- Tucker Carlson Takes on Ivanka Trump Hater, Then Drops Mic on Her
This wasn’t all that crazy, until the very end when he dimmed the lights and executed a fatality move on her. The look on her face was priceless.
Watch the full vid for full effect, so that you can appreciate the fatality move all the more.
I’m all about spreading the holiday cheer. Enjoy this with your families by the fireside.
Content originally generated at iBankCoin.com
- This Is How The US Government Destroys The Lives Of Patriotic Whistleblowers
Submitted by Mike Krieger via Liberty Blitzkrieg blog,
We live in a time and within a culture where the best amongst us are thrown in jail, demonized or destroyed, while the worst are celebrated, promoted and enriched. Nothing more clearly crystalizes this sad state of affairs than the U.S. government’s ruthless war on whistleblowers who expose severe constitutional violations by those in power. This war knows no political affiliation, and has be waged with equal vigor by the administrations of George W. Bush and Barack H. Obama.
Earlier this morning, I read one of the most enlightening articles on the subject to-date. It was published back in May, and should be read by every single American citizen. We need to admit to ourselves what we have become before we can make changes.
What follows are excerpts from the Guardian piece, How the Pentagon Punished NSA Whistleblowers, but you should really take the time to read the entire thing.
If you want to know why Snowden did it, and the way he did it, you have to know the stories of two other men.
The first is Thomas Drake, who blew the whistle on the very same NSA activities 10 years before Snowden did. Drake was a much higher-ranking NSA official than Snowden, and he obeyed US whistleblower laws, raising his concerns through official channels. And he got crushed.
Drake was fired, arrested at dawn by gun-wielding FBI agents, stripped of his security clearance, charged with crimes that could have sent him to prison for the rest of his life, and all but ruined financially and professionally. The only job he could find afterwards was working in an Apple store in suburban Washington, where he remains today. Adding insult to injury, his warnings about the dangers of the NSA’s surveillance program were largely ignored.
But there is another man whose story has never been told before, who is speaking out publicly for the first time here. His name is John Crane, and he was a senior official in the Department of Defense who fought to provide fair treatment for whistleblowers such as Thomas Drake – until Crane himself was forced out of his job and became a whistleblower as well.
His testimony reveals a crucial new chapter in the Snowden story – and Crane’s failed battle to protect earlier whistleblowers should now make it very clear that Snowden had good reasons to go public with his revelations.
During dozens of hours of interviews, Crane told me how senior Defense Department officials repeatedly broke the law to persecute Drake. First, he alleged, they revealed Drake’s identity to the Justice Department; then they withheld (and perhaps destroyed) evidence after Drake was indicted; finally, they lied about all this to a federal judge.
“Name one whistleblower from the intelligence community whose disclosures led to real change – overturning laws, ending policies – who didn’t face retaliation as a result. The protections just aren’t there,” Snowden told the Guardian this week. “The sad reality of today’s policies is that going to the inspector general with evidence of truly serious wrongdoing is often a mistake. Going to the press involves serious risks, but at least you’ve got a chance.”
“None of the lawful whistleblowers who tried to expose the government’s warrantless surveillance – and Drake was far from the only one who tried – had any success,” Devine told me. “They came forward and made their charges, but the government just said, ‘They’re lying, they’re paranoid, we’re not doing those things.’ And the whistleblowers couldn’t prove their case because the government had classified all the evidence. Whereas Snowden took the evidence with him, so when the government issued its usual denials, he could produce document after document showing that they were lying. That is civil disobedience whistleblowing.”
Crane’s testimony is not simply a clue to Snowden’s motivations and methods: if his allegations are confirmed in court, they could put current and former senior Pentagon officials in jail. (Official investigations are quietly under way.)
But Crane’s account has even larger ramifications: it repudiates the position on Snowden taken by Barack Obama and Hillary Clinton – who both maintain that Snowden should have raised his concerns through official channels because US whistleblower law would have protected him…
Within weeks of the September 11 attacks, Drake was assigned to prepare the NSA’s postmortem on the disaster. Congress, the news media and the public were demanding answers: what had gone wrong at the NSA and other federal agencies to allow Osama bin Laden’s operatives to conduct such a devastating attack?
As Drake interviewed NSA colleagues and scoured the agency’s records, he came across information that horrified him. It appeared that the NSA – even before September 11 – had secretly revised its scope of operations to expand its powers.
Since its inception, the NSA had been strictly forbidden from eavesdropping on domestic communications. Drake’s investigation persuaded him that the NSA was now violating this restriction by collecting information on communications within as well as outside of the United States. And it was doing so without obtaining legally required court orders.
Drake’s descent into a nightmare of persecution at the hands of his own government began innocently. Having uncovered evidence of apparently illegal behaviour, he did what his military training and US whistleblower law instructed: he reported the information up the chain of command. Beginning in early 2002, he shared his concerns first with a small number of high-ranking NSA officials, then with the appropriate members of Congress and staff at the oversight committees of the US Senate and House of Representatives.
Drake spent countless hours in these sessions but eventually came to the conclusion that no one in a position of authority wanted to hear what he was saying. When he told his boss, Baginski, that the NSA’s expanded surveillance following 9/11 seemed legally dubious, she reportedly told him to drop the issue: the White House had ruled otherwise.
John Crane first heard about Thomas Drake when Crane and his colleagues at the Pentagon’s Office of the Inspector General received a whistleblower complaint in September 2002. The complaint alleged that the NSA was backing an approach to electronic surveillance that was both financially and constitutionally irresponsible. The complaint was signed by three former NSA officials, William Binney, Kirk Wiebe and Edward Loomis, and a former senior Congressional staffer, Diane Roark. Drake also endorsed the complaint – but because he, unlike the other four, had not yet retired from government service, he asked that his name be kept anonymous, even in a document that was supposed to be treated confidentially within the government.
Binney, Wiebe, Loomis and Roark shared Drake’s concerns about the constitutional implications of warrantless mass surveillance, but their complaint focused on two other issues.
The first was financial. The whistleblowers contended that the NSA’s surveillance programme, codenamed Trailblazer, was a shameful waste of $3.8 billion – it had been more effective at channelling taxpayer dollars to corporate contractors than at protecting the homeland.
Of course it was.
Second, the whistleblowers warned that Trailblazer actually made the US less secure. They acknowledged that Trailblazer had vastly expanded the amount of electronic communications NSA collected. But this avalanche of raw data was too much – it left NSA’s analysts struggling to distinguish the vital from the trivial and thus liable to miss key clues.
Drake had discovered a shocking example while researching his postmortem report on the September 11 attacks. Months beforehand, the NSA had come into possession of a telephone number in San Diego that was used by two of the hijackers who later crashed planes into the World Trade Center. But the NSA did not act on this finding.
As Drake later told the NSA expert James Bamford, the NSA intercepted seven phone calls between this San Diego phone number and an al-Qaida “safe house” in Yemen. Drake found a record of the seven calls buried in an NSA database.
US officials had long known that the Yemen safe house was the operational hub through which Bin Laden, from a cave in Afghanistan, ordered attacks. Seven phone calls to such a hub from the same phone number was obviously suspicious. Yet the NSA took no action – the information had apparently been overlooked.
Incredible.
The Bush administration’s mass surveillance efforts were partly exposed in December 2005, when the New York Times published a front page article by reporters James Risen and Eric Lichtblau, which revealed that the NSA was monitoring international phone calls and emails of some people in the US without obtaining warrants.
Eight years later, that story would be dwarfed by Snowden’s revelations. But at the time, the Bush White House was furious – and they were determined to find and punish whoever had leaked the details to the New York Times.
According to Crane, his superiors inside the Pentagon’s Inspector General’s office were eager to help. Henry Shelley, the general counsel – the office’s top lawyer – urged that the IG office should tell the FBI agents investigating the Times leak about Drake and the other NSA whistleblowers.
This Shelley character is a particularly heinous cretin in this entire saga.
After all, the NSA whistleblowers’ recent complaint had objected to the same surveillance practices described in the Times article – which made them logical suspects in the leak. Crane objected strenuously. Informing anyone – much less FBI investigators – of a whistleblower’s name was illegal.
After debating the matter at a formal meeting in the personal office of the inspector general, Shelley and Crane continued arguing in the hallway outside. “I reached into my breast pocket and pulled out my copy of the Whistleblower Protection Act,” Crane recalled. “I was concerned that Henry was violating the law. Our voices weren’t raised, but the conversation was, I would say, very intense and agitated. Henry [replied] that he was the general counsel, the general counsel was in charge of handling things with the Justice Department and he would do things his way.”
There the disagreement between Crane and Shelley stalled. Or so it seemed until 18 months later. On the morning of 26 July, 2007, FBI agents with guns drawn stormed the houses of Binney, Wiebe, Loomis and Roark. Binney was towelling off after a shower when agents accosted him; he and his wife suddenly found themselves with guns aimed directly between their eyes, the retired NSA man recalled.
Crane smelled a rat. The investigation that his staff had conducted into the whistleblowers’ complaint had been highly classified: very few people could have known their names, and they would have been inside the IG’s office. After the raids, Crane confronted Shelley and demanded to know whether the IG’s office had given the names to the FBI. Shelley refused to discuss the matter, Crane says.
The battle soon escalated. Four months later, FBI agents stormed Drake’s house in an early morning raid, as his family watched in shock.
After Drake was indicted in 2010, his lawyers filed a Freedom of Information Act request to obtain documents related to the investigation Crane’s office had conducted into the claims of the NSA whistleblowers. According to Crane, he was ordered by his superiors in the IG’s office to delay releasing any documents – which could have exonerated Drake – until after the trial, which was expected to take place later in 2010.
Crane alleges that he was ordered to do so by Shelley and Lynne Halbrooks – who had recently been named the principal deputy inspector general (in other words, the second-highest ranking official in the IG’s office). Crane protested but lost this skirmish as well. (Halbrooks did not respond to repeated requests for an interview.)
Crane was at once alarmed and revolted. The complaint from Drake’s lawyers seemed to confirm his suspicion that someone in the IG’s office had illegally fingered Drake to the FBI. Worse, the indictment filed against Drake had unmistakable similarities to the confidential testimony Drake had given to Crane’s staff – suggesting that someone in the IG’s office had not simply given Drake’s name to the FBI, but shared his entire testimony, an utter violation of law.
Drake’s complaint demanded investigation, Crane told Halbrooks. But Halbrooks, joined by Shelley, allegedly rejected Crane’s demand. She added that Crane wasn’t being a “good team player” and if he didn’t shape up, she would make life difficult for him.
But there was even worse to come. As Drake’s trial approached in the spring of 2011, Crane knew that the law required the IG’s office to answer the retaliation complaint filed by Drake’s lawyers. But, Crane says, Shelley now informed him it would be impossible to respond – because the relevant documents had been destroyed. Lower level staff “fucked up”, Crane said Shelley told him: they had shredded the documents in a supposedly routine purge of the IG’s vast stores of confidential material.
Crane could not believe his ears. “I told Henry that destruction of documents under such circumstances was, as he knew, a very serious matter and could lead to the inspector general being accused of obstructing a criminal investigation.” Shelley replied, according to Crane, that it didn’t have to be a problem if everyone was a good team player.
On 15 February, 2011, Shelley and Halbrooks sent the judge in the Drake case a letter that repeated the excuse given to Crane: the requested documents had been destroyed, by mistake, during a routine purge. This routine purge, the letter assured Judge Richard D Bennett, took place before Drake was indicted.
“Lynne and Henry had frozen me out by then, so I had no input into their letter to Judge Bennett,” Crane said. “So they ended up lying to a judge in a criminal case, which of course is a crime.”
With Drake adamantly resisting prosecutors’ pressure to make a plea deal – “I won’t bargain with the truth,” he declared – the government eventually withdrew most of its charges against him. Afterwards, the judge blasted the government’s conduct. It was “extraordinary”, he said, that the government barged into Drake’s home, indicted him, but then dropped the case on the eve of trial as if it wasn’t a big deal after all. “I find that unconscionable,” Bennett added. “Unconscionable. It is at the very root of what this country was founded on … It was one of the most fundamental things in the bill of rights, that this country was not to be exposed to people knocking on the door with government authority and coming into their homes.”
We are now becoming a police state,” Diane Roark said in a 2014 television interview. Referring to herself and the other NSA whistleblowers, she added, “We are the canaries in the coal mine. We never did anything wrong. All we did was oppose this programme. And for that, they just ran over us.”
“They’re saying, ‘We’re doing this to protect you,’” Roark’s fellow whistleblower William Binney told me. “I will tell you that that’s exactly what the Nazis said in Special Order 48 in 1933 – we’re doing this to protect you. And that’s how they got rid of all of their political opponents.”
These are strong statements – comparing the actions of the US government to Nazi Germany, warning of an emerging “police state” – so it’s worth remembering who made them. The NSA whistleblowers were not leftwing peace nuts. They had spent their professional lives inside the US intelligence apparatus – devoted, they thought, to the protection of the homeland and defence of the constitution.
They were political conservatives, highly educated, respectful of evidence, careful with words. And they were saying, on the basis of personal experience, that the US government was being run by people who were willing to break the law and bend the state’s awesome powers to their own ends. They were saying that laws and technologies had secretly been put in place that threatened to overturn the democratic governance Americans took for granted and shrink their liberties to a vanishing point. And they were saying that something needed to be done about all this before it was too late.
Let’s all make a resolution to do whatever we can to alter this situation and restore constitutional values to the land. Let’s also give thanks to all the incredibly courageous American patriots who have been relentlessly and despicably persecuted by their government.
- Irrational Exuberance in US Stock Market Grasps at 20K for Dow
This article by David Haggith was first published on The Great Recession Blog:
Since Trump’s election, the US stock market has climbed unstoppably along a remarkably steep path to round off at a teetering height. Is this the irrational exuberance that typically marks the last push before a perilous plunge, or is the market reaching escape velocity from the relentless gravity of the Great Recession?
This burst of enthusiasm in response to Trump’s victory, flew in the face of almost everyone’s predictions. That it lifted the market from seven months of languor certainly makes 20K on the Dow look like the elevation marker of a breathtaking summit.
While breaking 20k, if it happens, may be as meaningless as one more mile on the odometer when all the numbers roll over, it is psychologically potent for many. Breaking through it, could cause fear as eyes turn down and see how far below the earth now is, or the rarified air up here may bring euphoria that lifts the market to even greater levels on a rising current of hot air.
Investors have been buying and selling with as much frenzy as Christmas shoppers. Now there will be much eating and drinking to celebrate this record-setting Santa-Clause rally, even if it doesn’t top 20, before Christmas, as investors take a brief rest to enjoy their surprise gains, fat and happy in belief that 2017 will be a prosperous new year.
There is almost no evidence of fear amongst all the cheer. According to Gallop, economic confidence has never been higher in the general population. Some are calling it Trumphoria as people seem to be relieved that eight years of Obamanomics are ending, and business is seizing the reins of government, guided by one of the world’s richest and most dazzling developers.
The first positive double-digit index score since the inception of Gallup Daily tracking in 2008 reflects a stark change in Americans’ confidence in the U.S. economy from the negative views they expressed in most weeks over the past nine years.
A similar CNBC survey indicates this is the greatest breath of fresh air for consumer confidence since Obama was elected in 2008, and it is not just stocks that are soaring. The US dollar has reached its highest peak in fourteen years. TechonoMetrica also says consumer confidence has just hit its highest level since 2006 (just in time for Christmas shopping).
The surge in consumer confidence is primarily due to a collective sense of relief among Americans over the conclusion of the contentious 2016 presidential election season, as well as a feeling of hope regarding the prospect of a new administration taking office…. Consumers are ecstatic that the election is finally over.
Will this exuberant ride continue in 2017?
Many analysts believe the push through a major milestone, if it happens, confirms a strong new market trend; but what does history say about breaking past such major psychological resistance barriers? When the Dow first broke past the 100 level in 1916, it tumbled below the line immediately and then sputtered along that ceiling for almost ten years. It didn’t break through with any continuance again until the mid 20s! When the Dow flirted with the 1,000 mark for the first time in 1966, it tumbled down and again stumbled along near that ceiling for seven years. When it finally passed it at the end of 1972, it did continue a tiny ways higher; but in less than three months the market fell for the next two years, eventually plumbing a depth 44% lower, while the nation sank into recession. The Dow didn’t permanently break through 1,000 again until 1982! And, after the Dow broke major, major milestone of 10,000 in 1999, it made it about 10% above that and then fell about 30% from 2001 to 2003 in what became known as the dot-com crash.
What if we look at what history has to say about irrational exuberance by using other measures than the Dow? The ratio of stock prices against corporate earnings is one of the most common ways of assessing the relative height of a market peak. Here again, there are only a few times in history that the S&P 500 has climbed to prices that are 27.9 times more than corporate earnings of the last ten years, which is where the S&P stands now. Once was in 1929 just before the Great Depression, then again in an ill-fated boom of the 60’s, and only one other time in 2002.
The altimeter I’m using here to assess our present peak is called the CAPE (the Cyclically Adjusted Price-Earnings ratio that won Yale’s Robert Schiller his Nobel Prize). In market terms, our present mark on the gauge means we’re entering the stratosphere! Even in 2007, the market was not this overpriced by the CAPE’s measure, and irrational exuberance has always accompanied this level: (Some will argue otherwise, but hang with me a minute.)
Early 1929 was actually a fantastic time to get into the US stock market — so long as you didn’t stick around. So were the late 1990s. Someone who sold their stocks in late 1996, when the CAPE hit 28, missed out on the biggest free-money bubble bonanza in recorded history…. Nonetheless … over the past 150 years, it has generally been an extremely poor move to invest in U.S. stocks with the CAPE at these levels. (Market watch)
Not everyone thinks passing this mark on the CAPE matters. In fact, apparently many don’t, or the stock market wouldn’t have kept climbing into the CAPE’s red zone this month, but according to Valentin Dimitrov of Rutgers University and Prem Jain of Georgetown, the measure has been applied too simplistically by those who disregard it:
In a nutshell: Investors shouldn’t flee stocks simply because the Shiller PE is above average. They shouldn’t flee stocks even when the Shiller PE is way above average. But history has said they should flee stocks when the Shiller PE is at extreme levels — like now. Only when the CAPE is “higher than 27.6”, they conclude, has the stock market proven to be a really bad investment. (Marketwatch)
It is, however, not just the height of this peak, but the rate of rise that evidences irrational exuberance. This month, the US stock roller coaster ratcheted its way relentlessly up its highest hill one clanky link at a time. If the Dow closes above 20,000 this week, it will be the fastest 1,000-point rise in market history! The previous record rate of rise came in 1999 in the run-up to the dot-com bubble crash. Of course, the higher the market is, the less meaningful a thousand-point rise is.
Do these graphs look like irrational exuberance?
Sometimes a visual says more than words:
Fastest, longest rise of the Dow in the past two years. Irrational exuberance?
Notice that it is not just prices that have shot up. Sometimes prices soar while trading volume treads flatly. In other words, there are very few traders, but those that are buying are willing to pay more. This time, trading volume has gone astronomical (lower part of graph) as money floods into stocks. That means it’s a flurry of high-stakes trading. The last time we saw this kind of trading volume was …
Is the steepest climb in a decade irrational exuberance, particularly when accompanied by the highest trading volume since the Great Recession began?
Yes, the last time trading volume (lower graph) reached this frenzy was in 2008 and 2009 when we experienced the greatest stock market crash since the Great Depression. And look how long and steep the post-Trump rally (right end of upper graph) looks compared to any other climb during the past decade, including the run-up to the Great Recession. It’s almost a straight-up wall!
How irrationally exuberant are investors right now?
Forget about measures for a moment, let’s look at forecasts by the revered experts in the industry because if everyone is running with glee in the same direction …
Some market experts are espousing an unequivocally bullish outlook for equities. That level of enthusiasm was on full display after Robert Doll, Nuveen Asset Management’s chief equity strategist, on Wednesday said he was “fully invested” in the market. Asked by one CNBC reporter if he recommended keeping any cash holdings … Doll had this to say: Hold cash? “What for? Market’s going up!” (Marketwatch)
Clearly, Doll sees no top to the hill in sight. Apparently neither do others: in spite of our present nose-bleed heights, Wall Street’s gauge of investor fear, the CBOE Volatility Index VIX, rests comfortably at a 16-month low. Seems almost no one sees any reason for concern at all.
Lance Roberts writes,
Over this past weekend, Barron’s Magazine published its big story the “2017 Market Outlook….” After 8-years of a bull market advance not one of the forecasters had a “bearish” outlook. In fact, as the article concludes: “If all goes smoothly, our experts’ forecasts might even prove too tepid. The old bull isn’t ready to call it quits yet….” Of course, since it is rising asset prices which drives their business – being “bullish” is good for business…. However … it is extremes in both “psychology” and “behaviors” that tend to give us the best indications as to future outcomes. The legendary Bob Farrell had two rules specifically relating to today’s topic. The first was … “When all the experts and forecasts agree – something else is going to happen.”
Barron’s panel of ten experts (from JPMorgan, Goldman Sachs, Barclays, Citi, Morgan Stanley, BofA, Blackrock and others) were unanimous in their cheer that the US stock market will ascend well beyond its present record heights.
But, if everything is so rosy, Wolf Richter asks, why are bank insiders and big industrials selling their own company’s stocks faster than ever: (Someone has to be selling for all that buying to happen.)
Why are insiders at banks and industrial companies selling their shares as if there were no tomorrow? Banks had a blistering run. The shares of Wells Fargo, the most hated bank in America these days, soared 28% over the past 30 days, Citigroup 25%, JP Morgan 26%, Goldman Sachs, which is successfully placing its people inside the Trump administration, 37%. It has surged 50% since the end of October…. But high-ranking insiders have been dumping their shares faster than at any time in the data going back to 2003. These executives are considered the “smart money.”
Have market insiders just lost their appetite for dizzying heights, or do they have reason to believe they are selling into the stock market’s last hurrah? Are their banks, perhaps, getting clobbered by the bond crisis that is now developing on the other side of all this trading?
Even the Wall Street Journal, notes Richter, saw this high-volume trading as a bullish sign. They couldn’t, however, say why it was bullish, but only that it might be profit-taking. Well, why take profits now if you’re confident your bank has room to run? Is WSJ’s bullish note just more irrational exuberance from all market experts who can smell nothing but roses since Trump’s victory?
This is how BofA’s Michael Hartnett explains it: Wall St. is bullish: expectations of “above trend” growth at five-year highs … global inflation expectations at second highest % since Jun 2004 … global bank stock positioning has hit record highs. (Zero Hedge)
Bonds are smarter … and far from exuberant
One old adage says that bond traders are the smart money. Money is now fleeing bonds at a record rate of fall that matches the record rate of rise we are seeing in the stock market. Bond money has to go somewhere; so, it could easily be that stocks are going up less because of Trumphoria and more because of bond phobia, triggered by Trump. Fear of what could easily turn into the biggest bond-bubble crash in the history of the world makes stocks look like the safest haven.
The global realization that central banks are not so enthusiastic about additional stimulus anymore, has bond investor’s realizing that the longest bull market in bond history may finally be waning. At the same time Trump’s plan of spending somewhere between half a trillion and one trillion dollars on infrastructure investments (financed on national credit) means interest rates will have to rise in order to attract enough creditors, which they are already doing in anticipation. In many nations, investors’ money is trapped in bonds near zero-percent interest. Knowing higher interest on new bonds is almost inevitable now, these investors want to get their money out of current bonds. Even in the US, who wants to be stuck in bonds at 2.5% for ten years when two to three years from now, interest may be at 5%?
The prevalent thinking is that Trump’s credit-card spending spree will heat the economy with numerous new jobs, and those new jobs will raise wages in order to attract enough workers. The increased demand for great amounts of materials will also drive up the cost of materials for everyone. The combination of many more workers flush with new cash and rising demand for materials means inflation will rise significantly; and inflation eats away at the value of money stored in bonds. So, one more reason to exit bonds. Goldman Sachs believes the main effect from fiscal stimulus this late in the employment recovery curve will be to drive up interest and inflation.
In my view, all of that means the Fed’s statement that it will be raising interest more often next year is now irrelevant. I said that before the Fed’s last meeting, and I think we see it is true in the stock market’s relative indifference to what the Fed said. Interest rates are already rising everywhere in the US economy, regardless of the Fed’s target. So, the Fed is clearly failing to accomplish anything with its stated target rate because the market is finally taking over and driving interest. That is why it was easy for the Fed to say it will increase its number of rate increases. I suspect its stated target will play catchup all year in 2017 to what the market is already doing with interest rates.
So the bond bull is breaking; but that break can cause major bond funds to wind up in liquidity traps where they cannot pay off investors who want out fast enough because the more they sell bonds that people don’t want anyway to raise cash and pay out investors, the more they have to lower the price to make a sale, driving down the value of the bonds they continue to hold, causing more investors to want out. The breaking of the longest and highest bond bull market in history could become a financial vortex, and bond values have already been falling at their fastest rate in history.
David Gundlach, the bond king who manages the DoubleLine Total Return Bond Fund, sees trouble if bonds get about half a percent higher than they are today:
We’re getting to the point where further rises in Treasurys, certainly above 3 percent, would start to have a real impact on market liquidity in corporate bonds and junk bonds…. Also, a 10-year Treasury above 3 percent in my view starts to bring into question some of the aspects of the stock market and of the housing market in particular. (Newsmax)
If bond funds go bust, they will likely take banks and retirement funds and ultimately the whole economy down with them, since almost everyone has been parking large amounts of money in bond funds because they are typically viewed as safe havens in uncertain times. If all of that goes down, the stock market likely does, too. It’s hard to see how it wouldn’t. It’s always been hard for me to see which would go first in the next big drop back into the Great Recession because both look so dangerous, and it is still hard to say. Will the insolvency of bond funds wipe out some banks and hedge fund managers, taking their stocks down to nothing, or will irrational exuberance in the stock market give way to panic? Right now, it appears to me that bonds will lead the crash.
Of course, I predicted the Epocalypse of 2016, so you might not want to listen to me. (Though I did say it might not happen until after the election when the Fed gives up and lets Trump take the fall.) I also predicted a second plunge in the price of oil in 2016, and that didn’t happen either. My predictions for 2016 were apparently badly off (at least in timing) for the first time in almost a decade. I started writing regularly on eonomics after predicting the crash of the housing market nearly to the month back in 2007, which I said would quickly become an enduring global catastrophe, the likes of which few people alive had ever seen.
That said, I anticipate the remainder of this December will go something like last year’s transition into the new year where the market crashed in the manner I said it would by going up first (due to euphoria that the Fed’s interest rate increase didn’t bring down the house), then rounds off and then falls off a cliff; but we’ll see. I’m not certain of that this year, as I was last year, and the fall off the cliff last year was not as severe as I thought it would be … though it was the worst January in the history of the stock market. This year, the euphoria is MUCH higher, so the fall could be much greater and be the kind that I anticipated for 2016.
Is it irrational for stocks to rise due to betting on the Trump card?
It could be. Consider that the entire marketplace began shifting overnight out of bonds and into stocks when Trump won, and it’s still shifting like a huge landslide. What if it repositions to this large degree, and then Trump changes his positions … again? As a matter of fact, he’s already started to backpedal from his infrastructure pledge just as he has been doing from almost all of his stated campaign pledges since being elected:
Trump made rebuilding the nation’s aging roads, bridges and airports very much part of his job-creation strategy in the presidential race. But lately lobbyists have begun to fear that there won’t be an infrastructure proposal at all, or at least not the grand plan they’d been led to expect…. Senate Majority Leader Mitch McConnell tried to tamp down expectations last week, telling reporters he wants to avoid “a $1 trillion stimulus.” And Reince Priebus, who will be Trump’s chief of staff, said in a radio interview that the new administration will focus in its first nine months with other issues… He sidestepped questions about the infrastructure plan. In a post-election interview with The New York Times, Trump himself seemed to back away, saying infrastructure won’t be a “core” part of the first few years of his administration…. He acknowledged that he didn’t realize during the campaign that New Deal-style proposals to put people to work building infrastructure might conflict with his party’s small-government philosophy. “That’s not a very Republican thing — I didn’t even know that, frankly,” he said. (Newsmax)
Seriously? Wow! How could he not know this, given that Republicans have resisted doing any infrastructure stimulus plans for eight years? He is either scarily out of touch if he didn’t realize he’d have a fight from the Republican congress, or this statement is proof that Trump was a Trojan horse from the beginning. This is a remarkably rapid turn from the New-Big-Deal plan that Steve Bannon advocated as being the economy’s salvation, given that Trump is not even in office yet.
We could have one wild roller coaster ride in 2017 since the market is entirely repositioning itself toward Trump’s infrastructure pledge if that plan takes a few years to come about or doesn’t make it through congress at all … or maybe doesn’t even get presented. It certainly never had a chance of making it through congress unless Trump pushed hard and leveraged his campaign victory toward that end, and the above statements don’t sound like Trump has any push left!
Zero Hedge recently reported on growing Republican resistance to Trump’s tax and infrastructure plans:
[In an article titled] “A “Big Problem” Emerges For Trump’s Economic Plan” … we reported that while the market may (still) be blissfully unaware about the emerging conflict between Trump’s debt-fueled vision for the future, Republican politicians had started to notice…. Republican lawmakers warned “that there could be a major obstacle to enacting President-elect Donald Trump’s agenda: the national debt.” “I was disappointed that it wasn’t brought up in the campaign,…” Sen. Jeff Flake (R-Ariz.) said of deficits and debt. “So I’m very concerned about it. It’s going to be tough to address if there’s no push from outside of the Congress,” he added. “I’m very concerned about it. It’s the biggest problem we face, by far.”
Rapidly rising interest rates already mean the infrastructure program will become much harder to finance. If Trump waits three years to get seriously started, interest rates could make the plan nearly impossible, plus he will likely have expended all his political capital that comes from a surprise election victory, which will be ancient news by then. He will need that capital to get the plan through a reluctant congress.
Rising interest rates already mean the mammoth national debt that came about as the result of the Great Recession will become much harder to finance over the next few years, even without taking out another trillion for new infrastructure. So, that will be a new and serious burden on the economy unless so much money flees Europe to bond and stock safety in the US that we’re saved by dumb luck … as once again being the best horse in the glue factory.
So, is the stock market irrational in its exuberance for shifting so much just because of Trump’s pledges, which are far, far from becoming reality? I think so. I haven’t even talked about Democrat resistance to Trump’s plans, and he’s already got resistance from the Republican leader of the senate. He is already fading back on his own push for the plan … before he is even in office. He has faded back on almost everything he has promised.
So, I think it is extremely irrational for the market to completely reposition from bonds to stocks — especially banking stocks — when Trump is hedging his words on all of his pledges … backpedaling hard on immigration enforcement and on putting Hillary in jail and now even on infrastructure spending.
David Rosenberg, chief investment strategist at Gluskin Sheff & Associates Inc., agrees:
The bullish run “probably can get extended into the new year,” but “we’ve just taken a very big leg up here, and levels of sentiment, levels of market positioning and levels of valuation do have me a bit worried that if we see any disappointment at all, it could lead to the sort of pullback we had last year….” Rosenberg calls current valuation levels “extreme.” (Newsmax)
Gathering around the stock ticker in the US stock market crash of 1929.
That doesn’t mean the market won’t keep going up. Who knows what the maximum height or duration of irrational exuberance is (because who knows how crazy people can get); but I am certain of this much: the higher stock market rockets upward on such irrationality, the harder it falls into the chasm of ever-growing debt from which it has been constructed. NO significant economic reforms have happened since the start of the Great Recession. There has been no significant improvement in corporate earnings, just a lot of expanded debt to buy back shares in order to improve Price-Earning ratios, which still look terrible. The entire market is but a poof of speculative hot air.
But, for the time being, Merry Christmas. If you’re not heavily invested in stocks or bonds, raise a glass of cheer and party on because you have less to fear. There is nothing you’re going to do that can stop the markets (in stocks and bonds) from having their hangover when the bubbly stuff is over and irrational exuberance suddenly looks like delirium. Our greatest economic crashes have always happened when least expected.
- Hillary Voters Ate Their Feelings On November 9th – Cheesecake Orders Surged 72%
On Novemer 9, 2016, America’s pampered, Hillary-supporting snowflakes chose to express their complete devastation in a variety of ways. Some took to the streets to riot and burn down entire city blocks of private property…
Thick smoke in the air from cars peeling out at the Portland anti trump protest. #electionday #election2016 pic.twitter.com/mxOIIR7UBb
— Mike Bivins (@itsmikebivins) November 9, 2016
…Lena Dunham, in a letter entitled “Don’t Agonize, Organize,” gave us excruciating details of how she simply lay in the shower “crying,” “mumbling incoherently” and “clutching herself”…which is way more than any of us needed to know.
By the time we’d made it over the bridge, a friend called. “It’s over,” she said. “I love you.” I was frozen. We stopped at the diner. No one was speaking as they ate, no one in the whole place.
At home I got in the shower and began to cry even harder. My boyfriend, who had already wept, watched me as I mumbled incoherently, clutching myself. “It wasn’t supposed to go this way. It was supposed to be her job. She worked her whole life for the job. It’s her job.”
Still others wandered aimlessly in the Arizona desert on shroom-induced “vision quests” seeking guidance from the “big red rock”…oh wait, that was Lena Dunham too. Oh well, you get the idea.
Finally, new evidence from the calorie counting app, Lose It!, and meal-ordering app, Caviar, suggest that the majority of America’s disaffected millennial democrats simply lay in bed eating their feelings.
According to the CEO of Lose It!, the number of active users going to the gym on the Wednesday after election day this year declined by over 4x the typical mid-week decline. Per Bloomberg:
So they did what Americans do best: They ate. And ate. And ate.
Lose It!, a calorie counting app that helps users track their daily food intake, says there’s always a Tuesday to Wednesday drop-off of active users, as dieters lose motivation they had earlier in the week. (Ever notice how the gym is always more crowded on Monday?) But something funny happened the Wednesday after Election Day. The drop-off rate was four times as much as usual.
“There was definitely a post-election slump,” said Charles Teague, chief executive officer of Lose It!. The company doesn’t record its users’ political leanings, but it says 75.8 percent are female and 77 percent are aged from 18 to 44—demographics that swung to Clinton.
Meanwhile, meal-ordering app Caviar, which operates in 15 urban markets like Boston, New York and Seattle that all swayed massively towards Hillary, said that orders of cheesecake, pie and ice cream surged 72% the day after Hillary lost.
Meanwhile, orders for desserts such as cheesecake, pie, and ice cream were up 72 percent on Caviar, a meal-ordering app operating in 15 urban markets, including Boston, New York, Dallas, and Seattle. Clinton also carried cities with 50,000 residents or more with a strong margin, even in deep-red Texas.
On the bright side, unintentional pregnancies collapsed in the days following November 8th.
- Geopolitics, Globalization, And World Order: Part 1
Submitted by Federico Pieraccini via Strategic-Culture.org,
Understanding the objectives and logic that accompany the expansion of nations or empires is always of paramount importance in helping one draw lessons for the future
In this series of four articles I intend to lay a very detailed but easily understandable foundation for describing the mechanisms that drive great powers. To succeed, one must analyze the geopolitical theories that over more than a century have contributed to shaping the relationship between Washington and other world powers. Secondly, it is important to expound on how Washington’s main geopolitical opponents (China, Russia and Iran) have over the years been arranging a way to put a stop to the intrusive and overbearing actions of Washington. Finally, it is important to take note of the possibly significant changes in American foreign policy doctrine that have been occurring over the last twenty years, especially how the new Trump administration intends to change course by redefining priorities and objectives.
The first analysis will therefore focus on the international order, globalization, geopolitical theories, their translations into modern concepts, and what controlling a country’s sovereignty means.
Before examining geopolitical theories, it is important to understand the effects of globalization and the changing international order it entails, a direct consequence of US strategy that seeks to control every aspect of the economic, political and cultural decisions made by foreign countries, usually applying military means to achieve this objective.
Globalization and the International Order
It is important to first define the international order among nations before and after the collapse of the Berlin wall, especially focusing on the consequences of existing in a globalized world.
For the first half of the twentieth century the world found itself fighting two world wars, then, during the Cold War, lasting from 1945 to 1989, the balance of power maintained by the US and USSR held the prospect of a third world war at bay. With the dissolution of the USSR, the United States, the only remaining world superpower, thought it could aspire to absolute domination over the globe, as was famously expressed through the Project for A New American Century. Putting aside for a moment perpetual wars, one of the key strategies towards fulfilling this objective was the so-called experiment of globalization, applied especially in trade, economics and finance, all of course driven by American interests.
Having achieved victory in the Cold War over its socialist rival, the world went from a capitalist system to a turbo-charged capitalist system. US corporations, thanks to this model of world globalized economy, have experienced untold riches, such as Apple and other IT corporations generating amounts of cash flow equivalent to that of small countries.
Banks and US financial institutions such as Wall Street incrementally increased their already considerable influence over foreign nations thanks to the rise of computer technology, automation and accounting deceptions such as derivatives, just to give one example. The FED implemented policies that took advantage of the role of the dollar in the globalized economy (the dollar is the premier world reserve currency). Over the years this has caused economic crises of all kinds all over the world, defrauding the entire economic system, consisting of schemes such as being able to print money at will, allowing for the financing massive wars, even going so far as lowering interest rates to 0% to keep banks and big corporations from failing – all a repudiation of the most basic rules of capitalism. All this was made possible because the US being the sole world power after 1989, allowing Washington to write the rules of the game in its favor.
Since the fall of the Berlin Wall, Wall Street, Big Oil and military corporations, health-care providers, the insurance and agricultural industries slowly replaced national governments, managing to dictate agendas and priorities. A political form of globalization has led to an expropriation of national sovereignty in Europe, with the creation of the Euro and the Lisbon Treaty signed by all EU nations in 2007.
Globalization has forced the concept of sovereign states directed by their citizens to be replaced with an international superstructure led by the United States, driving away even more citizens from the decision-making process. The European Union, and in particular the European Commission (not elected, but appointed), is unpopular not only for the decisions it has taken but also for the perception that it is an imposter making important decisions without ever having been elected.
Basically, with the end of the USSR, the international order went from a relationship between states made up of citizens to a relationship between international superstructures (NATO, UN, IMF, WTO, World Bank, EU) and citizens, with the weight of the balance of power decisively in favor of the globalists with the economic burden resting on the people.
The international order and globalization are therefore to be interpreted according to the logic of Washington, always looking for new ways to dominate the globe, preserving its role of world superpower.
It is also for this reason that it is important to understand some geopolitical theories that underlie US strategic decisions in the pursuit of world domination. These theories are some of the most important with which Washington has, over the last 70 years, tried to pursue total domination of the planet.
MacKinder + Spykman + Mahan = World Domination
Heartland
The first geopolitical theory is the so-called Heartland theory, drawn up in 1904 by English geographer Sir Halford Mackinder. The basic principle was the following:
«Heartland or Heartlands (literally: the Heart of the Earth) is a name that was given to the central zone of the Eurasian continent, corresponding roughly to Russia and the neighboring provinces, by Sir Halford Mackinder, the English geographer and author of Democratic Ideals and Reality; the Heartlands of the theory was submitted to the Royal Geographical Society in 1904.
The Heartland was described by Mackinder as the area bounded to the west by the Volga, the Yangtze River to the east, from the Arctic to the north and south from the western Himalayas. At the time, this area was almost entirely controlled by the Russian Empire.
For Mackinder, who based his theory on the geopolitical opposition between land and sea, Heartland was the "heart" button of all the earth civilization, because logistically unapproachable by any thalassocracy. Hence the phrase that sums up the whole concept of Mackinder’s geopolitics: ‘Who controls East Europe commands the Heartland: Who controls the Heartland commands the World-Island: Who controls the World-Island commands the world’».
In terms of countries, the Heartland consists mainly of Russia, Kazakhstan, Afghanistan, Mongolia, the Central Asian countries, and parts of Iran, China, Belarus and Ukraine.
Rimland
The second geopolitical theory, another important lodestar for US foreign policy, was developed in the 1930s by the American Nicholas J. Spykman, also a student of geography as well as a scholar of MacKinder’s theory. Spykman, thanks to advancing naval technology, added to the definition of the Heartland theory the Rimland theory. The Rimland is divided into four main areas: Europe, North Africa, Middle East and Asia.
«For ‘world island’ it means the Eurasian region, ranging from Western Europe to the Far East. If for Mackinder the Tsarist empire represents the aforesaid area-pin, Spykman instead focuses on the area around Heartland, i.e. Rimland, recognizing it as a strategic point of great importance. The Rimland is characterized by the presence of rich countries, technologically advanced, with great availability of resources and easy access to the seas. Its size at the same time makes sea and land attacked by both sides. On the other hand this means that its dual nature as a possible mediating zone between the two world powers: the United States and Russia. The greatest threat from the geopolitical point of view lies in the union between Heartland and Rimland under one power».
The Rimland essentially consists of Europe (including eastern Europe), Turkey, the Middle East, the Gulf States, India, Pakistan, Southeast Asia (Brunei, Cambodia, Laos, Malaysia, Myanmar, the Philippines*, Thailand, Vietnam) and Japan.
As one can see from observing a map, the United States is not physically close to either the Rimland or the Heartland. They are both on the other side of two 6,000-mile oceans. The US is undeniably protected in this way, almost impervious to attack, with an abundance of resources and powerful allies in Europe. These are all characteristics that have favored the rise of the American superpower throughout the twentieth century.
But world domination is a different matter and, given the geographical location of the US compared to the Heartland and Rimland, first requires a large capacity to project power. Of course with two oceans in between, it is naval power through which power has been conveyed, especially in the early part of the last century.
Mahan and Maritime Power
The third geopolitical theory is based on the importance given to maritime (or naval) power. The author of this theory, propounded towards the end of 1800, was US Admiral Alfred Thayer Mahan.
«Mahan was a ‘precursor’ to international organizations. He assumed that through a union between the United States and Britain, being two maritime powers, they could unite to share the conquest of the seas. The key concept is that ‘the maritime powers are united in opposition to those continental.’ Mahan explains the concept of naval doctrine, which is the policy that states pursue in the maritime and military arenas. In order for a state to have a naval doctrine, it must possess a substantial navy, as well as of course access to the sea, adequate projection capability, adequate means, and have strategic objectives to be protected (such as security zones exposed to risk)».
As one can easily understand, these three doctrines are central to controlling the whole world. Dominating the Heartland is possible thanks to the control of the Rimland, and in order to conquer the Rimland it is necessary to control shipping routes and dominate the seas, relying upon the Mahan theory of maritime supremacy.
In this sense, seas and oceans of great geographic importance are those that encircle the Rimland: The East and South China Seas, the Philippine Sea, the Gulf of Thailand, the Celebes Sea, the Java Sea, the Andaman Sea, the Indian Ocean, the Arabian Sea, the Gulf of Aden, the Red Sea, and finally the Mediterranean.
In particular, straits such as Malacca, between Indonesia and Malaysia, or the Suez Canal, are of strategic importance due to their role as a transit route and connection between all the seas adjacent to the so-called Rimland.
A bit of history. Route to global domination
It was Hitler's Germany during World War II that tried to put into practice the theory of geopolitics MacKinder was describing, managing to seize the Heartland but ultimately amounting to nothing with the final victory of the Red Army, who rebuffed and destroyed the Nazis.
After the end of World War II, the United States placed the Soviet Union in its crosshairs, with the intention of conquering the Heartland and thereby dominating the world. Alternatively, Plan B was to prevent other nations from teaming together to dominate the Heartland. This explains the historical conflicts between the US and Iran and between Russia and China, the three most important nations composing the Heartland.
Russia, since Tsarist times and throughout the Soviet period to today, has always been in the crosshairs of the United States, given its geographical location central to the Heartland.
Iran also constitutes a valuable piece of the 'Heart of the World', which was gifted to the Anglo-Americans courtesy the Pahlavi monarchy lending itself to the American plan to conquer the heart of the land. It was only after the 1979 revolution, which ousted the Pahlavi monarchy and installed an Islamic Republic, that Tehran became an enemy of Washington.
The reason why Afghanistan was invaded and Ukraine destabilized, and why the Belarusian leadership is hated almost as much as is the Russian one, is the same, namely, the geographical positions of these countries in composing the Heartland compels the US to conquer them as part of its grand strategy to dominate the world through the control of the Heartland.
The Republic of China, another constituent part of the Heartland theory, was during the Cold War the great Asian pivot thanks to Kissinger’s policy aimed at curbing the USSR and preventing the birth of a possible alliance between Tehran, Moscow and Beijing that would dominate the Heartland, especially in the late 1980s. The United States, instead of directly attacking China, used it against the Soviet Union. Washington's primary goal, as well as to expand its influence everywhere, was to prevent any kind of alliance that would control the Heartland, specially preventing any alliance or understanding between Moscow and Beijing; but this will be very well explained in my third analysis on how Eurasia reunited to reject the American global empire.
Control of a nation
Historically, control of a nation takes place through military power that allows for a variety of impositions. Also, culture is part of the process of conquering a nation. Today, other than militarily, it is mainly economic power that determines the national sovereignty of a nation. In the modern world, especially in the last three decades, if you control the economy of a nation, you control the rulers of that nation. The dollar and neoliberal experiments like globalization are basically the two most powerful and invasive American tools to employ against geopolitical opponents. The application of military force is no longer the sole means of conquering and occupying a country. Obligating the use of a foreign currency for trade or limiting military supplies from a single source, and impeding strategic decisions in the energy sector, are ways the globalist elites are able to dominate a foreign country, taking control over its policies. The European Union and the NATO-member countries are good examples of what artificially independent nations look like, because they are in reality fully dispossessed of strategic choices in the areas mentioned. Washington decides and the vassals obey.
It is not always possible to employ military power as in the Middle East, or to stage a color revolution as in Ukraine. Big and significant nations like Russia, India, China and Iran are virtually impossible to control militarily, leaving only the financial option available. In this sense, the role of central banks and the de-dollarization process are a core strategic interest for these countries as a way of maintaining their full sovereignty. In going in this direction, they deliver a dramatic blow to US aspirations for a global empire.
The next article will focus on how the United States has tried to implement these strategies, and how these strategies have changed over the last seventy years, especially over the last two decades.
- In His Latest Letter, Odey Refuses To Throw In The Towel
With his fund down ~50% YTD, one wonders if Crispin Odey should be thinking about quietly exiting stage left after along and mostly illustrious career. However, as his latest letter suggests, Odey is just getting his second, or maybe third, wind and is confident that he will ultimately win the war against central bankers, although as he himself points out, the risk is not so much his own fund blowing up as much as LPs saying enough to active investing altogether, and cautioned that “skilled investors are being driven out by mindless (passive) investing.”
Putting it mildly (especially for his own fund), Odey said that “this has been a difficult year for active managers,” and added that “passive investing has taken money which typically would have been in the bond market and deposited it in the equity market.”
While it remains to be seen if active management is on the endangered list, Odey has bigger troubles with his own LPs in the coming weeks, although his fortune may change in 2017 when as he warns, “central bankers will have to respond to what their governments are doing fiscally, rather than bolstering asset prices with low interest rates. There could be trouble ahead.”
There could, indeed, which simply means the cycle starts from scratch and central banks LBO even more of the global capital markets, until the 0.01% own all the assets while the rest “own” the debt.
His full November letter below:
This is not the beginning of a new cycle. This recovery which began in 2009 on the back of zero interest rates is long in the tooth. After 7 years, the benefits of low interest rates – cheaply financed cars and houses – are played out, whilst oil is now a conundrum. For half the world, the problem is that oil has fallen 50% and for the other half the problem is that the price of oil is up 50%.
What is true is that there are two problems for the developed world that have not gone away. They are that house prices, and assets in general, are too expensive to be bought out of income. The disparity between the “Haves” and the “Have-nots” is too great. Secondly and relatedly is the brutal difference in lifestyle of the young and the old.
QE has resulted in very high asset prices and ushered in weaker and weaker productivity gains. Low growth cannot sit alongside rising inequality.
Brexit, Trump, the Italian referendum came about because the problems seem impossible to solve. Everyone is now looking to any individual who believes he can solve the problem.
A world fuelled by government spending initiatives, as demanded by voters, promises to undermine the careful husbandry of the developed economies crafted by the policies of central banks.
If unemployment is already at cyclical lows, new expansionary policies will get reflected in higher inflation reasonably quickly.
At present markets are just pleased to see a yield curve coming back, but there is no thought that inflation will truly come through.
Part of this is a belief in the USA that Trump is like Reagan and 2017 is like 1981. However, Reagan was elected after a re-cession. Interest rates were over 20% when he took office. Indebtedness for the whole economy was at 0.9x GNP and the P/E for the stockmarket was 12x. Trump comes in with indebtedness at 3.5x GNP and the stockmarket on 22x current earnings.
Leverage means every 1% rise in interest rates demands a 3% rise in incomes to keep debt serviceable.
This has been a difficult year for active managers. 70% of turnover is now accounted for by passive managers. Passive investing has taken money which typically would have been in the bond market and deposited it in the equity market. Naturally skilled investors are being driven out by mindless (passive) investing.
Is this the time to dump the active managers? One imagines that their time comes again when this sea of money starts to ebb, driven by inflation and higher interest rates. The UK is already facing it. Companies are encountering higher import prices, which is increasing the working capital requirement as well as wage pressures. Is this the beginning of a new cycle?
Beware leap years! 1994 was the year that deflation came to the world, and a difficult year then was the prelude to many hap-pier years because the skill set required for the subsequent years was exactly the opposite of what was required for 1994.
Similarly a world of inflation and default is a world in which active managers should outperform.
Certainly, politicians are no longer interested in higher prices for assets. Politics demands the solution of the “Haves” and “Have-nots”, the young and the old.
Stockmarkets since the Trump victory have merely served to put cyclical sectors on the same high ratings of growth compa-nies. Whether it is the oil price or other commodities, spot prices are now almost flat going out along the curve. There is little to go for in this area unless inflation comes through.
China is now the source of inflation. Tax changes in the USA involving raising import prices by 20% effectively and lowering export prices by 12%, will also increase inflationary pressures.
2017 looks to be a year when central bankers will have to respond to what their governments are doing fiscally, rather than bolstering asset prices with low interest rates. There could be trouble ahead.
* * *
Curious what Odey’s biggest positions were as of November 30? The answer is below.
- Here Are The Countries Where Millennials Will Have To Work Until They Die
It turns out there is a downside to spending 120% of your annual income every year from the time you graduate college until that day you turn 40 and finally realize that you’re getting old and have absolutely no liquid assets and no hopes of ever retiring. While the above strategy seemingly makes sense to our elitist, Ivy League-educated central planners at the Fed who have waged a nearly decade-long war on saving (because how can we have economic growth if people aren’t willing to lever their income 5x and spend every dollar they make?), the roughly 19% of Americans who are over the age of 65 and are still forced to work are probably wishing they could go back and do things slightly differently.
As Bloomberg points out, the percentage of 65 years olds working in the U.S. today is higher than at any point going back to at least 1965.
Unfortunately, this looks to be a record that millennials are destined to beat. As we recently pointed out (see “Most Millennials Have Less Than $1,000 In Savings, Live Paycheck-to-Paycheck“), the majority of millennials are living paycheck to paycheck.
A recent survey of millennials by HowMuch.net found that 51.8% of those aged 18-34 have less than $1,000 held between bank accounts and cash savings.
As Visual Capitalist’s Jeff Desjardins notes, this echoes previous data we’ve seen – not just on millennials, but Americans in general. For example, we know that 14% of Americans have “negative” wealth. We also know that 62% of Americans don’t have emergency savings that could cover a $1,000 hospital visit or a $500 car repair.
Taking that into consideration, here’s a deeper dive into the more recent millennial data…
Courtesy of: Visual CapitalistMeanwhile, as a testament to their strong work ethic, a study by ManpowerGroup recently found that roughly 30% of millennials envisioned taking an “extended break” from work at some point in their careers to “relax/travel/vacation” while another ~20% said they’d take a break to “pursue a life dream or hobby.” Sure, why not? If everything goes horribly wrong then taxpayers will be waiting to payoff your student loans for you…so no worries.
And, unless you thought this was just a phenomenon limited to America’s snowflakes, turns out millennials all over the world have very little confidence in their ability to save.
Well, at least we’re not alone…misery loves company as they say.
- Forget Monte Paschi, Italy May Have A Far Bigger Problem
While the metaphorical 'earthquake' of a systemic banking crisis is coming to a head, it appears Italy may have a far more existential problem on its hands. As The Independent reports, one of the world’s most dangerous supervolcanoes is showing signs of reawakening under the Italian city of Naples.
The Campi Flegrei may be nearing a critical pressure point necessary to drive an eruption for the first time in 500 years, according to scientists.
Researchers say the volcano is moving towards a threshold beyond which rising magma could spark the release of fluids and gases at 10 times the normal rate.
This surge would cause an injection of extremely hot steam into surrounding rocks, Giovanni Chiodini, lead author of the study, told AFP.
This could ultimately trigger a “very dangerous” eruption for the three million people living in the area.
Since 2005, the Campi Flegrei has been undergoing “uplift”, which is the accumulation of magma under the surface of a volcano.
In response, Italian authorities raised the threat level from green to yellow in 2012, signalling the need for the supervolcano to be actively monitored.
Four years ago, scientists warned any eruption could kill millions living near or on top of the volcano.
"These areas can give rise to the only eruptions that can have global catastrophic effects comparable to major meteorite impacts," said Giuseppe De Natale, head of a project to monitor the volcano's activity.
Nearby Mount Vesuvius, whose massive eruption buried Roman settlements including Pompeii in AD79, is also considered an active volcano.
- 6 Charts That Make The Case We Are In Long-Term Secular Bear
Submitted by John Mauldin via MauldinEconomics.com,
As I look out over the coming years, I am convinced that we’ll see the blowing up of the biggest bubbles in history – including those of government debt and government promises. And it’s not just in the US, but all over the world.
That will lead to an eventual global crisis of biblical proportions. Although, it isn’t clear what the immediate cause of the crisis will be.
Let’s start with some basics
The most common way to measure valuation is with the price-to-earnings ratio (P/E). Analysts compile P/E and other indicators from many companies to give us valuation metrics on entire markets and indexes.
You can see overvaluation and undervaluation in this chart from my friend Ed Easterling of Crestmont Research.
The red line is the combined P/E ratio of the S&P 500 as originally reported. The green and blue lines are adjusted Crestmont and Shiller versions, which occasionally diverge. The P/E ratio spent most of the last century between 10 and 25.
Presently, all three P/E versions are near or above 25, indicating overvaluation. This doesn’t mean the end is near—though it could be. But it does suggest that we are not at the beginning of another long-term bull market.
P/E adjusted to economic growth
The next chart illustrates the past and present trend in a different way.
Direct your attention to the dashed line.
It’s Ed’s long-term earnings baseline, which he adjusts to reflect the relationship of earnings to economic growth. Reported earnings per share go below the baseline during bear markets and above it in bullish periods. Currently, it is way above trend and is projected by S&P and many others on Wall Street to become even more so.
The Buffett indicator
The Buffett Indicator is essentially the market value of all publicly traded securities as a percentage of GDP. Intuitively, it seems odd that the combined value of every public stock would be worth more than the country’s annual production. But sometimes it is. Those periods tend to mark overvaluation, as you can see here.
The interesting thing here is that right now, the Buffett Indicator—while down from its late 2014 peak—is still higher than it was before the 2008 financial crisis. That should not be encouraging if you’re a bull.
S&P 500 median since 1964
The next chart is from Ned Davis and shows us the S&P 500 median P/E back to 1964, which is 16.9 (dotted green line). The distance we are above or below the median is a valuation clue.
Could the market get more overvalued? Absolutely. It did in the tech bubble.
Household equity percentage vs. S&P 500 total return
The following chart takes some explaining.
It shows the percentage of household financial assets invested in stocks (blue line) versus the S&P 500 total return for the following 10 years (dotted line).
Notice that the right axis is inverted and the dotted line tracks pretty close to the solid blue one. The correlation is 0.91, which is extraordinarily high.
What the chart shows us is that a higher percentage of household assets in equities points to a lower annualized return over the next 10 years.
Note the green arrow at the 2009 low. It points off to the right scale just below 15. That suggests that someone who bought stocks at that low point and holds them until 2019 will realize a roughly 15% annualized return.
That’s the good news. The bad news is that the red arrow at 6-30-2016 means that the 10 years ending 6-30-2026 should produce a 3.25% annual gain. That’s not awful, of course, but it is nowhere near the 7% or more that many pensions and insurance companies think they can earn on their portfolios.
We are way overdue for a correction
Bottom line: We are way overdue for a correction. Again, our situation is not the worst it’s ever been, but we are beginning to bump up against historical lines in the sand.
Here’s the chart, which shows the number of days before the start of 5%, 10%, and 20% corrections.
Here is how you read this chart:
The top section shows the history of the S&P 500 Index from 1928 to present. The next three sections show the number of days prior to the start of 5%, 10%, and 20% corrections.
I think we are still in a very long-term secular bear, although there has been a clear cyclical bull market since 2009. I think the next global recession (hopefully not a depression) will potentially give us a vicious bear market that will mark the end of this secular bear.
You can see that it has been 116 days since we had a 5% correction. Since 1928, the average number of days before a 5% correction occurred was 50. In secular bull periods, the average number of days was 84. In secular bear periods, the average number of days was 31.
Note that we have been 210 days without a 10% correction. Since 1928, the average number of days before a 10% correction occurred was 167. In secular bull periods, the average number of days was 331, while in secular bear periods, the average number of days was 91.
It has been 1955 days since we suffered a 20% correction. Since 1928, the average number of days before a 20% correction occurred was 635. In secular bull periods, the average number of days was 1105. In secular bear periods, the average number of days was 486.
The current case of 1955 days without a 20% correction is more than three times the average of 635 days (for the whole period from 1-3-1928 to 12-8-2016).
For this record number of days, let us all join hands and exclaim, “Thank you, Fed, BOJ, and ECB!”
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