Today’s News 24th January 2016

• Putin Is Winning The Final Chess Match With Obama

  Submitted by Ron Holland via PravdaReport.com,

  The world press is filled with violence and sexual attack horror stories about the Islamic refugees escaping from Syria and other war torn countries of the Middle East to Greece and consequently flooding into all areas of Europe. It is actually very easy to travel from Syria to Lebanon and then take the ferry to Turkey and from there to Greece and subsequently the mainland overland to Europe. This is now big business organized like a one-way tour package from the Middle East to Europe.

  Although there obviously are some ISIS fighters and Islamic militants slipping into Europe under cover of the humanitarian crises most are simply Sunni Moslems escaping the poverty, death and destruction of foreign military intervention in the region. Yes the sex crimes are a real problem because the majority of those escaping the region are men looking for work coming from a conservative society to the open societies of Europe.

  Most immigrants enter Europe through the economic basket case of Greece where the economy has already been destroyed by too much government debt, corruption and EU banking excesses so Greece can afford to do little to stem the Islamic refugee tide. While a case can be made that the location of Syria and Lebanon adjacent to Turkey and the ease of transportation to Greek islands just offshore is helping the flow to Europe. Still the organized nature of the operation makes me wonder if this is also an undercover operation designed to create a new mission for NATO at the same time weakening the economy of Europe to further Washington's economic interests today in the Obama Crash of 2016.

  The world is now in recession at best and maybe flirting with a global depression. This means politicians will do what is best for their national political future and the consequences for the national economy, citizens or business future is of little consequence to them. This also suggests that global alliances will mean little when domestic national politicians are fighting for survival.

  Here is how the chess matches have turned out so far in the Putin/Obama competition.

  Chess Match 1 – Consider the pattern of Washington actions against Russia. First Washington supported the overthrow of the legitimate but pro Russian government of Ukraine. The goal was three fold, first to control and cut off Russian gas exports to Europe through Ukraine, second to force Russia to vacate their warm water naval base in Crimea or else act militarily against Ukraine and create the fear of a Russian threat against all of Europe. This would force Europe to depend more on NATO that is an extension of the American military power in Europe. Putin's response was checkmate, as he wisely didn't take the bait and this plan failed to create the desired Russian military threat to strengthen NATO and US leadership in Europe against Russia.

   

  Chess Match 2 – The second attempt was to overthrow Assad allowing ISIS to do the dirty work thus opening up a Qatar gas pipeline to Europe again competing with and ending European dependence on Russian gas. This would have meant curtailing much of the Russian gas profits, taxes and government revenues. Again surprisingly Putin acted to defend Syria and Assad from ISIS and again Putin checkmated Washington.

   

  Chess Match 3 – We are now in the middle of the third chess game between Putin & Obama. This game is the reason for Washington's destruction and desolation of much of the Middle East. Again remember Washington's foreign policy objectives are to control Middle East energy resources and force Russia to stand down against American global hegemony.

  A strong and united NATO is necessary to put pressure on Russia and since the collapse of communism and the perceived Soviet threat to Europe, NATO has had little reason to exist. Well now I would suggest that part of the Islamic threat and massive movement of refugees to Europe is being manipulated and manufactured as a means to recreate a mission for NATO forces in Europe. A strong Washington led NATO will allow the United States to bring more pressure against Russia.

  If I am right here, then what is the checkmate course of action for Russia in Syria and Lebanon? The ultimate solution is for Russia to stop the movement of refugees and Islamic radicals to Europe by forcing ISIS out of Syria and back into Iraq and effectively blocking off the escape routes to Turkey both overland and by ferry.

  This would probably take more than just Syrian troops as it may mean Russian troops on the ground in both countries after military security requests from Syria and Lebanon to halt the exodus and end ISIS occupation of Syria. Security in Syria and Lebanon would help to halt the refugee flow to Europe and Putin and Russia would then get the credit they deserve for this action to protect Europe. This successful outcome would guarantee good relations between the people of Europe and Russia ultimately forcing more European politicians and governments to restore friendly and close relations with Putin's Russia.

  This would be the final checkmate needed to force the Obama Administration to reevaluate Neocon policies in the Middle East. American military actions and occupation have already destroyed much of the prosperity of the region. When this is combined with our earlier attempt to weaken Russia and Iran with lower oil prices not taking into account the growing threat of global recession and depression the problem today only gets worse. Today the Middle East is looking at increased instability and a lower standard of living at a time when Europe is suffering economically and can not absorb the inflow of refugees.

  Finally, take a look at a map of Europe and you will see the 28 members of the European Union and most are in NATO. Then look at the lone country not in the EU or NATO that can still control it's borders and policies and it is the neutral but still independent Switzerland. Neutral Switzerland can be a safe haven for your personal and retirement wealth in the coming global crash and depression.

  Yes Russia and Europe would do well to work together to counter and halt the flood of Middle East refugees to Europe before the current global recession/depression destroys the prosperity of the region. While the refugee threat might have been a reasonable tool or Washington geopolitical tactic to restore NATO and therefore American leadership over Europe under normal economic conditions, the situation is now getting out of control. With today's global economic slowdown and the risk of depression threatening the economy of Europe this tactic borders on economic genocide for Europe and must be countered and restrained for the peace and prosperity of the region. Let us all work together and hope and pray that the Obama Crash of 2016 does not turn into the Obama Global Depression of 2016 because of some poorly timed geopolitical brinkmanship and maneuvering suggested by Washington neocon advisors.

  

  

  

  

  

• John Kerry Can't Understand Why Hezbollah Needs "80,000 Rockets"

  As those who follow Syria’s seemingly intractable civil war are no doubt aware, Washington is a big part of why the conflict is now going into its sixth year.

  What began as a plan to destabilize the Alawite government by “playing on Sunni fears of Iranian influence” (to quote a leaked diplomatic cable from then-Deputy Chief of Mission in Syria William Roebuck) gradually metamorphosed into a overt and at times absurd effort to arm and train a series of rebel groups in an attempt to bring about regime change in Damascus.

  Those efforts have thus far failed, in part because of how poorly the programs were orchestrated and implemented and in part due to Russian and Iranian intervention on behalf of the SAA.

  But even as the US hasn’t succeeded in overthrowing Assad (which, incidentally, may mean that Washington has finally met its Waterloo when it comes to meddling in the affairs of Mid-East politics), America has done an admirable job of exacerbating an already hopeless situation by funneling billions in funding and arms to the mishmash of Sunni rebels battling for control of the country.

  You’ll recall that the US effort to supply Syrian rebels with weapons went full-metal-retard in October when the Pentagon resorted to dropping 50 tons of ammo into the middle of the desert on 112 pallets.

  

  As Vladimir Putin dryly noted at the time, that’s probably not the best idea considering there’s really no way of knowing who is going to pick the arms up.

  On Friday, in a hilarious example of Washington and Riyadh’s penchant for blatant hypocrisy, John Kerry and Saudi foreign minister Adel al-Jubeir told reporters after a meeting with the six-nation Gulf Cooperation Council that they are concerned about Iran’s support for “terror groups” and specifically about Tehran supplying Hezbollah with rockets.

  “The United States remains concerned about some of the activities that Iran is engaged in in other countries,” Kerry said, with a straight face.

  

  “Iran remains the world’s chief sponsor of terrorism,” Jubeir said. “Overall I think the United States is very aware of the danger of Iran’s mischief and nefarious activities… I don’t believe the United States is under any illusion as to what type of government Iran is.”

  It’s difficult to overstate how absolutely ridiculous that is. Jubeir is the top diplomat for a state that just beheaded 47 people not three weeks ago and which has a human rights record so abysmal that it’s become something of a standing joke in foreign policy circles.

  Worse still, the sponsorship of terror isn’t just an explicit foreign policy aim in Riyadh, it’s actually enshrined into the country’s collective psyche via the promotion of Wahhabism. Remember, ISIS and al-Qaeda follow Riyadh’s brand of Islam, not Tehran’s.

  But the real kicker came when Kerry decided to comment on the supply of weapons to Hezbollah through Syria.

  “These are concerns that we share, which is why the arms component, the missile component, the human rights component, the state sponsor of terror component are all part of the continued sanctions of the United States and the agreement,” Kerry remarked before posing the following question: “I mean, Hezbollah has 70-, 80,000 rockets. What do they need that for?”

  Well John, for one thing they are mired in a prolonged war of attrition with the Israelis who possess one of the most efficient militaries on the face of the planet. That conflict had quieted down since 2006 but when the IAF assassinated Samir Qantar late last month, hostilities escalated anew.

  But on top of that, Hezbollah is also fighting to stabilize a country the US and its regional allies thrust into chaos. Thanks to the fact that the US, Saudi Arabia, Turkey, and Qatar are sending weapons to the rebels, Iran has to send weapons to Hezbollah. Why arming Sunni extremists counts as “supporting the democratic resistance” while sending rockets to Hezbollah is “mischievous and nefarious” is a complete mystery.

  Indeed, we might ask Kerry the very same question he’s asking us.

  “I mean come on John, Sunni militants in Syria have thousands of TOWs. What do they need that for?”

  Oh, that’s right.

  They need them to destroy Russian search and rescue helicopters.

  

  

  

  

  

• "But It's Only A Manufacturing Recession, What's The Big Deal" – Here's The Answer

  Despite the services economy starting to turn down towards manufacturing's inevitable recessionary prints, there remains a hope-strewn crowd of status-quo face-savers desperately clinging to the linear-thinking "but manufacturing is only 12% of economic output and thus is no longer a good bellwether for the overall economy" narrative. Here is why they are wrong not to worry…

   

  On the left below, we see the mainstream media's perspective on why a collapse in manufacturing "doesn't matter" and you should buy moar stocks.

  On the right below, we see why it does… especially since the "doesn't matter" narrative is used only to justify buying moar stocks…

  

  h/t @Spruce_gum

   

  Which explains why this is happening!!

  

  Self-destructing The Fed's very own wealth-creation scheme.

  While it is hoped that the economy can continue to expand on the back of the "service" sector alone, history suggests that "manufacturing" continues to play a much more important dynamic that it is given credit for.

  The decline in imports, surging inventories, and weak durable goods all suggest the economy is weaker than headlines, or the financial markets, currently suggest. And in fact, services are starting to follow…

  

   

  Of course, as we previously concluded, while recessions are "needed," public opinion is generally quite simple in regard to recession: upswings are generally welcomed, recessions are to be avoided. The “Austrians” are however at odds with this general consensus — we regard recessions as healthy and necessary. Economic downturns only correct the aberrations and excesses of a boom. The benefits of recessions include:

  • Sclerotic structures in the labor market are broken up and labor costs decline.
  • Productivity and competitiveness increase.
  • Misallocations are corrected and unprofitable investments abandoned, written off, or liquidated.
  • Government mismanagement of the economy is exposed.
  • Investors and entrepreneurs who were taking too great risks suffer losses and prices adjust to reflect consumer preferences.
  • Recessions also allow a restructuring of production processes.

  At the end of the corrective process, the foundation for a renewed upswing is more stable and healthy. We thus see deflationary corrections as a precondition for growth in prosperity that is sustainable in the long term. Ludwig von Mises understood this when he observed:

  The return to monetary stability does not generate a crisis. It only brings to light the malinvestments and other mistakes that were made under the hallucination of the illusory prosperity created by the easy money.

  However, in addition to leading to true temporary hardship for the malinvestment-affected areas of the economy, an economic recession in the near future would represent a harsh loss of face for central bankers. Their controversial monetary policy measures were justified as an appropriate means to nurse the economy back to health. That is, their efforts to end or avoid helpful recessions were claimed to contribute to the eagerly awaited self-sustaining recovery.

  

  

  

  

  

• The Institutionalized Looting Of America

  Submitted by Jesse via Jesse's Cafe Americain blog,

  "Give a small number of people the power to enrich themselves beyond everyone's wildest dreams, a philosophical rationale to explain all the damage they're causing, and they will not stop until they've run the world economy off a cliff."

  Philipp Meyer

   

  "Wall Street is not being made a scapegoat for this crisis: they really did this."

  Michael Lewis

   

  "My daughter asked me when she came home from school, “What’s the financial crisis?” and I said, it’s something that happens every five to seven years."

  Jamie Dimon

   

  "The greatest tragedy would be to accept the refrain that no one could have seen this coming, and thus nothing could have been done. If we accept this notion, it will happen again."

  Financial Crisis Inquiry Commission (2009–2011)

  The US has been in a cycle of bubbles, busts, and crashes since at least 1995, and more likely since Alan Greenspan became the Chairman of the Federal Reserve in August, 1987.

  The cycle is the same, only the depth and duration seems to change in a continuing 'wash and rinse' of the public money and the real economy.

  It has become a machine for transferring income, wealth, ownership, and power to the very top.

  This is not 'the new normal.'   This is financial corruption and the erosion of systemic integrity.

  

   

  Are there any markets that have not been shown to have been systematically manipulated, for years?

  This is just institutionalized looting.

  

  

  

  

  

• Energy Creditors Lucky To Recover 15 Cents On The Dollar In Bankruptcy

  This past Wednesday, we reported that in the latest twist of the energy sector collapse, liquidating oil and gas producers, and specifically their creditors, got a nasty lesson in trough cycle asset values when in one after another bankruptcy “stalking horse” aka 363 auction, they were not only unable to cover the outstanding debt (both secured and unsecured) through asset sales, but barely able to cover a tiny fraction of it.

  “A lot of people got into this business and didn’t really understand the ups and downs of price cycles,” said Becky Roof, a managing director for turnaround and restructuring with the consulting firm AlixPartners. “They’re getting a very bad dose of reality right now.”

  Becky is right as the following bankruptcy liquidation sales tabulated by Bloomberg demonstrate:

  • Dune went belly up owing $144.2 million. Its assets sold for $20 million.
  • In May, American Eagle Energy Corp. filed for bankruptcy with debts of $215 million. Its properties sold for $45 million in October.
  • BPZ Resources Inc. owed $275.2 million. Its assets fetched about $9 million.
  • Endeavour International Corp. went into bankruptcy owing $1.63 billion. The company sold some assets for $9.65 million and handed over the rest to lenders.
  • ERG Resources LLC opened an auction with a minimum bid of $250 million. Response? No takers.

  Then earlier today we learned that as part of its 363 Asset Sale, the 3rd largest bankruptcy of 2015 after Samson Energy and Sabine Oil, that of Quicksilver, the estate was only able to collect $245 million in cash proceeds from BlueStone Natural Resources. With $2.35 billion in debt, Quicksilver was one of the first casualties of the energy bust when it filed on March 17, 2015. Today’s news means that the recovery for its creditors is a paltry 10 cents on every dollar of total debt, most of which will go to partially satisfy secured claims.

  The problem as the chart below shows is that these bankruptcy auctions confirm recoveries on existing debt will be paltry, and based on our limited dataset, average to roughly 15 cents on total debt exposure, which includes both secured and unsecured debt.

  

   

  The good news is that our data set won’t remain limited for long.  Here are several charts from Haynes and Boone showing why all those bankruptcy lawyers and financial advisors who were sitting back twiddling their thumbs for so many years, are now fully back in business.

  First, the cumulative North American E&P bankruptcy filings, with some of the most notable filers for any given month:

  

  Next, the cumulative debt that was gone “under” in the past year: some $17.2 billion:

  

  Finally, the full list of all 2015 bankruptcies as of January 6.

  

  In other words, the energy bankruptcy party is only just starting.

  As a reminder, there are currently over 60 companies accounting for $325 billion in debt which are cash flow negative, a number which is about to surge as oil price hedges expire, unless of course oil manages to soar from here. If only 10% of these companies file in 2016, that would mean a doubling of the total amount of defaulted debt in 2015, and a shock to the entire US banking system which despite what it would like you to believe, it very much exposed to the next big default wave.

  It’s only downhill from there.

  

  

  

  

  

• ObamaTrade Will Cost 448,000 American Jobs, New Study Finds

  Submitted by Derrick Broze via TheAntiMedia.org,

  One of the major purported selling points for the Trans-Pacific Partnership (TPP) is a supposed increase in new jobs as a result of the controversial trade deal. The deal involves 12 nations, including the U.S., Australia, Canada, New Zealand, Japan, Malaysia and more. However, two recent economic reports have contradicted the claims that jobs will increase. They have shown that, more than likely, the deal will lead to a loss of jobs.

  First there was a World Bank report that predicted that TPP would produce negligible boosts to the economies of the U.S., Australia, and Canada. TechDirt writes:

  “So according to the World Bank’s figures, the U.S. will gain an extra 0.04% GDP per year on average, as a result of TPP; Australia an extra 0.07% annually, and Canada a boost of 0.12% per year.”

  This study was followed up by a review from Jerome Capaldo and Alex Izurieta at Tufts University. In a study titled “Trading Down: Unemployment, Inequality and Other Risks of the Trans-Pacific Partnership Agreement,” Capaldo and Izurieta claim their study uses a more realistic model than past analyses. Specifically, the researchers state that their model incorporates effects on employment that were previously excluded from TPP calculations.

  Their study found that economic growth is likely to be limited — and negative — for some countries, including the United States. The researchers also found the TPP would probably lead to increased unemployment and inequality. Capaldo and Izurieta explained:

  “The standard model assumes full employment and invariant income distribution, ruling out the main risks of trade and financial liberalization. Subject to these assumptions, it finds positive effects on growth. An important question, therefore, is how this conclusion changes if those assumptions are dropped.”

  In the paper, the two researchers state that changes in GDP growth are “mostly projected to be negligible.” After using two sets of growth figures, ten-year measurements, and annual averages, they concluded the TPP “appears to only marginally change competitiveness among participating countries. Most gains are therefore obtained at the expense of non-TPP countries.”

  The fact that any gains — however negligible — will come at the cost of non-TPP countries should be a warning to all nations of the world, especially those who do not stand to benefit from the agreement. Concerning predictions of actual job losses or gains, the researchers write, “TPP would lead to employment losses in all countries, with a total of 771,000 lost jobs. The United States would be the hardest hit, with a loss of 448,000 jobs.”

  Finally, the researchers draw harrowing conclusions about the end result of the TPP.

  “Globally, the TPP favors competition on labor costs and remuneration of capital. Depending on the policy choices in non-TPP countries, this may accelerate the global race to the bottom, increasing downward pressure on labor incomes in a quest for ever more elusive trade gains.”

  This latest analysis of TPP job claims is even more dismal than a February 2015 analysis by the Washington Post, which revealed the U.S. government’s numbers on expected job increases from the TPP are not factually correct. The Post’s Fact Checker examined several quotes from government officials, including Secretary of State John Kerry and Secretary of Agriculture Tom Vilsack. Both Kerry and Vilsack claimed the international trade agreement would create 650,000 new jobs. However, these numbers do not take into account income gains and changing wages. According to the government’s own sources, imports and exports would increase by the same amount — resulting in a net number of zero new jobs.

  The TPP has faced criticism for several years, not least because it has been negotiated in secret with overwhelming influence from multinational corporations. In late June 2015, President Obama signed into law the so-called “fast-track” bill, which set the stage for approval of the TPP. “Fast-track” limits Congress’ ability to alter the provisions of the trade deal, and only allows a vote of yes or no. The final terms of the deal were agreed upon in October 2015, and the full text of the agreement was released in November. The earliest Obama can sign the deal is February 4, 2016.

  Following the release of the text of the TPP, journalist James Corbett released an excellent report examining the effects of the proposal. Corbett concludes that the most egregious portions relate to the Investor-State Dispute Settlement (ISDS) Mechanism, intellectual property, and food safety standards.

  According to the report, ISDS will give corporations loopholes to escape accountability and empower international bodies, overriding the national sovereignty of signing nations. Under ISDS, foreign corporations would be allowed to appeal legal decisions to international tribunals, rather than face domestic courts. Critics fear this could lead to a loss of sovereignty and the enrichment of transnational corporations.

  In late 2015, Anti-Media reported the TPP might not be voted on until after the 2016 presidential elections, or possibly into the next presidential term, according to Senate Majority Leader Mitch McConnell.

  In an interview with the Washington Post, McConnell said he does not support the idea of voting on the TPP before the election. “It certainly shouldn’t come before the election. I don’t think so, and I have some serious problems with what I think it is,” he said. “But I think the president would be making a big mistake to try to have that voted on during the election. There’s significant pushback all over the place.”

  “We will continue working with Congressional leaders to pass the Trans-Pacific Partnership as soon as possible next year,” Brandi Hoffine, a White House spokeswoman, told the Post on Thursday. On Friday, White House Press Secretary Josh Earnest told reporters, “Our view is that it is possible for Congress to carefully consider the details of this agreement and to review all the benefits associated with this agreement … without kicking the vote all the way to the lame-duck period.”

  Recently, the Electronic Frontier Foundation also released a report on the dangers of the TPP. EFF writes:

  “Everything in the TPP that increases corporate rights and interests is binding, whereas every provision that is meant to protect the public interest is non-binding and is susceptible to get bulldozed by efforts to protect corporations.”

   

  The EFF’s report offers “a list of communities who were excluded from the TPP deliberation process,” and examples of “the main ways that the TPP’s copyright and digital policy provisions will negatively impact them.”

  These communities include Innovators and Business Owners; Libraries, Archives, and Museums; Students; Impacts on Online Privacy and Digital Security; Website Owners; Gamers; Artists; Journalists and Whistleblowers; Tinkerers and Repairers; Free Software; and Cosplayers and Fans of Anime, Cartoons, or Movies.

  Before the deal was signed, fifteen different organizations issued an open letter asking TPP negotiators to provide public safeguards for copyrighted works. These groups include Australian Digital Alliance, Consumer NZ (New Zealand), Copia Institute (United States), Creative Commons (International), Electronic Frontier Foundation (United States, Australia), Hiperderecho (Peru), Futuristech Info (International), Global Exchange (International), iFixit (International), New Media Rights (United States), ONG Derecho Digitales (Chile), Open Media (Canada), Public Citizen (United States), and Public Knowledge (United States).

  The authors of the letter state copyright restricts important, everyday use of creative works. The groups call on the negotiators to be open to new changes that require participating nations to develop balanced and flexible rules on copyrights. Also highlighted in the letter are four key concerns from the organizations, including retroactive copyright term extension, a ban on circumvention of technology protection measures, “heavy-handed criminal penalties and civil damages,” and trade secret rules that could criminalize investigative journalism and whistleblowers reporting on corporate wrongdoing.

  As the EFF writes, “Despite its earlier promises that the TPP would bring ‘greater balance’ to copyright more than any other recent trade agreement, the most recent leak of the Intellectual Property chapter belies their claims. The U.S. Trade Representative (USTR) has still failed to live up to its word that it would enshrine meaningful public rights to use copyrighted content in this agreement.”

  The TPP is not only facing resistance from electronic privacy groups, but from grassroots activists and concerned professionals around the world. Both the Anglican and Catholic churches of New Zealand have demanded governments be more transparent about the negotiations. Radio NZ reports that bishops from the churches are concerned with the lack of openness. They are worried corporate interests are influencing the agreement while the people are excluded. The churches also called on the New Zealand government to make the draft text of the agreement public.

  Doctors Without Borders released a statement following the conclusion of negotiations:

  “Doctors Without Borders/Médecins Sans Frontières (MSF) expresses its dismay that TPP countries have agreed to United States government and multinational drug company demands that will raise the price of medicines for millions by unnecessarily extending monopolies and further delaying price-lowering generic competition. The big losers in the TPP are patients and treatment providers in developing countries. Although the text has improved over the initial demands, the TPP will still go down in history as the worst trade agreement for access to medicines in developing countries, which will be forced to change their laws to incorporate abusive intellectual property protections for pharmaceutical companies.”

  In early February 2015, doctors and health professionals representing seven countries released a letter warning the TPP will lead to higher medical costs for all nations. The letter, published in the Lancet Medical Journal, states, “Rising medicine costs would disproportionately affect already vulnerable populations.” Those doctors called on the governments involved in the trade deal to publicly release the full text of the agreement. They also demanded an independent analysis of the effects on health and human rights for each nation involved in the deal.

  

  

  

  

  

• How Billionaires Are Investing In 2016: "The Only Winning Move Is Not To Play The Game"

  Ever since 2009, when we first showed how broken the capital markets are first at the micro level, thanks to the pervasive spread of parasitic, frontrunning algos, and then at the macro, as a result of constant, artificial central bank intervention and levitation, we have advised readers that the best option is to simply avoid rigged, manipulated markets altogether. Now, 7 years later, the world’s richest people agree.

  Remember when we warned virtually every single day for the past 7 years that constant central bank and HFTs manipulation will lead to a market so broken nobody will have any faith in price discovery or asset valuation until everything collapses and is rebuilt from scratch? Well, we are delighted to announce that this is now conventional wisdom, and as a result every so-called “prominent investor” is now resistant to putting on fresh positions and expected asset prices to head downward, according to the WSJ.

  In short, they say, the only winning move is not to play the game.

  It’s not just that: according to WSJ reporting from the just concluded symposium of billionaires, prominent investors and other hypocrites in Davos, the consensus is that “the world’s central banks can’t save us anymore.”

  The next WSJ sentence is absolutely epic: “Their mood here was irritated, bordering on affronted, with what they say has been central-bank intervention that has gone on too long.”

  Oh yeah, they had no problem with central bank intervention for 1, 2, 3, 4, 5, or even 6 consecutive years… but seven? Now that’s just absurd!

  The WSJ goes on to vindicate all so-called tinfoil fringe websites by admitting that “from this anecdotal sampling, at least, that has created growing distortions in nearly all asset prices—from stocks to bonds to real estate.“

  But… fundamentals?

  Great job central bankers and other central planners: the one thing you just had to save at any cost, the market, pardon the “market”, even if it meant crushing the middle class, is no longer credible – not even to the smartest people in the room.

  “The trade now is to hold as much cash as possible,” said Nikhil Srinivasan, chief investment officer for Generali, a European insurer with $480 billion in assets. “Equity markets could go down 15% to 20%.“

  Or much more: after all the S&P is only in the vicinity of 1900 instead of 666 thanks to 7 years of central bank intervention. Pull the rug, and you get a 70% collapse.

  Srinivasan said the central banks in the U.S. and Europe have done all that is possible, bringing rates to historic lows, and in Europe weakening the Euro to help sustain exports. Markets need to “stop expecting miracles,” he said, “now it’s time for the fiscal side to do its job.”

  Actually, all central banks have done is delay mean reversion by injection trillions in liquidity which not only did not end up in the economy where it was not requested due to a complete collapse in demand, but simply inflated asset prices to record levels. Now even the wealthiest admit that the day of reckoning is coming.

  The sentiment was the same for Axel Weber, the chairman of UBS AG. He said in a panel at Davos that: “There may be no limit to what the ECB is willing to do but there is a very clear limit to what QE can and will achieve,” he said, referring to the European Central Bank. “The problem is that monetary policy has largely run its course.”

  Which is funny considering the only reason for the market rebound of the past two days was promises and hopes of more stimulus. Monetary policy may have “run its course” but the same billionaires will be delighted to get a few extra final hits before it all comes crashing down.

  Added one other CEO of a major global financial firm: “The sickness is not inflation, it’s the mispricing of assets.”

   

  The realization that Western economies will be growing slowly—and there was little that the central banks may do to aid—put financial executives here in something of a stupor.

   

  The Netherlands, for instance, is experiencing negative interest rates. “We have limited opportunities to lend on the other side” of customer deposits because of those negative yields, said Ralph Hamers, the chairman of Dutch bank ING NV. “The only thing we can do is extend credit we would normally not do, and that leads to an accident waiting to happen.”

   

  For Mr. Hamers and others, a shift in sentiment seemed to be taking hold. Annual growth of the old order—3% to 4% for the U.S. and other Western economies, is far away. Absent structural changes led by governments, there was little reason to be cheered.

  One person who has also been warning about this terminal outcome for years is Elliott Management chief Paul Singer who said that “if central banks double down on their policies of QE, ZIRP and NIRP, it could cause a loss of confidence in central bankers, paper money in general, or one or more currencies, and lead to a collapse in bonds and stock prices.”

  He is, of course, right, and incidentally this “thought scenario” is precisely what will happen because as we have repeatedly said, not a single economy or fiat system in the history of the world has disintegrated from deflation: governments and their central bank owners will always find a way to reflate, even if it means dropping money out of helicopters, even if it means destroying a reserve currency. And, as Venezuela most recently found out the very hard way, in the end, only hard assets remain – assets such as gold, which have preserved their value across the centuries.

  As for these “prominent investors” who were anything but and merely rode the central bank wave for over half a decade, the fun is over.  For him, “we call it the new abnormal and we better get used to it.”

  What a coincidence that even the world’s richest are suddenly using terms first coined on this website all the way back in 2010, almost as if we were right from day one.

  Now, anyone interested in a nice game of chess?

  

  

  

  

  

• The Islamization Of America In 2015 (Part 1)

  Submitted by Soeren Kern via The Gatestone Institute,

  • Representative André Carson (D-Indiana), a convert to Islam, was appointed to the House Permanent Select Committee on Intelligence. Carson has extensive ties to the Muslim Brotherhood.

  • Officials at the Rocky Heights Middle School in Littleton, Colorado, ignited controversy when they told female students to dress according to Sharia law while visiting a mosque during a field trip.

  • Islamic politics "advocates the world's greatest double standard: if you come to our country, we won't let you worship the way you want, we won't let you say what you want to say… However, we have come to your country, therefore we have the right to do whatever we want to do, including kill you if you make us mad." — Former US President Bill Clinton.

  • Fouad ElBayly, an Egyptian-born imam who in 2007 said that Somali-born activist Ayaan Hirsi Ali should receive the death penalty for her criticism of Islam, is now a Department of Justice contractor hired to teach classes to Muslims who are in federal prison. – The Daily Caller

  • "I pledge allegiance to the Flag of the United States of America, and to the Republic for which it stands, one Nation under Allah…." – Arabic rendering of the Pledge of Allegiance, Pine Bush High School, New York.

  • Breitbart News revealed the existence of what is believed to be the first official Sharia law court in the United States, in Irving, Texas. The so-called Islamic Tribunal settles civil disputes among the growing Muslim population.

  The Muslim population of the United States surpassed 3.5 million in 2015, according to demographic projections compiled by the Pew Research Center. In percentage terms, Muslims currently comprise roughly 1% of the US population.

  As in Europe, Islam was an ever-present topic in American newspaper headlines during 2015. Most news items involved terrorism-related issues — including many cases of lone-wolf terrorists — closely followed by articles about Muslim integration and assimilation.

  JANUARY 2015

  January 6. Officials at the Rocky Heights Middle School in Littleton, Colorado, ignited controversy when they told female students to dress according to Sharia law while visiting a mosque during a field trip. Peter Boyles, a radio talk show host in Denver, said: "Public schools are forbidden from holding girls to different standards than boys. They're holding these girls to a different standard, it's a religious reason. Islam dictates many … repressive practices against women…. That's their belief … but don't apply it to public school kids."

  January 7. Hashim Hanif Ibn Abdul-Rasheed, a 41-year-old Muslim armed with two knives taped to his legs, attempted to buy a plane ticket at the Port Columbus International Airport in Columbus, Ohio. Abdul-Rasheed was shot after he lunged at a police officer. Police said his behavior was "consistent with someone who intended to hijack an aircraft."

  January 9. Abdalah Mohamed, a 19-year-old migrant from Kenya, was arrested after he threatened to kill the owner of a Jewish delicatessen in Portland, Oregon. Police said Mohamed entered the store asking for a single cigarette. When the owner replied that he did not sell individual cigarettes, Mohamed reportedly said: "I will blow up your store. I'm going to take care of you, you mother (redacted). I'll call my people to take care of you to shoot you! I will blow up your store in the name of Allah, I will take care of people like you!"

  January 12. ISIS sympathizers hacked the official Twitter account of the US Central Command, the Pentagon division in charge of the Middle East. One tweet sent from CENTCOM's account stated: "American soldiers, we are coming, watch your backs." Another tweet said: "ISIS is already here…. With Allah's permission we are in CENTCOM now."

  January 13. Representative André Carson (D-Indiana), a convert to Islam, was appointed to the House Permanent Select Committee on Intelligence. Carson, who has extensive ties to the Muslim Brotherhood, is the first Muslim to sit on the committee.

  January 14. Christopher Lee Cornell, a 20-year-old convert to Islam, was arrested in Cincinnati, Ohio, for plotting to "wage jihad" by attacking the US Capitol. Cornell and his accomplice, who was actually an FBI informant, planned to detonate pipe bombs and gun down lawmakers. Cornell, whose Muslim name is Raheel Mahrus Ubaydah, had bought two M-15 rifles and 600 rounds of ammunition. He had also posted messages and videos espousing support for ISIS.

  Left: Rep. André Carson (D-Indiana), a convert to Islam, was appointed to the House Permanent Select Committee on Intelligence. Carson has extensive ties to the Muslim Brotherhood. Right: Christopher Lee Cornell, a convert to Islam, was arrested in Cincinnati, Ohio, for plotting to "wage jihad" by attacking the US Capitol. Cornell planned to detonate pipe bombs and gun down lawmakers.

  January 14. Shelton Thomas Bell, a 21-year-old convert to Islam from Jacksonville, Florida, was sentenced to 20 years in federal prison for attempting to provide material support to terrorists. According to court documents, Bell "conspired to train and prepare as a combatant for overseas violent jihad, then travel from Jacksonville to the Middle East for the ultimate purpose of providing the skills to terrorists, including members of Ansar al-Sharia in Yemen."

  As part of his training, Bell conducted a late-night "jihadi training mission" that involved destroying religious statues in a multi-denominational cemetery in Jacksonville. He also uploaded training and recruiting videos onto the Internet, including one in which he makes homemade pipe bombs and another in which he burns an America flag.

  January 15. Carol Swain, a prominent professor of law and political science at Vanderbilt University in Nashville, Tennessee, penned an op-ed in The Tennessean titled, "Charlie Hebdo attacks prove critics were right about Islam." She wrote:

  "What horrendous attack would finally convince us that Islam is not like other religions in the United States, that it poses an absolute danger to us and our children unless it is monitored better than it has been under the Obama administration?

  "More and more members of the PC [politically correct] crowd now acknowledge that Islam has absolutely nothing in common with Christianity…

   

  "It becomes clearer every day that Islam is not just another religion to be accorded the respect given to Christianity, Judaism, Buddhism, Baha'i and other world religions. The Jan. 7 terrorist attack resulting in 12 deaths at the Paris offices of Charlie Hebdo, a satirical magazine that committed the apparently unpardonable sin of lampooning the Prophet Muhammad, once again illustrates that Islam is a dangerous set of beliefs totally incompatible with Western beliefs concerning freedom of speech, freedom of assembly and freedom of association."

  Vanderbilt's Muslim Students Association said Swain's "hurtful, inciting comments" had caused "a great deal of emotional distress and frustration." Swain responded: "Why are today's university students so fragile they need counseling and affirmation whenever they hear something that makes them uncomfortable? Learning how to deal with your emotions is part of growing up."

  January 15. Former US President Bill Clinton, appearing on NBC's Late Night with Seth Meyers, said Islamic politics "advocates the world's greatest double standard: if you come to our country, we won't let you worship the way you want, we won't let you say what you want to say, we won't let you do what you want to do. However, we have come to your country, therefore we have the right to do whatever we want to do, including kill you if you make us mad."

  January 15. Duke University in Durham, North Carolina, canceled its plan to use the gothic bell tower of its chapel for the adhan, an amplified call to prayer for Muslims. The about-face followed criticism from many corners, including from Christian evangelist Franklin Graham, who wrote:

  "As Christianity is being excluded from the public square and followers of Islam are raping, butchering, and beheading Christians, Jews, and anyone who doesn't submit to their Sharia Islamic law, Duke is promoting this in the name of religious pluralism. I call on the donors and alumni to withhold their support from Duke until this policy is reversed."

  January 17. A conference in Garland, Texas, aimed at "defeating Islamophobia," featured several Muslim extremists who advocate the implementation of Sharia law in the United States. The conference, titled, "Stand with the Prophet in Honor and Respect," was billed as "not an event" but the "beginning of a movement. A movement to defend Prophet Muhammad, his person, and his message."

  January 18. The New York Post reported that Muslim groups are pressing the New York Police Department to remove a report about Islamic terrorism from its website. The groundbreaking, 90-page report, titled, "Radicalization in the West: The Homegrown Threat," angers critics who say it promotes "religious profiling" and discrimination against Muslims. Others argue that removing the report would send the message that the NYPD is backing down on its counterterrorism effort in the name of political correctness.

  January 19. Louisiana Governor Bobby Jindal, addressing the London-based Henry Jackson Society, warned that "non-assimilationist Muslims" pose a danger to Europe and the United States. He said:

  "In America we are quite happy to welcome freedom loving people, regardless of religion, who want to abide by our laws allowing for freedom of expression and a host of other democratic freedoms. But we will never allow for any sect of people to set up their own areas where they establish their own set of laws.

   

  "For example, Sharia law is not just different than our law, it's not just a cultural difference, it is oppression and it is wrong. It subjugates women and treats them as property, and it is antithetical to valuing all of human life equally. It is the very definition of oppression. We must stop pretending otherwise.

   

  "I favor robust debate on everything: on religion, on policy, on politics, on everything. It is called freedom. But when debate stops, and when a movement decides that they no longer want to debate their ideas, but rather they want to simply subdue, silence, and kill those who disagree … that is called terrorism, barbarism, and inhuman behavior, and it cannot and must not be tolerated."

  January 20. The US Supreme Court unanimously ruled that Arkansas corrections officials had violated the religious liberty rights of Muslim inmates by forbidding them to grow beards. The case concerned Gregory H. Holt, also known as Abdul Maalik Muhammad, who sought to grow a half-­inch beard.

  January 20. Montana State Senator Janna Taylor introduced Montana Senate Bill 199, which establishes "the primacy of Montana law by prohibiting the application of foreign law when it violates a fundamental right guaranteed by the Montana or United States Constitution." The bill is aimed at restricting the use of Islamic Sharia and other foreign law in the state.

  January 21. The American-Arab Anti-Discrimination Committee (ADC) complained that the movie "American Sniper" was spurring threats against American Muslims. ADC President Samer Khalaf said it did not make sense to call for a boycott of the film, given its box office success: "If we boycott it, it will only cause people to want to see it more."

  January 22. Malak Kazan, a 27-year-old Muslim woman, filed a religious discrimination lawsuit in Detroit, Michigan, accusing the Dearborn Heights Police Department of violating her First Amendment right to religious freedom when she was forced to remove her head scarf, after being arrested for driving with an expired license. Dearborn Heights Police Chief Lee Garvin said:

  "Articles such as hats, caps, hijabs, can contain concealable items that could pose a threat or chance of injury to the cops or to themselves. Our procedure is to have them take the hijab off in the presence of a female. We don't always have enough female officers present in the station. Our number one concern is security of our officers and the prisoners."

  Kazan's lawyer, Amir Makled, disagreed:

  "The main issue here is that my client's constitutional rights, her religious liberties, can't be stripped at the jailhouse door. She has an absolute right to maintain her faith. We hope this cause of action will bring to light a policy that is dated and needs to be amended…. We also hope to get some further diversity training for officers in the city. Hopefully this will be a learning experience for other law enforcement agencies."

  January 23. Addressing the World Economic Forum in Davos, Switzerland, US Secretary of State John Kerry said that Muslims should not be blamed for Islamic terrorism: "The biggest error that we could make would be to blame Muslims collectively for crimes … [that] the overwhelming majority of Muslims oppose."

  January 23. A federal judge in Denver, Colorado gave a four-year prison sentence to Shannon Maureen Conley, a 19-year-old woman who admitted to wanting to become an ISIS bride and join the jihad in the Middle East. Conley is one of the first Americans to be sentenced for conspiracy to support ISIS. Prosecutors hope her sentence has a deterrent effect.

  January 23. Senator Ted Cruz (R-TX) filed legislation to ban American citizens who fight alongside ISIS and other terror groups from returning to the United States. The bill, known as the Expatriate Terrorist Act, seeks to strip those Americans who travel abroad to fight with ISIS of their US citizenship rights.

  January 26. ISIS vowed to behead President Obama and "transform America into a Muslim province."

  January 28. The Natomas Pacific Pathways Prep, a public charter school in Sacramento, California, sponsored an official "Hijab Day" in cooperation with the Council on American-Islamic Relations (CAIR). To concerns about why a public school would be hosting such an event, the school responded with charges that critics were motivated by "hatred" and "bigotry."

  January 28. The US State Department hosted a delegation of Muslim Brotherhood operatives for a meeting about their ongoing efforts to overthrow the government of Egyptian President Abdel Fattah al-Sisi. A few days after the meeting, the Muslim Brotherhood called for "a long, uncompromising jihad" in Egypt.

  January 29. The FBI added a former Northern Virginia taxicab driver to the Most Wanted Terrorists list. Liban Haji Mohamed, 29, a Somali-born naturalized US citizen, is accused of being a recruiter for al-Shabaab, a terrorist organization in Somalia.

  January 30. The Refugee Women's Alliance, one of the largest refugee and immigrant service providers in Seattle, Washington, was forced to close in anticipation of a protest against one of its head teachers, Deepa Bhandaru, who led a discussion about free speech and religious pluralism in the wake of the Charlie Hebdo massacre. A group of Somali immigrants demanded that Bhandaru be fired for showing some of the Hebdo cartoons in her class. Bhandaru, who has received an "excellence in teaching" award from the University of Washington, was placed on paid leave while the agency "investigates" the matter.

  FEBRUARY 2015

  February 2. Darlene Hider, a 32-year-old Muslim-American woman who lives in Dearborn, Michigan, said she was harassed on a Delta Airlines flight because she was wearing an Islamic headscarf: "I felt as if I wanted to defend myself but I couldn't because of the Islamophobia going on." Others, however, said her children were being disruptive.

  The president of the American-Arab Anti-Discrimination Committee, Samer Khalaf, said: "We encourage Delta to take immediate steps to rectify this matter."

  But Hider says she wants more than a simple apology: "I want justice for every woman who wears a scarf and who's Muslim and doesn't have to worry about being on a plane or in a restaurant or a mall, or walking down the street… That is what I'm standing up for and I will not be quiet."

  February 4. The Mississippi House voted 116-1 to pass House Bill 177, which bans use of foreign law. Proponents of the measure want to prevent courts in the state from referring to Sharia law when deliberating cases.

  February 4. The head of the FBI's counterterrorist division, Michael Steinbach, warned that the Islamic State is targeting and recruiting teenage Americans, including females, to carry out terrorist attacks on US soil.

  February 4. A Bloomberg Politics/Des Moines Register Iowa Poll found that 53% of likely Republican caucus participants and 81% of likely Democratic caucus participants said they believe Islam is inherently peaceful. Only 13% of likely Democratic caucus participants said they view Islam as inherently violent, compared with 39% of likely Republican caucus participants.

  February 5. US President Barack Obama, speaking at the National Prayer Breakfast in Washington, DC, attempted to downplay the dangers of Islamic terrorism by creating a false moral equivalence with the Crusades, which occurred 1,000 years ago, in response to Muslim invasions.

  February 5. The Health and Human Services Committee of the South Dakota House of Representatives approved a proposal that would make it a felony to perform female genital mutilation in the state.

  February 5. The Board of Education in Waterbury, Connecticut, announced that all schools in the Waterbury School District would begin honoring two of Islam's most holy days, Eid al-Fitr and Eid al-Adha, by not scheduling tests, field trips or major school events on those days. This is the first decision of its kind in the state of Connecticut.

  February 6. The FBI charged six Bosnian immigrants with terrorist related crimes: Ramiz Zijad Hodzic, 40; his wife, Sedina Unkic Hodzic, 35; and Armin Harcevic, 37, all of St. Louis County, Missouri; as well as Nihad Rosic, 26, of Utica, New York; Mediha Medy Salkicevic, 34 of Schiller Park, Illinois; and Jasminka Ramic, 42, of Rockford, Illinois. All defendants were charged with conspiring to provide material support and resources to terrorists. Ramiz Zijad Hodzic and Nihad Rosic were also charged with conspiring to kill and maim persons in a foreign country. According to the FBI, the defendants raised money and shipped weapons and uniforms and other aid to ISIS fighters in Syria.

  February 6. Army Secretary John McHugh approved awarding the Purple Heart and its civilian counterpart, the Secretary of Defense Medal for the Defense of Freedom, to victims of the November 2009 shooting at Fort Hood, Texas. Thirteen people were killed and more than 30 wounded in the attack by Army Major Nidal Malik Hasan, a psychiatrist whose business card read "SoA" for "Soldier of Allah." The Obama administration had classified the attack as "workplace violence," but Congress redefined what should be considered an attack by a "foreign terrorist organization" for purposes of determining eligibility for the Purple Heart.

  February 9. WFTV Channel 9 television in Orlando, Florida, investigated a school in Seminole County after parents complained that students were learning too much about Islam in a public classroom. One parent became concerned after he spotted a text on his son's phone from a teacher reminding him to complete a prayer rug assignment and study an Islam packet. WFTV found that a textbook included a chapter dedicated to the "Rise of Islam," including prayers and scriptures from the Quran. But the first 100 pages of the book, discussing Judaism and Christianity, were missing. Officials from the school district blamed a manufacturer defect in 68 books that are only a year old.

  February 10. Craig Stephen Hicks, 46, murdered three college students at a condominium complex in Chapel Hill, North Carolina, allegedly over a dispute over a parking space. Muslim groups branded the triple-homicide as a hate crime because the three victims were Muslim.

  February 12. Representatives of several NGOs in Olympia, Washington, called on Representative Larry Haler to apologize for saying in a House Judiciary Committee hearing that the Council on American-Islamic Relations (CAIR) is "basically run by the Muslim Brotherhood and Hamas," with a goal "to overthrow the country." Haler said he has already apologized twice to CAIR for his remarks: "It is unfortunate that these two instances do not satisfy their definition of apology."

  February 13. Reaz Khan, a 51-year-old Pakistani-born naturalized US citizen living in Portland, Oregon, pleaded guilty to providing $2,450 to Ali Jaleel, a terrorist who killed more than 30 people in a May 2009 suicide bombing in Lahore, Pakistan. Prosecutors presented an email in which Jaleel reminded Khan about their shared promise to seek martyrdom in the name of Allah.

  February 14. Terrence Lavaron Thomas, 39, a convert to Islam, stabbed two people at a bus stop in Southfield, a northern suburb of Detroit, Michigan. Police say Thomas asked a group of people if they were Muslim and attacked those who responded 'no' with a three-inch knife. American media outlets, including the Washington Post, were accused of seeking to downplay the Muslim attack on non-Muslims by publishing misleading headlines.

  February 16. State Department spokeswoman Marie Harf, speaking on MSNBC's Hardball, said that the solution to defeating ISIS was "a jobs program." She said: "We need … to go after the root cause that leads people to join these groups, whether it's lack of opportunity for jobs."

  At that point, Harf was interrupted by host Chris Matthews, who pointed out, "There's always going to be poor people. There's always going to be poor Muslims."

  Harf continued to argue that the US should help Muslim countries "build their economies so they can have job opportunities for these people." She added: "If we can help countries work at the root causes of this — what makes these 17-year-old kids pick up an AK-47 instead of trying to start a business?"

  February 17. The White House launched a three-day Summit on Countering Violent Extremism but refused to use the term Islamic extremism. The summit featured Islamists known for preaching anti-Western themes.

  February 17. Al-Hamzah Mohammad Jawad was arrested as he tried to fly out of Detroit Metropolitan Airport in Michigan, to Amman, Joran, on a one-way ticket. According to the FBI, Jawad, who came to the US in 2013 as a refugee from Iraq, was planning to join ISIS in Iraq.

  February 18. Lawmakers in the North Dakota House of Representatives objected to a Muslim delivering the chamber's opening prayer on Ash Wednesday because some members wanted a Christian pastor to give the invocation. The Minnesota chapter of the CAIR called on North Dakota Republican Party leaders to apologize to Dr. Nadim Koleilat. House leader Al Carson said no such apology would be forthcoming.

  February 18. Department of Homeland Security Secretary Jeh Johnson said his job is to "give voice to the plight of Muslims living in this country and the discrimination that they face." He added: "And so I personally have committed to speak out about the situation that very often people in the Muslim community in this country face. The fact that there are 1.6 billion Muslims in the world and the Islamic faith is one about peace and brotherhood."

  February 19. US President Barack Obama said that Americans who criticize Islam are guilty of provoking Islamic terrorists: "When people spew hatred towards others — because of their faith or because they're immigrants — it feeds into terrorist narratives. If entire communities feel they can never become a full part of the society in which they reside, it feeds a cycle of fear and resentment and a sense of injustice upon which extremists prey."

  February 21. The Islamist group al-Shabaab released an online video in which it called for an attack on the Mall of America, a megamall in Bloomington, Minnesota.

  February 23. Sohiel Omar Kabir, 37, and Ralph Deleon, 26, were sentenced to 25 years in federal prison for seeking to join al-Qaeda and training to carry out attacks on Americans in Afghanistan. Deleon is a citizen of the Philippines who lived in Ontario, California. Kabir, is an Afghanistan-born American citizen who lived in Pomona, California, and had relocated to Kabul, but was subsequently arrested by American military personnel in Afghanistan.

  February 23. Abdirahman S. Mohamud, a 23-year-old Somali-born American citizen residing in Columbus, Ohio, was charged with providing "electronic devices to persons engaged in terrorism in the Middle East."

  February 24. Jean Camara, a convert to Islam, filed a lawsuit against Costco, the world's third largest retailer, for religious discrimination. He said he was working as a cashier at a store in Brooklyn, New York, when pork came across the conveyor belt. After Camara told his manager that it is against his religious beliefs to touch either pork or alcohol, he was transferred outside to collecting the shopping carts. After he filed a human rights complaint against the company, he says he was fired for insubordinate conduct.

  February 25. The FBI charged three residents of Brooklyn, New York, with conspiracy to provide material support to ISIS. Akhror Saidakhmetov, a citizen of Kazakhstan, was arrested at John F. Kennedy International Airport, where he was attempting to board a flight to Istanbul, Turkey. Abdurasul Hasanovich Juraboev, a citizen of Uzbekistan, had previously purchased a plane ticket to travel from New York to Istanbul and was scheduled to leave the United States in March. Abror Habibov, a citizen of Uzbekistan, helped fund Saidakhmetov's efforts to join ISIS. According to the FBI, Juraboev offered to kill the President of the United States if ordered to do so by ISIS, and Saidakhmetov expressed his intent to buy a machine gun and shoot police officers and FBI agents if thwarted in his plan to join ISIS in Syria.

  February 25. The US Supreme Court heard the case of Samantha Elauf, a Muslim woman who said the Abercrombie & Fitch clothing store illegally denied her a job because she wears a hijab in keeping with her faith.

  February 26. Abdullahi Mohamud Yusuf, a Somali-American teenager, pleaded guilty in federal court in Minneapolis, Minnesota, of conspiring to support ISIS. Yusuf, 18, was stopped by FBI agents at Minneapolis-St. Paul International Airport in May 2014 as he attempted to leave the US for Turkey.

  February 26. An annual report delivered to the US Senate by the director of National Intelligence, James Clapper, removed Iran and Hezbollah from its list of terrorism threats, after years in which they featured in similar reports.

  February 27. Hundreds of Muslims attended the first ever "Muslim Day" at the Oklahoma state capitol. The event, which was organized by the Oklahoma chapter of the Council on American-Islamic Relations (CAIR).

  MARCH 2015

  March 2. The director of National Intelligence, James Clapper, revealed that about 180 Americans have traveled to Syria to join Islamist militants and around 40 of them have returned to the United States.

  March 3. The city council of Taylor, Michigan, unanimously approved a resolution against Islamophobia. The resolution says the city will "stand against those who preach hate and incite violence." Resident Fred Lyons said he did not feel the resolution was necessary. "I don't see why we need a resolution to say we're against hate. We are," Lyons said. "Anyone who would say you are supporting hate would be asinine." He said he feared the resolution could lead to lawsuits against the city.

  March 3. The Daily Caller revealed that Fouad ElBayly — an Egyptian-born imam who in 2007 said that Somali-born activist Ayaan Hirsi Ali should receive the death penalty for her criticism of Islam — is now a Department of Justice contractor hired to teach classes to provide "leadership and guidance" to Muslims at a federal prison in Maryland.

  March 4. New York Mayor Bill de Blasio announced that public schools in the city would begin observing two Muslim holidays, Eid al-Fitr and Eid al-Adha. The change is the result of nearly a decade of lobbying by Muslim groups. Muslims make up about 10% of the students in New York City public schools.

  March 4. Zaytuna College based in Berkeley, California, became the first Muslim college in the United States to receive accreditation.

  March 4. Minh Quang Pham, a 32-year-old Vietnamese man extradited from the United Kingdom, pleaded not guilty to supporting al-Qaeda in the Arabian Peninsula, receiving military training from the terrorist organization in Yemen, and possessing a firearm intended for use in crimes of violence. Pham, formerly a graphic designer who lived in southeast London, was arrested at Heathrow International Airport when he returned in July 2011 from a six-month trip to Yemen.

  March 4. Abid Naseer, a 28­-year­-old Pakistani man, was convicted in Federal District Court in Brooklyn, New York, of conspiring with al-Qaeda to bomb a shopping center in Manchester, England. Naseer, a graduate of Flushing High School in Queens, was indicted in the US under a law that allows the federal government to pursue terrorism cases even when they occur outside the country; he was extradited to the US in 2013.

  March 6. The Associated Students of the University of New Mexico (ASUNM), the undergraduate student government for UNM, unanimously passed a resolution urging the UNM administration to "publicly state their opposition to Islamophobia." The document, known as Resolution 6S, defines Islamophobia as a "dislike or prejudice against Islam or Muslims, especially as a political force."

  March 10. Diego Chaar, a 24-year-old Brazilian who converted to Islam while in prison, was arrested after stalking the Ohev Shalom synagogue in Miami Beach, Florida, shouting "Allahu Akbar" and threatening to cut off the heads of congregants exiting the synagogue.

  March 12. Raees Alam Qazi, 22, and Sheheryar Alam Qazi, 32, two brothers born in Pakistan — both are naturalized US citizens who spent most of their lives in South Florida — pleaded guilty to federal terrorism charges after admitting they had plotted a terrorist attack on landmarks in New York City. Later, while in custody, they assaulted two deputy US Marshals. The younger brother pleaded guilty to an additional charge of attempting to provide material support to al-Qaeda.

  March 16. Miguel Alejandro Santana Vidriales, 24, of Upland, California, was sentenced to 10 years in prison, and Arifeen David Gojali, 24, of Riverside, was sentenced to five years, for their involvement in a conspiracy to travel to Afghanistan to kill American troops.

  March 16. Adam Dandach, a 21-year-old convert to Islam who also goes by the name Fadi Fadi Dandach, pleaded not guilty to charges that he provided material support and resources to ISIS. He had previously pled not guilty to lying on a passport application. Prosecutors say he obstructed justice when he allegedly asked a website administrator to delete his post history. FBI agents had prevented Dandach from boarding a Delta Airlines flight at John Wayne Airport in Orange Country, California, to Istanbul, Turkey, in July 2014.

  March 16. A United Airlines jet traveling to Denver returned to Washington Dulles International Airport after passengers subdued a man who rushed toward the cockpit yelling "Jihad! Jihad!"

  March 17. Tairod Nathan Webster Pugh, a 47­-year­-old American convert to Islam and Air Force veteran from New Jersey, was charged with trying to join ISIS.

  March 18. An effort to mark national Foreign Language Week by reading the Pledge of Allegiance of the United States in Arabic ignited controversy at the Pine Bush High School in New York. Students and parents were angered by the Arabic rendering: "I pledge allegiance to the Flag of the United States of America, and to the Republic for which it stands, one Nation under Allah…."

  March 18. Commissioners in Clark County, Nevada, unanimously approved the establishment of the first Islamic cemetery in the Las Vegas metropolitan area. The private, nonprofit cemetery will be situated on two acres just south of McCarran International Airport.

  March 19. The city council of Irving, Texas, voted to endorse a state bill that would forbid judges from using foreign law in their rulings. The move comes after Breitbart News revealed the existence of what is believed to be the first official Sharia law court in the United States. The so-called Islamic Tribunal, based in Irving, settles civil disputes among the growing Muslim population. Irving Mayor Beth Van Duyne said the tribunal "bypasses American courts" and warned that if basic rights are being violated, "I will not stand idle, and will fight with every fiber of my being against this action."

  March 19. Mohammad Yahya, 39, filed a lawsuit against the Gregg County Jail in Longview, Texas, for violating his right to observe Ramadan. Yahya, who is serving time for wire fraud, said Gregg County jailers refused to honor his right to have his meals provided before 4:45 a.m. and after 8:30 p.m. during Ramadan.

  March 21. ISIS hackers called on their "brothers in America" to kill 100 US service members whose names, addresses and photographs were published online.

  March 25. The US Army charged Sergeant Bowe Bergdahl with desertion and misbehavior before the enemy. Bergdahl, 28, disappeared from his outpost in Afghanistan on June 30, 2009. He has been accused of leaving his patrol base intentionally before he was captured by Taliban insurgents. He spent five years as a captive of the Taliban before he was freed in a prisoner swap that also freed five Taliban leaders from the US military prison at Guantanamo Bay, Cuba.

  March 26. Army National Guard Specialist Hasan Edmonds, 22, a US citizen, was arrested at Chicago Midway International Airport while attempting to fly to Cairo, Egypt, eventually to join ISIS. His cousin, Jonas Edmonds, 29, a US citizen, was arrested without incident at his home in Aurora, Illinois in connection with an alleged plot to carry out an armed attack on a US military facility in northern Illinois.

  

  

  

  

  

• Norway's Biggest Bank Demands Cash Ban

  The war on cash is escalating faster than many had imagined. Having documented the growing calls from the elites and propagandist explanations of the "benefits" to their serfs over the last few years, with China, and The IMF entering the "cashless society" call most recently, International Business Times reports that Norway – suffering from its own economic collapse as oil revenues crash – has joined its Scandi peers Denmark and Sweden in a call to "ban cash."

  By way of background, as we explained previously, What exactly does a “war on cash” mean?

  It means governments are limiting the use of cash and a variety of official-mouthpiece economists are calling for the outright abolition of cash. Authorities are both restricting the amount of cash that can be withdrawn from banks, and limiting what can be purchased with cash.

  These limits are broadly called “capital controls.”

  Why Now? Why are governments suddenly so keen to ban physical cash?

  The answer appears to be that the banks and government authorities are anticipating bail-ins, steeply negative interest rates and hefty fees on cash, and they want to close any opening regular depositors might have to escape these forms of officially sanctioned theft. The escape mechanism from bail-ins and fees on cash deposits is physical cash, and hence the sudden flurry of calls to eliminate cash as a relic of a bygone age — that is, an age when commoners had some way to safeguard their money from bail-ins and bankers’ control.

  Forcing Those With Cash To Spend or Gamble Their Cash

  The conventional answer voiced by Mr. Buiter is that recession and credit contraction result from households and enterprises hoarding cash instead of spending it. The solution to recession is thus to force all those stingy cash hoarders to spend their money.

  And the benefits of a cashless society to banks and governments are self-evident:

  1. Every financial transaction can be taxed.

   

  2. Every financial transaction can be charged a fee.

   

  3. Bank runs are eliminated.

   

  In fractional reserve systems such as ours, banks are only required to hold a fraction of their assets in cash. Thus a bank might only have 1 percent of its assets in cash. If customers fear the bank might be insolvent, they crowd the bank and demand their deposits in physical cash. The bank quickly runs out of physical cash and closes its doors, further fueling a panic.

   

  The federal government began insuring deposits after the Great Depression triggered the collapse of hundreds of banks, and that guarantee limited bank runs, as depositors no longer needed to fear a bank closing would mean their money on deposit was lost.

   

  But since people could conceivably sense a disturbance in the Financial Force and decide to turn digital cash into physical cash as a precaution, eliminating physical cash also eliminates the possibility of bank runs, as there will be no form of cash that isn’t controlled by banks.

  So, when the dust has settled who ultimately benefits by this war on cash – government and the central banks, pure and simple.

  Which explains why Norway's biggest bank, DNB, has called for the country to stop using cash which is just the latest move in a country that has been leading the global charge toward electronic money in recent years, with several banks already not offering cash in their branch offices and some industries seeking to cut back on paper currency.

  DNB's proposal suggests eliminating the use of cash would cut down on black market sales and crimes such as money laundering.

   

  “Today, there is approximately 50 billion kroner in circulation and [the country’s central bank] Norges Bank can only account for 40 percent of its use. That means that 60 percent of money usage is outside of any control. We believe that is due to under-the-table money and laundering,” Trond Bentestuen, a DNB executive, told Norwegian website VG, the Local reported.

   

  “There are so many dangers and disadvantages associated with cash, we have concluded that it should be phased out,” he added.

   

  The country has already moved in this direction. Bentestuen estimated that only about 6 percent of Norwegians use cash on a daily basis, with the numbers higher among elderly people.

  Norway’s Ministry of Finance is opposed to the proposal, however, and other critics have raised concerns about privacy issues as well as how the change would affect tourists. Privacy advocates in Norway have expressed worries for years that, without cash, there would be no way for an individual to purchase something without being tracked.

  In 2014, Finans Norge, a financial industry organization in Norway, said the country was on pace to be a cashless society by 2020, Ice News reported. While DNB said its proposal will take time to complete, executives suggested the country start phasing out cash by discontinuing the 1,000 kroner note so it could focus on updating its banking system.

  “Eighty-five percent of our customers say that they never or only very rarely go to the bank. Therefore we think it is a mistake to maintain a very old structure with local branch offices. It is better to follow the customers and improve the offers where the customers are: digital,” Bentestuen said.

   

  In the meantime, DNB and Norway’s second largest bank, Nordea, have already stopped using cash in their branch offices. And the movement toward a goal of no cash has been going on for a while. The Norwegian Hospitality Association pushed to eliminate consumers’ right to pay cash at all stores and restaurants in 2013, The Local reported.

   

  Other countries including Denmark and Sweden have made similar pushes as their populations also rely largely on electronic money.

  If allowed to continue, state wealth control will exist.

  And thus, as we concluded previously, if you can’t withdraw your money as cash, you have two choices: You can deal with negative interest rates…or you can spend your money. Ultimately, that’s what our Keynesian central planners want. They are using negative interest rates and the War on Cash to force you to spend and “stimulate” the economy.

  If you ask us, these radical and insane measures are a sign of desperation.

  The War on Cash and negative interest rates are huge threats to your financial security. Central planners are playing with fire and inviting a currency catastrophe.

  

  

  

  

  

• Austria To Refugees: Learn To Speak German Or Get No Money

  On Friday, we brought you the latest in a series of cartoons and pictographs designed by European authorities to help Mid-East refugees better understand European society.

  Judging from the integration “guides”, migrants are having a hard time coming to terms with quite a few things, but the two main problems appear to be publicly beating women and small children and randomly groping women’s behinds.

  

  European officials have also endeavored to pen lengthy instruction manuals to accompany the visual aids with pointers on everything from where to urinate to how to properly enter a room (hint for refugees: you should not storm through a closed door without knocking).

  All jokes aside, Europe is quickly running out of time to address the worsening migrant crisis. As one unnamed German politician told Reuters earlier this month, “there is a risk that February could start a countdown to the end.”

  “We have passed a tipping point where the influx reduces the capacity of the countries to assimilate or integrate the refugees,” George Soros said this week in Davos, echoing the sentiments of those who sense the death of the euro is at hand. “There is panic,” he added.

  French economy minister Emmanuel Macron, speaking to an audience in Davos, had the following to say about the situation: “We have a few weeks to concretely deliver our options… otherwise you have country-by-country solutions (and that is) the beginning of the dismantling for sure.”

  Yes, “country-by-country solutions”, like those pursued by Hungary’s Viktor Orban who simply build a giant razor wire fence and sprayed tear gas and water at migrants as though they were angry zoo animals trying to claw their way out of their cage.

  Or like a new approach adopted by Austria, where Foreign Minister Sebastian Kurz now says any refugee who refuses to attend “special integration training courses” may not receive social benefits.

  “Those who are not willing to learn German, who do not want to be part of the labor market, who are not ready to attend an integration course, will face social benefits cuts,” Kurz said in Davos, before adding that “it is an absolutely necessary next step.”

  “The migrant inflow should be reduced but those, who do have the right to get asylum, should be integrated into society,” he continued.

  As RT notes, Markus Wallner, the head of Austria’s western Vorarlberg region, concurs. “Here can eventually be no avoidance behavior. Specifically, if someone avoids attending the values training course, [his] social benefits should be reduced,” he said.

  “Eight-hour ‘value and orientation’ training courses aimed at teaching refugees Austrian laws and social norms are a part of the broader integration program developed and agreed by the government and the heads of the Austrian regions on January, 20,” RT goes on to say. “The first courses will start in February [and] will cover the basic values embodied in the country’s constitution, equal rights and equal treatment of men and women as well as other democratic principles.”

  These classes will cost the Austrian government around €5 million.

  Recall that Austria has temporarily suspended Schengen and has become increasingly frustraed with its role as a corridor on the crowded Balkan route to Germany. Tiny Slovenia said that as a result of the Austrian border controls, it too would need to close its border with Croatia in order to avoid a migrant logjam. 

  When it comes to measuring the “success” of Austria’s new migrant training courses, Wallner says check back in three months: “We will see, how it will work in the first quarter [of the year], and can extend the offer if necessary.”

  As for the chances that Austria (or Europe as a whole for that matter) will be able to successfully Westernize millions of Mid-East asylum seekers, Kurz isn’t optimistic. 

  “Let’s not delude ourselves,” he said. “We have an intensive long lasting integration process ahead of us.”

  Yes Frau Merkel, let’s not “delude ouselves.”

  

  

  

  

  

  

• Here Are The 100 Biggest Hedge Funds And Their Favorite Stocks

  Once upon a time, long before central planning, before “smart beta”, and before various attorney generals busted Stevie Cohen’s massive “expert network” insider trading pardon “information arbitrage” gig, hedge funds were spoken about in hushed tones of reverence, with special admiration reserved for their portfolio managers whose egos (and certainly bank accounts) promptly rose to the status of “financial god.”

  Then, slowly at first then very fast, the facade fell off in no small part thanks to central bankers acting as Chief Risk Officers of the “market” and making any correction impossible (and thus eliminating the need to hedge as we first warned in 2011), and hedge funds quickly became the butt of all jokes, especially after 2015 when it was revealed that “alpha” simply meant jumping into a handful of “idea dinner” hedge fund hotel positions with hopes that the slowest greater fool will push up the stock price (with leverage) to mark books that much higher, and collect that elusive “20.”

  Alas it did not work out, and while others were laughing, there were no smiles among LPs and fund investors, and certainly not the hedge fund employees who for yet another year were stiffed despite hopes of retiring after just a few years of “buysiding it.”

  Oh well, maybe 2016 is your year. Good luck. However, as frequent readers know we have long predicted the collapse of the hedge fund industry, along with its $4 trillion or so in (unlevered) AUM for the simple reason that with central banks, there is no need to hedge (and thus the 2 and 20 model is unsustainable), while without hedge funds, there is no possible hedge one can put on to offset the systemic collapse.

  Hence, in some ways, the name of this blog.

  That does not mean, however, that the hedge fund industry will disappear overnight.

  Here, courtesy of Bank of America, here is a list of the 100 top hedge funds in the US and their 100 favorite stock holdings – assuming the status quo continues, expect very substantial asset declines among these 100 when we rerun this analysis in 52 weeks time.

  

   

  Next, here are the top equity positions of the top hedge funds listed above, and all others:

  

   

  Same thing, but broken down by sector:

  

  Finally, here are the core holdings of the 150 hedge funds as of the start of Q4: as recent experience has shown, everyone is happy on the way up – it is the panic on the way down, observed most violently at AGN in recent months, that is what brings a frown to many a hedge funders’ face.

  

  

  

  

  

• 700 Days In No Man's Land – Why They Can't Keep It Up

  Submitted by David Stockman via Contra Corner blog,

  This week brought another reason to get out of the casino, and to sell it short if you can tolerate some volatility.

  On Friday the Japanese stock market ripped 6% higher and the European bourses were up 5% because their respective central bankers emitted some hints of more easing just ahead. Even the US market managed to find green for the week.

  Apparently, the day traders and robo-machines think BTFD still works. But they are going to be sorely disappointed – just as they have been for nearly 700 days running.

  That is, since the S&P 500 crossed the 1870 mark in early March 2014, there have been 35 attempts to rally higher. All of them have failed.
  

  ^SPX data by YCharts

  Like the bloody trenches of World War I, the movement back and forth in “no man’s land” on the chart above has been pointless. At some juncture in the not too distant future, the stock averages are going to break this trading range, and plunge back down to earth.

  In the meantime, you can’t blame the punters for trying. This week they succumbed once again to the BTFD delusion undoubtedly because the “moar money” chorus grew ever louder as Friday approached.

  That baleful refrain was led this time around by no less than the posse of oligarchs and apparatchiks assembled at Davos. Thus, when Mario Draghi, the world’s most ludicrous monetary dunce, let on that there were “no limits” on how much fraudulent credit could be emitted by the ECB’s printing press, he surely spoke a frightening truism.

  Yet the world largest asset gather, Larry Fink, founder of $4.5 trillion BlackRock, gushed with an endorsement of what was pure monetary crack pottery:

  “We’ve seen over the last few years you have to trust in Mario,” Laurence Fink, chief executive officer of BlackRock Inc., said in Davos. “The market should never, as we have seen now, the market should not doubt Mario.”

  That’s right. You can’t make this baloney up. As Jeffery Snider shows in a nearby post, the massive ECB exercise in QE, which has already emitted some $700 billion in printing press airballs, has had no impact at all on its ostensible targets. Namely, the generation of a burst of private borrowing in order to stimulate spending and inflation.

  In fact, European bank lending has been on the flat-line for 7 years and neither the ECB’s massive LTRO of 2012 or the QE explosion during 2015 has changed this trend.

  

   

  That’s because Europe is at “peak debt” and has been so ever since the original single currency borrowing binge peaked in 2008.

  

  Surely, Larry Fink knows that QE has been a failure in Europe, the US and everywhere else it has been tried. To wit, when the household and business sectors are at “peak debt” central bank money printing amounts to pushing credit on a credit string. It does nothing except inflate the value of existing financial assets and provides cheap carry trade funding for speculators.

  That is actually the point, of course. Contemporary central bankers function like a team of monetary wranglers, herding the retail cattle toward the asset gathers. And the latter always and everywhere manage to scalp a fee from investor portfolios being inflated by central bank action. It’s the modus operandi of our regime of bubble finance.

  So the Larry Fink’s of the world have become cynical advocates for monetary policies that any half-wit can see amount to gibberish. Here is what the ECB said a year ago when it launched into it $1.4 trillion QE program:

  The Governing Council took this decision in a situation in which most indicators of actual and expected inflation in the euro area had drifted towards their historical lows. As potential second-round effects on wage and price-setting threatened to adversely affect medium-term price developments, this situation required a forceful monetary policy response.

   

  Asset purchases provide monetary stimulus to the economy in a context where key ECB interest rates are at their lower bound. They further ease monetary and financial conditions, making access to finance cheaper for firms and households. This tends to support investment and consumption, and ultimately contributes to a return of inflation rates towards 2%. [emphasis added]

  Needless to say, the first paragraph above is errant nonsense. The idea that Europe was suffering from a dearth of inflation is essentially Keynesian newspeak. What these monetary cranks were talking about as requiring a “forceful monetary policy response” was the tiny area of relatively benign consumer inflation shown in the circle.

  

  Even then, the 26-year average rate of consumer inflation shown above was 2.1%. By contrast, the slight relief experienced by wage earners and savers in recent months is entirely due to the great oil and commodity deflation now washing through the world economy.

  Yet since the Eurozone produces virtually no fossil energy or industrial raw materials (even most of the coal is produced in Poland which is not in the euro area), it’s a wonderful thing; it results in higher real wages and more real output and wealth.

  In fact, after years of deteriorating terms of trade with the rest of the world due to the China driven commodity bubble, the pendulum is swinging favorably in Europe’s direction. But its self-serving monetary central planners and financial class have managed to turn an unequivocal good  into an entirely contrived problem——as in the specious claim that “potential second-round effects on wage and price-setting threatened to adversely affect medium-term price developments”.

  That is gibberish. So what if stronger real wages and better purchasing power on global commodity markets result in a lower trend of nominal wages and prices in Europe. For 200 years until about 2009, most economists thought that was a very good thing.

  And virtually none of them believed in “inflation targeting”, let alone a magic threshold of 2%. That was the half-baked theory of Ben Bernanke and a small posse of second rate academics like Frederic Mishkin of Columbia Business School, who published indecipherable papers in Ben’s forgettable books.

  Simply put, there is no logic or empirical evidence whatsoever that supports the idea that 2.00% consumer inflation is better for economic growth and improvements in real productivity and living standards than is 1.22% or 0.02% consumer inflation.

  This is just a postulate made-up from wholecloth that justifies massive central bank intrusion in the financial system and constant efforts to falsify and inflate the prices of financial assets. Since the annual Davos confab has increasingly become the equivalent of an asset gatherers ball, it is not surprising that it has become a loud lobby in favor of moar central bank monetary fraud.

  Nor were the BOJ and ECB the only source of renewed hope for monetary ease. Davos based whispers that the Fed’s expected March raise would be taken off the table quickly flooded the canyons of Wall Street. In no time flat the dip buyers were back in force.

  But let me pick out Ray Dalio for special mention in the roll call of shame. The founder of the $200 billion Bridgewater complex of  hedge funds was talking his book like there was no tomorrow on the sidelines at Davos, assuring the world’s punters that QE4 is just around the corner:

  “I think a move to a quantitative easing would bolster psychology,” he told CBBC’s “Squawk Box: at the so-called World Economic Forum at Davos…..This will be a negative for the economy, this market movement. The Fed should remain flexible. It’s shouldn’t be so wedded to a path……. “The risks are asymmetric on the downside, because asset prices are comparatively high at the same time there’s not an ability to ease,” he said. “That asymmetric risk exists all around the world. So every country in the world needs an easier monetary policy.”

  You can listen to the whole interview if you can manage your blood pressure, but it amounts to this. Dalio’s $80 billion “All Weather” portfolio is in deep trouble because his fabled “risk parity trade” is in danger of puking big time.

  So he urges the central banks to plunge into another fit of destructive money printing, and thereby keep tens of millions of ordinary savers and retirees impaled on the economic torture racks of ZIRP. Worse still, without a trace of compunction or embarrassment he urges the retail sheep back to the stock market slaughter for the bald faced reason that he needs to nix the VIX.

  Let me explain. Dalio ended up a billionaire not because he created a lot of economic value added or societal wealth gains as did Bill Gates, Steve Jobs, Sam Walton or even Jeff Bezos. The latter’s stock is way over-valued, but the immense gains he has delivered to tens of millions of consumers cannot be gainsaid.

  By contrast, Dalio did little more than stumble on a Wall Street gambling formula that would be absolutely bogus without the perverted “wealth effects”  policies of today’s Keynesian central bankers. The turbo-charging effect of Wall Street’s fast money traders and robo-machines piling on for the ride only makes Dalio’s rent scalping even more lucrative.

  They call the underlying dynamic “risk-on/risk-off” on bubblevision, but it amounts to this. In a rigged financial market in which stock and bond prices are continuously rising over time owing to systematic falsification of financial asset prices by the central banks, you can make tons of money being long. Yet there is even more megatons of windfall gains to be harvested if you add Dalio’s secret sauce, as I explained in a post a few months ago:

  Indeed, never in all of history have a few ten thousand punters made so many trillions in return for so little economic value added. But what Dalio did in this context was to invent an even more efficient machine to strip-mine the Fed’s monumental largesse.

   

  To wit, Bridgewater’s computers buy more stocks on the “rips”, when equity volatility is falling and prices are rising; and then on the “dips” they rotate funds into more bonds when equity volatility is rising and the herd is retreating to the safe haven of treasuries and other fixed income securities, thereby causing the price of the latter to rise.

   

  In short, there is a payday in every type of short-run financial weather because Bridgewater’s computers are monetary sump pumps; they constantly purge volatility from the portfolio.

  But here’s the thing. The “risk parity trade” could never exist in an honest free market.

   

  You couldn’t create algorithms to safely pump out volatility and milk the market on alternating strokes because the regularity of the waves on which it is based are not natural; they are the handiwork a central bank that has been taken hostage by the casino gamblers.

   

  Nor is “hostage” too strong a word. In the days of Paul Volcker and William McChesney Martin anybody who even speculated about 80 months of ZIRP would have been assigned to the William Jennings Bryan school of monetary crankery.

  The occasion for these musings was the August market swoon, which was triggered by the initial financial shock waves from the fracturing Red Ponzi of China. This caused something to happen which violated the rules generated by the 29-year regime of Bubble Finance inaugurated by Alan Greenspan in October 1987 when the stock market plunged on Black Monday.

  To wit, when stock prices fell by 12% during late August to the 1870 low on the S&P 500, bond prices did not surge owing to risk-off clamoring by the market herd. Accordingly, Bridgewater’s risk party portfolio became swamped with too much volatility on both the bond and equity side of Dalio’s big boat. So the algorithmic sump pumps went into over-time dumping stocks in order to drain the ship.

  Consequently, Bridgewater wiped out its entire profits for the year in a few days during August. This spasmodic stock selling, in turn, pushed the casino’s plain vanilla momo chasers and robo-machines into the drink in the process. Needless to say, the capsizing Big Boats in the casino were soon firing at each other in public, but also lining-up for a full court press at the Eccles Building.

  Here’s the reason. In an honest financial market in which debt is priced by the willingness of savers to forego current use of their money, there could be no “risk parity” trade because the price of stocks and bonds would not be inversely correlated. Indeed, the price of government bonds and blue chips corporates would fluctuate only modestly over time owing to secular changes in the propensity to save, but they would absolutely not vary inversely to the stock average on a short and mid-term basis.

  The graph below, therefore, is a pure product of central bank driven bubble finance. The stock index rose by 11X on a trend basis over the last three decades even as national income (GDP) rose by only 3X. That yawning gap was due to the Fed’s massive financial repression which subsidized the flow of speculative capital into the stock markets.

  At the same time, the yield on the 10-year treasury note dropped from 9% to 2%, meaning that the price of the risk free benchmark bond surged by order of magnitude over the period.

  So risk parity really worked only because in two stroke engine fashion it deftly moved short-term trading positions back and forth along the rising trend lines of the stock and bond markets, while minimizing the setbacks owing to occasional downward price corrections in both markets.

  

  The rub, of course, is that in a classic world of independent economies and central banks, even Dalio’s two stroke engine would not work. That’s because in response to the egregious money printing of the Bubble Finance era—-the Fed’s balance sheet rose from $200 billion to $4.5 trillion or 22X during the last three decades—-the US dollar’s exchange rate would have collapsed, causing a surge of domestic inflation and a 1970s style crash of bond prices.

  So enter the Red Ponzi of China and the linked and derivative mercantilist central banking policies of its EM supply chain and the petro-states which, on the margin, literally fueled the world’s explosive growth between 1992 and 2014

  As it happened, however, in the last few months the long reign of the global money printers has begun to sprout fractures. Over on the other side of the earth in China what had become a 20-year long $4 trillion cumulative “bid” for US treasuries and other DM fixed income securities has gone serious “offers”.

  This will prove to be one of the great financial pivots of history. During the course of their stupendous inflation of China’s $30 trillion Credit Ponzi, the red suzerains of Beijing bought treasuries hand over fist and thereby kept their price rising and the volatility of the world bond market falling.

  To be sure, this wasn’t charity for America’s debt besotted shoppers and governments. It was done in order to peg the RMB exchange rate and thereby keep its mercantilist export machine humming and the people grateful to their beneficent  communist party rulers.

  But at length it became too much of a good thing because every time the Peoples Bank Of China (PBOC) bought Uncle Sam’s debt it similtaneously expanded the internal banking system and supply of RMB credit. Moreover, after Beijing launched its madcap infrastructure building campaign in response to the the 2008 financial crisis the phony construction and investment boom which ensued attracted increasing waves of hot money from abroad, thereby inflating the domestic Chinese economy to a fever pitch.

  In fact, the PBOC was forced to let the RMB slowly rise against the dollar to keep its banking system from becoming a financial runaway. But the steadily rising RMB drastically accelerated the inflow of foreign capital and speculative funds into the Chinese economy, thereby filling the vaults of the PBOC to the brim at more than $4 trillion early this year compared to a few hundred billion at the turn of the century.

  

  But these weren’t monetary reserves in any meaningful or historic sense of the term; they were the fruits of an utterly stupid mercantilist trade policy and the conversion of a naïve old man, and survivor of Mao’s depredations, to the view that communist party power could be better administered from the end of a printing press than from the barrel of a gun.

  But Mr. Deng merely unleashed a Credit Monster that sucked in capital and resources from all over the globe into a domestic whirlpool of digging, building, borrowing, investing and speculation that was inherently unstable and incendiary. It was only a matter of time before this edifice of economic madness began to wobble and sway and to eventually buckle entirely.

  That time came in 2015 – roughly 30 years after Mr. Deng proclaimed it is glorious to be rich. So saying, he did not have a clue that a credit swollen simulacrum of capitalism run by communist apparatchiks was a doomsday machine.

  In any event, what is happening in China now amounts to the end of the risk parity trade. Because China’s state economic prison is not escape proof, it is now experiencing massive, unrelenting capital flight. That means that is will be forced to sell dollar and euro bonds and thereby choke its own banking system and domestic economy.

  As we pointed out in a post earlier this week, China’s faltering industrial economy was more than evident in the 10% decline in freight volume it recorded during 2015 – an outcome its has not experienced since Mr. Deng’s proclamation.

  But this means its oil consumption will soon stop growing, and actually already has once you set aside its purchases for the strategic reserves’, which are now full.

  Needless to say, sinking global oil demand from China and the EM means that oil prices will remain trapped in the $20s and the petro states will be forced to dump growing portions of their $7 trillion in sovereign wealth funds, driving both stock and bond markets lower.

  That’s why Ray Dalio is so very afraid. It is only a matter of time before the risk parity machines and their imitators and confederates trigger a selling crescendo like that of October 1987.

  But this time there can be no central bank rescue. The latter have already shot their wad – expanding their collective balance sheet from $2 trillion in the mid-1990s to $21 trillion today.

  But since the global economy has had its artificial boom and CapEx frenzy already, years of deflationary liquidation and correction lie ahead. Money printing has failed. Any effort by the central banks to double down on another $20 trillion of bond purchases would blow the world’s financial casinos sky high.

  At the end of the day, the asset gathers will profoundly regret what they are clamoring for.

  

  

  

  

  

• Anyone Using New York City Roads After 2:30pm Will Be Arrested

  Congratulations New Yorkers: moments ago not only did your local authorities ban all travel starting at 2:30pm…

  • CUOMO: PORT AUTHORITY ISSUED TRAVEL BAN ON G. WASHINGTON BRIDGE
  • CUOMO: PORT AUTHORITY ISSUED BAN ON LINCOLN, HOLLAND TUNNELS
  • CUOMO: PORT AUTHORITY ISSUED BAN ON BAYONNE, GOETHALS BRIDGES
  • MTA TO SUSPEND LIRR, METRO-NORTH SERVICE AS OF 4PM
  • CUOMO: PORT AUTHORITY ISSUED BAN ON OUTERBRIDGE CROSSING

  … but the local police announced that anyone using New York roads after that time will be arrested on the spot, like the vile criminal filth they are.

  We will begin enforcing the travel ban immediately at 2:30 p.m in #NYC #Blizzard2016

  — NYPD NEWS (@NYPDnews) January 23, 2016

  After 2:30 p.m and you’re on the road, we will arrest you @NYPDChiefofDept says

  — NYPD NEWS (@NYPDnews) January 23, 2016

  “Last year no one got arrested. People made the right decisions. We are looking for that again today,” @NYPDChiefofDept says re: travel ban

  — NYPD NEWS (@NYPDnews) January 23, 2016

  Stay off the road, @NYPDChiefofDept says. We don’t want to have to arrest you. pic.twitter.com/MOUvbuLARy

  — NYPD NEWS (@NYPDnews) January 23, 2016

  

  

  

  

• Calais On Lockdown After 100s Of Migrants Storm UK-Bound Ferry

  Update: 35 ppl arrested, including 24 refugees after storming ferry at Calais port Via @BFMTV

  * * *

  Coinciding with UK's Labor leader Jeremy Corbyn's arrival at the French refugee camps, Sky News reports the port of Calais has been temporarily closed as 100s of migrants stormed on to a ship in the hope of reaching the UK. About 50 migrants are thought to have made their way on to a P&O-operated vessel called Spirit of Britain, and police are at the scene and have reportedly deployed water cannons to break up the crowds of protesters.

  DFDS Seaways tweeted: "The Port of Calais has been temporarily closed due to a migrant invasion, as soon as they are cleared the Port will re-open."

  CALAIS 62 : Des réfugiés ont réussi à pénétrer dans le port. Ils occupent actuellement le navire "Spirit Of Britain" pic.twitter.com/tTau2yZXDn

  — Infos Française (@InfosFrancaise) January 23, 2016

   

  #Calais refugees have accessed the port. They currently occupy the ship "Spirit of Britain" pic.twitter.com/x3aDfoYYO6 https://t.co/c9Yjix7rVm

  — Calais Solidarity (@calaisolidarity) January 23, 2016

  The shut-down follows a protest march in support of the migrants that was reportedly attended by 2,000 people.

  

  

  

  Authorities in France said a group of 500 people illegally forced their way through barriers and police lines, 150 migrants were able to get into the cordoned-off area.

   

  ?URGENT CALAIS 62 :Débordements à Calais. Le port de Calais pris d'assaut par plus de 500 migrants. (@plusde6) pic.twitter.com/8d9Ov2JGli

  — Infos Française (@InfosFrancaise) January 23, 2016

   

  A statement from the Port of Dover said: "The Port of Calais is currently experiencing migrant activity which has caused disruption to ferry services. Therefore services to and from Calais via the Port of Dover are affected."

  

  The latest incident coincides with Jeremy Corybn's visit to the migrant camps in Calais and Dunkirk where thousands of people are sleeping rough – his first foreign trip as Labour leader.

  He said the conditions would be a "disgrace anywhere" – and that thousands of people were living in a "sea of mud".

  

  

  

  

  

  

• The End Is Nigh For The Fed's "Bubble Epoch"

  Submitted by Bill Bonner of Bonner & Partners (annotated by Acting-Man's Pater Tenebrarum),

  Market Mythology

  Twice in the last 15 years, markets have tried to correct the mistakes and excesses of the Bubble Epoch.

   

  

  Business cycle trumps central planning again.

   

  Each time, the Fed came back with even more mistakes and excesses. Trillions in new credit… lower lending rates… easier terms… ZIRP… QE… and the Twist!

   

  

  The gaggle of price-fixers the job of which is to regularly falsify one of the most important price signals in the economy. The idea that the economy can be “improved” by the interventions of a handful of people who have zero practical economic experience and rely on extremely dubious theories to guide their decisions is downright bizarre. Who can possibly believe that this works? It is a huge farce – one that is very dangerous for prosperity and economic progress.

   

  Over the short run, markets respond to myths. Investors are ready to believe almost anything… for a while. But over the long run, there is death and destruction – a reality outside of what we believe.

  No matter how badly investors want asset prices to go up, for example, asset prices don’t always comply.

  The financial media don’t know what to do. Typically, they downplay a bear market as long as they can… explaining the many reasons why the sell-off is “overdone” and why the “bottom” has already been found.

  The Wall Street Journal, for example, tells us that the “market’s panic is incongruent” with economic reality. Yahoo! Finance already sees “signs of capitulation.” It offers advice on “how to trade a bear market,” too.

   

  

  The DJIA and crude oil. Over the past two days they have begun to bounce a little after becoming extremely oversold. Still, the market doesn’t care about anyone’s opinions – it will do whatever it needs to do – click to enlarge.

   

  At the Diary, we don’t believe you should try to “trade a bear market.” Bears are treacherous and unpredictable. Our best advice is to stay out of its way. We don’t know whether it will get uglier now… or further down the road. But sooner or later, markets will retest the myths that support today’s asset prices.

  They will begin by asking questions: Are stocks too expensive? Can investors repay their debt? Is the economy capable of real growth? Can a small bunch of PhD economists with no market or business experience really manage the entire world’s economy?

  As to the first, second, and third questions, we don’t know the answers. But the answer to the fourth is an unhedged, undiluted “no.”

   

  Only Human

  Greenspan, Bernanke, and Yellen are, after all, only human. They respond to myths as much as anyone… maybe more. They’ve spent their entire careers studying the sacred texts of modern economics. Like Talmudic scholars late in life, they aren’t likely to convert to Baptists!

  They say they want inflation at 2%. Not 1%. Not 3%. Two hundred basis points – no more, no less. What theory… what experience… what revelation leads them to think that an economy should have annual price increases of 2%? There is none. It is a modern myth. In reality, prices go up and down on supply and demand. There’s no more reason they should always go up by 2% than down by 2%.

   

  

  The “era of price stability” under the Fed. As you can see, they are real masters at fulfilling their absurd mandate. Their inflation targeting theory is not only completely bereft of theoretical and empirical support, it is in fact plainly contradicted by both theory and the empirical studies that do exist (some of which have been undertaken by the Fed’s own economists!). In short, it is complete hokum – click to enlarge.

   

  The PhDs at the helm of the world’s central banks also believe they can change people’s buying, selling, and investing decisions – for the better – by providing them with false data. We have no doubt the Fed can change behavior. It’s the “for the better” part that troubles us.

  Interest rates by Fed diktat, for example, send completely phony signals, since they disguise the true cost of credit. The theory goes that low interest rates motivate people to borrow and spend. But where’s the evidence? Isn’t there an economic law somewhere that cutting incomes for savers has the opposite effect?

  And there’s more to the story. There’s a reality, as well as a myth. Reality is that resources are limited. Prices tell us what we’ve got to work with. Falsify prices and you get errors of omission and commission. After a while, the system suffers from things it shouldna, oughtna done.

  As Hjalmar Schacht, Germany’s minister of economics in the 1930s, put it: “I don’t want a low rate. I don’t want a high rate. I want a true rate.”

  An honest interest rate tells the truth about how much savings are available and at what price. People still make mistakes; they still get up to some pretty weird stuff. But at least the perverts aren’t handing out candy on the playground.

   

  

  “Old School” economy minister and later central banker, Hjalmar Schacht – not interested in manipulate interest rates.

   

  Greasy Numbers

  Then there’s the “unemployment rate.” The feds look at its figures and tell us the recovery has been a success… because the unemployment rate is back down to about 5%. They are citing as “fact” a statistic so greasy even a witchdoctor would be embarrassed by it.

  In December, for example, the Bureau of Labor statistics announced that 292,000 Americans had found jobs. This was widely regarded as a triumph for the Fed. Many times has Janet Yellen said she feels the pain of the jobless. Naturally, she takes great pride in the current job picture as she has painted it.

   

  

  By the time the final revisions arrive, the numbers won’t be recognizable anymore. The initial release is usually so far removed from reality, one wonders why anyone should be interested in it at all. The main reason why governments gather these statistics is that they give them a reason to meddle with the economy – click to enlarge.

   

  But as you have probably heard by now, only 1 out of every 28 of those new hires can buy you a beer to toast their new-found fortune. The others – 281,000 of them – don’t exist. The feds merely made a “seasonal adjustment.” The jobs were mythical, in other words.

  Mythical facts. Mythical theories. Mythical recovery. Watch out. The market is a myth buster.

  

  

  

  

  

• Bloomberg May Run For President After Becoming "Frustrated" With Race Gone "Haywire"

  If you enjoy the circus, then this presidential campaign is for you.

  In the last nine months, we’ve witnessed the unlikely rise of not one, but two dark horse candidates to the top of the polls and we’ve also had the pleasure of looking on as a dizzying array of GOP candidates engaged in a series of soapbox free-for-all debates that at times devolved into pure comedy.

  Bernie Sanders, a far-left socialist running on a platform that includes such pipe dreams as free college for everyone, has emerged as a real threat Hillary Clinton on the Democratic ticket.

  On the Republican side, Donald Trump has managed to pull off an unlikely transition from the boardroom to the ballot box, on the way to whipping large swaths of the electorate into a nationalistic frenzy.

  Meanwhile, Clinton is under investigation for possibly throwing around state secrets on a private e-mail server and Ted Cruz may not even be eligible to hold office.

  Well just in case things needed to get any more entertaining, it now appears billionaire and former New York City mayor Michael Bloomberg is going to insert himself into the race as an independent candidate.

  “Former New York Mayor Michael Bloomberg is taking early steps toward launching an independent campaign for president, seeing a potential path to the White House amid the rise of Republican Donald Trump and Democrat Bernie Sanders,” AP reports, adding that “the billionaire media executive is said to be concerned by Trump’s lasting hold on the Republican field and is worried about the impact of Sanders’ campaign on Hillary Clinton’s bid for the Democratic nomination.”

  In other words, Bloomberg is afraid that America may well end up having to choose between becoming i) a socialist “paradise” or ii) a nation run by a brazen real estate mogul with absolutely no filter and not much in the way of experience to suggest he’s fit for the job.

  Apparently, Bloomberg will almost definitely run if Bernie Sanders wins the Democratic ticket and either Cruz or Trump prevails on the GOP side. 

  “Mike Bloomberg for president rests on the not-impossible but somewhat unlikely circumstance of either Donald Trump or Ted Cruz versus Bernie Sanders,” said Edward G. Rendell, the former governor of Pennsylvania and a past Democratic National Committee chairman. “If Hillary wins the nomination, Hillary is mainstream enough that Mike would have no chance, and Mike’s not going to go on a suicide mission.”

  Underscoring our assessment of the campaign to date, The New York Times says Bloomberg “has grown more frustrated with what he sees a race gone haywire.”

  “At a dinner party late last fall at the home of Roger C. Altman, an investment banker and former deputy Treasury secretary, Mr. Bloomberg delivered a piquant assessment of Mrs. Clinton as a presidential candidate,” The Times writes, adding that “in the presence of Mr. Altman, a longtime supporter of Mrs. Clinton and her husband Mr. Bloomberg described her as a flawed politician, shadowed by questions about her honesty and the continuing investigation into her email practices as secretary of state.”

  “The fact is Hillary Clinton is behind in Iowa and New Hampshire. That should scare a lot of people — and it does,” one advisor said.

  While commentators are so far divided on the effect a Bloomberg run would have on the Democratic and Republican tickets, one thing is certain: Hillary Clinton has the most to lose. Voters who are fervently pro-Trump or pro-Sanders probably wouldn’t be swayed. However, for voters who prefer a more “mainstream” candidate but who aren’t satisfied with Clinton, Bloomberg might well be a welcome addition to the race.

  “Even a victory by Mrs. Clinton in the Democratic primaries might not preclude a bid by Mr. Bloomberg, his associates said, if he believed she had been gravely weakened by the contest,” The Times continues. Alan Patricof, a financier and longtime donor to the Clintons who is also friendly with Mr. Bloomberg says it would be “a terrible thing for the Democrats” if Bloomberg were to run as an independent. 

  Trump concurs. Bloomberg “would take a lot of votes away from Hillary,” he told ABC last week.

  Here’s a bit more color from AP:

  Bloomberg, one of the richest people in the United States, has previously toyed with presidential runs, but concluded ahead of the 2008 and 2012 campaigns he could not win.

   

  The former mayor is largely a social liberal — he fought for same-sex marriage in New York and is pro-abortion rights — and implemented a number of health reforms in New York City, banning smoking in public places and instituting calorie counts on menus.

   

  He has also become arguably the nation’s most vocal proponent of gun control, using his fortune to bankroll candidates across the country who clash with the National Rifle Association.

   

  But liberals have found fault with his cozy ties to Wall Street and his unquestioned support for the New York Police Department, which drove down crime during his tenure but engaged in tactics that a federal judge later ruled discriminated against minorities.

  And from The Times:

  Mr. Bloomberg, 73, has already taken concrete steps toward a possible campaign, and has indicated to friends and allies that he would be willing to spend at least $1 billion of his fortune on it, according to people briefed on his deliberations who spoke on the condition of anonymity because they were not authorized to discuss his plans. He has set a deadline for making a final decision in early March, the latest point at which advisers believe Mr. Bloomberg could enter the race and still qualify to appear as an independent candidate on the ballot in all 50 states.

   

  Mr. Bloomberg would face daunting and perhaps insurmountable obstacles in a presidential campaign: No independent candidate has ever been elected to the White House, and Mr. Bloomberg’s close Wall Street ties and liberal social views, including his strong support for abortion rights and gun control, could repel voters on the left and right.

  As for how Trump would react if Bloomberg does indeed put his name in the hat, the GOP frontrunner says the former mayor is “a great guy” and a “friend.” 

  Check back in March to see how quickly that rhetoric dries up if Bloomberg becomes the second billionaire vying for America’s top elected office.

  *  *  *

  Apparently, Bloomberg is already polling fifth… 

  Bloomberg at 5% to win, ahead of Christie, Bush. On Predictit pic.twitter.com/rQZwlPmqhC

  — Mike Zaccardi, CMT (@MikeZaccardi) January 23, 2016

  

  

  

  

  

• Confident Trump Says "Could Shoot Somebody" & Still Win

  Did Donald Trump just jump the shark with his extreme comments? While the correlation between the un-PC-ness of The Donald's comments and his poll success is high, his latest statement may be too much for some…

  "I could stand in the middle of 5th Avenue and shoot somebody and I wouldn't lose voters," Trump said at a campaign rally in Iowa.

   

   

   

  While he may well be correct in his statement, we suspect the mainstream media will have a field day with this one as the Iowa and New Hampshire caucuses loom.

  

  We suspect though that the Brits will certainly ban him from entry if he did.

   

   

  Of course, as we detailed previously, Trump's success is not as much his doing as a symptom of growing dissatisfaction in America. In Chronicles, in 1996, Francis, a paleoconservative and proud son of the South, wrote:

  “[S]ooner or later, as the globalist elites seek to drag the country into conflicts and global commitments, preside over the economic pastoralization of the United States, manage the delegitimization of our own culture, and the dispossession of our people, and disregard or diminish our national interest and national sovereignty, a nationalist reaction is almost inevitable and will probably assume populist form when it arrives. The sooner it comes, the better.”

  What we saw through a glass darkly then, we now see face to face.

  Is not Trump the personification of the populist-nationalist revolt Francis predicted?

   

  

  And no matter what, Trump is not the last of the populist-nationalists.

  Given his success, other Republicans will emulate him. Already, other candidates are incorporating his message. The day Francis predicted was coming appears to have arrived.

  

  

  

  

  

• Square Holes And Currency Pegs

  Submitted by Raul Ilargi Meijer via The Automatic Earth blog,

  When David Bowie died, everybody, in what they wrote and said, seemed to feel they owned him, and owned his death, even if they hadn’t thought about him, or listened to him, for years. In the same vein, though the Automatic Earth has been talking about deflation (for 8 years, it’s our anniversary today) and the looming China Ponzi disaster for a long time, now that these things actually play out, everybody talks as if they own the story, and present it as new (because, for one thing, well, after all for them it is new…).

  And that’s alright, it’s how people live, and function, they always have, and no-one’s going to change that. It’s just that for me, I’ve been wondering a little about what to write lately, because I’ve already written the deflation and China stories, many times, before most others tuned into them. But still, it’s strange to now, as markets start plunging, read things like ‘Deflation is Here’, as if deflation is something new on the block.

  Deflation has been playing out for years. Central bank largesse has largely kept it at bay in the public eye, but that now seems over. Debt deflation is inevitable when -debt- bubbles burst, and when these bubbles are large enough, there’s nothing that can stop the process, not even miracle growth. But you’re not going to understand this if and when you look only at falling prices as the main sign of deflation; they’re merely a small part of the process, and a lagging one at that.

  A much better indicator of deflation is the velocity of money, the speed at which ‘consumers’ spend money. And velocity has been going down for years. That’s where and how you notice deflation, when combined with the money and credit supply. Which have soared in most places, but were no match for a much faster declining velocity. People have much less money to spend. Which shouldn’t be a surprise if, just to name an example, new US jobs pay 23% less than the ones they’re -supposedly- replacing.

  

  As I said a few weeks ago, it’s probably only fitting, given its pivotal role in our economies and societies, that it’s oil that’s leading the way down. Other commodities are not far behind, because demand for -and spending on- them has been plummeting too, as overproduction and overinvestment, especially in China, do the rest.

  However you look at present global debt, percentage wise, or in absolute numbers, you name it, there’s never been anything like it. We outdid ourselves by so much we don’t have the rational or probably even subconscious ability to oversee what we’ve done. We live in the world’s biggest bubble ever by a margin of god only knows how much. And that bubble will deflate. It is already doing just that.

  The next steps in the debt deflation process will of necessity be chaotic. A substantial part of that chaos is bound to emerge from denial, and the reluctance to accept reality. Which often rise from a poor understanding of the processes taking place. It certainly looks as if there’s lots of that in China, where both the working principles of financial markets and the grip authorities -can- have on them, seem to be met with a huge dose of incomprehension.

  Mind you, given the levels of comprehension vs outright ‘theoretical religion’ among leading western politicians and economists, the ones who most often rise to decision-making positions in governments and financial institutions, we have nothing on China when it comes to truth and denial.

  From all that follows what will be the next leg down in the ‘magnificent slump’: the awfully messy demise of currency pegs.

  In a short explainer for the uninitiated, allow me to steal a few words from Investopedia: “There are two types of currency exchange rates—floating and fixed, still in existence. Major currencies, such as the Japanese yen, euro, and the US dollar, are floating currencies—their values change according to how the currency is being traded on forex markets. Fixed currencies, on the other hand, derive value by being fixed (or pegged) to another currency.”

  While there are more currency pegs in the world today than we should care to mention -there are dozens-, it seems fair to say that in today’s deflationary environment, practically all are under siege. Most African currencies are pegged to the euro, and they do have to wonder how smart that is going forward. Still, the main, and immediate, problems seem to arise in pegs to the US dollar (with one interesting exception: the Swiss franc – more in a bit).

  Most oil producing Gulf nations are pegged to the greenback. So is Hong Kong. And, for all intents and purposes, so is China, though you have to wonder what a peg truly is if you change it on a daily basis. China is on its way to a peg vs a basket of currencies, but that seriously interferes with its stated intention to become a reserve currency -of sorts-. If your currency can’t stand on its own two feet, i.e. float, you’re per definition weak.

  China’s vice president Li Yuanchao said this week in Davos that Beijing has no plans to devalue the yuan, i.e. to cut the peg to the dollar. Then again, he also stated that “central command” would ‘look after’ stock market investors. Put the two statements together and you have to wonder what the one on the yuan (couldn’t help myself there) is worth.

  The first “link in the chain” that appears vulnerable is the Hong Kong dollar, which is stuck between China and the US, and unlike the yuan still has a solid dollar peg, but, obviously, also has a strong link to the yuan. The issue is that if China continues on its current course of daily small yuan devaluations, the difference with the HKD will grow so large that ever more investments and savings will move to Hong Kong, despite a maze of laws designed to keep just that from happening.

  And that is the overall danger to currency pegs as they still exist in today’s rapidly changing global financial world: all economies are falling, but some are falling -much- faster than others.

  Not so long ago, the World Bank called on Saudi Arabia to defend its USD peg with its FX reserves. It even looked as if they meant it. But Saudi Arabia has no choice but to deplete those reserves to prevent other nasty things from happening that are much more important than a currency peg. Like social chaos.

  It’s somewhat wonderfully ironic that the main most recent experience with abandoning a peg comes from a source that faced -and now feels- the exact opposite of what nations like Saudi Arabia and China do. That is, it became too costly and risky for Switzerland to keep its franc pegged (or ‘capped’, to be precise) to the euro any longer a year ago, because of upward, not downward pressure.

  Since then, the euro went from 1.20 franc to 1.09 or thereabouts, which perhaps doesn’t look all that crazy, and many ‘experts’ seek to downplay the effects of the move, but it’s still estimated to have cost the Swiss some $25 billion. For comparison, the US has 40 times as many people as Switzerland’s 8 million, so the per capita bill would be close to $1 trillion stateside. That wouldn’t have added to Yellen’s popularity. Currency pegs and caps can be expensive hobbies.

  And that’s why the Saudis and Chinese are so anxious about letting go of their pegs. That and pride. In their cases, their respective currencies wouldn’t, like the franc, rise versus the one they’re pegged to, they would instead lose a lot of value. And in the fake markets we live in today, where price discovery has long since been left behind, there’s no telling how much. Well, unless they seek to keep control, but then it would be just a matter of time until they need to rinse and repeat.

  Even if it seems obvious to make a particular move, and if everybody knows you really should, showing what can be perceived as real weakness could be a killer when everything else around you is manipulated to the bone.

  Still, neither Beijing nor Riyadh stand a chance in a frozen-over hell, to ultimately NOT sharply devalue their currencies or just simply let go of their pegs. Simply because China’s economy is falling to pieces, and the Saudi’s dependence on oil prices is dragging it into a financial gutter. Just look at what falling prices had done to the riyal vs non-pegged oil producer currencies by October 2015, when Brent was still at $45:

  

  The Saudis could have been paid for their oil in a currency worth perhaps twice as much as their own, the one their domestic economy runs on. That’s overly simplistic, because the Saudi tie to the USD runs far and deep, but that doesn’t make it untrue.

  What will bring down the Chinese and Saudi pegs, along with a long list of other pegs, is, how appropriately, the very same markets they’ve been relying on to NOT function. The bets against Hong Kong’s ability to maintain its USD peg have already started, and China is next, along with the House of Saud (the latter two just take more fire-power). Which of course is exactly why they speak their soothing ‘confident’ words. Words that are today interpreted as the very sign of weakness they’re meant to circumvent.

  What worked for George Soros in his bet vs the Bank of England and the pound sterling in 1992, will work again unless these countries are ahead of the game and swallow their pride and -ultimately- smaller losses.

  Granted, so much will have to be recalibrated if the yuan devalues by 50% or so, and the riyal does something similar (it’s very hard to see either not happening), that it will take some serious time before everyone knows where they -and others- stand. And since volatility tends to feed on itself once there’s enough of it, it seems to make sense that governments would seek control. But that doesn’t mean they -can- actually have any.

  Today’s major currency pegs are remnants of a land of long ago lore; they have no place in this world. They are financial misfits who’ve been allowed to persist only because central banks and governments have been able to distort markets for as long as they have. But that ability is not infinite, and it’s in nobody’s longer term interest that it would be.

  Not even those that now seem to profit most from it. We will end up with societies that function no better for the ridiculous Davos elites than they do for the bottom rung. But no elite will ever see that, let alone admit it voluntarily.

  Deflation and foreign exchange chaos. There’s your future. As for stocks and oil, who’s left to buy any? Not the consumer who’s 70% of US and perhaps 60% of EU GDP, they’re maxed out on private debt. So why would investors put their money in either? And if they don’t, where do you see prices go?

  Even more importantly, deflation makes a lot of money, and even much more virtual money, vanish into overnight thin air. That’s what everyone is running into when all these currencies, China, Saudi, Gulf states et al, are forced to recalibrate. $17 trillion disappeared from global equities markets in the past 6 months.

  How much vanished from the value of ‘official’ oil reserves? How much from iron ore and aluminum? How much do all the world’s behemoth corporations and banks and commodity-exporting countries have their resource ‘wealth’ on their books for in their sunny creative accounting models? And how much of that is just thin hot air too?

  We’re about to find out.

  

  

  

  

  

• Why Are There No Stock Buyers? Goldman Has Five Answers

  Unlike Goldman’s cross asset strategists, whose six Top Trade recommendations for 2016 have gotten destroyed three weeks into the year, with half of them already stopped out as we showed yesterday, the bank’s chief equity strategist David Kostin has been notably more accurate in his predictions, with his conservative 2015 year end target of 2000 on the S&P almost exactly where the stock market ended.

  Since then stocks have taken a sharp leg lower, with the S&P dropping as much as 15% from its all time high, half the average post-war recession drawdown.

  Which has forced Goldman’s clients to ask some very simple questions, starting with: “just what is going on”, and more importantly “what does the market know that they don’t:

  Despite the generally positive US economic data, the sudden fall in asset prices has investors focused on the potential for a US recession. Clients understandably point to the stock market as a cause for concern, and wonder what the market has come to know in early 2016 that they do not.

  Kostin responds:

  A long few weeks ago, at the end of 2015, client conversations centered on the limited set of opportunities in an expensive stock market. With the median S&P 500 stock trading at a forward P/E of 17x – ranking in the 94th historical percentile – clients were reluctant to add exposure to equities, but almost universally expressed a desire to buy the market 10% lower.

  So where are the buyers? According to Goldman’s clients these are the 5 biggest risks facing anyone will to BTFD:

  1. who is brave enough to catch a proverbial falling knife?;
  2. US industrial activity is contracting and the consumer will soon follow, dragging the broad economy into recession;
  3. the plunge in crude increases financial stress on Energy firms, and will lead to further cuts in capex and a profit downturn across many industries;
  4. China’s economy is slowing and the RMB will soon be devalued, exporting deflation and prompting the Fed to halt its tightening path, unsettling investors; and
  5. share prices need to fall further to offer an attractive risk-adjusted return given heightened economic and market risks.

  According to Kostin the biggest risks remain energy and China, where Goldman’s own GDP ‘estimator’ shows just 4.5% growth, 230 bps below the official number…

  Energy and China have been the two sources of negative macro news in 2016. Most visibly, WTI crude plummeted by 20% to below $30/barrel from $37 at the start of the year as global equities tumbled and Treasury yields dipped below 2%. Crude oil has now declined by 31% in 12 months and trades 70% below its local peak of $107 in mid-2014.

   

  

   

  In China, the government reported 4Q GDP growth of 6.8%. However, during the same time period our China CAI (Current Activity Indicator) expanded at an average of just 4.5%, 230 bp slower than the official measure. Earlier this week our December CAI reading suggested China economic growth has decelerated to just 4.2%.

  … even as the US economy has stubbornly refused to enter an all out recession (despite the clear manufacturing contraction):

  In contrast, our MAP index of US economic surprises stands at roughly the same level as in early December when the S&P 500 stood at 2100. Broadly speaking, the industrial side of the US economy has continued to disappoint, with the ISM manufacturing index falling for six consecutive months to its current level of 48.2. Meanwhile, employment and services data have signaled economic health, with job creation averaging 284k during the past three months, lifting the full-year 2015 total to 2.7 million. Personal income is growing and consumer sentiment remains healthy. Although it has declined from mid-2015 highs, the ISM nonmanufacturing index remains deep in expansion territory at 55.3. Our economists expect US GDP growth will accelerate from its tortoise-like pace of around 1% in 4Q as headwinds from the inventory cycle, financial conditions, and oil prices fade.

  So what does Goldman expect will happen in the coming year?

  We continue to believe that a US recession is unlikely in 2016 and that the S&P 500 will rise to 2100 by year-end. Our economists expect that US GDP will grow at 2% this year as the Fed hikes rates four times. They estimate that risks to the US economy from a further slowdown in China are limited, and that the negative effects of lower oil prices will be offset by benefits to the consumer (see Global Economics Analyst, Jan. 15, 2016).

   

  Our S&P 500 EPS estimate of $117 assumes US GDP growth of 2%. Every 100 bp shift in GDP growth impacts EPS by $5 per share. Our 2016 EPS growth forecast is 11%. However, EPS growth for S&P 500 ex-Energy will equal only 5% (see page 24 for EPS growth by sector).

   

  The downdraft in equities YTD clearly reveals that investors believe a recession is more likely than we expect. The S&P 500 P/E has contracted by 6%. Cyclicals have underperformed Defensives by 422 bp YTD, as Telecom Services, Utilities, and Consumer Staples have led the market. Fed funds futures are pricing just over one hike in 2016.

   

  Of course, prolonged market weakness in itself has the potential to weigh on growth, providing another example of financial market reflexivity. Even if the correction in equity prices was unwarranted based on economic fundamentals, the sell-off may become a self-fulfilling prophecy if lower share prices and increased volatility weigh on consumer spending and corporate investment.

  Will Goldman be right, and will the US economy bounce back despite a hard landing in China, despite SWFs liquidating assets (up to $4 trillion in total), despite a new round of European bank tremors, despite increasing anti-austerity tensions in Europe’s periphery, and despite headwinds from a tightening Fed? Not even Kostin knows the answer, which is why he provides to scenarios how to trade the US: one assuming a recession, and assuming no recession.

  For investors who do not expect a US recession, the current S&P 500 correction provides a buying opportunity. At the start of the year we forecast the index would rise by just 3% in 2016. Following the correction the prospective price return is now 10% (total return of 12% with dividends).

   

  For investors concerned about a recession in 2016, our recommended strategies of strong balance sheets and domestic sales exposure should deliver relative outperformance even in the event of an economic downturn. These qualities have outperformed recently, with long/short basket trades returning 131 bp and 413 bp YTD, respectively. We believe these strategies should continue to generate strong returns given the trends of relative US economic strength, a rising US dollar, high corporate leverage, and oil-exacerbated credit market weakness.

   

  

  And just like that, Goldman’s clients are once again happy.

  

  

  

  

  

  

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