worrying, to put it mildly, especially as these two well-armed nations are squaring up to each other over the Kashmir imbroglio.

    Before India and Pakistan became independent in 1947 there were some 560 feudal rulers of princely states, of which Kashmir was one of the few in which a Muslim majority were subjects of a Hindu maharajah. He decided to accede to India but the territory continued to be disputed between India and Pakistan, and remains in such status on the books of the UN Security Council.

    The main UNSC resolution about Kashmir is 122 of 24 January 1957. It reminds the governments of India and Pakistan that «the final disposition of the State of Jammu and Kashmir will be made in accordance with the will of the people expressed through the democratic method of a free and impartial plebiscite conducted under the auspices of the United Nations».

    India has tried for many years to convince the world that the 1972 India-Pakistan Simla Accord following their war of 1971 in some way invalidates UN Security Council resolutions regarding Kashmir. But the first paragraph of the Simla Agreement is «that the Principles and Purposes of the Charter of the United Nations shall govern the relations between the countries». Then it states that «the two countries are resolved to settle their differences by peaceful means through bilateral negotiations or by any other peaceful means mutually agreed upon between them» [emphasis added]. It is obvious that, contrary to Indian claims, there is no legal exclusion of the UN or any third party from mediation over Kashmir, given the covenant to include «any other means» towards settlement.

    India, however, seized upon its selective interpretation of the wording of the Accord to unilaterally forbid the UN Military Observer Group in India and Pakistan (UNMOGIP) to carry out its duties to «observe and report» on both sides of the line of Control dividing the disputed territory. That Mission has forty uniformed observers who investigate cease-fire violations on the Pakistan side, but are not permitted to operate in Indian-administered Kashmir. This state of affairs neutralises objective UN reporting about the region, and one has to ask the question : who benefits from that?

    Indian-administered Kashmir is a scenically beautiful region which is economically self-supporting by virtue of food production, tourism, and export of world-class handicrafts — carpets and papier-mâché and carvings. Its citizens desire only fair governance, but over the years have become increasingly alienated from the Indian mainstream, and the recent increase in anti-India violence in the Valley is an indication of infuriated frustration. The insurgency has settled into a grumbling resentment with occasional outbreaks of forcefulness, and some barbaric incidents such as the recent unforgivable murder of a young man.

    On 9 May 2017 a young Indian army officer was kidnapped and murdered. He was aged 22, recently commissioned, unarmed, and home to attend a family wedding in Indian-administered Kashmir when five men burst into his father’s house and overpowered him, took him away and shot him dead after treating him despicably.

    Lieutenant Ummer Fayaz was an enlightened Kashmiri from a humble background who had made good because he was intelligent and hard-working. He was, of course, a Muslim, which made him doubly vulnerable to those evil fellow-Muslims who killed him. Their achievements were to plunge a family into grief, deprive the world of a good upright citizen, spread even deeper hatred throughout India, and demonstrate that they were vile savages who murdered a defenceless man. These reptiles are not freedom fighters. They are simply murderous criminals who lack any sort of morality and possess not a shred of compassion for their fellow human beings.

    Which brings us to the treatment of another young man, Farooq Dar, a Kashmiri not much older than Lieutenant Ummer Fayaz, who survived to tell his tale, but also suffered at the hands of brutal bullies who had no fear of justice being applied.

    According to the Economist, a reputable publication with no axe to grind in the India-Pakistan imbroglio over Kashmir, Mr Farooq Dar «suffered a severe beating» by Indian soldiers and was then «tied up on a spare tyre attached to the front bumper of an armoured jeep. Indian soldiers claimed he had been throwing stones. Mr Dar was driven in agony through villages… The soldiers reckoned the sight of him would deter others from throwing stones at their patrol».

    By far the majority of the citizens of Indian-administered Kashmir who object to draconian Indian rule in the disputed territory are peaceful and want matters to be resolved politically, in accordance with Security Council Resolutions, but some have resorted to barbarism, and unfortunately the Indian army and paramilitary forces have lowered themselves to the level of the extremists. The use of pellet-firing shotguns to deliberately blind protestors was particularly malevolent, but in line with the recent statement by India’s army chief that «This is a proxy war and proxy war is a dirty war. It is played in a dirty way… You fight a dirty war with innovations». Like blinding people. The Indian Express reported that after one demonstration in 2016, doctors performed nearly 100 operations on people with pellet gun injuries. Sixteen had been blinded. Welcome to free Kashmir.

    As Human Rights Watch observed, «a major grievance of those protesting in Kashmir is the failure of authorities to respect basic human rights», but the whole Kashmir catastrophe is about human rights, and it is time India and Pakistan devised a solution about the disputed territory. Countless lives would be saved if these governments eschewed the crude and dangerous attractions of ultra-nationalism and agreed to settle the dispute by referring it to independent arbitration. There is no possibility that India would ever agree to surrender the territory it occupies, because no Indian government would survive five minutes after making such a decision. Pakistan must live with the unpalatable fact that it has lost the territory and must make the best compromise.

    At this moment the disagreement between India and Pakistan over Kashmir is one of the world’s most dangerous confrontations. It could only too easily lead to nuclear war, given Pakistan’s preparedness to use tactical nuclear weapons if Indian forces penetrate Pakistani territory, as they will probably do if there is a major fire-exchange incident along the Line of Control.

    Then there will be a world catastrophe, because there is no such thing as a limited nuclear war.

    The Line of Control in Kashmir should be declared the international border, with minor adjustments effected after independent mediation. Prime Minister Narendra Modi of India and Prime Minister Nawaz Sharif of Pakistan should meet and declare that the Kashmir imbroglio is over, and that the countries have agreed to go forward to mutually beneficial cooperation.

    Then they could go to Norway to accept their Nobel Peace Prizes.

  • Is The People's Bank Of China Manipulating The Bitcoin Price?

    China’s dominance of the bitcoin network is incredibly concerning to the digital currency’s techno-libertarian purists, who fear that the concentration of mining power in the world’s second-largest economy is threatening to subvert bitcoin’s democratic nature. With more than half of the network’s hashing power resting in their hands, giant Chinese mining pools like AntPool, Bitmain and the other massive bitcoin-mining conglomerates can effectively monopolize control over the bitcoin blockchain.

    Given bitcoin’s stated aim – to bypass the authority of central banks and governments and return control of the world’s money supply to individuals – many have noted the incongruity between the currency’s democratic aspirations, and the Chinese government’s apparent willingness to tolerate, and even nurture, the country’s bitcoin industry.

    “Bitcoin Uncensored” explained one theory for the Chinese government's embrace of bitcoin: The People’s Bank of China is using its jawboning powers to manipulate the price of the digital currency to benefit politically connected elites.

    “The CCP is not out to kill bitcoin – at least not right now. Since China can have such a huge impact on the price of bitcoin, why wouldn’t the Chinese government use this power to its advantage? Chinese government regulators can, in theory, exert a huge influence on the global price of bitcoin. So, if you own bitcoin, well, the value of your money can be heavily influenced by the whims of the world’s largest authoritarian regime.”

    As the theory goes, the massive swings in bitcoin’s valuation witnessed back in 2013 were engineered by the PBOC when authorities prohibited local financial institutions from dealing in the digital currency. In early September of that year, one bitcoin was worth $100. By late November, the price had ballooned to $1,000. Then the price came crashing down seemingly overnight. Chinese authorities were widely blamed for the drop, which created what should’ve been an incredible buying opportunity.

    But whatever the PBOC’s plans might’ve been, they were disrupted by the collapse of Japanese bitcoin exchange Mt. Gox, which ushered in a bear market that endured until late 2015.

    However, more than two years later, Chinese authorities again resorted to jawboning to influence the bitcoin price when they announced in January that they were investigating the country’s digital currency exchanges. After forcing the three biggest exchanges in the country, BTCC, Huobi and OKCoin, trading volumes in China dissipated and the price fell – though not by as much as in 2013, creating yet another buying opportunity. But the time withdrawals were reinstated four months later, the digital currency had climbed to all-time highs, driven largely by an influx of Japanese and South Korean retail investors who have been enticed by the promise of exponential returns during the modern low-interest rate environment.

    Of course, Chinese authorities have plenty of other reasons to try and control the bitcoin market. Here’s BU with more:

    “So why has the Chinese regime been targeting bitcoin other than it being a democratic currency? There are a few reasons. First Chinese people can use bitcoin to get their money out of China. The Chinese regime has limits on the amount of foreign currency people can buy. But Chinese investors can buy bitcoin in China then later exchange that for foreign currency in any amount they want.

     

    Huge fortunes that might be made through corruption could be safely stored out of reach of China’s pesky investigators. That is why China’s central bank started investigating bitcoin exchanges back in February, and threatened to shut down exchanges that violated rules on foreign exchange payments and settlement. That was why China’s central bank started investigating bitcoin exchanges back in February and threatened to shut down exchanges that violated rules on foreign exchange management, money laundering and payment and settlement.

    To be sure, it’s unclear how much money is being moved out of China through bitcoin. Bitcoin transactions in China are not anonymous since you have to link a Chinese bank card to your bitcoin account. You could move a few thousand yuan, but large amounts would attract attention.”

    Should it choose to use it, Chinese authorities have at their disposal what BU describes as “the ultimate sword of Damocles.”

    “The Chinese government has the ultimate sword of Damocles over bitcoin operations in China. Chinese regulators could crack down on bitcoin by classifying it as a foreign currency which would limit individual transactions to $50,000 a year.”

    While the Chinese government could easily crush the bitcoin market, it hasn’t because that would allow miners in other countries to usurp its dominance – something the PBOC might find difficult to undo. China is home to between 50% and 70% of the world’s bitcoin mining operations, BU reports.

    Below is chart illustrates the bitcoin network's hashrate distribution by mining pool. As the graphic clearly shows, Chinese pools control more than half of the network's power, though the exact percentage is in constant flux because miners are constantly competing to process the next block of transactions: (source: blockchain.info)

    Instead of cracking down on the mining community, the Chinese government has been effectively propping it up by supplying its miners with cheap electricity.

    Major bitcoin mines in China’s northwest are being given access to government supported low cost wind and solar power. Powering the computer servers needed to mine digital currencies is one of the biggest financial challenges that bitcoin miners face. The PBOC’s logic here is easy to spot: The more bitcoin miners who set up shop in the China, the greater the control the PBOC exercises over the global bitcoin market.

    Lingering fears of a crackdown have only served to benefit the government’s position. As BU explains:

    “A lot of people feel they should buy as much bitcoin as they can right now, which will of course further drive up the price, possibly making officials very rich.”

    ****

    After bitcoin plunged to a two-week low earlier Thursday, CNBC and a handful of other media organizations blamed the latest drop on a trifecta of reasons ranging from cyberattacks to new regulations that are presently being debated by US Congress. An outline of their reasoning can be found below:

    Cyber attack

    As CNBC reports, major bitcoin exchanges were hit with multiple cyberattacks this week. Bitfinex, the largest U.S. dollar based bitcoin exchange, announced it was under ‘distributed denial-of-service’ attacks (DDOS) which slowed the service down.  The attacks come at a time when consumer interest in bitcoins have also led to heavier than normal traffic on the exchanges, compounding the attacks.

    Platform upgrade

    On August 1st, the bitcoin platform will be undergoing a protocol upgrade labeled BIP148, meant to solve the block size debate – an argument over the size of bitcoin’s ‘blocks’ (a record of transactions on the public ledger – the ‘blockchain’). The planned improvements are supposed to help ‘scale’ bitcoin for future growth, lower fees, and speed up transaction times –  however the upgrade is not without risks, and the Bitcoin community is divided.

    Inclusion in Anti-Money Laundering Bill:

    Last but not least, Senators Chuck Grassley (R-IA), Dianne Feinstein (D-CA), John Cornyn (R-TX) and Sheldon Whitehouse (D-RI) have co-sponsored bill S.1241 (Combating Money Laundering, Terrorist Financing and Counterfeiting Act), which adds language to existing anti-money laundering provisions to include digital wallets, prepaid access devices, and other ‘digital currency exchangers’ if they contain over $10,000 of cryptocurrency. Also included in the bill are cell phones, flash drives, and computers containing information on holdings which will need to be declared and reported upon entry into the U.S. In other words, the notion of using digital currency to transact anonymously will become much less attractive if this bill is signed into law.

    Demand for cryptocurrencies has skyrocketed over the last few months, beginning with Japan recognizing bitcoin as legal currency in April. Other countries including South Korea and Malaysia are reportedly set to follow suit.

    Chinese leader Xi Jinping has vowed to combat corruption among China’s business and political elite – a crackdown that recently led to the detention of the CEO of Anbang, China's hyperacquisitive insurance conglomerate. The company has been blamed for a sizable portion of China's merger spree between 2014 and 2016, and which has since been accused of being a money laundering vehicle, of wreaking "havoc" with the Chinese insurance market.
     

  • CBS Anchor Blames Trump's Tweets for Congressional Baseball Field Shooting

    Now this is the sort of journalism that gets the blood pumping. Scott Pelley from SHEE-BEE-ESH News asked the question last night, ‘Was the congressional shootings self inflicted?’ To prove his case, Pelley didn’t cite the endless barrage of violent protest by leftists in the streets or Democratic politicians calling for ‘resistance.’ Instead, Pelley called into question President Trump’s tweets, especially one that said the enemy of America was the media — as the millstone from which killers like Hodgkinson drew energy from to activate into seditious violence.

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    Source: SHEE-BEE-ESH News

    It’s time to ask whether the attack on the United States Congress Wednesday was foreseeable, predictable and, to some degree, self-inflicted.

    Too many leaders, and political commentators, who set an example for us to follow have led us into an abyss of violent rhetoric which, it should be no surprise, has led to violence.

    Wednesday was not the first time.

    In December last year, a man with an assault rifle stormed into a Washington-area pizzeria to free child sex slaves whom Hillary Clinton was holding there — or at least that’s what political blog sites had said. He fired into a locked door to discover no children in chains.

    Sen. Bernie Sanders has called the president the “most dangerous in history.” The shooter on Wednesday was a Sanders volunteer.

    You might think that no sane person would act on political hate speech, and you’d be right. Trouble is, there are a lot of Americans who struggle with mental illness.

    In February, the president tweeted that the news media were the “enemy of the American people.”

    Later, at a lunch for reporters, President Trump was asked whether he worried that language would incite violence. His pause indicated it had never crossed his mind. Then he said, “No, that doesn’t worry me.”

    As children we’re taught, “Words will never hurt me.” But when you think about it, violence almost always begins with words. In “Twitter world,” we’ve come to believe that our first thought is our best thought.

    It’s past time for all of us — presidents, politicians, reporters, citizens, all of us — to pause to think again.

    It’s past time for all of us — presidents, politicians, reporters, citizens, all of us — to pause to think again.

    In summary, Hodgkinson shot up a baseball field filled with GOP politicians because of pizzagate, which Pelley said inplicated Hillary Clinton in holding child sex slaves inside of Comet Ping Pong’s basement (even the most extreme conspiracy theorists never implicated Clinton, just Podesta), Trump’s hatred for the media, and also mental illnesses pervading America’s collective psyche. CBS never bothered to mention, in this disgraceful display of agitprop, the fact that left wing extremists have been slandering the President of the United States with false accusations of treason, blatant lies regarding Russia’s involvement in the elections, and a wholesale disregard and contempt for the highest office in the land. To blame right wingers for inciting violence conducted by a left wing Berniebro is reprehensible, but not unexpected by the cromagnons who traverse the indecorous halls of SHE-BEE-ESH News.

  • Bank Of Japan Leaves Policy, Economic Outlook Unchanged

    As expected by all 43 economists who estimate such things, the Bank of Japan left their policy mix unchanged and in a desperate bid to appear modestly positive about how things are going, maintained that "Japan's economy has been turning toward a moderate expansion," adding that that consumer spending "increased its resilience." Hardly a rousing evaluation of the state of the economy after who-knows-how-many-years of so-called 'stimulus'.

    Following The Fed's 4th rate hike in 11 years, The Bank of Japan sat on its hands once again…

    • The BOJ maintained its short-term policy rate on some bank reserves at -0.1 percent and…
    • left its target for 10-year government bond yields at around 0 percent.
    • It kept the pace of its asset purchases unchanged at about 80 trillion yen ($700 billion) annually.

    As Bloomberg's Enda Curran notes, looking through the statement, there's not much new in terms of signalling or a change to the narrative. This may suggest the BOJ is reasonably comfortable with where the economy is headed and policy makers are happy to tread water.

    USDJPY chopped around a litle, but NKY futures were entirely unimpressed as Kuroda delivered the anticipated 'nothing-burger'.

     

    The vote to do nothing was 7 to 2 with the two dissenters, Mr. Sato and Mr. Kiuchi, having one more policy meeting — July 19-20 — before their terms are up. Assuming they are sworn in by then, their replacements could change the 7-2 vote tallies that we've been seeing.

    Kuroda's news conference today could be interesting. Will he stick to being evasive about the topic of an exit, or will he drop any hints that the BOJ is starting to think about it?

    As we noted earlier, the central bank is "technically tapering," said Hiroshi Shiraishi, senior economist at BNP Paribas in Tokyo. This can be clearly seen in the following chart from Bank of America.

    Aside from the a declining supply of bonds held by the private sector, one tactical reason why the BOJ may be buying fewer bonds is its "yield curve control" policy, which aims to keep the yield on 10-year government bonds at zero. This implies it can buy fewer bonds when the yield is close to that target. Wednesday, the yield was at 0.06%.

    Previously, Kuroda has acknowledged this slowdown, but has been quick to declare that what effectively amounts to a 35% taper doesn't signal a retreat from easy-money policies. "At this stage, we are not exiting," Kuroda said at The Wall Street Journal's CEO Council meeting in Tokyo on May 16.

  • What's Triggering The Left Now? Soon You Won't Be Allowed To Say "Patriot"

    Authored by Mac Slavo via SHTFplan.com,

    There was a time when liberals and conservatives both agreed on one thing. They both used to love their country. Though they differed on what values and policies would be best for their homeland, they still had that shred of common ground.

    That’s clearly no longer the case. Across the Western world, you’ll find that even moderate liberals are often uncomfortable with terms like “patriotism” and “nationalism.” As for the far-left, they now view these terms as poisonous and archaic. That’s because they want the whole world to be one big happy family, where borders are meaningless, people can freely move from one country to the next, and no society is inherently better than another. They preach diversity, but they want the world to be blended into one drab monoculture that falls in line with their beliefs.

    So it was only a matter of time before leftists would start being triggered by patriotic rhetoric. It’s happening in Australia, where Prime Minister Malcom Turnbull recently stated that he wants the government to tighten citizenship and visa requirements.

    “There is no more important title in our democracy than “Australian Citizen”. And we should make no apology for asking those who seek to join our Australian family to join us as Australian patriots – committed to the values that define us, committed to the values that unite us. Our success as a multicultural society is built on strong foundations which include the confidence of the Australian people that their government, and it alone, determines who comes to Australia.”

    Sounds pretty inoffensive right? Not to many Australians, who have taken umbrage with his use of the word “patriot.”

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    That of course, is so typical of the Left. They care more about how they feel regarding an issue, rather than the objective truth. And the truth of the matter, is that these people don’t seem to know what patriotism means. According to the Merriam-Webster dictionary, it simply means “love for or devotion to one’s country.” According to thefreedictionary.com, a patriot is “a person who loves, supports, and defends his or her country and its interests.”

    What’s so bad about that?

    Make no mistake, people are increasingly being offended by patriotism across the Western world. It’s even ramping up in America, which is considered one of the most patriotic nations on the planet. Here we have leftists melting down over sports fans wearing red, white and blue clothing. Even in Germany, a country that is notorious for frowning upon most patriotic displays, it’s not taboo to wave the German flag at a sports game.

    This trend has to be fought at every turn, because there’s nothing shameful about loving where you come from.

    To everyone in the Western world, take note. What happens in you culture, will eventually influence government policies. So if this derision of patriotism ever goes mainstream, you can say goodbye to our borders. And when our nations are flooded with migrants who come face to face with a self-loathing culture, they’ll have no motivation to assimilate. Then you can say goodbye to your values and way of life as well.

  • Time To Get Over Your Myriad Of Reasons Not To Invest In Greece – by Michael Carino

     

    Human beings are flawed in many ways. One flaw is the desire
    to act in a repetitive manor, not adjusting and evolving as conditions change. Those
    that can change prosper and those that don’t, well, sometimes it doesn’t turn
    out so well.  Greece has been stuck in a
    repetitive negative feedback loop for almost a decade.  Yes, many of their problems are self-inflicted
    wounds.  But the patient that has been in
    a coma then moved to life support just left the hospital with a clean bill of
    health.  It seems most investors are preoccupied
    or refuse to pay attention, preferring to remain soured to the Greek markets
    after being disappointed time and time again.

     

    With today’s conclusion of the Eurogroup meeting of the
    Eurozone’s finance ministers and the IMF in Luxembourg, Greece secured the
    final $9.5 bn loan installment officially putting an end to their financial
    crisis.  The IMF has signed on board as
    well with their level of commitment to be determined pending conclusion of
    long-term debt relief. Eurogroup Chariman Jeroen Dijsselbloem said today’s
    agreement is “a major step forward” that will lead to Greece’s conclusion of
    its support program in 2018.

     

    The Eurozone also agreed on debt relief linking debt
    repayment to its rate of growth as well as deferring and extending repayment of
    $145 bn of loans – or around half Greece’s debt – by up to 15 years.
    Additionally, the Eurogroup will specify further debt relief measures by July
    27    th.  This is a precondition
    for the IMF’s participation.

     

    Believe it or not, with today’s meeting, Greece has decided
    to steer the country in the direction of stability and prosperity.  The political landscape is, dare I say it, stable
    for the foreseeable future.

     

    Unbeknownst to many investors, the Greek main benchmark
    index, the ASE is one of the top performing equity markets so far this
    year.  It is up approximately 23% year to
    date.  I know, I know, how and when did
    that happen.  Though this sounds great,
    the index is still off around 85% from its peak in 2007.  Some Greek companies can still be found
    trading around 20% of asset value.  There
    are many equity markets currently trading at historically expensive levels over-crowded
    with heard like investors.  Get over your
    preconceived notions that nothing positive will come out of Greece.  It’s time to acknowledge the progress and
    positive developments and start a list of reasons to invest in Greece.

     

     

     

    by Michael Carino, 6/15/17

     

    Michael Carino is the CEO of Greenwich Endeavors, a
    financial service firm, and has been a fund manager and owner for more than 20
    years.  He is optimistically invested in
    Greek equities.

     

     

        

  • JPMorgan's Kolanovic: "$1.3 Trillion In S&P 500 Options Expire Tomorrow"

    With Nasdaq 'VIX' reaching 15-year highs relative to S&P 'VIX' in the last week, we suspect tomorrow's quad-witching will be a little more noisy than normal as traders scramble to cope with $1.3 trillion of expiring S&P options…

     

    JPMorgan's Marko Kolanovic lays out the details…

    In our view, it will be difficult for the market to go much higher from these levels (~2,450) unless there is meaningful progress on US fiscal reform (i.e. tax cut).

     

    Current positioning of various investors is already quite high and that poses additional risk going into weak seasonals.

     

     

    Low volatility and positive price momentum resulted in high leverage of systematic investors: CTAs are likely at their ~95th percentile of equity exposure, Volatility targeting funds are likely at maximum equity exposure, and other investors (such as equity long-short and risk parity funds) also have above average equity exposure and leverage.

    Certainly, the last month has seen a regime shift in Risk Parity funds from the year-to-date upward thrust…

    But it is tomorrow's quad witch which has Kolanovic most worried…

    The impact of S&P 500 derivatives has been supporting the market going higher in the first few days of this week (expiry momentum)…

     

    …and will turn into a headwind next and the following week (reversion of expiry effect, and reversion due to monthly/quarterly rebalances).

     

    $1.3T of S&P 500 options expire on Friday, and this will change dealers’ positioning (half of the long gamma positions will expire).

     

    This can result in market volatility starting on Friday and into next week.

    In english, Friday's expiration could change options dealers' positions in a manner that could leave them more likely to feed into any uptick in stock market volatility going forward, and after tomorrow, dealers' positions in S&P 500  options will change so that any stock market selloff could quickly see dealers boosting volatility as they hedge their positions.

    Or even more simply put, the foot on the throat of volatility could well be lifted tomorrow… and positioning suggests any pain will quickly feed on itself.

  • The UN Just Accused The US Of Killing 300 Civilians Since Last Week In Raqqa

    Authohred by Darius Shahtahmasebi via TheAntiMedia.org,

    According to a U.N. Commission of Inquiry tasked with investigating violations of international war crimes and crimes against humanity in Syria, the intensification of airstrikes by the U.S.-led coalition has led to a “staggering loss of civilian life,” the Guardian reports.

    The U.N. war crimes investigators found that since the acceleration of airstrikes in the Syrian city of Raqqa commenced last week, 300 civilians have already died. This statistic arguably makes Bashar al-Assad pale in comparison; Assad’s regime reportedly kills approximately 20-50 people in any given week.

    “We note in particular that the intensification of air strikes, which have paved the ground for an SDF advance in Raqqa, has resulted not only in staggering loss of civilian life, but has also led to 160,000 civilians fleeing their homes and becoming internally displaced,” Paulo Pinheiro, the chairman of the U.N. Commission of Inquiry told the human rights council in Geneva.

    According to Karen Abuzayd, an American commissioner on the independent panel, the figure of 300 is based only on deaths caused by airstrikes. Therefore, the figure of civilian deaths caused by troops on the ground may ultimately higher.

    As the Guardian also notes, speculation that the coalition has been using white phosphorous has already drawn strong condemnation.

    Not surprisingly, this operation was conducted with full knowledge that there would be mass suffering for the civilian population. At the end of May of this year, Secretary of Defense James “Mad Dog” Mattis announced that the U.S. would be switching to so-called “annihilation tactics” against ISIS, stating:

    “Our intention is that the foreign fighters do not survive the fight to return home to North Africa, to Europe, to America, to Asia, to Africa, we are not going to allow them to do so…We are going to stop them there and take apart the caliphate.”

     

    According to Mattis, civilian deaths “are a fact of life in this sort of situation.” However, Mattis did add that the U.S. military would “do everything humanly possible consistent with military necessity, taking many chances to avoid civilian casualties at all costs.”

    Mattis’ announcement that the U.S. would annihilate ISIS (and massacre civilians by the hundreds) is still somewhat dubious, considering video footage appears to have emerged of ISIS fighters fleeing the conflict in Raqqa safely despite the hundreds of bombs and white phosphorous loaded munitions U.S.-backed forces have been dropping over the city. It has been speculated that in reality, these ISIS fighters are being granted safe passage to put added pressure on the Syrian government, a longtime adversary of the United States.

    Further, using a dangerous element like white phosphorous and burying over 300 civilians after approximately a week of fighting seems, on the face of it, to be nothing short of a blatant war crime. The Commission of Inquiry and the mainstream media may not use the term “war crime” outright, but that is surely an inference one can draw from their calculations.

    If anything, it would appear the U.S. is annihilating civilians — and not much else.

  • Four Reasons Why College Degrees Are Becoming Useless

    Authored by Jonathan Newman via The Mises Institute,

    Students are running out of reasons to pursue higher education. Here are four trends documented in recent articles:

    Graduates have little to no improvement in critical thinking skills

    The Wall Street Journal reported on the troubling results of the College Learning Assessment Plus test (CLA+), administered in over 200 colleges across the US.

    According to the WSJ, “At more than half of schools, at least a third of seniors were unable to make a cohesive argument, assess the quality of evidence in a document or interpret data in a table”. The outcomes were the worst in large, flagship schools: “At some of the most prestigious flagship universities, test results indicate the average graduate shows little or no improvement in critical thinking over four years.”

    There is extensive literature on two mechanisms by which college graduates earn higher wages: actually learning new skills or by merely holding a degree for the world to see (signaling). The CLA+ results indicate that many students aren’t really learning valuable skills in college.

    As these graduates enter the workforce and reveal that they do not have the required skills to excel in their jobs, employers are beginning to discount the degree signal as well. Google, for example, doesn’t care if potential hires have a college degree. They look past academic credentials for other characteristics that better predict job performance.

    Shouting matches have invaded campuses across the country

    It seems that developing critical thinking skills has taken a backseat to shouting matches in many US colleges. At Evergreen State College in Washington, student protests have hijacked classrooms and administration. Protesters took over the administration offices last month, and have disrupted classes as well. It has come to the point where enrollment has fallen so dramatically that government funding is now on the line.

    The chaos at Evergreen resulted in “anonymous threats of mass murder, resulting in the campus being closed for three days.” One wonders if some of these students are just trying to get out of class work and studying by staging a campus takeover in the name of identity politics and thinly-veiled racism.

    The shouting match epidemic hit Auburn University last semester when certain alt-right and Antifa groups (who are more similar than either side would admit) came from out of town to stir up trouble. Neither outside group offered anything of substance for discourse, just empty platitudes and shouting. I was happy to see that the general response from Auburn students was to mock both sides or to ignore the event altogether. Perhaps the Auburn Young Americans for Liberty group chose the best course of action: hosting a concert elsewhere on campus to pull attention and attendance away from both groups of loud but empty-headed out-of-towners. Of the students who chose not to ignore the event, my favorite Auburn student response was a guy dressed as a carrot holding a sign that read, “I Don’t CARROT ALL About Your Outrage.”

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    Source. 

    Trade schools and self-study offer better outcomes for many

    College dropouts are doing just fine, bucking the stereotype. Some determined young people are skipping college altogether to pursue their business ideas. Many are also choosing trade schools, which require less time and tuition money, but graduates end up with a specific set of skills. Trade school graduates leave school prepared for the industry they enter, where they can earn much higher wages than many four-year degree-holders.

    Young men in particular are leaving colleges in droves. Over the past decade, 30% of male freshmen dropped out before starting a second year. The journalists, psychologists, and sociologists who comment on this trend can’t figure out how to fit it into a narrative [emphasis mine]:

    “This is very concerning to me,” Hunter Reed said. Young men — like all students, she emphasized — need support from a variety of groups to thrive in higher education.

     

    “The most successful have a sense of place in college,” she said.

     

    Stark, 28, studied computer science for a year and a half before leaving Metro State University to study on his own.

     

    Now a software engineer for a music company in Denver, Stark also DJs at some of the area’s most notable nightclubs. “What I was getting in the classroom just didn’t jibe with me. I felt I could teach myself on the Internet,” he said.

     

    He worked a fast-food job and then took a corporate gig to support himself while he studied on his own. The alternative, he said, was to work four years to get a bachelor’s degree and then another year or two to earn a master’s degree, then “go to work for some huge company and go home at night and live my life with my family. And that just didn’t sound appealing to me at the time.”

    Notice the call for helping these poor young men “thrive in higher education” that precedes a small anecdote about one man who dropped out and ended up just fine. Later in the same article, the author says that young men shouldn’t assume they will do well if they drop out, but then equivocates by turning it into a gender wage-gap problem to explain how some men do seem to turn out fine after dropping out:

    Observers say many young men delude themselves into thinking they are one idea away from being the next Bill Gates or Steve Jobs. They think they can make a fortune without a college degree, said Riseman. “As a result, they enter college with little sense of purpose and end up failing out,” he said. “While these dropouts imagine they can succeed without a degree, successful start-ups are rare.”

     

    While young men without degrees, in general, land higher-paying jobs than their female peers, many of the top-paying jobs are in high-risk industries like oil and gas or manufacturing.

    Tuition is increasing, but future earnings are decreasing

    In another recent WSJ article, we see the financial consequences of these trends. While tuition keeps climbing across the country, the prospective earnings of graduates aren’t keeping up. There is a lot of variation across colleges and majors, but the overall trend is that the returns to a four-year degree are decreasing.

    Since students are just getting started in life, it means that they must borrow to pay for these expensive degrees that don’t guarantee higher earnings. Total student loans are at $1.3 trillion and climbing. These loans have no collateral and cannot be dissolved through bankruptcy.

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    The New York Fed tracks the delinquency rate for different types of loans. As of the first quarter of 2017, total student loan debt was increasing the most and had the highest delinquency rate.

    These trends are unsustainable. The higher education system seems to be suffering from both economic and cultural issues, but these two types of problems often cause each other in a feedback loop. The ultimate cause for both of them is political.

     

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