- Death Of Russiagate? Mueller Team Tied To Mifsud's Network
Via Disobedient Media,
In April last year, Disobedient Media broke coverage of the British involvement in the Trump-Russia collusion narrative, asking why All Russiagate Roads Lead To London, via the quasi-scholar Joseph Mifsud and others.
The issue was also raised by WikiLeaks’s Julian Assange, just days before the Ecuadorian government silenced him last March. Assange’s Twitter thread cited research by Chris Blackburn, who spoke with Disobedient Media on multiple occasions covering Joseph Mifsud’s ties to British intelligence figures and organizations, as well as his links to Hillary Clinton’s Presidential campaign, the FBI, CIA and the private cyber-security firm Crowdstrike.
We return, now, to this issue and specifically the research of Chris Blackburn, to place the final nail in the coffin of the Trump-Russia collusion charade. Blackburn’s insights are incredible not only because they return us to the earliest reporting on the role of British intelligence figures in manufacturing the Trump-Russia collusion narrative, but because they also implicate members of Mueller’s investigation. What we are left with is an indication of collusion between factions of the US and UK intelligence community in fabricating evidence of Trump-Russia collusion: a scandal that would have rocked the legacy press to its core, if Western establishment-backed media had a spine.
In Disobedient Media’s previous coverage of Blackburn’s work, he described his experience in intelligence:
“I’ve been involved in numerous investigations that involve counter-intelligence techniques in the past. I used to work for the 9/11 Families United to Bankrupt Terrorism, one of the biggest tort actions in American history. I helped build a profile of Osama bin Laden’s financial and political network, which was slightly different to the one that had been built by the CIA’s Alec Station, a dedicated task force which was focused on Osama bin Laden and Al-Qaeda. Alec Station designed its profile to hunt Osama bin Laden and disrupt his network. I thought it was flawed. It had failed to take into account Osama’s historical links to Pakistan’s main political parties or that he was the figurehead for a couple of organizations, not just Al-Qaeda.”
“I also ran a few conferences for US intelligence leaders during the Bush administration. After the 9/11 Commission published its report into the attacks on the World Trade Center and the Pentagon it created a public outreach program. The US National Intelligence Conference and Exposition (Intelcon) was one of the avenues it used. I was responsible for creating the ‘View from Abroad’ track. We had guidance from former Senator Slade Gorton and Jamie Gorelick, who both sat on the 9/11 Commission. We got leaders such as Sir John Chilcot and Baroness Pauline Neville Jones to come and help share their experiences on how the US would be able to heal the rifts after 9/11.”
“The US intelligence community was suffering from severe turf wars and firewalls, which were hampering counter-terrorism efforts. They were concentrating on undermining each other rather than tackling terrorism. I had mainly concentrated on the Middle East, but in 2003 I switched my focus to terrorism in South Asia.”
Counter Terrorism, Not Counter Intelligence, Sparked Probe
In an article published by The Telegraph last November, the paper acknowledged the following:
“It forces the spotlight on whether the UK played a role in the FBI’s investigation launched before the 2016 presidential election into Trump campaign ties to the Kremlin… Mr. Trump’s allies and former advisers are raising questions about the UK’s role in the start of the probe, given many of the key figures and meetings were located in Britain… One former top White House adviser to Mr. Trump made similar insinuations, telling this newspaper: “You know the Brits are up to their neck.” The source added on the Page wiretap application: “I think that stuff is going to implicate MI5 and MI6 in a bunch of activities they don’t want to be implicated in, along with FBI, counter-terrorism and the CIA.” [Emphasis Added]
The article cites George Papadopoulos, who asked why the “British intelligence apparatus was weaponized against Trump and his advisers.” Papadopoulos has also addressed the issue at length via Twitter. In response to the Telegraph’s coverage of the issue, Chris Blackburn wrote via Twitter:
“The Telegraph story on Trump Russia acknowledges that activities involving counter-terrorism are at the heart of the scandal…not counter-intelligence. If the [London Centre for International Law Practice] was British state, not private, some Commonwealth countries are going to be seriously pissed off.”
Blackburn spoke with Disobedient Media, saying:
“If you factor in the dreadful reporting to discredit Joseph Mifsud and leaks, it is pretty clear something rather strange happened to George Papadopoulos during the campaign while he was shuttling around Europe and the Middle East. He was working with people who have intelligence links at the London Centre of International Law Practice. A recent article in The Telegraph also alludes to MI5, MI6, and CIA using counter-terrorism assets which would tie into the London Centre of International Law Practice (LCILP), and its sister organizations, doing counter-terrorism work for the Australian, UK and US governments. They quote anonymous officials who believe that their intelligence agencies used counter-terrorism personnel to kick start the investigation/scandal.” [Emphasis Added]
Blackburn discussed this differentiation with Disobedient Media:
“Counter-terrorism is obviously involved in more kinetic, violent political actions-concerning mass casualty events, bombings, assassinations, poisonings, and hacking. But, the lines are blurring between them. Counter-intelligence cases have been known to stretch for decades- often relying on nothing more than paranoia and suspicion to fuel investigations. Counter-terrorism is also a broader discipline as it involves tactical elements like hostage rescue, crime scene investigations, and explosive specialists. Counter-Terrorism is a collaborative effort with counter-terrorism officers working closely with local and regional police forces and civic organizations. There is also a wider academic field around countering violent, and radical ideology which promotes terrorism and insurgencies. Cybersecurity has become the third major discipline in intelligence. The London Center of International Law Practice, the mysterious intelligence company that employed both Papadopoulos and Mifsud, had also been working in that area.”
Continuing, Blackburn pinpointed the significance of defining counter-terrorism as the starting point of the investigation, saying: “It shows that there is a high probability that intelligence was deliberately abused to make Papadopoulos’ activities look like they were something else. As counter-terrorism and counterintelligence are close in tactics and methods, it would seem that they were used because they share the same skill sets – covert evidence gathering and deception. It’s basically sleight of hand. A piece of theatre would be more precise. However, we don’t know if the FBI knew it was real or make-believe. It’s more likely that the CIA played the FBI with the help of close allies who were suspicious and frightened of a Trump presidency.”
Mueller’s Team And Joseph Mifsud
Zainab Ahmad, a member of Mueller’s legal team, is the former Assistant United States Attorney in the Eastern District of New York. As pointed out by Blackburn, Ahmad attended a Global Center on Cooperative Security event in 2017. In recent days, Blackburn wrote via Twitter:
“Zainab Ahmad is a major player in the Russiagate scandal at the DOJ. Does she work for SC Mueller? She was at a GCCS event in May 2017. Arvinder Sambei, a co-director of the [London Centre of International Law Practice], worked with Joseph Mifsud, [George Papadopoulos] and [Simona Mangiante]. She’s a GCCS consultant.”
Blackburn told this author:
“Zainab Ahmad was one of the first DOJ prosecutors to have seen the Steele dossier. In May 2017, she attended a counter-terrorism conference in New York with the Global Center on Cooperative Security (GCCS), an organization which Joseph Mifsud, the alleged Russian spy, had been working within London and Riyadh, Saudi Arabia.”
Zainab Ahmad (AHMAD). Image via the Combatting Terrorism Center, West Point
“Richard Barrett, the Former Chief of Counter-Terrorism at MI6, Britain’s foreign intelligence department traveled with Mifsud to Saudi Arabia to give a talk on terrorism in 2017. Ex-CIA officers, US Defense, and US Treasury officials were also there. The London Centre of International Law Practice’s relationship to the Global Center had been established in 2014. The Global Center on Cooperative Security made Martin Polaine and Arvinder Sambei consultants, they then became directors at the London Centre of International Law Practice.”
“The Global Center on Cooperative Security’s first major UK conference was at Joseph Mifsud’s London Academy of Diplomacy (LAD). Mifsud then followed Arvinder Sambei and Nagi Idris over to the London Centre of International Law Practice. Sources have told me that Mifsud was moonlighting as a specialist on counter-terrorism and Islamism while working at LAD which explains why he went to work in counter-terrorism after LAD folded.”
“I don’t think it’s a coincidence that Global Center on Cooperative Security is connected to various elements that popped up in the Papadopoulos case. The fact that a prosecutor on Mueller’s team was at Global Center before Mueller was appointed as special counsel is also troubling.”
Days ago, The Hill reported on Congressional testimony by Bruce Ohr, revealing that when served as a DOJ official, he warned FBI and DOJ figures that the Steele dossier was problematic and linked to the Clintons. Critically, The Hill writes:
“Those he briefed included Andrew Weissmann, then the head of DOJ’s fraud section; Bruce Swartz, longtime head of DOJ’s international operations, and Zainab Ahmad, an accomplished terrorism prosecutor who, at the time, was assigned to work with Lynch as a senior counselor. Ahmad and Weissmann would go on to work for Mueller, the special prosecutor overseeing the Russia probe.” [Emphasis Added]
This point is essential, as it not only describes Ahmad’s role in Mueller’s team but places her at a crucial pre-investigation meeting.
Last year, Blackburn noted the connection between Mifsud and Arvinder Sambei, writing: “LCILP director and FBI counsel, works with Mike Smith at the Global Center. They ran joint counter-terrorism conferences and training with Mifsud’s London Academy. Sambei then brought Mifsud over to the [London Centre of International Law Practice]. [Global Center works with Aussies, UK and US State too.”
Sambei has been described elsewhere as a “Former practising barrister, Senior Crown Prosecutor with the Crown Prosecution Service of England & Wales, and Legal Adviser at the Permanent Joint Headquarters (PJHQ), Ministry of Defence.” [British spelling has been retained]
Arvinder Sambei. Image via the Public International Law Advisory Group
That Sambei has been so thoroughly linked to organizations where Mifsud was a central figure is yet another cause of suspicion regarding allegations that Joseph Mifsud was a shadowy, unknown Russian agent until the summer of 2016. She is also a direct link between Robert Mueller and Mifsud.
Blackburn wrote via Twitter: “Arvinder Sambei helped to organize LCILP’s counter-terrorism and corruption events. She used her contacts in the US to bring in Middle Eastern government officials that were seen to be vulnerable to graft. Lisa Osofsky, former FBI Deputy General Counsel, was working with her.” Below, Arvinder is pictured at a London Centre of International Law Practice (LCILP) event.
Arvinder Sambei, pictured at an LCILP event. Image via Chris Blackburn, Twitter
As Chris Blackburn told this author:
“Mifsud and Papadopoulos’s co-director Arvinder Sambei was also the former FBI British counsel working 9/11 cases for Robert Mueller. She also runs a consultancy which deals with Special Investigative Measure (SIMs) which is just a posh description for covert espionage and evidence gathering. She has worked for major intelligence and national law agencies in the past. She wore two hats as a director of London Centre and a consultant for the Global Center on Cooperative Security (GCCS), a counter-terrorism think tank which is sponsored by the Australia, Canada, UK and US governments. Alexander Downer’s former Chief of Staff while at the Australian Department of Foreign Affairs and Trade now works for the Global Center. Mifsud was also due to meet with Australian private intelligence figures in Adelaide in March 2016. So. Australia is certainly a major focus for the investigation.” [Emphasis Added]
Below, former FBI Deputy General Counsel Lisa Osofsky is pictured at a London Centre for International Law Practice event. Osofsky also served as the Money Laundering Reporting Officer with Goldman Sachs International. Since 2018, she has served as the Director of the UK’s Serious Fraud Office (SFO).
Lisa Osofsky, pictured at an LCILP event. Image via Chris Blackburn, Twitter
An Embarrassment For John Brennan?
Disobedient Media previously reported that Robert Hannigan, then head of British spy agency GCHQ, flew to Washington DC to share ‘director-to-director’ level intelligence with then-CIA Chief John Brennan in the summer of 2016. This writer noted that “The Guardian reported Hannigan’s announcement that he would step down from his leadership position with the agency just three days after the inauguration of President Trump, on 23 January 2017. Jane Mayer, in her profile of Christopher Steele published in the New Yorker, also noted that Hannigan had flown to Washington D.C. to personally brief the then-CIA Director John Brennan on alleged communications between the Trump campaign and Moscow. What is so curious about this briefing “deemed so sensitive it was handled at director-level” is why Hannigan was talking director-to-director to the CIA and not Mike Rogers at the NSA, GCHQ’s Five Eyes intelligence-sharing partner.”
Blackburn told Disobedient Media:
“Former Congressman Trey Gowdy, who has seen most of the information gathered by Congress from the intelligence community concerning the Russia investigation, said that if President Trump were to declassify files and present the truth to the American public, it would “embarrass John Brennan.” I think that is pretty concrete for me, but it’s not definitive. I know the polarization and spin in Washington has become perverse, but that statement is pretty specific for me. If Brennan is involved, it is most probably through Papadopoulos who sparked off the ‘official’ investigation at the FBI. He also made sure the Steele dossier was spread through the US government.”
Blackburn added: “Chris Steele was also working on FIFA projects, and a source has told me that he was working to investigate the Russian and Qatari World Cup bids. The London Centre of International Law Practice has been working with Majed Garoub, the former Saudi legal representative of FIFA, the world governing body for soccer. He’s also been working against the Qatari bid. Steele likes to get paid twice for his investigations.”
“Mifsud has also been associated with Prince Turki the former Saudi intelligence chief, Mifsud and the London Academy of Diplomacy used to train Saudi diplomats and intelligence figures while Turki was the Saudi Ambassador to London. Turki is a close friend of Bill Clinton and John Brennan. Nawaf Obaid was also courting Mifsud and tried to get him a cushy job working with CNN’s Freedom Project at Link Campus in Rome. He also knows John Brennan. Intelligence agencies like to give out professional gifts like this plum academic position for completing missions. In the US, it is widely known that intelligence agencies gift the children of assets to get them into prestigious Ivy League schools.”
At minimum, we can surmise that Mifsud was not a Russian agent, but was an asset of Western intelligence agencies. We are left with the impression that the Mifsud saga served as a ploy, whether he participated knowingly or not. It seems reasonable to conclude that the gambit was initially developed with participation of John Brennan and UK intelligence. Following this, Mueller inherited and developed the Mifsud narrative thread into the collusion soap opera we know today.
Ultimately, we are faced with the reality that British and US interests worked together to fabricate a collusion scandal to subvert a US Presidency, and in doing so, intentionally raised tensions between the West and a nuclear-armed power.
- Opioids More Likely To Kill Americans Than Car Crashes
The National Safety Council has reported that Americans are now more likely to die from an opioid overdose than car crashes for the first time.
As Statista’s Niall McCarthy notes, the overall rate of drug overdose deaths in the U.S. increased by 9.6 percent between 2016 and 2017 with the death rate from fentanyl skyrocketing 45 percent. The U.S. had experienced a shocking 70,000 overdose deaths by late 2018 and unsurprisngly, the National Safety Council says that there is an increased risk of dying due to the crisis.
As of 2017, someone living in the U.S: had a 1 in 96 chance of dying from a drug overdose while the probability of dying in a car crash was 1 in 103. The most likely cause of death is still heart disease with lifetime odds of 1 in 6 while overdoses comes fifth overall.
You will find more infographics at Statista
After a spate of mass shootings, the chances of dying due to gun assault stands at 1 in 285, greater than perishing in a motorcycle accident, drowning or choking to death. Dying in a railway accident remains highly unlikely with the chances of that happening 1 in 243,765. Dying from a lightning strike is actually more likely at 1 in 218,106.
- Is America About To Officially Dump Pakistan As An "Ally"?
Authored by Andrew Korybko via Oriental Review,
Republican Congressman Andy Biggs just put forth House Resolution 73 seeking to remove Pakistan’s designation as a “major non-NATO ally”, which would eliminate its privileged military cooperation with the US that’s already been put under strain over the past year since Trump decided to suspend various sorts of aid to the country and decried it for supposedly not doing enough to fight terrorism. Biggs wants to make any reclassification of Pakistan as a “major non-NATO ally” contingent on the President proving to Congress that the country is fighting the so-called “Haqqani Network” that’s bedeviled the US for years, suggesting that this initiative might have something to do with once again scapegoating Pakistan for the latest setback to the incipient US-Taliban peace process.
In addition, the move itself is highly symbolic because it comes over two years after the US designated Pakistan’s rival India as its first-ever “Major Defense Partner” after entering into a military-strategic partnership with the country to tacitly “contain” China. It’s very likely that the US might be toying with the idea of replacing Pakistan with India as its newest “major non-NATO ally”, though that would provocatively push Pakistan even closer to the US’ Russian and Chinese rivals, something that could have serious implications for Afghanistan if Islamabad refuses to broker any more talks between Washington and the Taliban, for example. Altogether, however, the suggestion to strip Pakistan of its “major non-NATO ally” designation is predicable because the US was never Pakistan’s “ally” to begin with.
It never mattered how much Pakistan assisted the US with its War on Terror, nor how many tens of thousands of Pakistanis died as the country’s military fought its own version of this conflict on its home soil, the US always condescendingly treated Pakistan as a “junior partner” and criticized it to “do more”. Over the past couple of years, Pakistan finally decided to say “no more” and began pursuing an independent foreign policy that strives to achieve a “balance” between the world’s Great Powers instead of indefinitely perpetuating its erstwhile strategic dependence on a single one like the US, which has actually revolutionized regional and global affairs by virtue of the geostrategic importance of the CPEC megaproject.
NATO trucks crossing Pakistan’s border
For as much as some in the US’ permanent military, intelligence, and diplomatic bureaucracies (or “deep state”) might want to “punish” Pakistan for this through various means such as symbolically stripping away its “major non-NATO ally” status, others also understand that many Pakistanis would be happy to see their faux “alliance” with the US finally end and know that their country could potentially make matters difficult for the US in Afghanistan, which is why it remains to be seen whether this measure will pass into law. Even so, it nevertheless sends a very strong signal to Islamabad that some in Washington harbor very hostile intentions against their country and don’t appreciate its many sacrifices that were made on their behalf in the War on Terror.
- "Drink Good Wine, Hide Cash": $364 Million Ponzi Scheme Mastermind Told Wife To Hide Assets
Federal officials announced in September the indictment and arrest of a Baltimore man, involved in the most massive Ponzi scheme ever in the Baltimore–Washington metropolitan area.
With his accounts frozen, Kevin B. Merrill, the mastermind behind the fraud, allegedly wrote a prison note to his wife telling her to hide their assets.
The note was found in Merrill’s sock by prison guards as he faces charges of defrauding investors of $364 million.
“Have your dad take my golf clubs,” he allegedly wrote. “Hide cash or checks … drink good wine in sub zero’s, replace with sh– wine in basement.”
“F— them. They have taken enough! Get stuff out,” he allegedly wrote.
Federal prosecutors revealed the note in criminal charges filed last month against Amanda Merrill, the young wife of the mastermind fraudster. She was charged with conspiracy, obstruction, disobeying a court order and removing property to prevent its seizure.
US Attorney Robert Hur said Merrill swindled family offices and investors around the country. He called it the largest Ponzi scheme in Maryland’s history.
Federal agents arrested Merrill in September and raided his multi-million dollar home in Ruxton-Riderwood, Maryland.
He and his business partner, Jay Ledford, 54, of Texas, have been indicted on federal charges of wire fraud, identity theft, and money laundering.
Investors in the scheme believed they were buying “consumer debt portfolios,” tranches of credit card debt, car loans, and student loans. Instead, Merrill shifted the money from new investors to old investors, prosecutors say.
Merrill spent investors’ money on dozens of luxury cars, including a million dollar Bugatti Veyron. Prosecutors say he spent $37,500 on designer watches and jewelry, $50,000 on private flights and $100,000 at Las Vegas casinos. They even say he decorated his mansions with the fine art of the mustached Monopoly character Rich Uncle Pennybags.
A federal judge issued a restraining order stopping Merrill and Ledford from selling their assets.
Federal officials have filed documents with the courts to instruct Sotheby’s International Realty to sell a dozen mansions the men owned in Maryland, Florida, Texas and Nevada, collectively worth $20 million or more.
Officials are also ready to sell off the fleet of 34 exotic cars, motorcycles and boats.
Both individuals have pleaded not guilty. Their trials have not yet been scheduled.
- The Fetishization Of The Corporate Media
Authored by CJ Hopkins via The Unz Review,
So the corporate media have gone and done it again. As they have, repeatedly, for the last two and half years, they shook the earth with a “bombshell” story proving beyond any reasonable doubt that Donald Trump colluded with the Russians to steal the presidency from Hillary Clinton, or at least committed an impeachable felony in connection with something to do with the Russians, or Ukrainians, or other Slavic persons … which story turned out to be inaccurate, or not entirely accurate, or a bunch of horseshit.
This time it was BuzzFeed’s Jason Leopold, “a reporter with a checkered past” (i.e., a history of inventing his sources) who broke the “bombshell” Russiagate story that turned out to be a bunch of horseshit. Leopold, and his colleague Anthony Cormier, reported that Trump had directed his attorney, Michael Cohen, to lie to Congress about plans to construct a Trump Tower in Moscow, thus suborning perjury and obstructing justice. Their sources for this “bombshell” story were allegedly “two federal law enforcement officials involved in an investigation of the matter.”
Approximately twenty-four hours later, Special Counsel Robert Mueller’s office (i.e., the office “involved in an investigation of the matter”) stated that the BuzzFeed story was “not accurate,” which is a legal term meaning “a bunch of horseshit.” BuzzFeed is standing by its story, and is working to determine what, exactly, Mueller’s office meant by “not accurate.” Ben Smith, BuzzFeed’s Editor-in-Chief, has called on Mueller “to make clear what he’s disputing.”
Liberals and other Trump-obsessives have joined in the effort to interpret the Special Counsel’s office’s cryptic utterance. French hermeneuticists have been reportedly called in to deconstruct the meaning of “accurate.” Professional Twitter semioticians are explaining that “not accurate” doesn’t mean “wrong,” but, rather, refers to something that is “accurate,” but which the user of the word doesn’t want to disclose publicly, or that legal terms don’t mean what they mean … or something more or less along those lines.
Glenn Greenwald, in August 2018, reporting on another “bombshell” story that turned out to be a bunch of horseshit, compiled a partial list of Russiagate stories that the corporate media had published and promoted over the course of the previous eighteen months which turned out to be a bunch of horseshit (i.e., the stories did, not Greenwald’s list). In the wake of this latest horseshit story, Greenwald revised and renamed this list “The 10 Worst, Most Embarrassing U.S. Media Failures on the Trump/Russia Story.”
But Greenwald’s list is just a small sample of the Russiagate stories that have turned out to be horseshit. For the record, here are several more:
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“Seventeen intelligence agencies” confirm Russia interfered in the U.S. elections (New York Times)
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Russia interfered in the Brexit referendum (The Guardian)
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Russia interfered in the German elections (Reuters)
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Russia hacked the French elections (Politico and numerous other outlets)
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Michael Cohen conspired with the Russians in Prague (BuzzFeed)
My personal favorite remains the one about how Hillary Clinton may have been poisoned by Putinist operatives back in 2016. And then there’s the pot-smoking, prostitute-banging, incompetent Novichok perfume assassins, the African American-brainwashing memes, the Putin-orchestrated Yellow Vest rebellion, the brain-eating Russian-Cubano crickets, and various other bunches of horseshit.
I am using the terms “horseshit” and “a bunch of horseshit” (as opposed to terms like “failures” and “errors”), not just to be gratuitously vulgar, but, also, to try to make a point. One is not supposed to use these terms in connection with “serious,” “respected” news outlets. Which is why journalists like Greenwald and Aaron Maté (who have extensively reported on the corporate media’s ongoing production and dissemination of horseshit) do not use such terms in the course of their reporting, and instead use less inflammatory terms like “false,” “inaccurate,” “mistake,” and “error.” Principled journalists like Greenwald and Maté are constrained by (a) their journalistic ethics, (b) their integrity, and (c) their belief in the idea of a “free and independent press,” which is one of the pillars of Western democracy.
Being neither a respected journalist nor a believer in the existence of an “independent press,” I am under no such constraints. Because I’m not trying to get or keep a job, or maintain a “respectable” reputation, I’m free to call a spade a spade and a bunch of horseshit a bunch of horseshit. I am also free to describe “journalists” like Leopold, Luke Harding, Craig Timberg, Franklin Foer, and many of their corporate media colleagues (not to mention TV clowns like Rachel Maddow) as the liars and rank propagandists they are. I don’t need to pretend their fabricated stories are simply the result of “shoddy journalism,” or “over-reliance on official sources,” or any other type of “error” or “failure.” These people know exactly what they are doing, and are being extremely well paid to do it. They went to school to learn how to do it. Then they butt-sucked and back-stabbed their way up the ladder of establishment power to be able to do it.
Yes, of course, there are still principled journalists working for the corporate media, but they are doing so by walking a very fine line. No one has to tell them where it is. Every professional journalist knows precisely where it is, and what it is there for. Though they are permitted to walk right up to it, occasionally (to keep them from feeling like abject whores), one step over it and they will be cast into the Outer Darkness of the Blogosphere and excommunicated from the Church of Respectable Journalism. If you don’t believe me, just ask Seymour Hersh, or John Pilger, or any other journalistic heretic.
If Russiagate serves no other useful purpose, it is at least exposing the corporate media as the propaganda factories that they are. Given the amount of obviously fabricated horseshit they have disseminated during the last two years, you’d have to be a total moron or a diehard neoliberal cultist not to recognize the function they perform within the global capitalist ruling establishment (which is essentially no different than the function the establishment media perform in any other society, namely, to disseminate, maintain, and reify the official narrative of its ruling classes).
Sadly, there’s no shortage of morons and cultists. I don’t blame the morons, because … well, they’re morons. The cultists are another species entirely. These are people who, no matter how often the corporate media feed them another “explosive,” “bombshell” Russiagate story that turns out to be a bunch of horseshit, will defend the concept of the “independent media” like head-shaven, bug-eyed Manson followers. Confront them with facts contradicting their beliefs and they close their eyes and start chanting and humming and repetitiously babbling banishing spells. The notion that the Western corporate media may serve the interests of the ruling establishment (just like the media in every other society serve that society’s ruling classes) is unimaginable and tantamount to heresy.
This fetishization of “the independent press” is a phenomenon unique to Western capitalism. Basically, it’s a childish fairy tale, like believing that Santa Claus is an actual person or that voting in elections in a corporate oligarchy has anything to do with actual democracy. Think about it dispassionately for a minute. Why would any ruling establishment permit a genuinely “independent” press to disseminate ideas and information willy-nilly throughout society? If it did, it wouldn’t last very long.
Most people understand this intuitively, which is why the corporate media relentlessly repeat the mantra-like phrase, “free and independent press,” over, and over, and over again. Seriously, switch on NPR, or have a look at The Guardian or the Washington Post, or any of the other corporate media repeatedly reminding you how “independent,” “free” and “democratic” they are. It’s essentially Neuro-linguistic programming.
So let’s not be shocked when the corporate media continue to bombard us with “bombshell” stories about Trump and Russia that turn out to be horseshit. Personally, I welcome these stories. The more corporate media horseshit the better! Who knows, if they dish out enough blatant horseshit, more people might lose their “trust in the media,” and begin to investigate matters themselves. I know, that makes me a Nazi, right? Or at least a Russian propagandist? I mean, encouraging folks to distrust the corporate media? Isn’t there some kind of law against that? Or have they not quite gotten around to that yet?
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- Eric Peters: "How Will We Address The Inequality We Created?"
Submitted by Eric Peters, CIO of One River Asset Management
Spending: The Federal gov’t will spend $4.4trln in 2019 (21% of our $21trln GDP). 62% of our $4.4trln spending is on “mandatory” programs (Social Security $1,046bln, Medicare $625bln, Medicaid $412bln, plus income support, child tax credits, child nutrition, student loans, etc). 30% of spending is “discretionary” (Defense $886bln, Veterans $83bln, Health/Human Services $70bln, Education $60bln, Homeland Security $53bln, State Dept $40bln, HUD $30bln, Energy Dept $30bln, $266bln in other agencies). The remaining 8% of spending ($363bln) pays interest.
Revenue: The Federal gov’t will collect $3.4trln in 2019 (16% of our $21trln GDP). 49% of that $3.4trln in revenue will be collected via income taxes ($1.6trln). 36% is via Social Security tax, Medicare tax, and unemployment insurance tax ($1.2trln). Corporations pay 7% of gov’t revenue ($225bln). Customs/excise taxes account for 3%. The final 5% comes from the Federal Reserve, estate taxes and miscellaneous sources. The $3.4trln the gov’t collects falls short of the $4.4trln that it will spend in 2019, so that $1trln balance is our deficit – which is roughly 5% of GDP.
Pendulums: Corporate taxes were introduced in 1909. They were 1% and rose until 1926 when they hit 13.5%. They were cut to 11% into the 1929 bubble, but then rose for a couple decades to pay for WWII and the Korean War, hitting a high of 52.8% in 1968 to fund the Great Society (programs to eliminate poverty and racial injustice) and Vietnam War. Those were years of peak equality in America. Ever since, corporate tax rates have bumped lower, even as profit margins have been increasing. Nixon cut them to 48%, Carter 46%, Reagan 34%, and now Trump 21%.
Historically: The 16% of GDP the Federal gov’t will collect in taxes in 2019 is well below the 19% level that tends to be America’s average. In 2007, before the Great Recession, corporations paid $395bln in taxes on profits of $1.5trln (26.3% tax rate). In 2015, corporations paid $390bln in taxes on profits of $2.1trln (18.5% tax rate). After the recent tax cuts, that effective tax rate will fall further. The long-term US budget deficit is 3%. The fact that we’re now running a 5% deficit at a time of above trend growth and full employment is historically unprecedented.
The Green New Deal: The Great Society was a set of US domestic programs launched by Lyndon Johnson in 1964–65. The goal was the total elimination of poverty and racial injustice. New major spending programs that addressed education, medical care, urban problems, rural poverty, and transportation were launched. The Great Society in scope and sweep resembled the New Deal domestic agenda of Franklin D. Roosevelt in the early 1930s. Today’s Green New Deal is an emerging set of initiatives to remedy economic inequality and climate change.
Infinity and Beyond: Republican control of the Presidency, House and Senate led to trillion-dollar deficits, forecasted to grow inexorably. With interest rates close to inflation rates, and the dollar strong, issuing new debt has been easy. So let’s call that modern-day fiscal conservatism. The Green New Deal will be funded by MMT (Modern Monetary Theory), which holds that the gov’t can spend money by simply creating it, constrained only by the fact that if politicians spend too much money, they’ll use all the economy’s productive capacity and spark inflation.
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Anecdote: “The pendulum has returned to its starting point,” said the CIO. “We had a massively regulated, terribly inefficient economy,” he continued. “Carter started deregulating. Then Reagan. They got government out of the rule-making business.” Efficiency surged. “Deregulation made the market the final arbiter of which businesses succeeded and failed.” But as lobbyists swarmed the swamp, antitrust legislation lifted like a fog. Natural economic forces exerted themselves.
“Now the economy is dominated by oligopolistic markets. Tech is the one major exception.” Tech is still an industry where new business models leap ahead, killing competitors. “You and I couldn’t start an airline today. The industry has so consolidated that only a few remain.” The top four US airlines have 70% market share. The top four wireless networks have 98.5% market share. “And monetary policy amplifies the problem.” Yesteryear’s economic enemy was government regulation, today’s is a combination of oligopolistic markets with unlimited access to cheap capital.
“We’ve come full circle. Before Carter/Reagan you had government-endorsed rent seeking via regulation. Now you have government-granted rent seeking via anti-trust. And rent seeking is awful for an economy.” Productivity growth remains inexplicably anemic. “We’re now tolerating low-productivity, inefficient companies with record high profit margins.”
Politicians granted oligopolistic markets to capital owners, cut interest rates to boost their asset values, then cut corporate taxes. “I’m an owner of capital. But how much better are we going to make it for God’s sake?” he asked. “When I grew up Democrats were the protectors of the post-war regulation that handcuffed America’s entrepreneurial zeal. Republicans unshackled us. Now, they’re the status quo.” The pendulum swung too far.
“I may not agree with the details of the solutions I hear, but we’re beginning to ask the right questions. How will we address the inequality we created? How will we provide and pay for healthcare? Education?”
- Feds Prepare To Bail Out "Vast Majority" Of 90,000 Sears Pensions
The Pension Benefit Guaranty Corp (PBGC) said in a Friday press release that it believes Sears Holdings Corp’s “continuation of the plans is no longer possible” following the Company’s October bankruptcy, after it was revealed in a Friday filing that Chairman Eddie Lampert’s $5.2 billion rescue package does not include pension plans.
PBGC, a government agency, covers individuals’ pensions in the event a pension plan shuts down without sufficient funding to meet its obligations. The Sears pension system, meanwhile, is underfunded to the tune of approximately $1.4 billion, which the agency could attempt to recover through the bankruptcy, according to MSN.
It should be noted that the PBGC is not supported by general tax revenues, rather, funding comes from four sources; insurance premiums paid by sponsors of defined benefit pension plans; assets held within the pension that PBGC takes control of; recoveries of unfunded pension liabilities from the bankruptcy estates of plan sponsors, and investment income. Sears entered into a five-year protection plan with the PBGC in 2016.
Ron Olbrysh, chairman of the National Association of Retired Sears Employees, said the guarantee means retirees aren’t worried about losing pensions, but they do have concerns about other benefits.
“The pensions are secure through Sears or through the Pension Benefit Guaranty Corp.,” he said. “The big impact if Sears does liquidate is that retirees will lose life insurance.“
The PBGC said it expects its guarantee will cover the “vast majority” of pension benefits earned under Sears’ plans. Retirees who have questions about what the takeover would mean for their pensions can visit www.pbgc.gov/Sears-QA. -MSN
Until Sears agrees to terminate the pensions or the court orders them to do so, the Hoffman Estates-based retail giant will remain responsible for the plans, which the agency is looking to assume control of as of January 31.
Lampert – then the company’s CEO, wrote in a September blog post that the company’s pension obligations had become a major sticking point.
In addition to the very difficult retail environment, Sears has also been significantly impacted by its long-term pension obligations. In the last five years, we contributed almost $2 billion, and since 2005 we have contributed over $4.5 billion, to fund our Pension Plans.
…
The reality is that, while we strongly believe in our vision and our strategy for the Company, we also have had to address the pressures that result from the unsatisfactory operating performance as well as the ongoing burden of our legacy pension liabilities. –Eddie Lampert
Sears confirmed on Thursday that Lampert’s $5.2 billion rescue package had been accepted, preserving 45,000 jobs – but not the roughly 90,000 pensions the company is on the hook for. Lampert’s offer will still require approval from US Bankruptcy Court in the Southern District of New York – while the company’s creditors are already beginning to complain.
- BuzzFeed CEO Spoofed Prominent Gun Rights Activist To Spread Disinformation
Long before BuzzFeed was publishing unverified dossiers and anti-Trump claims refuted by Robert Mueller, founder and CEO Jonah Peretti created a fake website and email address in the name of prominent gun rights advocate John Lott in order to spread disinformation.
Peretti, then-director at Brooklyn-based technology nonprofit Eyebeam, used Lott’s name in 2003 to trick people into thinking that Lott had changed his mind on a key piece of gun-rights legislation that protected gun makers from abusive lawsuits designed to put them out of business.
I was already relatively well-known in 2003 to those who care about the gun control debate because of my book “More Guns, Less Crime.” Peretti sent emails under my name to convince people that I had changed my mind and come out against the Act. The emails then urged people to ask their congressmen and Senators to oppose the bill. –John Lott via Fox News
Lott explains Peretti’s deception in a Monday Op-Ed which you can read below.
***
BuzzFeed, a popular “news” website, has once again been shamed for publishing fake allegations against Donald Trump. BuzzFeed’s anonymously sourced report claimed that President Trump ordered his former lawyer, Michael Cohen, to lie to Congress about a proposed business deal in Moscow. Supposedly, two unnamed federal law enforcement officials claimed that Special Counsel Robert Mueller’s office had the goods. They were purported to have collected emails, texts, and testimony proving the explosive claim.
The story dominated the news on Friday, with Democrats calling for Trump to be impeached. MSNBC’s “Morning Joe” opened with the announcement that this revelation was “a big one.” CNN’s “New Day” host John Berman claimed the disclosure was so dramatic he almost spilled his coffee.
But by late Friday, Special Counsel Robert Mueller’s office issued a very rare rebuke saying that BuzzFeed’s account was “not accurate.” This was hardly BuzzFeed’s first embarrassment. As Trump reminded people, “it was BuzzFeed that released the totally discredited ‘Dossier,’ paid for by Crooked Hillary Clinton and the Democrats . . .”
BuzzFeed’s culture of fake news starts at the top with founder and CEO Jonah Peretti, who has a history of knowingly spreading false information. He has used fraudulent websites and email accounts to pose as people he wished to defame. I was one of his victims.
Peretti’s first victim was MBA student Jeff Goldblatt, who had set up a dating service called the Rejection Hotline. This was inadvertently in competition with Peretti’s newly created rejectionline.com. Peretti’s sister and co-founder, Chelsea, contacted Goldblatt to gain information on his business. She “interviewed” him, under the false identity of New York-based reporter Vanessa Holmes.
Then Jonah Peretti set up the website JeffGoldblatt.com, under the pretense that it was Goldblatt’s personal website. Peretti sent out emails from me@JeffGoldblatt.com that, according to Goldblatt, “contained multiple lies about me and portrayed me as an arrogant jerk who was bragging about how I stole the idea of the New York City Rejection Line.”
Goldblatt contacted me after Peretti did the same thing to me in 2003. In my case, Peretti set up AskJohnLott.org and used the email address john@AskJohnLott.org. Peretti’s expropriation of my name wasn’t for financial gain, but to support gun control.
Pretending to be me, Peretti sent out hundreds of thousands of emails lobbying against the proposed “Protection of Lawful Commerce in Arms Act.” This bill, which was being debated at the time (it ultimately passed in 2005), protected gun makers from abusive lawsuits that were solely designed to put them out of business with overwhelming legal fees. Peretti even purchased advertising for his fake website on Google, and the advertising promoting “my“ appeared at the very beginning of any search results on my name.
I was already relatively well-known in 2003 to those who care about the gun control debate because of my book “More Guns, Less Crime.” Peretti sent emails under my name to convince people that I had changed my mind and come out against the Act. The emails then urged people to ask their congressmen and Senators to oppose the bill.
A number of the recipients were people I knew, and some wrote back using the John@AskJohnLott.org email address and questioned why I would have changed my mind. But Peretti continued the charade of being me in multiple email chains.
I first learned about the website from James K. Glassman, a former Washington Post columnist, who later served as U.S. Under Secretary of State for Public Diplomacy. He shared the email exchange with me that he had with Peretti’s fake John Lott.
Peretti also used my name and picture to advise people on how to violate gun control laws. Soon, I received hundreds of angry phone calls from people who were upset that I was supposedly advising them to break the law.
My emails to john@AskJohnLott.org asking who was behind the effort were ignored. The website’s registration didn’t help, as it was supposedly registered to me.
I spent money to find out who was behind these efforts. When I contacted Peretti, he denied any involvement. After I hired lawyers, Peretti finally included a disclaimer on the website, stating that he intended to parody me. But he still refused to take down the website down or stop sending emails.
Goldblatt didn’t have the money for a legal battle, so I included him in my case.
After a year-and-a-half, we finally reach a legal settlement. Peretti, who worked for a company called Eyebeam, publicly acknowledged: “The AskJohnLott.org site was created by The Eyebeam Atelier, Inc. This site was never associated, endorsed or otherwise affiliated with John R. Lott, Jr. E-mail sent from the AskJohnLott.org domain that was identified as coming from Lott was also never associated, endorsed or otherwise affiliated with John R. Lott, Jr. Eyebeam deeply regrets any confusion and offers a formal apology to John R. Lott, Jr. The terms of the settlement are confidential.”
Peretti also apologized to Goldblatt and took down JeffGoldblatt.com. I received an undisclosed monetary settlement.
People are again asking how BuzzFeed could possibly publish such “fake” news against Trump. They need look no further than BuzzFeed’s CEO and founder Jonah Peretti.
John R. Lott, Jr. is a columnist for FoxNews.com. He is an economist and was formerly chief economist at the United States Sentencing Commission. Lott is also a leading expert on guns and op-eds on that issue are done in conjunction with the Crime Prevention Research Center. He is the author of nine books including “More Guns, Less Crime.” His latest book is “The War on Guns: Arming Yourself Against Gun Control Lies (August 1, 2016). Follow him on Twitter @johnrlottjr.
- Watch: Nomura's McElligott Dishes On China's Slowdown, His CTA Model & Why Traders Should Fear The Steepener
In the years after the financial crisis, as central banks engineered a blissfully uninterrupted rally in risk assets, investors could easily afford to remain ignorant of the growing influence of systematic, trend-following strategies that have come to dominate price dynamics in global equity markets.
But, as evidence by the sudden reintroduction of two-way equity market volatility beginning with the ‘Shocktober’ selloff and continuing through the historic pre-Christmas selloff, those days are over. And as investors from Leon Cooperman on down to aging workers plunking their retirement savings in SPY struggle to understand the nuances of the new investing paradigm, one equity derivatives strategist has emerged as the market’s eerily prophetic guiding light. That man is Nomura’s Charlie McElligott, and his CTA model that tracks one of the most influential class of systematic traders.
As we have assiduously documented in these pages, as other strategists were left slackjawed by the violent downturn in US equities and the bottom falling out of the formerly market-leading tech stocks, McElligott successfully lined up the dominoes of the selloff, leading him to make a series of eerily accurate calls about the duration of the selloff and – even more importantly – the ‘bear market rally’ that has endured for the past three weeks.
Fortunately for investors who don’t have access to his daily market notes, McElligott laid out his views on everything from the implications of the yield curve on equity markets to the risk that a slowing Chinese economy to the mechanics undergirding his CTA model in an epic, hour-long interview with MacroVoices (readers can listen to the full interview below) that is reminiscent of the final scene from the Godfather:
Here’s a breakdown of the topics discussed:
- China Trade Collapse
- Update on China Credit Impulse
- PBoC Liquidity Operations
- Bear market rally or continuation of bull market?
- Fading the Fed’s economic optimism
- Sequencing that could cause a force in on the equity markets
- CTA Model Positioning across asset classes
- Positioning in risk parity funds
- Purge in equity fund flows in Q4 2018
- Fear the steepener
True to form, the McElligott interview was accompanied by a chart book where the Nomura strategist – whose calls elicited blowback from strategists at other banks (and even from within Nomura itself) over whether systematic funds were truly to blame for the selloff – offered more support for his calls.
Instead of offering a detailed breakdown of topic explored by McElligott and Townsend during the interview, we’re going to break out a few highlights (and their attendant charts), separated by topic.
Weakening Chinese Data
Townsend: Why don’t we jump into your chart book and talk about China? What is driving the situation, and how China is going to play into market action as this whole trade talk thing gets resolved in the next several weeks or months?
McElligott: I appreciate the opportunity to be on again and speak with you.
I had a great time last time. And it expanded some of the folks that I interact with. So thank you for that. I think, as we look to base this conversation out of the impulse that’s originating out of China, and, last time we spoke, we did touch on that idea of the Chinese credit impulse – that credit impulse, of course, with regards to the government’s forcing, pushing on a string of credit out through social financing, through new loan growth, through efforts to stimulate money supply, that has been the “past is prologue” playbook for Chinese responses to liquidity tightening in economic slowdown. I think what the update is since maybe we last spoke, with regards to the continued degradation of the Chinese economy, has been twofold frankly. You’re dealing with a situation where policies have been very focused on preventing financial crisis and a credit freeze. Other policies, they’re trying to support growth, but not enough to offset some of the negatives that are developing.
And it’s both domestic demand issue and, from the folks that we have boots on the ground economic contact with there, I don’t think a lot of folks in the West understand the incredible cynicism, skepticism, pessimism view from the ground within China.
I think that, also, risk markets, global markets, have been anticipating a more holistic BOOM- POW response from Chinese authorities, from the policy setters, from the PBOC, from the Ministry of Finance, more than what the Chinese authorities are able to provide – meaning there is no short-term QE solution, rate-cut solution that would give the market what it wants.
Instead it’s been these very piecemeal attempts. I think we’ve had now four triple-R cuts since last January. We’ve had a number of value-added tax cuts and corporate income tax cuts. The fact of the matter is – and certainly mandating putting more pressure on local authorities and banks to stimulate that loan growth, that credit impulse – they are now in a really tricky part of their process right now.
And I think, generally speaking, it was consensus. Folks understood that when you pile on the trade war and the impact that the tariffs are having on Chinese trade that you’re in a situation where, because of the tariffs implementation, there was this potential relief by pulling forward much of the ordering from clients of Chinese counterpart corporations.
And you did see that to a certain extent – very limited extent – in some of the Q4 monthly data that’s coming out. I think what’s happened in the last couple of days is that – you actually saw in the Chinese trade data yesterday export growth was down 4.4% year over year, which is a negative read on industrial production and employment on GDP.
And then import growth was down 7.6% year over year, which also speaks to this further domestic demand slowdown. It’s highlighting that we’ve already hit the end of that tariff frontloading effect. So you’re really now dealing in the market – and we’re going to talk on this very tactical, very positioning-driven risk rally that I’ve been making the case for since mid-December.
But I think now you’re at that point in the market where there is a lot of discomfort in owning this rally, because you are seeing this negative global growth impulse out of China really get picked up in the global data. And our in-house view – Ting Lu, our Chinese economist, has been way more aggressively negative than the rest of the market and continues to be – is that it’s only going to get worse in Q1 and Q2, especially now that that tariff frontloading effect is gone.
Townsend: Now I want to ask a qualifying question. When you say that it gets worse into Q1, I’m assuming we’re talking about the Chinese economic data getting worse. But I could imagine that translating to more accommodative policy. And, potentially, US markets could be rallying as the US Fed gets a little more accommodative because of what they’re afraid of. So are we necessarily expecting global markets to be worse? Or do you just mean the Chinese economic data gets worse in Q1?
McElligott: It’s the right question to ask. It’s a critical clarification. We’re absolutely speaking with the Chinese economic data which, in turn, is having this dragging effect globally. We saw the German GDP print yesterday confirm the slowdown fears. It’s, of course, a known thing, right? Germany is the world’s third largest exporter, the largest economy in Europe.
It’s very much representative of the flu that has originated out of China. I think what this next wave is, with regards to that Q1–Q2 behavior in China, is that you’re now going to see a situation where, instead of this growth deterioration or growth deceleration, it’s now going to become – which has been due to this deleveraging campaign that began two years ago, so it’s self-inflicted – you’re now going to see the credit crunch in H1.
That’s really where I think you’re going to start seeing the narrowing impact and the smaller response that their economy is getting from these various piecemeal stimulus and easing efforts. They’re smaller, they’re more narrow, they’re less effective than past policy stimulus. Now you’re going to see the payback for the frontloading of exports.
You’re going to see probably now the property market corrections, certainly in the lower-tier cities, is our house view. And probably more defaults and widening of credit spreads in China. That, ultimately – which you are highlighting specifically here Erik – that is things getting worse to force that much more aggressive policy response from Chinese authorities that ultimately puts us back on track for a global economic pivot off of these H1 2019 lows is what we are anticipating.
Fear the Steepener
Townsend: Charlie, I want to skip ahead in the interest of time to Page 20 in the deck because I want to revisit a topic we discussed in your last interview. Where so many people fear an inversion or a flattening of the yield curve, you say we should actually fear the steepening of the curve. What do you mean by that? It seems counterintuitive to a lot of people. What do you mean by it? And maybe talk us through the charts to explain your point.
McElligott: My long-time message has been that the key here with regards to the hyperventilation on curve inversions – The inversion obviously precipitates the steepening of the curve, but what really matters is that the curve-steepening side of the where-we-are-in-the-cycle indicator is telling us that – I have used the term in a number of my pieces, and maybe even on our last call – that the market has finally sniffed out the slowdown. We’ve figured out that the policy tightening, the normalization, have impacted the real economy, that the lagging impact of tightening is starting to lead into financing and funding and the costs of capital.
And it’s causing behavioral shifts with corporate management, CAPEX discussion that we had before, and, ultimately, it’s affecting the actual output in the real economy. So when I say that what matters most is actually the steepening, as the cyclical risk-off signal, that’s exactly what we’ve seen – over the last number of US recessions – is that you don’t need to worry about trying to reverse engineer the timing of the inversion into when does the US recession start, just because there is no historical kind of signal there. It’s incredibly noisy. What does signal – because it’s closer to the real event happening – is that, when you get this steepening, that’s the market picking up the slowdown and confirming the slowdown. The charts on Slide 20 show you the extent of the front end.
We’re looking at eurodollar spreads. And this shows you the extent by which the markets went pricing out the end of the Fed normalization cycle and pricing in the easing cycle. And at the peak of early January, before the Fed’s pivot (basically), before the Jerome Powell and Richard Clarida double whammy messaging that the markets had forced them to take a knee, we were at a point where we had priced in almost a full cut in the end of 2019. There were times since July of last year that the eurodollar 2020 calendar spread was telling us that the Fed was on the margin looking to cut. That clearly escalated to a full cut over the course of the last couple of months. What was still amazing in that real panicky December and then pre-Powell period in January was that we pulled forward that Fed easing, that Fed cut, from 2020 into the end of 2019. And that just captures the accuracy, frankly, by which the equities markets began pricing in this real recession risk. And that we spoke about in those deeply cyclical sectors.
So we have since moderated. The dovish Fed pivot has done enough right now to offset the policy error concerns. They are telling us they’re going to be patient, meaning there is no pause probably for the next two – well, let’s say this: There is probably going to be a pause through, at a minimum June.
And that’s why you’ve seen a modest steepening again in these curves, in these eurodollar short-term curves. What I think is pretty important, though, is to get a little perspective (Slide 21) of the more traditional US Treasury curves and just get a grasp of where we have come on a larger lookback since, say, 2009 over the post-crisis period. You’re looking at 5s 30s, you’re looking at 2s 10s, you’re looking at 2s 30s – and you get a sense for the incredible flattening that has occurred, which has been by design.
That has been by design because it eases financial conditions, it eases financing costs for corporates to do things that could stimulate growth. That’s what the Fed has been doing with their balance sheet purchases, with their reinvestment plans. That’s what they have been trying to create. Now the market is seeing the impact of the reversal of these policies and we are just now beginning this very nascent steepening.
[…]
And that is hyper, hyper, hyper-critical because the shape of the yield curve impacts so many things across the asset spectrum. In particular, I’ve always focused on the impacts that this has within the equities space. Things like cyclicals versus defensives, and certainly a real talking point that I’m going to be focusing on (and I focused on it in my note today) in the months ahead – huge impact with regards to this value-versus-growth debate within the US equities space.
But, yes, the concern, and the trigger, and the more near-term tactical signal is the steepening of the curve. Because that’s telling us the slowdown is here, the slowdown is real. And that, typically, at that point, even though the Fed can have some impact with regards to liquidity provision, as far as softening the impact on the depth of the recession, a slowdown is an inevitability and that’s where we need to watch. Because in prior examples – and that’s what I go over on Slides 22 and 23 – a year before the ultimate risk-off events, you begin seeing the curve steeping begin.
And sometimes it’s less than a year. That’s also important to note.
The CTA Model
Townsend: Okay, Charlie, with that backdrop in place, let’s go ahead and dive in at Slide 9 in your deck to the CTA model positioning estimates that you’re showing now. What is this graph showing us? And why don’t you walk us through the next couple of charts in the deck here?
McElligott: So I think really what I wanted to grab there was not simply just in regards to this capture of general risk sentiment, but also, too, capture this idea that the trend has been very much about a slowdown posture. And of course a CTA model is not worrying about a macro output per se. There might be macro overlays, unequivocally. There could be humans that are kind of tilting the behavior to some extent with regards to exposures.
But, generally speaking, that’s against the point of the quantitative strategy. What this is capturing though, against a backdrop of some other things that I’ll bring up, is that you’ve really seen markets – whether it’s these systematic trend models or a later risk parity or discretionary long-short – pivot into a very risk-off stance. Which is a huge part of the reason that we find ourselves now 270 handles in the S&P off the lows made two weeks ago. What you’re seeing (particularly here, in that top bucket), you see major markets.
It just goes to some of the primary risk asset and key cross-asset securities that can give you a sense for this much more risk-off positioning. You see the max short in the S&P 500 in Euro Stoxx, in Nikkei, the two G10 FX crosses there, eurodollar, euro/US dollar, and US dollar/yen – obviously, the dollar/yen short – both of those expressions are very risk-off there – short dollar/yen and short euro speak to that similar footing in the FX space. And then that middle bucket is looking at rates. So Treasuries, 10-year Treasuries – and you have a max long. Then you look at crude.
Brent and WTI as global growth, consumption, the global economic engine, are also max short. And then you look at gold – and this is, I believe two days old, this snapshot – but gold at basically 50% long position. You look back to the far right column versus a month ago, that was an incremental short. And you see – again, looking in that month prior, that far right column, one month in parentheses – you see, generally speaking, the escalation of this kind of risk-off positioning over the last month. The next bucket down goes just a little bit more granularity across the global equities bucket. And you see the extent, again, of the short positioning. A lot of max short, negative 100s.
However – again, as I highlighted, this was a snapshot, I believe, from Monday morning – you do see that Russell 2000 had begun covering. You see that FTSE 100, Hang Seng, ASX, and KOSPI had all covered from that max short position, which was a precursor that told us that we were getting the ball rolling, that this max short bearish positioning had overshot. And then the right side of the screen speaks to the fixed income side of the risk-off positioning. You recall, for almost the entirety of 2018, one of the most crowded trades on the board for sure was bearish fixed income, bearish Treasuries, bearish rates. It was based upon above-trend growth, above-trend inflation, the tailwinds of fiscal stimulus, of the Phillips curve of labor impacting wage inflation. All of these very globally cyclical bullish phenomena.
Plus the reality of Fed Treasury issuance, where supply – there was going to be this supply shock due to the deficit spend, realities that we touched on earlier – that it was just going to really lean on global fixed income. And by the end of the year – this is always part of my thesis and it goes back to that Chinese credit impulse slide. Once you lose that credit impulse and commodities and inflation expectations and industrial metals and cyclicals versus defensives ratios – those all started coming off because you’re unable to create the demand side into this tightening liquidity backdrop via the Fed’s QT, via China’s deleveraging efforts, via later the ECB slowing their bond purchases and even the BOJ tapering their bond assets. What it ended up doing was create this very real slowdown in the back half of 2018 that got picked up in the very cyclical data, the very cyclical US data as well as global manufacturing data.
I mean, the JP Morgan global manufacturing PMI index is down nine of the ten months. Those types of things forced people into this much more defensive slowdown posture which was the opposite of the bearish rates, bearish Treasuries trade. It was instead max long Treasuries, max long European government bonds, and max long JGBs, and onward from there.
That’s Slide 9 for you.
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Of course, if McElligott’s model is once again proved correct, the equity bulls who have retaken the market should probably tread lightly: Because the rally we’ve experienced so far this month is only a temporary lull…
…and as McElligott warned in one of his earlier notes, there’s a whole lot of downside risk left.
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