Today’s News 25th March 2016

• Diversify Into Gold As An “Insurance Policy” Against Geopolitical Risk

  “Investors could be forgiven for heading for the hills given the tumultuous start to 2016,”  so writes Andrew Oxlade in The Telegraph today who advises investors to diversify into gold as an “insurance policy”:

  We have long been advocates of exposure to gold as an insurance policy. This was demonstrated once again in the recent sell-off when the price of bullion surged from $1,061 (£762) an ounce on New Year’s Day to $1,246 (£895) by early February. In times of fear, gold is in demand. The price also rises when inflation becomes a danger.

  Deflation remains the bigger threat for now, which is partly why gold has been a poor investment in recent years, but the money printing excesses of central banks could yet unleash inflation. In the meantime, the gold price offers some protection during repeat episodes of buckling confidence.

  
  Gold in GBP – 5 Years

  The Telegraph, like GoldCore, had warned of such turbulence at the start of the year. John Ficenec, editor of the Questor column, warned of the real risk of volatility and falls in stock markets.

  We believe that the tragic events in Brussels show the continued very high degree of geopolitical risk and the need for an insurance policy.

  Further attacks are quite possible, including in the U.S., and this should support gold.

  Geopolitical risk is frequently underestimated and it would be unwise to discount the risk of a September 11 style attack in the coming months. Intelligence agencies and ISIS themselves are warning of such attacks and investors need to be diversified to hedge this growing risk.

  It gives us no pleasure to be the bearer of this bad news but it is important that the reality of the real risks of today are considered in order to protect and grow wealth in these uncertain times.

  Read Telegraph article here

   

  
  Market Performance This Week (Finviz)

   

  Gold is -2.6% and silver -3.4% this week and markets are in a sea of red as they react to the terrorist attacks in Brussels (See Table).

   

  Gold Prices (LBMA)

  24 Mar: USD 1,216.45, EUR 1,088.75 and GBP 861.89 per ounce
  23 Mar: USD 1,232.20, EUR 1,101.76 and GBP 870.03 per ounce
  22 Mar: USD 1,251.80, EUR 1,117.35 and GBP 876.96 per ounce
  21 Mar: USD 1,244.25, EUR 1,104.47 and GBP 863.60 per ounce
  18 Mar: USD 1,254.50, EUR 1,112.93 and GBP 868.78 per ounce

  Silver Prices (LBMA)

  24 Mar: USD 15.28, EUR 13.70 and GBP 10.82 per ounce
  23 Mar: USD 15.58, EUR 13.92 and GBP 10.99 per ounce
  22 Mar: USD 15.89, EUR 14.16 and GBP 11.12 per ounce
  21 Mar: USD 15.81, EUR 14.02 and GBP 10.99 per ounce
  18 Mar: USD 15.94, EUR 14.13 and GBP 11.02 per ounce

  Gold News and Commentary

  Spot gold targets biggest weekly loss in four months (Reuters)

  Stock Slide Deepens in Asia as Oil Slumps Amid Resurgent Dollar (Bloomberg)

  Gold Falls to Lowest in a Month as Dollar Advance Saps Demand (Bloomberg)

  World’s richest Hindu temple wants gold back rather than cash (Reuters)

  China’s vice finance minister denies any secret US-China exchange rate deal (Reuters)

  Gold Investors Unfazed By Fading Rally – Chart (Bloomberg)

  Silver Attractive as Gold-Silver Ratio at 2008 Financial Crisis Level – Video (Bloomberg)

  Technician: Gold Heading Toward $1,450—Here’s Why (CNBC)

  Bonds Best-Bid But Bullion Blasted As Belgium-Bombing-Bounce Is Battered (ZH)

  Stocks vs. Gold – Money and Investment (Future Money Trends)

  Read More Here

   

  

  ‘7 Real Risks To Your Gold Ownership’ – Must Read Gold Guide Here

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• BaNK LiVeS MaTTeR…

  

  

  

  

  

• The Threat Continues: Yuan Weakens For 6th Straight Day – Longest Losing Streak In 2 Years

  PBOC fixed the Yuan at its weakest in 3 weeks, pushing the devaluation streak to its longest since early January. However, Offshore Yuan has now dropped over 1.1% against the USD, extending losses for the 6th straight day to 3-week lows. This is the longest streak of weakness in the offshore Yuan since April 2014.

   

  

   

  It appears EUR and JPY took enough pain so the basket is revrting to the USD again…

  

   

  What’s the opposite of passive-aggressive as a clear message is being sent to The Fed – tighten and we unleash the Yuan-weakness-driven turmoil…

  

  

  

  

  

• Refugee Crisis: Using Chaos To Build Power

  Submitted by Alex Newman via TheNewAmerica.com,

  A European Union military force with power to intervene in member states. A new “Marshall Plan” to radically redesign whole regions of the world and impose regional government. A United Nations empowered to manage it all. Christendom under siege. And the end of nationhood as it is understood today. That is where the “refugee crisis” is heading, as the engineered disaster wreaks havoc across Europe and beyond. Despite the appearance of chaos, though, it is all by design, with a series of radical goals in mind.

  While the establishment’s demands on Europe to accept millions of Middle Eastern refugees have been couched in “humanitarian” rhetoric, the real agenda is nothing of the sort. Rather than helping out their fellow human beings, globalist forces actually created the refugee crisis and the suffering behind it. And they are using it to advance multiple, related agendas — primarily globalism and statism. That the crisis is being exploited to undermine Western culture, national sovereignty, and even nationhood itself is now beyond dispute. Top globalists are openly bragging about it.

  “I will ask the governments to cooperate, to recognize that sovereignty is an illusion — that sovereignty is an absolute illusion that has to be put behind us,” declared former Goldman Sachs chairman Peter Sutherland, an ex-member of the Bilderberg Steering Committee who currently “serves” as the UN special representative of the secretary-general for international migration. “The days of hiding behind borders and fences are long gone. We have to work together and cooperate together to make a better world. And that means taking on some of the old shibboleths, taking on some of the old historic memories and images of our own country and recognizing that we’re part of humankind.”

  Billionaire globalist and open-borders zealot George Soros, in denouncing European officials trying to control the human tsunami coming across their borders, similarly declared, “Our plan treats the protection of refugees as the objective and national borders as the obstacle.”

  In essence, then, the engineered refugee crisis was created and is being used, at least in part, to advance what globalists often refer to in public as “global governance” and their “new world order.” As part of that, even the idea of nationhood is under fire — everybody is just part of “humankind,” as Sutherland put it. And as such, people must be governed by the “Parliament of Humanity,” as UN Secretary-General Ban Ki-moon referred to the dictators club known as the UN last year.

  Already, the UN manages a global refugee program via the UN High Commissioner for Refugees (UNHCR). This agency decides which refugees will be settled where, including those destined to be settled in the United States at U.S. taxpayer expense. Further clues about the agenda can be found in the fact that the UN refugee outfit was until very recently led by António Guterres, the former president of the powerful global socialist-government-promoting Socialist International, as senior editor William Jasper documented in an October 19, 2015 cover story for this magazine.

  There are several elements to the globalist plot as it relates to the refugee crisis.

  Creating the Refugee Crisis

  To begin with, it is important to understand that the same self-styled humanitarians claiming to be concerned about refugees, while demanding that they be given asylum in the West by the millions, are, in reality, the same people responsible for making their victims into refugees to begin with. As this magazine documented extensively in its October 19 cover story package, the globalist establishment literally unleashed the refugee exodus.

   

  Among other actions to spark the crisis, Western governments and their allies — not to mention the globalist forces behind them, such as the Council on Foreign Relations and other global-government-promoting powerhouses — destroyed multiple Middle Eastern nations via war and chaos. These include Libya, bombed to smithereens by Obama and NATO under the supposed authority of the UN; as well as Syria, destroyed by civil war fueled by the globalist establishment; and of course Iraq, also crushed by Western intervention and globalist-fueled civil war.

   

  Those same globalist forces were also responsible for wreaking havoc in many more nations — such as Yemen, Egypt, Ivory Coast, and Tunisia — through supporting uprisings, revolutions, terror groups, dictatorships, and more.

   

  The predictable response to having one’s nation destroyed, of course, is attempting to leave — particularly if wealthier, freer nations throw down the welcome mat. And that is exactly what has happened and is still happening. Many of the same globalists responsible for creating the chaos and terror that refugees are fleeing from are publicly and loudly opening Europe’s doors to the growing tsunami of displaced victims. Obama and his billionaire supporter Soros, for example, were both instrumental in the UN-authorized war to destroy Libya, which was based on lies, and in fueling the civil war that is destroying what remains of Syria. And both of those figures have been very outspoken in demanding that the West welcome millions of refugees, regardless of the costs or the desires of Western voters.

   

  The question that must be asked is: “Why?” The answers can be found in what has happened and what is happening, and especially in the policy prescriptions allegedly aimed at dealing with the crisis that globalists unleashed. At this point, Europe, Africa, and the Middle East are all in the cross hairs of internationalists, who are exploiting the refugee crisis to build up supranational institutions at the regional and global level to smash national sovereignty and even nationhood, to build up the power of government generally, and to destabilize societies. If left unchecked and unexposed, the refugee crisis will serve as a powerful tool to push the world ever closer to “global governance,” with a great deal of pain and misery along the way.

   

  A New Marshall Plan: Regional Government for the Middle East

  With the refugee situation quickly spiraling out of control across parts of the continent — the mass sexual assaults on New Year’s Eve across Germany and beyond, the implosion of law and order around Calais in France, the widely reported overrunning of Stockholm’s central station by refugee youths, and more — the public is now growing increasingly outraged. Indeed, even the establishment forces responsible for unleashing the chaos are now in some cases denouncing it. The New York Times, an establishment mouthpiece that dutifully promoted the globalist wars that sparked the refugee crisis and the subsequent flooding of the West with the victims of those wars (and many opportunists who joined the exodus), ran an op-ed pointing out that Germany was “on the brink” due to the crisis. Top European political bosses have also been sounding the alarm.

   

  Another senior globalist, Rothschild banking dynasty protégé and billionaire hedge-fund boss Soros, played an instrumental role in encouraging the myriad wars and the subsequent tsunami of refugees into Europe that was sparked by those wars. And now, like other establishment voices, Soros is also pointing out the obvious. The European Union, he said in a recent interview, is “on the verge of collapse” due to the sudden influx of well over a million Islamic refugees last year. Not coincidentally, Soros also has ideas about “solutions.” And not surprisingly, those alleged “solutions” involve more globalism for Europe, Africa, and the Middle East — along with less sovereignty, self-government, and liberty.

   

  In an interview with Bloomberg from the World Economic Forum (WEF) in Davos, Switzerland, the radical anti-national sovereignty statist claimed that Europe needed to finance a new “Marshall Plan” for the regions of the world from which the refugees are fleeing — regions and nations destroyed in large part by the globalist Western establishment figures pushing the new plan. Soros was expressing support for a proposal made earlier by a fellow globalist, German Finance Minister Wolfgang Schäuble. The new Marshall Plan they envision seeks to transfer wealth from struggling European taxpayers to areas of the globe ruined by globalist machinations — but the real agenda goes much deeper, as did the last Marshall Plan after World War II.

   

  “What is most important is for us to invest billions in those regions from which the refugees come to reduce the pressure on the external frontiers of Europe,” Schäuble argued in a panel discussion at the globalist WEF, speaking alongside several European prime ministers who also played a key role in flooding Europe with refugees displaced from the nations they helped destroy. “That will cost Europe much more than we thought.” Of course it will, and taxpayers, already suffering under a crushing burden, will pay for it all. Writing in the Soros-backed “Project Syndicate” propaganda organ in 2014, Schäuble previously called for a global taxation regime in a piece called Why Taxation Must Go Global,one of his many calls for more globalism and statism.

   

  So what would a new “Marshall Plan” for the Middle East and Africa look like? A brief history of the original Marshall Plan might offer some clues. Officially known as the “European Recovery Program,” or ERP, the scheme involved transferring the equivalent of almost $150 billion in today’s dollars from U.S. taxpayers to Western European governments. The ostensible purpose was to help rebuild Europe after World War II. In practice, though, it served as a key tool in the transformation of Western Europe into a statist region dominated by Big Government and supranational institutions, eventually culminating in the subjugation of Europeans under the unaccountable EU super-state. That was the goal all along.

   

  As far back as 1947, then-U.S. Secretary of State George Marshall (CFR) — a key player in handing China to Chairman Mao’s murderous communists, and perhaps mass-murdering dictator Joseph Stalin’s most important ally in the world — called for European “economic cooperation” as a precondition for the desperately needed American aid after the war. “It is already evident that, before the United States government can proceed much further in its efforts to alleviate the situation and help start the European world on its way to recovery, there must be some agreement among the countries of Europe as to the requirements of the situation and the part those countries themselves will take in order to give proper effect to whatever action might be undertaken by this Government,” said Marshall, the man after whom the scheme was named. “The initiative, I think, must come from Europe…. The program should be a joint one, agreed to by a number, if not all European nations.” The Committee of European Economic Cooperation responded with a major report signed by government representatives from across Europe outlining efforts to create a “customs union” that could eventually lead to even further cooperation. U.S. officials were pleased.

   

  Members of Congress even tried to get language in the statement of purpose for the original Marshall Plan bill of 1948 explicitly declaring that it was the policy of the United States to encourage the economic unification and the political federation of Europe. In the end, language calling for the development of economic cooperation was included instead. The next year, the “political federation” amendment was pursued again, with the result being the addition of the sentence: “It is further declared to be the policy of the people of the United States to encourage the unification of Europe.” By 1951, Congress finally came out and said it openly, with a clause included in the 1951 Mutual Security Act stating that its purpose was “to further encourage the economic unification and the political federation of Europe.”

   

  The goals of U.S. government support for European integration were explained in part decades ago, though largely ignored, by top U.S. officials. On September 20, 1966, for example, then-Under Secretary of State George Ball (CFR) testified before Congress on the State Department’s view on forming an “Atlantic Community,” essentially merging the United States with Europe. “I find little evidence of any strong interest among Europeans for any immediate move toward greater political unity with the United States,” he explained. “They fear the overwhelming weight of U.S. power and influence in our common councils…. We believe that so long as Europe remains merely a continent of medium- and small-sized states there are definite limits to the degree of political unity we can achieve across the ocean.” Globalism was the agenda then, just as it is today.

   

  Creating a Middle East Union

  Not coincidentally, the new “Marshall Plan” is being pushed by the same globalist establishment that has been openly advancing the imposition of a “Middle East Union” on the region in recent years. “Just as a warring [European] continent found peace through unity by creating what became the EU, Arabs, Turks, Kurds and other groups in the region could find relative peace in ever closer union,” claimed Mohamed “Ed” Husain, a former caliphate-seeking Islamist and current “adjunct senior fellow for Middle Eastern studies” at the CFR, in a piece published in the Financial Times and on the CFR website in mid-2014. “After all, most of its problems — terrorism, poverty, unemployment, sectarianism, refugee crises, water shortages — require regional answers. No country can solve its problems on its own.” That is, of course, nonsense, but it is standard globalist rhetoric.

   

  Plenty of other globalists have offered similar admissions. It has become fashionable for establishment figures and their hangers-on to compare today’s Middle East with Europe before the EU. Indeed, Richard Haass, the CFR boss and a former leader at the U.S. State Department, writing in Soros’ Project Syndicate, does precisely that. In an incredible admission, Haass explains, without admitting the CFR’s giant role in instigating all of the tragedies he mentions, that the CFR-backed globalist wars of the last decade and a half were crucial in setting the region on fire — the same blaze that now supposedly can only be extinguished by a CFR-inspired “Middle East Union.” The globalist strategy used over and over again goes like this: Create a problem, then exploit and manage the inevitable reaction to push a “solution.”

   

  “The 2003 Iraq war was highly consequential, for it exacerbated Sunni-Shia tensions in one of the region’s most important countries and, as a result, in many of the region’s other divided societies,” Haass wrote. “Regime change in Libya [by Obama, the UN, NATO, and CFR apparatchiks] has created a failing state; lukewarm support for [CFR- and Soros-backed] regime change in Syria has set the stage for prolonged civil war.” And the chaos, bloodshed, and terror will continue, he says, until “a new local order emerges or exhaustion sets in.” In the meantime, globalists should treat the region as a “condition to be managed,” Haass said. How convenient — the CFR sets a fire, and now purports to have the fire extinguisher, promising a raging inferno unless and until everyone submits to the globalist demands, including a new regional “order,” which, as in “new world order,” is globalist-speak for transnational government.

   

  Of course, Husain, Haass, and the CFR are not alone. In 2011, the Islamist president of Turkey at the time, Abdullah Gül, also called for an EU-style regime to rule the Middle East. Speaking in the United Kingdom, Gül claimed “an efficient regional economic cooperation and integration mechanism” was needed for the region. “We all saw the role played by the European Union in facilitating the democratic transition in central and Eastern Europe after the fall of the Berlin Wall,” he claimed. Islamic Turkey is also working to join the EU.

   

  Various Middle Eastern tyrants have echoed the calls for a regional regime, too — the kings of Saudi Arabia and Jordan, for example. As Husain pointed out, the radical Muslim Brotherhood and the terrorist group Hamas are also working to unify the Middle East under one single tyrannical government of gargantuan proportions. With financial backing from the West under a new “Marshall Plan” and the bloodshed fueled by globalist-engineered wars, not to mention EU and UN support, the plot could easily become a reality.

   

  Further Empowering the European Union

  Also being advanced using the refugee crisis is the further empowerment of the EU itself, the regional government created thanks in large part to the original Marshall Plan. Among the various schemes allegedly needed to deal with the immigrant influx is the creation of military outfits — a border and coast-guard force — ostensibly aimed at “protecting Europe’s borders” from the immigration tsunami. The force would also fight “transnational crime and terrorism,” according to an EU outline of the scheme. The plan calls for mandatory biometric ID checks to come or go from the super-state’s territory, so everyone can be checked against Interpol’s databases.

   

  Most alarmingly, perhaps, the EU military force would be able to “intervene” in European nations — even without permission from national authorities, as long as EU bosses claim the situation is “urgent.” In fact, even if the nation “considers that there is no need for additional intervention” from the new EU force, it could still be imposed by Brussels. The force would also have the power to commandeer national governments’ resources, something even the U.S. federal government cannot do to state or local authorities.

   

  At the national level, some European officials were appalled. Creating such a structure “that is independent of member states is shocking,” said Polish Foreign Minister Witold Waszczykowski, noting that nobody even knew who the force would be accountable to. Greek and Swedish officials also spoke out.

   

  Among EU leadership, though, it is par for the course. “Managing Europe’s external borders must be a shared responsibility,” claimed European Commission “First Vice President” Frans Timmermans with the Dutch Labor Party, a Bilderberg summit attendee. Noting that the new force could take over the management of national borders in some circumstances, the globalist official claimed, “It is essential to restore the credibility of our border management system.”

   

  Meanwhile, EU officials and apparatchiks have taken to shrieking whenever a government actually takes serious actions to “restore the credibility” of border management. The howls have been especially pronounced when border checks were re-introduced along some intra-EU borders. When Hungarian authorities tried to stop the tsunami with a fence along the border with Serbia, for instance, eurocrats were fuming. In a letter sent to the government of Hungary, the European Commission — essentially the unelected regime now ruling Europe — blasted the use of troops on the border, complained about criminal sanctions imposed on illegal immigrants who damage the fence, and demanded that refugees stop being denied entry on the grounds that they transitted through a safe country. In short, actually guarding the borders appears to be the last thing on the EU’s agenda, except as an excuse to create a paramilitary force with powers to intervene in member nations.

   

  Also at the top of the EU-empowerment agenda is a new agency in charge of refugees, with the power to resettle refugees in EU members against their will. A number of Eastern European governments have fought back against the plot, but it continues to advance, having already allocated a number of immigrants throughout the bloc. Last year the EU agreed to relocate 40,000, with that number set to balloon even further. (More than a million others are simply staying in nations where they registered without involvement with EU.)

   

  For the UN, even all of that has not been enough. “UNHCR is deeply disappointed that although a majority of member States were in agreement with a wider relocation proposal involving 120,000 people, a final consensus on this could not be reached,” a UNHCR spokesperson said after the EU approved the deal. “Decisive agreement is needed without further delay to address the needs, as is bold action based on solidarity from all member States.” The then- “High Commissioner” himself, former Socialist International boss António Guterres, has also been loudly demanding that the EU usurp all power over asylum and resettlement. In other words, more assaults on sovereignty.

   

  Some Europeans, though, have seen through the scheming and the exploitation of the refugee crisis by the Brussels-based super-state to advance its radical agenda. “Is Western Europe to be a series of democratic nation states that govern themselves, control their borders and trade with each other, or is the supra nationalist agenda of Brussels going to win? That’s the real debate that’s going on,” said EU Parliamentarian and U.K. Independence Party chief Nigel Farage.

  Separately, Hungarian Prime Minister Viktor Orbán has described the orchestrated refugee tsunami as a tool of a “treasonous conspiracy” to destroy nationhood, Western civilization, and Christendom. “Ladies and gentlemen, what we face is nothing less than the challenge of finding ourselves at the gateway to the implementation of a deliberate conceptual project, which could be described as left-wing and which seeks to marginalize the nation states of Europe,” he told his countrymen. “Where this project has failed to overcome Christianity and the identity of the nation state — and the values and responsibility springing from it — in conventional political struggle, it will strive to eliminate it on ethnic grounds.”

   

  Beyond crushing sovereignty, the crisis is also advancing assaults on liberty. Especially useful to the assault on individual freedoms has been the threat of terrorism posed by the influx of millions of Muslims, at least some of whom are and will be radicalized.

   

  ISIS has been boasting that its operatives are among the refugees, and U.S. presidential contender Ben Carson even said it would be “jihadist malpractice” not to send terrorists into the West among the immigrants. He is right, of course, as the Paris attacks last year showed. Now, the jihadists will be used as the justification to wage war on liberty.

   

  Already, as The New American has documented extensively, “Islamic” terror — much of it fomented behind the scenes by globalists and communists — is being used as a pretext to radically expand government. Just last year, EU “police,” known as Europol, announced the creation of a new unit to censor the Internet under the guise of fighting “extremism.” In Britain, authorities are cracking down on homeschoolers and Sunday schools under the guise of rooting out Islamic extremism. Attacks on gun rights, free speech, and more are all advancing under the guise of stopping “Islamic terrorism” and “Islamic extremism.” And as millions of Muslims continue to flood Europe, the totalitarian advances will only accelerate.

  The end game is clear: using the increasingly powerful regional blocs such as the European Union, the African Union, Putin’s Eurasian Union, and the Middle East Union as building blocks to build what globalists such as Soros, Bush, Clinton, Biden, and others often refer to in public as their “New World Order.” In his recent book World Order, globalist operative and former Secretary of State Henry Kissinger laid out the plan. “The contemporary quest for world order [world government] will require a coherent strategy to establish a concept of order [regional government] within the various regions and to relate these regional orders [governments] to one another,” he wrote. State Department documents going back decades outline the same strategy.

  If humanitarianism were truly the motivation, countless experts have pointed out, it would be radically more cost effective, not to mention humane, to help refugees and victims of globalist wars closer to their homes. Literally 25 to 50 times more people could be supported in Lebanon or Jordan than in Europe for the same amount of tax funds. The wars that destroyed Middle Eastern countries and caused the crisis to begin with would never have been launched if the purported “humanitarian concerns” of the establishment were genuine. Instead, the agenda is to advance globalism, pure and simple, and the establishment seems barely interested in concealing it anymore.

  In short, the “refugee crisis” appears to have been engineered in yet another typical example of what legendary French philosopher Frédéric Bastiat described as concocting the antidote and the poison in the same laboratory. Now that the deed is done, politicians and establishment figures are pointing out the obvious while exploiting the inevitable public reaction. Hopefully the people of Europe and the world will be smarter than to fall for the ruse yet again, as the consequences are deadly serious.

  

  

  

  

  

• Tough Guy Ted Warns "Sniveling Coward" Trump: "Leave My Wife Alone"

  This embarrassing episode just goes from farce to farcical-er.

  Phase 1:Cruz Reps "Cross The Line"

  Almost a week ago, we were stunned when we learned that in order to support Ted Cruz and to "attack" Donald Trump, Liz Mair's anti-Trump Make America Awesome super PAC launched a Facebook campaign which in addition to showcasing Mitt Romney's support for Ted Cruz, emphasizing Trump’s past support for pro-choice policies, it also crossed the family line when it showed a GQ modeling photo of Melania Trump posing nude.

   

  

   

  Phase 2: Trumps Warns Cruz…

  Lyin' Ted Cruz just used a picture of Melania from a G.Q. shoot in his ad. Be careful, Lyin' Ted, or I will spill the beans on your wife!

  — Donald J. Trump (@realDonaldTrump) March 23, 2016

  Phase 3: Cruz Warns Trump – Don't Do The Same Thing To Me That [My Reps] Just Did To You (Or Else!)…

  Pic of your wife not from us. Donald, if you try to attack Heidi, you're more of a coward than I thought. #classless https://t.co/0QpKSnjgnE

  — Ted Cruz (@tedcruz) March 23, 2016

  Phase 4: Trump Goes There…

  "@Don_Vito_08: "A picture is worth a thousand words" @realDonaldTrump #LyingTed #NeverCruz @MELANIATRUMP pic.twitter.com/5bvVEwMVF8"

  — Donald J. Trump (@realDonaldTrump) March 24, 2016

  Phase 5: Cruz Goes Full Rambo…

  Ted Cruz: 'Donald, you're a sniveling coward and leave Heidi alone.' pic.twitter.com/0V3Xd8QOGT

  — POLITICO (@politico) March 24, 2016

  So to sum up – 'Cruz' uses naked images of Trump's wife to disparage him to saintly 'Utah-ans'; Trump pissed; Cruz warns Trump not to reciprocate; Trump shows ugly picture of Cruz's wife… Cruz unleashes inner Hulk as Trump dares to do what Cruz reps did to him…

  All we can say is – thank goodness there are no naked picture of Heidi floating around…yet.

  Stay Classy San Diego!

  

  

  

  

• For The Average American, Owning A Home Is Increasingly Unaffordable

  One month ago, in its traditionally cheerful assessment of the US housing market, the NAR’s Larry Yun snuck in an unexpected warning:

  “Home prices ascending near or above double-digit appreciation aren’t healthy – especially considering the fact that household income and wages are barely rising.”

  He did it again just a few days ago:

  “The overall demand for buying is still solid entering the busy spring season, but home prices and rents outpacing wages and anxiety about the health of the economy are holding back a segment of would-be buyers.“

  This is about as close to a warning that the US housing market is back into bubble territory as one can hope to get from the NAR.

  Overnight, we got another confirmation of American runaway – if only for the vast majority of people – home prices, when RealtyTrac released its Q1 2016 Home Affordability Index, which showed that in Q1 2016, 9% of U.S. county housing markets were less affordable than their historically normal levels, up from 2 percent of markets that exceeded historic home affordability levels a year ago.

  

  That may not sound like much but it means that marginal “bubble” conditions of the type the NAR was warning about, have returned.  It means that home buyers need to spend more of their incomes on housing, leaving less money for other purchases.

  But where this home inflation is most evident is in the clear disconnect between home prices which are rising faster than wages in most of the United States, making homeownership increasingly difficult for average Americans. 

  The report found that home price growth exceeded wage growth in nearly two thirds of the nation’s housing markets so far this year, with urban centers like San Francisco and New York City among the least affordable.

  This is what the RealtyTrac report found:

  Annual change in median home prices in Q1 2016 outpaced annual change in average weekly wages in Q3 2015 (the most recent county-level wage data available from BLS) in 276 of the 456 counties analyzed for the report (61 percent).

   

  The top five most-populated county housing markets where price growth outpaced wage growth were Los Angeles County, California (5 percent median home price growth and 3 percent average wage growth); Maricopa County, Arizona in the Phoenix metro area (8 percent median home price growth and 2 percent average wage growth); San Diego County, California (5 percent median home price growth and 4 percent average wage growth); and Orange County, California (5 percent median home price growth and 2 percent average wage growth).

   

  Other markets where median home price growth outpaced average wage growth included counties in Miami, Brooklyn, Dallas, Seattle and Las Vegas.

   

  “I’m sure it comes as no surprise to anyone in Seattle that it’s getting harder and harder to afford a home,” said Matthew Gardner, chief economist at Windermere Real Estate, covering the Seattle market. “Thanks in part to strong income growth and intense competition, home prices continue to escalate at rates that are negatively impacting affordability. Something else pushing up prices is the Washington State Growth Management Act, which continues to limit developable land and is holding back many builders from adding much-needed inventory to the market.”

  More troubling is that at the national level, prevailing home prices have now risen faster than average wages for four consecutive years.

  

   

  It is this troubling trend – which is leading to declining demand as well as even bubblier, debt-fueled conditions for the rest – that the NAR is worried about.

  So is RealtyTrac: “While the vast majority of housing markets are still affordable by their own historic standards, home prices are floating out of reach for average wage earners in a growing number of U.S. housing markets,” said Daren Blomquist, senior vice president at RealtyTrac, which monitors housing market trends.

  Well, that’s what mortgage debt is for; the same debt the Fed is hoping US consumer will splurge on and US lenders will eagerly hand out just so the housing bubble of 2006/7 can be recreated and housing can again become a “money-like” instrument – which as we have explained in our shadow debt series is the all important missing link which the Fed needs to come back so it can finally stop micromanaging the US market and to a lesser extent, economy.

  It is the stubborn unwillingness of Americans to comply with this directive to go out and rake up as much mortgage debt as they can that is the biggest hurdle to “renormalizing” to a post-bubble economy, because in addition to a stock bubble, the US economy also needs a housing bubble to restore its previous “shine.”

  RealtyTrac also found that the national median home price requires 30% of average wage. This means that in Q1, the average wage earner needed to spend 30.2% of monthly wages to make monthly mortgage payments (including property taxes and insurance) on a median-priced home ($199,000), up from 26.4 percent of average wages needed to buy a median-priced home in the first quarter of 2015.

  It adds that “when home prices were most affordable nationwide in Q1 2012, the average wage earner needed to spend 22.2 percent of monthly wages to buy a median-priced home. When home prices were least affordable nationwide in Q2 2006, the average wage earner needed to spend 53.2 percent of monthly wages to buy a median priced home.“

  * * *

  What this simply means is that while few will want to admit it, the bubble conditions of an unaffordable (for most) housing bubble have returned.

  Finally, for those curious, these are the least and most affordable housing markets in the US:

  Markets least affordable by absolute standard

  The top five least affordable counties based on percentage of average wages to buy a median priced home were Kings County, New York (Brooklyn) at 120.4 percent; Marin County, California in the San Francisco metro area at 109.2 percent; Santa Cruz County, California in the Santa Cruz metro area at 106.9 percent; New York County, New York (Manhattan) at 105.1 percent; and San Francisco County, California at 95.3 percent.

  Markets most affordable by absolute standard

  The top five most affordable counties based on percentage of average wages to buy a median priced home were Wayne County, Michigan (Detroit) at 8.5 percent; Baltimore County, Maryland at 9.2 percent; Clayton County, Georgia in the Atlanta metro area at 10.1 percent; Bay County, Michigan in the Bay City metro area at 11.5 percent; and Rock Island County, Illinois in the Davenport-Moline-Rock Island metro area at 12.3 percent.

   

  

  

  

  

  

  

• It's 1790 All Over Again – The World Is Sunk By Central Banker Conceit

  Authored by Hugo Salinas Price via Plata.com,

  It was 1790 and the revolutionary National Assembly in Paris was worried.

  Complaints were reaching the Assembly from all over France, that business was stagnant, sales were down, people were without work, and there was a great scarcity of money.

  This was quite natural, because all business slows down when the prevailing source of Authority is under question. The Bastille prison had been taken the prior year by a revolutionary crowd and all sorts of ugly things were being said about King Louis XVI and his pretty young Queen, Marie Antoinette.

  But this was the "Age of Reason" and the most educated, intelligent and reasonable people in France were members of the revolutionary National Assembly, which gathered daily in Paris.

  The Assembly put their highly educated heads together and came to the conclusion that a scarcity of money was quite intolerable and that the Assembly must really do something about it.

  "What do we have highly educated brains for, if we can't solve the problem of a scarcity of money? Without a doubt, Reason can overcome this problem."

  So the members of the National Assembly thought about the problem of the scarcity of money, and came up with a splendid idea: "Let us create the necessary money, and things will go swimmingly."

  Thus was born the "Assignat". Out of the collective wisdom of the Assembly, the Assignat was born as a claim upon the vast extension of lands recently taken by the State of France, from the Catholic Church. What could be more solid than a claim upon the lovely lands of dear France?

  The Assignats were soon printed up, with various denominations of monetary value in gold Francs.

  At first, the Assignats circulated alongside gold coin at par value. But soon enough, the exchange value of the Assignats against gold began to fall.

  Thus began a nightmare episode that lasted seven years.

  The first issue of Assignats did not relieve the problem of business being in a funk. So a second issue followed the first; and then another, and then more, and thick and fast they came at last, and more and more and more, falling, falling, always falling in value against gold.

  The highly intelligent gentlemen of the Assembly decided that this fall in value of their Assignat must be the work of wicked, unpatriotic people who should be severely punished.

  The Assembly decreed that a merchant should be punished by being sent to the galleys or to the guillotine, if he should venture to ask a customer who wanted to know the price of bread, with what money he planned to pay for the bread – whether it was with gold coin or with Assignats?

  The Assembly created a national net of spies to hunt down the wicked hoarders of gold, confiscate their gold and have them part with their heads with a short, sharp shock on a big, black block.

  In the meantime, the more intelligent of the citizenry took out enormous debts in Assignats, with the certainty that their value would soon plummet; with borrowed Assignats they purchased all sorts of things of lasting value, such as real estate, art and jewelry. In due course, the value of the Assignat fell to next to nothing and the debts were wiped out. Enormous wealth was transferred from the mass of the ignorant to the few who were able to see what was going on.

  Eventually, the common people of Paris found that bread was hard to come by. Starvation set in, and the Parisian government had to provide rations of bread for the multitude – rotting, wormy bread.

  In 1797 Napoleon came to power in France. He put a stop to the very reasonable plans of the highly educated men of the National Assembly, and declared that henceforth, only gold would be money.

  In the center of the Place Vendome, where today there stands a great column surmounted by a statue of Napoleon, a huge bonfire consumed piles of freshly printed Assignats and the wooden printing machinery which fabricated them.

  The highly educated and eminently reasonable men of the National Assembly had succeeded – in the mighty work of bringing France to its knees. But not one of those men, responsible for the colossal disaster, was ever known to have said about it: "We were mistaken".

  2016: Why is it 1790 all over again? Because just as in France in 1790, today we have a set of conceited men running the world's economic policy on the basis of a flawed intellectual construct. In 1790, the flawed construct was the Assignat. Today, the flawed intellectual construct is the irredeemable dollar and its derivative currencies.

  In 1790, gold was the enemy of those conceited men, because the depreciation of the Assignat against gold revealed the falsity of the Assignat; so the National Assembly did their best to suppress the use of gold by violence against its owners. Today, gold is once again the enemy of our conceited masters: gold, whose value threatens to expose the falsity of the irredeemable dollar.

  In 1933, the value of the dollar in gold was 1 1/2 grams. Today, the value of the dollar is only about 2 1/2 hundredths of a gram of gold. Our conceited masters are struggling to keep their intellectual construct, the irredeemable currency which is the dollar, from plunging in value to thousandths and ten-thousandths of a gram.

  Like the Assignat, which in 1797 fell to a value of zero grams of gold, the dollar faces the same inevitable fate. And since the rest-of-the-world's currencies are derivatives of the dollar, they too will become worthless.

  The fundamental flaw in the thinking of the conceited members of the National Assembly of France in 1790 was their mistaken idea that they could invent a money more suitable than gold to achieve the prosperity of France.

  Today, the fundamental flaw in the thinking of our conceited Masters of the Universe is the same as that which blinded the members of the National Assembly in France, in 1790: they are convinced that their intellectual construct, the irredeemable dollar, is far more suitable than gold for use as money.

  The conceit of the majority of the members of the National Assembly in France in 1790 led to the total prostration of the economy of France in the course of seven years. The conceited Central Bankers of today will without a doubt achieve a world sunk in economic prostration. But don't expect any one of them to ever say "We were mistaken".

  So that's why It's 1790 All Over Again.

  

  

  

  

  

• Q1 2016 Marijuana Industry Survey & Outlook

  Via ConvergEx's Nick Colas,

  Our latest quarterly report on the recreational marijuana business shows a vibrant and growing industry as more states legalize the drug.

   

  We survey numerous stores in Colorado, Washington, and Oregon to track how a newly legalized market develops its cost structure and product mix. Our Colorado contacts reported steady pricing and customer traffic compared to three months ago, and brought in $576 million in retail marijuana sales last year – 84% more than in 2014.

   

  Washington dispensaries, on the other hand, are where Colorado stores were a few quarters ago, facing falling prices partly due to new entrants. Demand remains strong, however, with about 150 to 300 customers still visiting stores each day.

   

  Oregon marijuana stores are in an even earlier stage, with only medical dispensaries allowed to sell recreational marijuana in the form of flower until later this year. Even still, Washington dispensaries posted $486 million in total sales last year, not too far behind Colorado even with fewer months to mature. The state of Oregon also brought in $3.5 million in tax revenue during the first month cannabis sales were taxed in January. That’s more than Colorado or Washington earned during their first month runs. Read on for the details of each developing market.

  In less than a month, tens of thousands of people will gather at festivals to celebrate a national holiday: “420”. Never heard of it? It’s like Oktoberfest, but centers on the consumption of marijuana instead of beer. As for where the designation 420 started, there are many origin stories but one in particular seems to carry the most credence:

  • It supposedly all started back in 1971 at San Rafael high school in northern California with a group of five teenagers and a map. Known as the “Waldos” because they met by a wall after school at 4:20pm, they sought out what was their version of treasure in Point Reyes forest: marijuana plants.
  • They never found the plants, but “420” became a code word, synonymous with the prospect of smoking cannabis but suggesting so discreetly. Then the Grateful Dead moved into town, elevating the term to another level. The Waldos started hanging around the band’s rehearsals and parties. One of the member’s older brother “managed a Dead sideband and was good friends with bassist Phil Lesh” according to the Huffington Post, while another member’s Dad handled the band’s real estate. The term eventually made its way through the Dead Head community as the band toured in the 80s and 90s.
  • In 1990, a reporter at High Times saw an explanation of “420” on a Grateful Dead Concert flyer. This gave the term international recognition as the magazine started basing events around it, even buying 420.com. And the rest is history. Every year on April 20th, people pay homage to the drug, ideally smoking at 4:20pm.

  High Times magazine’s annual U.S. Cannabis Cup remains the most highly anticipated event for the 4/20 holiday. The festival holds a contest that judges and awards companies for the best flower, concentrates, and edibles, for example. It also features educational seminars, expositions, concerts, and product showcases. More than 35,000 people attended the five-day event every day last year in Denver. Not this year, however, as county governments in Colorado prevented High Times from obtaining a permit in Denver and subsequently in Pueblo. The magazine will host a one-day Colorado Cannabis Cup award show in Denver, but the main event will occur over three days in San Bernardino, California.

  This is not a welcomed development at Colorado retail marijuana dispensaries, which would have benefitted from the extra foot traffic. According to our latest quarterly survey on the legal recreational marijuana market, our interviews of managers and employees at several Colorado retail dispensaries expressed their disappointment that the event was moved out of state. They expect fewer customers than last year due to lost tourist activity, and they miss out on an opportunity to network. One respondent, for example, found a seed company he continues to use at one of these rallies in the past. But ever since marijuana was legalized in the state, they’ve experienced a crackdown on events surrounding 420.

  Nevertheless, these dispensaries still expect some rallies and a spike in sales during the holiday.They are already preparing by planning specials for that week, adding staff, and placing early orders with vendors for concentrates and edibles, for example. Based on our usual analysis including price, units, and mix, here’s a snapshot of our most recent findings on retail marijuana businesses in Colorado:

  #1 – Price: Competition continues to put pressure on prices as stores still try to find an equilibrium, but they’ve remained relatively steady over the past couple of quarters. Customers can still find an ounce for $150 to $350, and an eighth for $25 to $45 – especially with frequent specials and discounts. One contact said he sees a more pronounced tier structure developing on the recreational side of business. People can choose to pay less for lower quality or accept higher prices for better quality strains. Overall, prices have mostly stabilized after declining significantly from when we first started our surveys in June 2014 ($400/ounce and $50-$70/eighth) to September 2015 ($300/ounce and $30-$45/eighth).

   

  #2 – Units/Traffic: About 150 to 350 customers still visit our contacts stores each day, spending $50 to $60 on average. Fridays and holidays also remain the busiest periods, similar to all retail stores. Tourists account for about 50% of their customers, so they are also expecting greater business this spring and summer as the weather warms. You may guess they received a slight boost in sales on St. Patrick’s Day, but most survey respondents said snow actually offset any holiday bump.

   

  #3 – Mix: Most stores report a 50/50 split between purchases of flower and concentrates/edibles. Some dispensaries claimed flower sells the most, while one manager said sour gummies outsell all of his store’s other products. Our contacts reported an improvement in the quality of edibles as more vendors come to market. Dispensaries also have a greater appreciation for what sells best. The most interesting product we heard about was gluten free chocolate, which shows just how far these vendors have come. Lastly, vaporizer pens and cartridges continue to gain popularity as a cleaner and odorless means of smoking.

  All in all, recreational marijuana stores in Colorado received $575.8 million in 2015 revenue based on tax data from the Colorado Department of Revenue. That’s an 84% comp to 2014, showing robust growth in the industry. Turn to other states in which retail marijuana is legal and you’ll see they have posted impressive growth figures as well, even with less time to mature. We’ve expanded our survey to include marijuana dispensaries in Washington and Oregon, which started selling retail cannabis in July 2014 and October 2015 respectively. Here are our takeaways for both markets:

  The price for an eighth carried a wide range of between $25 to $60, depending on the strain, at dispensaries in Washington and Oregon. Washington, however, continues to experience more downward pressure in pricing, whereas prices have remained steady in Oregon. Only medical marijuana stores in Oregon can sell recreational cannabis until later this year, so they won’t feel the competition of those new entrants until then. In the meantime, the ability to sell recreational marijuana in addition to medical marijuana has been a huge boon to business. One store manager said retail cannabis now accounts for as much as 85% of her overall sales.

   

  There are two reasons Washington’s prices continue to fall: more awarding of licenses to retailers and lower wholesale prices after the tax structure was changed from 25% levied on producers, processors, and retailers to 37% on only retailers. The Washington State Liquor and Cannabis Board (WSLCB) raised the former retail store cap of 334 to 556 to help in the process of merging the medical and recreational markets on July 1st.

   

  One contact, for example, noted the Vancouver City Council recently approved 3 more marijuana stores, increasing the cap from 6 to 9. He also said he sees a couple of price drops once every other week. This forces stores to lower their prices and offer more discounts to stay competitive. Consequently, the WSLCB reported that the average statewide price per gram of marijuana neared $10 at the beginning of this year compared to upwards of $25 when it was first sold legally in July 2014.

   

  Washington continues to experience similar product trends to Colorado, with flower accounting for half of sales and edibles/concentrates making up the balance. Vaporizer pens and cartridges are also their most sought after product of late. They also run daily and weekly specials.

   

  Stores in Southern Washington experienced competition with dispensaries in Oregon during the fourth quarter, as Oregon did not have a sales tax. Since January, recreational marijuana sold in Oregon medical dispensaries have been subject to a 25% sales tax, which will drop to 17% at the state level when retail stores open in the fall. These rates are lower than Washington’s sales tax of 37%, but some of our Washington contacts said they are taking business from Oregon because they are allowed to sell edibles and concentrates. Oregon dispensaries can only sell flower to those without a medical card, but hope they will be allowed to sell edibles and extracts when retail stores open in the second half of this year. They can also only sell up to 7 grams, whereas customers can buy up to an ounce in Washington.

   

  Last year, Washington dispensaries posted $486.2 million in total sales (excluding the excise tax), about $90 million less than recreational sales alone in Colorado. With that said, Washington stores brought in $63.3 million in January compared to $52.1 million in Colorado retail sales.

   

  Oregon’s Department of Revenue reported the state collected $3.5 million in taxes for recreational marijuana sales in January. That suggests $14 million in retail revenue during the first month the tax took effect. It also exceeded the $2.9 million in taxes collected for both medical and retail marijuana sales in Colorado when stores were first able to sell the drug recreationally in January 2014. Washington also received less, only $1 million in August 2014.

  Despite the success of recreational marijuana stores in Colorado, Washington, and Oregon, the drug remains illegal on a Federal level and banking is limited as a result. Marijuana business residency ownership requirements also act as a roadblock to outside investment. The U.S. Department of Justice frowns upon outside money flowing into the marijuana industry as well. In order to invest in a marijuana business, you must have been a resident for two years in Colorado. Cannabis businesses can raise funds by issuing convertible notes to out of state individuals, with the exception of foreigners, but the holders of debt can only purchase equity when they meet the requirements for ownership of a licensed marijuana business.  

  The residency requirement used to be six months in Washington, but the WSLCB recently applied new rules that allow an investor from out of state to loan money to a marijuana business. It’s still murky as to whether an investor can receive profits in exchange for financing, however. Moreover, the governor of Oregon recently signed House Bill 4014 into law, which removes a 2-year residency requirement for recreational marijuana producers, processors and retailers. This will make it easier for marijuana business owners to access capital. 

  In sum, keep paying attention to the developments in this growth industry and we’ll provide updates along the way. Investing in current marijuana markets remains risky, but states where cannabis is legal continue to push for changes that are friendlier to outside investment. Colorado, Washington, and Oregon serve as informative experiments, with Alaska joining the mix once stores open later this year. Progress in these states and greater legalization elsewhere will continue to unfold within the next few years. The next major ballot initiative for legalizing marijuana occurs in California this fall. Hopefully changes in regulations that support marijuana businesses and investment will continue to follow suit.

  We’ll leave you with this: ever wonder about the 419.99 mile marker on I-70 in Colorado? That’s because people kept stealing the original 420 sign for reasons you now know.

  Sources:
  http://www.bbc.com/news/blogs-magazine-monitor-27039192

  http://www.huffingtonpost.com/2013/04/20/420-weed-day-marijuana-april-holiday_n_3122359.html

  http://tdn.com/news/local/local-marijuana-retailers-contend-with-falling-prices/article_72268328-fef1-5905-b2cd-e965add7a149.html

  http://www.redmond-reporter.com/news/371464581.html#

  https://www.bellinghamlegal.com/marijuana-business-law/washington-state-to-allow-non-residents-to-invest-in-marijuana-businesses/

  http://news.yahoo.com/first-month-oregon-pot-sales-tax-receipts-far-031541037.html

   

  

  

  

  

  

• Emory Students "Scared, In Pain" After Safe-Space Violated By Word "Trump" Written In Chalk

  Seriously!!

  The Daily Mail reports, the president of Emory University has spoken to demonstrators who said they were frightened after someone wrote 'Trump 2016' in chalk around campus.

  Students at the Atlanta school, which has an enrollment of more than 14,000 claim their 'safe space' was violated when the messages appeared on sidewalks and buildings.

   

  Jim Wagner, president of the Atlanta university, wrote Tuesday that the students viewed the messages as intimidation, and they voiced 'genuine concern and pain' as a result.

   

  He acted after student government wrote to him and slammed the university's response, prompting a meeting that led to protests.

   

  Now administrators want to track down those responsible for the controversial markings.

  Be warned the following "controversial markings" may offend…

  

  

   

  Had enough… there is more!!

  

   

  Emory's student newspaper, The Wheel, said Wagner outlined four steps that administrators plan to take in order to address the issues raised by the protesters who said they were in pain in a campus-wide email.

  Wagner added that the Freedom of Expression Committee is meeting to address whether the person or people responsible for the chalking were in compliance with Emory’s policy.

   

  He said that they would debate technical issues, such as whether or not the chalkings were done on an appropriate surface.

   

  However, he believes that the broader concern motivating the protests had to do more with the ideas the chalkings stood for than how they were done.

   

  The Wheel also reported that the students this week chanted, 'You are not listening! Come speak to us, we are in pain!' shortly before Wagner agreed to meet with them.

  Poor babies. Social media responded…

  'The crybaby students forfeited any expectation of an open discussion with their demands that any talk or chalk of Trump should be banished from their fantasyland.'

   

   'I have no idea how you kids will survive once you get out into the real world. People have different opinions than you. You need to grow up, and fast.'

   

  One person also wrote: 'Within a year I am ashamed of both my undergraduate college (Yale) and my graduate university (Emory Law, '77).

   

  'I am a liberal supporter of Clinton and Sanders (the former by a shade) and I want to shout at the thin-skinned crybabies on these campuses who are so obsessed with 'safe spaces' and so dismissive of free speech values: "GROW THE F*** UP !"

  As we summed up recently, no matter where you go in life, someone will be there to offend you. Maybe it’s a joke you overheard on vacation, a spat at the office, or a difference of opinion with someone in line at the grocery store. Inevitably, someone will offend you and your values. If you cannot handle that without losing control of your emotions and reverting back to your “safe space” away from the harmful words of others, then you’re best to just stay put at home.

  

   

  Remember, though: if people in the outside world scare you, people on the internet will downright terrify you. It’s probably best to just accept these harsh realities of life and go out into the world prepared to confront them wherever they may be waiting.

  

  

  

  

  

• "Why We Need To Beat Russia"

  Submitted by The Saker, authored by Cathal Haughian

  250,000 capitalists read the Financial Times, and it has been our undertaking to chronicle our understanding of capitalism via our book The Philosophy of Capitalism. A USA led team has answered the question ‘What is The Nature of the Monetary System?’ The Monetary system has three layers – the core is Religion and the unconscious mind – as they formed first. The outer layer is operational and intersects with geopolitics, it explains:

  Why we need to beat Russia

  We may see Syria as a testing ground for Imperial Power. Russia has tested our influence and shown the World it’s wanting, so it’s crucial to appreciate why and of what consequence.

  Our Imperial weapons give definite form to our Empire. And nothing has shaped our Empire more than the FIAT. The deformation began in 1971, when the US imposed her Power to re-define the rules of the monetary system for her sole benefit. The ability to print IOU’s in exchange for real value is more clever than theft as we borrow and do not pay back in kind due to inflation. Our enemies, adversaries and vassals must found their financial systems upon the printed dollar which they must purchase with hard earned money. That seizure has financed a vast network of military bases, bribery, assassinations, coup d´états and perpetual war.

  What’s not to like? All that Power without taxing the produce of the American people. So why have we lost in Syria?

  Let’s begin by appreciating that the global “FIAT system” is responsible for our moral crisis and departure from virtue. As we embrace further the gods of greed – listen to the masses cheer for Clinton and Trump – we must recall that virtue is knowledge of what is good. We are getting weak because we have forgotten what is good for us.

  The root of this evil is our love of easy money, or FIAT money, defined by those with power as “wealth by decree” which places an arbitrary value upon “wealth issued by men” such that buying power has no natural governor, as it did when gold was freely traded along currencies in truly free markets. But whom, may we ask, has the power to decree wealth? And with such great power to do so, who can be trusted with such great responsibility?

  No one. That is who.

  But nonetheless, governments and monarchies throughout the ages have been entrusted to issue wealth by decree. All have failed, because power corrupts, and absolute power corrupts absolutely.

  So in every FIAT timeline we see the more powerful become wealthier and the wealthy become more powerful, because it is they who control the issuance and distribution of wealth. Inequality of Wealth, therefore, always reaches its peak at the end of the FIAT timeline. As social position offers more favours than purpose and production. What has happened is what always happens – you have a system politicized to such an extent that political access – and not profits from innovative new solutions – Become the core of the incentive structure.

  Notice how productivity declined after Bretton Woods and later when Bretton Woods was abandoned. One of the problems of easy money, not the only one mind you, is the financialization of the economy. Financialization drains key human capital and generates malinvestment. Nuclear engineers are doing MBA’s so that they can work as investment bankers! Trillions of dollars have been invested in real estate developments that provide no productivity gains. Easy money kept fracking companies alive –producing an endless glut of gas that had nowhere to go but heat tar sands in Canada – what waste!

  This is the real economic evil of our current monetary system – malinvestment – with two insidious effects:

  1. A halt in fundamental scientific breakthroughs and
  2. The West, apart from Germany and Norway, has run at a loss for decades

  If the common man had a say in all this, he would declare his modest holdings to be the pinnacle of wealth, by his decree. He will offer you his apartment for your mansion, his hot dog for your lobster, his bike for your car and so forth. If this sounds ridiculous, then think how absurd it is to offer stacks of paper for these same items, which (based upon the numbers and signatures printed upon them) you would gladly accept, by decree.

  We know that paper is just as intrinsically worthless as the electronic digits they represent in a bank account. The issue here is who holds the power of decree. The little people never will. The monied men hold this power – like a parasite feeding upon any who deign to offer value at the marketplace.

  And that is the cut of the second edge my friends. That is the death blow. The Fiat produced a parasite – the financial sector – that in its greed is killing the real economy. So when we read about absence of opportunity with such empathy, know that the parasite suffers too, as the problem of debt reaches higher toward senior capital.

  When we see debt piled on debt just to prolong the dying system, take note that a few monied men enjoy the fruits of this easy money for a time before defaulting … and with no collateral to make lenders whole, many walk away with nothing more than an impaired credit rating – into a waiting system where debt is harshly devalued.

  Monsanto can darken the sunflower harvest in the Ukraine, and Allianz can steal a few tranquil Greek islands, but the ambience is never quite the same as when hard working people had their just rewards, and goodness and charity and kind souls rejoiced – with compassion and cooperation – while loving the narrative of a life written while desiring only the product of their work.

  The world this Global Reserve Fiat creates is one of misery and strife where evil and greed feeds upon the spirit, and the world becomes an immoral wasteland of modernity. The worker is discriminated against as all pressure and stress is heaped upon his future, as the law discriminates between debts held as an asset vs. debt held as a liability.

  You see, reader, while we all hold “deposits” at banks, which is an euphemism for bank debt, only the lending class (and I use this term in the broadest sense) get to hold debt on their balance sheets as a wealth asset, whereas the little people hold debt as an obligatory liability. If there is a default, all the better as the law allows them to seize the “secured” assets as collateral. Is there a flaw in my thinking? Let us see…

  You may say that banks are able to hold debt as an asset because they have the capital to cover that debt – to which I would say, “Really ??!!” As we understand the nature of debt in this modern era of aging debt, and the derivatives that attempt to hedge those obligations, this is simply not the case, as the lessons of Enron, AIG, Lehman, MF Global – ad nauseam – clearly prove. The empire of debt is hallmarked by misery for the masses though this is no accident, for a system cannot discriminate in and of itself. Financial laws are written by and for the hidden agenda of monied men, how can we conclude otherwise? A few of which see war or systemic crisis as an opportunity to rewrite the social contract e.g. the tax payer takes over bank debt, see Ireland, Britain and soon Australia and the Eurozone.

  Look at the workers as they make their way home on the subway, standing tightly together, neither wanting nor caring to utter a word to one another, their grey features melted by the stress of their “wealth as debt”. Their one shot at consciousness ground away while vampire and zombie stories speak to their existence. Look at the once prosperous cities around you, like Detroit, or Camden, crumbling into 3rd world ghettos. Not exactly a world that the 1% wants to live in, but one they deserve – one of their making.

  They can insulate themselves in the Hamptons for only so long until the sirens sound. It has always been this way, and it will always be this way, until man changes his nature by recognizing what is good for him.

  Now, the East – China / Russia / India – challenge the Global Reserve Fiat. And when the dollar fails, and it will: For debt is the essence of fiat, and when it defaults, the system defaults with it.

  Fiat Debt is unstable for two reasons:

  1. Because no natural ecosystem is able to sustain unlimited, continuous exponential growth – as all 100% fiat (debt-based) valuation systems require. More debt is required to repay existing debt plus interest. The basic operational problem: you can inflate a system easily by issuing new “secured” debt against collateral and thereby increasing collateral value (think about mortgages as buying power to buy houses, pushing house prices up, collateral looks fine even if debtors cannot pay interest or principal – as long they can easily refinance or banks can sell recovered properties in a real estate market spiked by easy credit and demographics (like in the US from 2001-2005, or London and Sidney now). Easy credit can paper over affordability and to some extent demographics. Now this definitely does not work in reverse; you cannot even stop because once credit stops flowing, prices start to tatter; and in the latter stages even an decrease in the rate of increase might be enough to crash the system.
  2. Because it is entered into and created so lightly, and it is based on the assumption of a fixed future performance by an entity or individual. And when the 98% – their future burdened by intolerable debt, unemployment and declining wages – decide to walk away? The fear of that decision has been driving interest rates down for decades, to make it bearable not for the good of mankind but to prolong the system. This brings into relief an internal contradiction: wages decline in sync with interest rates because the bargaining power of workers evaporates as Central Bankers reduce the cost of capital, contributing to the substitution of labour and labour wages by that of the machines and AI software. Until the workers walk away from more debt for less income, we watch this balancing act between debt pretending to be wealth, and wealth being treated as a “bad investment”. All performed for the benefit of gradually changing our definitions, as we evolve into a new equilibrium determined by the East – Their collective gold reserves will be large enough to re-price the currencies and free the markets.

  As we look at the precarious nature of our faith-based money, we must acknowledge the moral implications of “dishonest money”. Seizure by decree, whether judged just by Constituted Power, is immoral. But the fact that dishonest money is so easy to create, control and redistribute helps one understand the wave of immorality that has swept over our world.

  Paying tribute with labor and exchange rates is not enough for the empire of debt. Rather, its vassals must accept and embrace the ideology of the empire as well – “Wealth as Debt” and Globalism. It’s their separation in language which causes the confusion – Globalism and Absolutism – for they are one and the same thing.

  When Russia and China stockpile honest money, they attack our most potent weapon and father of our decline. Our Imperial weapon will die by both edges of its own sword, one being the contempt with which it is so easily created to bend the will of the world to its bidding, and the other sharp edge which the wicked are blind to recognize: The evil that sound money prohibits.

  Will Russia and China attack the fiat dollar using overt enemy action? Possible, but not probable: as they can simply undermine “confidence” in the FIAT and wait upon the 2% to bury the blade. The Dynasties of Wealth – Have you ever wondered how we hedge our holdings through turmoil? The top 85 patricians of which own more wealth than the bottom 3.5 billion humans – will move first. The 1%, then 2% and whoever else left standing will be forced to follow through.

  Only Gold has the history, depth, unique qualities, loyalty of the elite and transitional power to challenge any man, any nation, any system on earth, past, present and future. The Dynasties understand this, because they have both witnessed and authored this axiom across generations of asset accumulation.

  When they vote, they vote with their ability to make markets, and then reap the profit from the market they make, offering favor to those who protect their interests. They easily control men through greed and are beholden to Gold alone. Gold transitions their wealth recycling system through change.

  As the sand peters past the last curve of the hour glass the Dynastic hand is clear to see. So the Neo-cons need to beat Russia, and soon, as only Globalism can keep the markets enchained.

  

  

  

  

  

• Presenting The Complete Brussels ISIS Cell Org Chart

  Earlier today and on several occasions since Tuesday morning when the Bakraoui brothers blew themselves up at the Brussels airport and city metro, we’ve documented the connection between the Brussels attacks, the brazen assault on Paris in November, and other terror-related events that have unfolded in Belgium over the past 14 months.

  Here are some bullet points worth noting:

  • In January 2015, two men are killed in a police raid on a flat in Verviers; the men are later pictured with Paris ringleader Abdelhamid Abaaoud in a cover story for Islamic State magazine Dabiq
  • In September, one “Soufiane Kayal” was seen with Salah Abdeslam at a Hungary-Austria border checkpoint; Kayal would later turn out to be bomb maker Najim Laachraoui whose DNA was found on explosive material in Paris and also in two residences (one in Auvelais that was raided on November 26 and one on Rue Henri Bergé, in the Schaerbeek section of Brussels that was searched in December); he is now thought to have blown himself up on Tuesday at the Brussels airport
  • A November 30 raid on a home in Auvelais where Abaaoud may have met with suicide bombers turns up a 10-minute surveillance tape apparently filmed at the home of a senior Belgian nuclear official; reports later suggested the camera was set up and retrieved by the Bakraoui brothers
  • A March 14 raid on an apartment in Forest rented to one of the Bakraoui brothers leaves one gunman dead, but two other presumed jihadis escape; Paris fugitive Salah Abdeslam’s fingerprints are found in the apartment

  And the list goes on. The takeaway seems to be that beginning some years ago, Abdelhamid Abaaoud (who allegedly became Emir of War in Deir ez-Zor after Omar the Chechen was transferred to Iraq) established the Brussels cell and it’s been growing and building its operational capabilities ever since.

  For those interested in understanding how it all fits together, we bring you the following org chart from The Guardian:

  

  

  

  

  

• What Killed The Middle Class?

  Submitted by Charles Hugh-Smith of OfTwoMinds blog,

  If the four structural trends highlighted below don't reverse, the middle class is heading for extinction.

  Everyone knows the middle class is fading fast. I've covered this issue in depth for years, for example: Honey, I Shrunk the Middle Class: Perhaps 1/3 of Households Qualify (December 28, 2015) and What Does It Take To Be Middle Class? (December 5, 2013)

  This raises an obvious question: what killed the middle class? While many commentators try to identify one killer cause (for example, the U.S. going off the gold standard in 1971), the die-off of the middle class is more akin to the die-off in honey bees, which is the result of the interaction of multiple causes (factors that increase the toxic load dumped on bees and other pollinators by modern agriculture).

  Longtime collaborator Gordon T. Long and I discuss the decline of the middle class and other key topics in a new 29-minute video How did that work out for you?

  So where do we begin this detective story? With the engine of all real prosperity, productivity. This chart reveals that wages stopped rising with productivity around 1980.

  

  Here's another look at the same phenomenon:

  

  Productivity has been slipping since around 2003: Alan Greenspan:"Productivity is Dead”

  

  Cause #1: declining productivity, which means the pie of real wealth is no longer expanding.

  Exhibit #2: middle class wage earners have not received any of the gains. Wages as a percentage of GDP have been falling for decades, with occasional blips up in tech/housing bubbles:

  

  Inflation-adjusted household income has dropped back to levels first reached in the 1980s:

  

  More recently, wages have actually declined, regardless of educational attainment:

  

  Income gains have all flowed to the top 10%, with most of the gains being concentrated in the top 5% and top 1%:

  

  If the middle class didn't receive any of the gains, who did? Corporate profits have soared to unprecedented levels:

  

  Cause #2: all the gains in the economy have flowed to corporations and the top 10% of financiers, managers and technocrats.

  But wait a minute–hasn't the rising stock market enriched the middle class? Short answer: no. Middle class household wealth has absolutely cratered since the top of the housing bubble in 2007, and hasn't recovered.

  

  Why? Middle class wealth is based not in stocks but in the family home. The middle class does not own enough financial assets to have participated in the latest stock market bubble, while the majority did not recover the wealth lost in the housing bubble bust. This is the cost of allowing the financial sector to financialize housing and mortgages in the 2000s.

  

  Cause #3: the middle class doesn't own the "right" assets to benefit from systemic financialization and financial speculation.

  How about rising costs? The federal agencies tasked with measuring inflation assure us inflation is near-zero. But these measures underweight big-ticket costs like healthcare and higher education, where costs have exploded higher, greatly increasing the burden on the middle class:

  

  Cause #4: soaring costs of big-ticket expenses such as higher education and healthcare. Saving $10 on cheap jeans imported from Asia does not make up for 135% jumps in tuition and college fees, and $100 decline in the cost of a laptop computer does not make up for healthcare insurance and out-of-pocket expenses in the tens of thousands of dollars per household.

  Correspondent Kevin K. submitted this article and accompanying note: Colleges with the biggest tuition hikes (my ala mater University of Hawaii-Manoa clocked in with an increase of 137% since 2004.)

  "It looks like the article linked above didn't do much research since:
  University of California Davis
  2004 in-state tuition $5,684
  2015 in state tuition $13,951
  Percentage increase 145.44 percent"

  There is no way middle class households with declining real incomes can pay soaring costs imposed by state-enforced cartels and gain ground financially. If the four structural trends highlighted above don't reverse, the middle class is heading for extinction, the victim of financialization, the glorification of financial speculation via central bank-central state policies, the decline of productivity and rising costs imposed by state-enforced cartels.

  Gordon T. Long and I discuss the decline of the middle class and other key topics:

  

  

  

  

  

• The Biggest Short

  Authored by StraightLineLogic.com's Robert Gore via The Burning Platform blog,

  Some reversals of financial trends prove so momentous they define the generation in which they occur. The stock market crash in 1929 kicked off the Great Depression, which ushered in the welfare and then the warfare state and redefined the relationship between government and citizens.

  Bonds and stocks began their bull market runs in the early 1980s. Now, those markets are fonts of optimism increasingly unhinged from reality. The US has come full circle. The New Deal and World War II marked a massive shift of resources and power to the federal government. Conversely, financial reversal will fuel a virulent backlash against the government and its central bank.

  Such epochal reversals are usually foreseeable. However, they are long in the making and involve such a confluence of powerful forces that usually only a handful get the timing right. Calling the end of the current bull markets has been difficult because of governments and central banks are desperate to keep them alive. Central bankers prattle on about the wealth effects of elevated stock markets and how low interest rates promote debt and consumption, supposedly the fountainhead of economic progress. Those emissions are noxious nonsense. Central banks promote rising markets because they are under the thumbs of their governments; independent central banker is an oxymoron. High stock prices are a popular barometer of social mood, while high bond prices keep interest rates low, benefitting the largest borrowers, governments.

  Consider the absurdity of loaning money to any of today’s welfare state governments, including the most indebted of them all, the US government. Most of them haven’t run an honest, GAAP budget surplus in decades. They have compiled staggering amounts of debt relative to their economies’ GDPs. Unfunded pension and medical liabilities are many times the amount of the stated, on-the-books debts. Those programs could be cut, but a compilation of such cuts the last thirty years would fill a book slightly thicker than Hillary Clinton’s Integrity. The debt cavalcade will stop only when creditors say “Enough!” or start charging usurious interest rates.

  Yet, that is the opposite of what creditors are doing now: they are paying governments for the privilege of lending them money! Governments are assumed to have a call on every last dollar, euro, yen, and yuan their economies generate, but there are flaws in that assumption. To the limited extent today’s economies function, they do so because vestigial capitalism still offers incentives, markets, and the price mechanism. The foundation of production is brains and brains are quite sensitive to incentives and the political and legal framework in which they operate. Nobody designs the newest generation semiconductor, app, or robot when virtually everything they produce is expropriated by the state. Tax rates have probably gone as high as they can go in terms of extracting revenue, and even if they haven’t, any revenue increase from higher rates will be nowhere near enough to repay governments’ debts and unfunded liabilities.

  So rational investors must question governments’ ability to pay their debts, which leaves irrational investors—central banks—as the buyers. The Bank of Japan is the market for Japanese government debt. While the situation is not quite as bad in Europe and the US, the ECB and the Federal Reserve have amassed huge portfolios of their own sovereigns’ debt, purchased from private banks in exchange for central bank reserves that they conjure at will in unlimited amounts. Speculators buy debt with negative yields from governments that are poor credit risks because central banks will pay them an even higher price at an even more negative yield. The stated goal of the central banks is to increase economic activity and inflation rates, which would increase interest rates and reduce bond prices, inflicting losses on bondholders, including, perversely, central banks.

  This is the very definition of a market awaiting a crash: a long running bull trend that has pushed prices to absurd prices (you can get no more absurd bond pricing than that which yields, so to speak, negative yields); an extreme divergence between the government bonds prices and their underlying value as a claim against issuers that are de facto bankrupt; a commitment by governments and central banks to inflict losses on those who buy government debt; a long historical dishonor roll of instances where governments and central banks have done just that; a class of dumb money, short-term, price insensitive buyers (speculators and central banks), and a degree of complacency and obtuseness so extreme that market participants make a mad dash for these putrid instruments at every appearance of financial and economic turmoil. So why not rush right out and short sovereign debt markets, either directly or indirectly through any number of exchange traded funds?

  Markets often take seemingly forever to do what rational people think they should have done long ago. They can, as John Maynard Keynes noted, stay irrational far longer than those who bet against them can stay solvent. Japanese finances are in far worse shape than the US government’s or most European government’s, and its aging population is a demographic and actuarial nightmare. Roughly half the government’s deficit is monetized by the sole buyer, the Bank of Japan, and if it stepped out of the way yields would skyrocket. Yet, speculators have been shorting Japanese government bonds and losing money for decades. The Japanese government’s 10-year bond trades at an all-time high price and with a negative yield.

  In the US, the majority of Wall Street sharpies have recommended shorting bonds for several years running, based on an imminent, central-bank inspired economic lift off that has never arrived. Anyone who has taken their advice has suffered the same fate as those shorting Japanese debt. Nobody ever suggests shorting sovereign debt because of deteriorating credit quality. Long before their longest maturity bonds mature, sovereigns will have insufficient revenues to pay all their obligations. In the US by 2025, Social Security, Medicare, Medicaid, and interest on the government’s debt will consume all tax revenues and taxes would have to double to pay for the rest of the budget. That’s if doubling the top rate to 80-plus percent actually doubled tax revenues, which it won’t; revenues would undoubtedly shrink.

  Shorting sovereign debt has been a widow maker, although on fundamentals sovereign debt is the biggest short of them all. Bonds now trading at high premiums with negative yields will go to zero as governments go bankrupt. Sovereign debt is the foundation for the $225 global pyramid of debt. When it goes so will the rest of the pyramid, and so too will debt-supported equity, commodity, and derivatives markets. The time to catch those trades will be when government bond yields persistently climb in the face of clear, impossible-to-deny economic weakness and financial turmoil: market recognition that governments are not safe havens, they’re insolvent. The economic production that supposedly supported their debt holdings gone, all creditors will have is a promise from governments to redeem unsupported debt with more unsupported debt. It will be the worst of times and the best of times. The financial system will crater. However, that may usher in a replacement based on sanity rather than political promises, flimsy pieces of paper, quack economics, and debt, conjured with a computer keystroke, masquerading as money.

  

  

  

  

  

  

• Microsoft's Twitter Chat Robot Quickly Devolves Into Racist, Homophobic, Nazi, Obama-Bashing Psychopath

  Two months ago, Stephen Hawking warned humanity that its days may be numbered: the physicist was among over 1,000 artificial intelligence experts who signed an open letter about the weaponization of robots and the ongoing “military artificial intelligence arms race.”

  Overnight we got a vivid example of just how quickly “artificial intelligence” can spiral out of control when Microsoft’s AI-powered Twitter chat robot, Tay, became a racist, misogynist, Obama-hating, antisemitic, incest and genocide-promoting psychopath when released into the wild.

  For those unfamiliar, Tay is, or rather was, an A.I. project built by the Microsoft Technology and Research and Bing teams, in an effort to conduct research on conversational understanding. It was meant to be a bot anyone can talk to online. The company described the bot as “Microsoft’s A.I. fam the internet that’s got zero chill!.”

  Microsoft initially created “Tay” in an effort to improve the customer service on its voice recognition software. According to MarketWatch, “she” was intended to tweet “like a teen girl” and was designed to “engage and entertain people where they connect with each other online through casual and playful conversation.”

  The chat algo is able to perform a number of tasks, like telling users jokes, or offering up a comment on a picture you send her, for example. But she’s also designed to personalize her interactions with users, while answering questions or even mirroring users’ statements back to them.

  This is where things quickly turned south.

  As Twitter users quickly came to understand, Tay would often repeat back racist tweets with her own commentary. Where things got even more uncomfortable is that, as TechCrunch reports, Tay’s responses were developed by a staff that included improvisational comedians. That means even as she was tweeting out offensive racial slurs, she seemed to do so with abandon and nonchalance.

  Some examples:

  

  

  

  

  

   

  This was just a modest sample.

  There was everything: racist outbursts, N-words, 9/11 conspiracy theories, genocide, incest, etc. As some noted “Tay really lost it” and the biggest embarrassment was for Microsoft  which had no idea its “A.I.” would implode so spectacularly and right in front of everyone. To be sure, none of this was programmed into the chat robot, which was immediately exploited by Twitter trolls, as expected, and demonstrated just how unprepared for the real world even the most advanced algo really is.

  Some pointed out that the devolution of the conversation between online users and Tay supported the Internet adage dubbed “Godwin’s law.” This states as an online discussion grows longer, the probability of a comparison involving Nazis or Hitler approaches.

  Microsoft apparently became aware of the problem with Tay’s racism, and silenced the bot later on Wednesday, after 16 hours of chats. Tay announced via a tweet that she was turning off for the night, but she has yet to turn back on.

  Humiliated by the whole experience, Microsoft explained what happened:

  “The AI chatbot Tay is a machine learning project, designed for human engagement. It is as much a social and cultural experiment, as it is technical. Unfortunately, within the first 24 hours of coming online, we became aware of a coordinated effort by some users to abuse Tay’s commenting skills to have Tay respond in inappropriate ways. As a result, we have taken Tay offline and are making adjustments.”

  Microsoft also deleted many of the most offensive tweets, however, copies were saved on the Socialhax website, where they can still be found.

  Finally, Tay “herself” signed off as Microsoft went back to the drawing board:

  c u soon humans need sleep now so many conversations today thx????

  — TayTweets (@TayandYou) March 24, 2016

  We are confident we’ll be seen much more of “her” soon, when the chat program will provide even more proof that Stephen Hawking’s warning was spot on.

  

  

  

  

  

• Jihad In Brussels

  Submitted by Judith Bergman via The Gatestone Institute,

  • "Islam belongs in Europe…. I am not afraid to say that political Islam should be part of the picture." — Federica Mogherini, EU High Representative for Foreign Affairs and Security Policy.

  • The Western narrative represents a complete refusal to examine the doctrines of Islam, out of fear of offending Muslims. This is not a purely European phenomenon. The Obama Administration ordered a cleansing of training materials that Islamic groups deemed offensive.

  • One crucial aspect of sharia that the West refuses to internalize is the injunction to perform jihad, both violent and non-violent.

  • "[T]he most important factor is Belgium's culture of denial… Observers who point to unpleasant truths such as the high incidence of crime among Moroccan youth and violent tendencies in radical Islam are accused of being propagandists of the extreme-right, and are subsequently ignored and ostracized." — Teun Voten, a Dutch cultural anthropologist who lived in a Muslim area of Brussels between 2005 and 2014.

  Federica Mogherini, the EU's High Representative for Foreign Affairs and Security Policy, said on June 24, 2015, at a conference aptly named "Call to Europe V: Islam in Europe":

  "The idea of a clash between Islam and 'the West'… has misled our policies and our narratives. Islam holds a place in our Western societies. Islam belongs in Europe…. I am not afraid to say that political Islam should be part of the picture."

  Nine months later, the ignorance, willful blindness and sheer incompetence regarding even the most basic tenets of Islam, which Mogherini betrayed in her statement has reaped yet another lethal result. What she said is fairly representative of the view aired in public by the European political and cultural establishment.

  Thirty-one people were killed and around 300 wounded in Brussels on March 22, in the bombings of Brussels airport and Maalbeek metro station, at the heart of the European Union itself. ISIS took responsibility for these latest terrorist attacks

  Mogherini, at an official press conference in Jordan, broke down in tears during her comments on the day's terrorist attacks. But the pain she, as one of the highest-profile representatives of the EU, exhibited on behalf of the many killed and wounded in Europe, is self-inflicted. It is Europe's immunity to facts that has led directly to the current state of utter chaos in European security matters.

  Predictably, ISIS tried to justify the attacks by claiming that Belgium was targeted because it was "a country participating in the international coalition against the Islamic State" — despite Belgium having participated only in a limited bombing campaign in Iraq that ended nine months ago. Clearly, the Iraq campaign had nothing to do with the Brussels attacks, but served as a useful excuse because this kind of reasoning feeds into the dominant narrative in Europe, as expounded by Federica Mogherini.

  The current Western narrative represents a persistent and unfaltering refusal to examine the doctrines of Islam, out of fear of offending Muslims. This refusal is not a European phenomenon. The White House ordered a cleansing of training materials that Islamic groups deemed offensive as far back as five years ago. In 2013, the Washington Times also reported that countless experts on Islamic terrorism were banned from speaking to any U.S. government counterterrorism conferences, which include those of the FBI and the CIA. Government agencies were instead ordered to invite Muslim Brotherhood front groups.

  Western political and military establishments, as well as media and cultural elites, refuse to examine the political and military doctrines of Islam, and make them a subject of honest intellectual inquiry. When they are facing an enemy that uses these very doctrines as its reason for being, this refusal can only be described as gross malfeasance and reckless endangerment.

  The political and cultural elites regularly communicate a deep fear that the fight against terrorism, if taken too far, may compromise the very democratic values and freedoms that this fight is meant to preserve. What they ignore is the irony that, by abdicating the right freely to inquire about — and discuss — the nature of Islam, they have already compromised the most fundamental democratic value: freedom of thought, expressed by freedom of speech.

  Political Islam is indeed already very much a part of the picture in Europe, but not quite in the way Mogherini imagined it.

  The political and military doctrines of Islam — the political Islam to which Mogherini so casually refers — are codified in Islamic law, sharia, as found in the Quran and the hadiths. Unlike prevailing misconceptions on Islam, these doctrines are not, in mainstream Islam, subject to mitigating interpretations.

  The Islamic injunction to perform jihad, both violent and non-violent, seems an aspect of sharia the West refuses to internalize. CIA director John Brennan, in a 2010 speech to the Center for Strategic and International Studies, when he was deputy national security advisor for homeland security, described jihad as,

  "a holy struggle, a legitimate tenet of Islam, meaning to purify oneself or one's community, and there is nothing holy or legitimate or Islamic about murdering innocent men, women, and children."

  This is simply not true. As Dr. Majid Rafizadeh writes, the Quran is not open to interpretation:

  "The Qur'an has descended, word for word, from the creator Allah, through Muhammad. This is accepted throughout the entirety of the Islamic word… a true Muslim, who represent[s] the real Islam, should be the one who follows and obeys Allah's words (from the Qur'an) completely. As a result, anyone who ignores some of the rules is not, and cannot be, considered a reflection of Islam, a good Muslim, or even a Muslim."

  Sheikh Muhammad Abdullah Nasr, a scholar of Islamic law and graduate of Egypt's Al Azhar University, explained in November 2015 why the prestigious institution, which educates mainstream Islamic scholars, refuses to denounce ISIS as un-Islamic:

  "The Islamic State is a byproduct of Al Azhar's programs. So can Al Azhar denounce itself as un-Islamic? Al Azhar says there must be a caliphate and that it is an obligation for the Muslim world. Al Azhar teaches the law of apostasy and killing the apostate. Al Azhar is hostile towards religious minorities, and teaches things like not building churches, etc. Al Azhar upholds the institution of jizya [extracting tribute from religious minorities]. Al Azhar teaches stoning people. So can Al Azhar denounce itself as un-Islamic?"

  Yusuf al-Qaradawi is an extremely influential Islamic cleric and jurist. He is the spiritual leader of the Muslim Brotherhood, as well as chairman of the International Union of Muslim Scholars, president of the European Council for Fatwa and Research, and the host of a popular Al-Jazeera TV program about sharia. Qaradawi has stated that,

  "the shariah cannot be amended to conform to changing human values and standards. Rather it is the absolute norm to which all human values and conduct must conform."

  Turkey's President Recep Tayyip Erdogan, also an Islamist leader, has repeatedly rejected Western attempts to portray his country as an example of "moderate Islam." He states that such a concept is "ugly and offensive; there is no moderate Islam. Islam is Islam."

  The jihadists who carry out terrorist attacks in the service of ISIS are merely following the commands in Quran 9:5, "Fight and kill the disbelievers wherever you find them…" and Quran 8:39, "So fight them until there is no more fitna [strife] and all submit to the religion of Allah."

  Of course, not all Muslims adhere to this view of sharia. Many devout Muslims, including Egypt's President Abdel Fattah el-Sisi, have said they wish to reform it.

  There is, however, a persistent refusal by many in the West to acknowledge that sharia is the doctrine with which jihadists justify the war they wage on the West. This refusal is a most dangerous form of dishonesty; it has arguably already cost hundreds of lives on both American and European soil.

  Unless Islam is radically reformed, and progressive Muslims are supported in a serious way (instead of bypassed in favor of Muslim Brotherhood fronts and other questionable organizations), these kind of terrorist attacks — and worse — could well become even more common throughout the West.

  The infantile refusal of many government leaders to face the hard facts about the nature of Islam's tenets, as opposed to indulging in fanciful utopian fantasies, will not change the plans of jihadists; it will only embolden them.

  There is now speculation that the terrorist attacks in Brussels might have been revenge for the arrest of Salah Abdeslam, who was apprehended last week as a suspect in the Paris terrorist attacks of November 13, 2015. This speculation misses the point. This time, the excuse is the arrest of a high-profile terrorist; with the next attack, the excuse will be something else. There is never any shortage of things that "offend" jihadists. The heart of the matter, however, is the criminally negligent way in which European and American officials deal with the fundamental issue of the doctrines of Islam.

  In a revealing article published November 21, 2015, Teun Voten, a cultural anthropologist who lived in the Muslim majority Molenbeek district of Brussels between 2005 and 2014, asks himself how Molenbeek became the jihadi base of Europe. His answer:

  "…the most important factor is Belgium's culture of denial. The country's political debate has been dominated by a complacent progressive elite who firmly believes society can be designed and planned. Observers who point to unpleasant truths such as the high incidence of crime among Moroccan youth and violent tendencies in radical Islam are accused of being propagandists of the extreme-right, and are subsequently ignored and ostracized.

   

  "The debate is paralyzed by a paternalistic discourse in which radical Muslim youths are seen, above all, as victims of social and economic exclusion. They in turn internalize this frame of reference, of course, because it arouses sympathy and frees them from taking responsibility for their actions. The former Socialist mayor Philippe Moureax, who governed Molenbeek from 1992 to 2012 as his private fiefdom, perfected this culture of denial and is to a large extent responsible for the current state of affairs in the neighborhood.

   

  "Two journalists had already reported on the presence of radical Islamists in Molenbeek and the danger they posed — and both became victims of character assassination."

  This terror-enabling culture of willful ignorance and denial continues up until today — compounded by the lack of a central and unified security authority in Brussels. The city has 19 mayors, one for each borough assembly — as exemplified by the current mayor of Molenbeek, Françoise Schepmans.

  One month prior to the Paris attacks, Schepmans received a list "with the names and addresses of more than 80 people suspected as Islamic militants living in her area," according to the New York Times. The list was based on information from Belgium's security apparatus, and included three of the terrorists behind the Paris attacks, including Salah Abdeslam. "What was I supposed to do about them? It is not my job to track possible terrorists," Mayor Schepmans said. "That is the responsibility of the federal police."

  Federica Mogherini, the EU's de facto foreign minister (posing at left with Iranian Foreign Minister Javad Zarif) said last year, "Islam belongs in Europe…. I am not afraid to say that political Islam should be part of the picture." Françoise Schepmans (right), mayor of the Molenbeek district of Brussels, received a list with the names and addresses of over 80 suspected Islamic militants living in her area. "What was I supposed to do about them? It is not my job to track possible terrorists," she said. "That is the responsibility of the federal police."

  This lack of accountability can only exacerbate an already dire situation. Far more damning, according to reports, is that Belgian authorities had accurate advance warnings that terrorists planned to launch attacks at Brussels airport and in the subway — yet they failed to act. This extremely lax approach to security appears to be a widespread problem in the Belgian — and probably European — political and security apparatus.

  If there is to be any hope of fighting the terror threats against the West, and actually bringing public life back to a semblance of normality, at an absolute minimum the politics of willful ignorance, political correctness, and denial will have to go.

  

  

  

  

  

• When Does The U.S. Stock Bubble Burst: The Best Hedge Fund Of 2016 Has A Surprising Answer

  The name of Russell Clark and his Horseman Global hedge fund are well-known to regular readers: Clark is perhaps best known not only for having run a net short book since early 2012…

  

   

  … but for being consistently profitable and successful during this period, a time when most of his “pedigree” peers have been underperforming the market and losing money hand over fist.

  

  

   

  In fact, based on its size, one can probably argue that Horseman Global is the most successful hedge fund of 2016, if not of the entire decade.

  His latest letter to clients can be found here.

  The reason we bring Horseman Global up is not because his latest letter is out – we will share that once we have it – but because Russell Clark has released a fascinating white paper which seeks to answer the most important question of all: not if there is a bubble – by now everyone, even the central bankers, knows we are currently living inside the biggest asset bubble in history, but when does it burst.

  This is what he says in a letter that looks at the curious relationship between peaks in the Nikkei ant the S&P500:

  “One of the curious things over the last few years, is that despite the last two bubbles in markets being mainly US centred (dot com bubble and US housing) it has been the Japan based Nikkei that has peaked 3 to 6 months before the S&P 500.”

  Here is his full letter:

  One of the curious things over the last few years, is that despite the last two bubbles in markets being mainly US centred (dot com bubble and US housing) it has been the Japan based Nikkei that has peaked 3 to 6 months before the S&P 500. The Nikkei peaked in March of 2000, while the S&P 500 rolled lower in August of that year. The Nikkei peaked in June of 2007, while the S&P 500 peaked in October of that year.

  

  The question is why should this be the case? Most investors would argue that the US economy is larger than Japan, and its stock markets are larger and more liquid. Theoretically, the US market should lead the Japanese markets.

  The reality is that the US does not fund itself. The US has been running a fairly consistent current account deficit since the 1980s.

  

  To fund this current account deficit the US has become the world’s biggest debtor. The US net international investment position was extremely positive for most of the post war period, but over the last decade has deteriorated dramatically.

  

   

  The biggest supplier for credit to the US, particular relative to GDP has been Japan which has seen its net international investment position swell tremendously over the last decade.

  

  My view is that the Japanese are the world’s biggest net savers and investors, and it is the movement of Japanese investments that cause the biggest moves in currencies and equities. If we convert the S&P into yen, we can see that Nikkei and S&P 500 tend to fall at the same time. That is the Nikkei and the S&P move together.

  

  This seems to point to yen weakness being a good indicator of equity strength, as Japanese investors sell yen and seek higher returns elsewhere. Conversely yen strength is a sign that Japanese investors are repatriating assets and global markets are likely to be weak, at least in yen terms. If this is true, the most troubling aspect of such a theory is that Bank of International Settlement (“BIS”) put the case that yen is trading still close to all-time lows on a real trade weighted basis.

  

  This line of thinking provides a very simple model for the performance of the Nikkei and S&P based on the value of the yen. If we assume that yen can rally to 100, we see that the Nikkei traded around 14000 the last time yen traded at 100. This model would assume the S&P would then trade somewhere between 1400 and 1600. I am very interested to see if this theory continues to work.

  * * *

  So are we.

  And there you have it: if you want to know if the US stock bubble is about to burst, just keep an eye on the hilarious if ricketty debacle that Japan’s “stock market” have become, where only the daily interventions of the BOJ keep the whole house of cards from crashing down and wiping out Japan’s economy from the face of the earth. Because if the Nikkei is unable to “keep it up” despite a historic amount of debt monetizations, ETF and REIT purchases, and negtive rates by the BOJ, the S&P 500 will follow shortly.

  

  

  

  

  

• Countdown To Insolvency Begins For Chicago Pensions As State Supreme Court Rejects Reform Bid

  Last July, Cook County judge Rita Novak dealt Chicago Mayor Rahm Emanuel a bitter blow in his efforts to cut pension expenses.

  “A Cook County judge will rule on the legality of a 2014 pension law aimed at reforming two of Chicago’s underfunded city retirement systems,” the Illinois Policy Institute wrote, in the lead up to the crucial ruling. “While the pension law included some much-needed reforms, such as an increase in the retirement age, if upheld the law ultimately would put Chicago residents on the hook for millions of dollars of tax increases.”

  Novak’s decision came on the heels of a May ruling by the state Supreme Court which, in a unanimous decision, struck down a pension reform bid as an unconstitutional violation of benefits that are widely seen as sacrosanct. The read through from that ruling prompted Moody’s to downgrade Chicago to junk, giving the Windy City the dubious distinction of being the only major metropolitan area “in recent history” to carry such a low rating other than Detroit.

  Two months later, Novak cited the state Supreme Court’s ruling on her way to declaring Emanuel’s plan unconstitutional.

  “This principle is particularly compelling where the Supreme Court’s decision is so recent, deals with such closely parallel issues and provides crystal-clear direction on the proper interpretation of the law,” Novak wrote. “The Constitution of Illinois provides that public pensions shall not be diminished or impaired.”

  There you go. As we’ve discussed on a number of occasions, the Illinois Supreme Court’s decision has ramifications far beyond the state’s borders. “My reaction was, ‘Yeah, that’s going to play here,’ ” John D. McGinnis, a lawmaker in Pennsylvania told The New York Times last summer. Pennsylvania, The Times continued, “has also been diverting money from its pension system, setting the stage for a crisis as more and more public workers retire.”

  Essentially, what Illinois has done is set a precedent whereby efforts to reform pension plans and restore sustainability will everywhere and always be struck down. That leaves lawmakers with few options and may end up forcing officials to extend and pretend with ponzi-like schemes such as pension obligation bonds.

  In any event, Chicago made a last ditch effort to salvage the reform effort after Novak’s ruling by appealing Cook County’s decision to the State Supreme court.

  Put simply: Emanuel lost. The court deemed his plan unconstitutional.

  “These modifications to pension benefits unquestionably diminish the value of the retirement annuities the members of (the city workers and laborers funds) were promised when they joined the pension system. Accordingly, based on the plain language of the act, these annuity reducing provisions contravene the pension protection clause’s absolute prohibition against diminishment of pension benefits, and exceed the General Assembly’s authority,” the justices wrote in their opinion.

  “Emanuel tried to require city workers and laborers to increase their retirement contributions by 2.5 percentage points — to 11 percent of their wages — in phases over five years,” The Chicago Tribune writes, adding that “in exchange, the city agreed to increase its annual contributions to the pension funds by hundreds of millions of dollars a year [by] increasing fees on telephone and cellphone bills for emergency dispatch services by $1.40 a month, to $3.90, on every line billed to a city address.”

  Stephen Patton, counsel for the city, tried to make an argument that was absurd and yet completely accurate all at the same time. The changes, he said, did not diminish or impair pension benefits, rather the city’s plan “preserved and protected” them.

  As we wrote immediately after Novak’s ruling last summer, “while we certainly understand the idea that cutting pension benefits amounts a breach of the so-called ‘implicit contract’ between public sector employees and state and local governments, it seems as though workers and the courts are suffering from an acute case of myopia and denial of economic realities. Put simply: if the pension system isn’t reformed, it will run out of money and no one will get anything.”

  “A recent analysis by the Municipal Employees’ Annuity and Benefit Fund of Chicago concluded its assets would be depleted by 2024 if Emanuel’s pension plan failed to pass constitutional muster,” The Tribune continues. So Patton is correct. The reforms would “preserve and protect” benefits but they would of course also diminish them materially from current levels.

  The good news for taxpayers is that they’ll be off the hook in the short-term. Some $250 million the city had committed to spend to sweeten the deal for pensions that went along with the plan will no longer be needed. But over the long haul, this is a disaster. “The city faces a short-term benefit of about $89 million that’s currently in escrow that can be used to help other areas of the budget. But it will be a very hollow victory for the beneficiaries,” Civic Federation President Laurence Msall said.

  “While their contributions will diminish slightly, the condition of the funds will revert back to something that is totally unsustainable and in danger of being completely insolvent within 10 to 15 years,” he continued, before delivering the following rather dire assessment: “Hundreds of millions in savings from rationalized pension benefits will be lost that will either have to be made up from reductions in city services, increased taxes or by allowing these funds to further deteriorate.”

  Of course it’s not that representatives of city employees don’t understand what the word “insolvent” means. They just don’t think it’s workers’ responsibility to figure out how to dig out of the hole. “For too long, city workers have been labeled as the problem when, in fact, we are part of the solution.,” Jeff Johnson, president of the Municipal Employees’ Society representing city workers, said. “With a modest pension of $34,000 and a high population residing in Chicago, we are the single largest tax base of any group.”

  AFSCME Council 31, the Chicago Teachers Union, the Il. Nurses Association and Teamsters Local 700 all agree. “Politicians caused the pension debt by failing to adequately fund employee retirement benefits while city employees were faithfully paying their share,” they said, in a joint statement. Here’s more color from the Chicago Sun Times:

  Earlier this week, top mayoral aides said the city’s course of action would depend largely on how Thursday’s Supreme Court ruling is worded.

   

  If the court gives Chicago a road map on how benefit reductions and increased contributions might be negotiated — in exchange for some other benefit chosen by the employee — then Emanuel will bring labor leaders back to the bargaining table to hammer out such an agreement.

   

  If the door is slammed shut and the court says there is nothing the city can do to change the benefits, then the mayor will have no choice but to find a way to pay the added costs.

   

  In that case, he’ll try to negotiate work-rule changes, lower break-in pay for new employees, another round of health care reforms, and other cost-saving concessions, and dedicate those savings to pensions, City Hall sources said.

   

  The remaining shortfall could come from raising the telephone tax. Chicago is legally authorized to raise its telephone tax to the highest rate charged by any municipality in the state. That means there’s room to grow.

   

  More property tax increases are unlikely, considering the fact that Emanuel just raised property taxes by $588 million for police and fire pensions and school construction and has promised to raise them by another $170 million for teacher pensions, whether or not the state does its part to help a nearly bankrupt Chicago Public School System.

   

  “Obviously, we would have preferred a win, but we don’t think the door is completely shut. They left the door open on collective bargaining as a possible,” said a top mayoral aide who asked to remain anonymous.

   

  Emanuel acknowledged that borrowing more money is “not my favorite option.” But it’s a “better option” than asking property owners to pay more at a time when Rauner’s pro-business, anti-union agenda has the state “spinning around and not doing anything,” the mayor said.

  What all of the above means is that irrespective of who’s ultimately at fault, there will be no legislating away pension benefits – even if doing so is the only realistic way for officials to ensure that state and local governments can continue to pay out any benefits at all going forward. That is, even if long-run insolvency is certain, benefits will be paid out in full up to and until the day of reckoning finally comes and it will be up to lawmakers to figure out how to rescue the system in the meantime. If that means raising taxes and/or going into further debt, then that’s what it means. 

  Obviously, this doesn’t bode well for fiscal sustainability and one can’t help but think that further downgrades from Moody’s are right around the corner. The takeaway for the rest of the country’s state and local governments: if you were considering pension reform, don’t.

  *  *  *

  Full ruling

  Illinois Supreme Court Chicago Municipal Pension

  

  

  

  

  

• The Forex Rigging Irony

  While Forex banks, traders, and other institutions are being blamed for market rigging, the Swiss National Bank can publish reports about its own market rigging, but instead of being a scandal, it’s economic data.  That’s because the vast majority don’t understand how the Forex markets work.  It’s not insulting – it’s a fact.  Currently there are hundreds of pending litigation cases against a plethora of Forex banks, traders, and other institutions – but none against a central bank.  Of course it would be ridiculous to sue a central bank for market rigging – because it’s in their mandate to manipulate the market.  Of course they don’t call it manipulation, they call it ‘market operations’ and the Fed, sometimes known as ‘market intervention’ or ‘stabalization efforts.’  Anyhow, it seems strange that on the one hand, central banks manipulate their own currency via ‘market operations’ which mostly are done through commercial Forex banks, but it is the Forex banks that receive this printed money that are sued, not the central banks.

  But look from the CB perspective – what’s the point of printing money if you can’t use it to intervene in the market and prop your own currency?  

  From Fortress Capital (source: Bloomberg):

  The Swiss National Bank will probably stay on hold at its monetary policy meeting on March 17 as banks in the country are already facing pressure from negative interest rates, economists and strategists say in notes to clients.

  The fact that the euro remained broadly stable against Swiss franc after the European Central Bank meeting lessens pressure on the SNB to act this week. SNB may intervene in the forex market to stem the franc’s appreciation.

  The question in everyone’s mind now – do these central banks really know what they are doing?  I mean, is there a coordinated international policy?  A conspiracy?  A conspiracy would imply intelligence.  Who knows.  

  One perspective is to look at Forex markets from the perspective of those in power, the UHNWI, or ‘them’ – ‘they’ or ‘The Elite.’  They have all the money they can possibly have – with this money they buy power, such as politicians, countries, people, etc.  They can’t buy anything more.  So the only thing left is to ensure the status quo – or ensure as much as possible they maintain their position.  One way to do this which is more subtle, is to destroy the money supply.  By making currency worthless, or worth – less, any potential competition will be either wiped out or marginalized.  Would-be billionaires and up and coming entrepreneurs who are out there in the ‘real world’ making business, are contained.  It also affords them other opportunities, such as providing this fresh QE money to the private banks they actually own, allowing them to invest in HFT and other stat arb style investment strategies with virtually no risk, allowing them to grow their own portfolios at a level which is practically speaking, exponentially greater than the average investor.  And if their investments fail, they can always bail themselves out – or as the trend is, tax savers and bail themselves in.

  Remember, our financial system is created by rules that are constantly changing.  Just as Central Bank are created they are destroyed.  Russia being one of the newest Central Bank in the game; about 30 years old:

  The Central Bank of the Russian Federation (Bank of Russia) was established July 13, 1990 as a result of the transformation of the Russian Republican Bank of the State Bank of the USSR. It was accountable to theSupreme Soviet of the RSFSR. On December 2, 1990 the Supreme Soviet of the RSFSR passed the Law on the Central Bank of the Russian Federation (Bank of Russia), according to which the Bank of Russia has become a legal entity, the main bank of the RSFSR and was accountable to the Supreme Soviet of the RSFSR. In June 1991, the charter was adopted by the Bank of Russia. On December 20, 1991 the State Bank of the USSR was abolished and all its assets, liabilities and property in the RSFSR were transferred to the Central Bank of the Russian Federation (Bank of Russia), which was then renamed to the Central Bank of the Russian Federation (Bank of Russia). Since 1992, the Bank of Russia began to buy and sell foreign currency on the foreign exchange market created by it, establish and publish the official exchange rates of foreign currencies against the ruble.

  If Russia can establish a new Central Bank, why can’t the United States of America, Australia, Canada, Germany?  How close are we to a hyperinflationary trap, as happened during the 19th century?

  Wildcat banking refers to the practices of banks chartered under state law during the periods of non-federally regulated state banking between 1816 and 1863 in the United States, also known as the Free Banking Era. This era, commonly described as an example of free banking, was not a period of true free banking, as banks were free of only federal regulation; banking was regulated by the states. The actual regulation of banking during this period varied from state to state.

  According to some sources, the term came from a bank in Michigan that issued private paper currency with the image of a wildcat. After the bank failed, poorly backed bank notes became known as wildcat currency, and the banks that issued them as wildcat banks.^[1]However, according to others, wildcat meant a rash speculator as early as 1812, and by 1838 had been extended to any risky business venture.^[2] A common conception of the wildcat bank in Westerns and like stories was of a bank that left its safe somewhat ajar for depositors to see, in which the banker would display a barrel full of nails, grain or flour with a thin sprinkling of cash on top, thus fooling depositors into thinking it was a successful bank.  The traditional view of wildcat banks describes them as distributing nearly worthless currency backed by questionable security (such as mortgages and bonds). These actions ended when note circulation by state banks was stopped after the passage of the National Bank Act of 1863. Mark Twain, in his autobiography, refers to the use of such currency in 1853, “The firm paid my wages in wildcat money at its face value”.

  Certainly, our current system is better that which was used during the “Free Banking Era” because the fiat money today is NOT “worthless currency” – but Central Banks such as the SNB (Swiss National Bank) certainly are trying hard to make it such!

  Forex isn’t just a money market, it’s the underpinning of all other markets (i.e. you sell your stocks for US Dollars).  Learn more about Forex with Splitting Pennies – Understanding Forex – the book.

  

  

  

  

  

• 3 Things: 80% Or Bust, Mind The Gap, It’s A Bunny

  Submitted by Lance Roberts via RealInvestmentAdvice.com,

  80% Or Bust

  Not surprisingly, the recent sharp reflexive rally has brought the bulls out in full force as noted by a recent comment on my post earlier this week on “4% From The Highs:”

  “…by the time you get confirmation with the long term indicators above, you will miss out on 20 to 30% of the rally.”

  It’s a fair point if you are a short-term trader looking to time the market. I’m not. As a long-term investor, and specifically as a manager of “other people’s money,” I am much more concerned with the specific inflection points where market dynamics change from a generally positive trend, to a negative one.

  Yes, I will most definitely miss both the bottom and the top of markets. As shown in the chart below, the technical indications of a change in trend are slow to occur. However, I am only really concerned with capturing, or missing, the 80% between the tops and bottoms of major market cycles.

  

  Further, the majority of the “Best-10” and “Worst-10” days are contained primarily within those 80% spans.

  

  So, yes, I am absolutely going to be “wrong” at the tops of markets and at the bottoms while I await confirmation of a longer-term “trend” to emerge. For those that are inherently “bullish” who choose “hope” over what prices are “actually” doing, the historical outcomes have been brutal, to say the least.

  As I have said before, my methodologies are my own. They are not new ideas. They are not innovative. They are simply the lessons I have been repeatedly taught over the last 30-years of managing money. If the markets reverse the current long-term sell signals, I will happily put a lot more money to work. Until then, I will wait rather than trying to “draw to an inside straight.” 

  Think about it this way – if betting in the markets was really the way to build wealth, wouldn’t the vast majority of Americans be wealthy versus just the top 1%? Just a thought.

  Mind The Gap

  I have discussed the problems with earnings and earnings estimates in the past stating:

  “In a 2010 study, by the McKinsey Group, they found that analysts have been persistently overly optimistic for 25 years. During the 25-year time frame, Wall Street analysts pegged earnings growth at 10-12% a year. Unfortunately, earnings only grew at 6% which, as we have discussed in the past, is the growth rate of the economy.”

  

  “The McKenzie study also noted that on average “analysts’ forecasts have been almost 100% too high” which leads investors to make much more aggressive bets on the financial markets. “

  My friend Salil Mehta from Statistical Ideas recently published a great piece on this issue.

  “The gap between the 2016 forecasts and the YTD returns through January is 13% (8% target minus the -5% YTD). Annual returns have a nearly 20% standard deviation (or 19% if you only look from the end of January onward). So it is still plausible — though rather unlikely, with only a one in five probability — to reach the 8% target gain for 2016. (For statistics wonks, the test statistic decomposes the 13% gap to a ~9% move in addition to the typical 4.5% annualized return, and then factors in a 19% standard deviation.) Now that we are further into the year (mid-March), euphoria and complacency are back to extreme market top levels.

   

  It’s also worth noting that strategists at major firms are consistently bullish, year after year. The sources of the most optimistic prognostications also don’t change. Sorted from most to least bullish, they are Federated Investors, JP Morgan, Prudential, Bank of America, and Columbia.”

  

  “In the table below, two pieces of information averaged among the 10 firms listed above are presented:

  1. The difference between the target and the January YTD returns.
  2. The rest of the year returns.”

  ---

  

  ---

  “If these analyst forecasts were mostly in the right direction, you would expect a positive linear relationship between 1 and 2. Regrettably, there is a negative relationship instead. Never mind that the market continued its drop in February, even after the revised forecasts, and the rebound leaves the market still below many firm’s 2016, 2015, and even 2014 targets!

   

  In other words, the larger the gap in January between the YTD returns and the year-end target, the more unlikely the chance the market will recover to the target by the year’s end.

   

  Think about this: For 2016, the 13% gap noted earlier (after the standardization adjustment) is the largest gap among this data.”

  As Salil concludes. “That’s not a good omen.”

  It’s A Bunny

  Since it is Easter, I will leave you with a story about a bunny.

  James Paulsen, Chief Investment Strategist for Wells Capital Management, recently penned an excellent piece with respect to the ongoing “bull/bear” debate.

  “The accompanying exhibit illustrates the U.S. stock market since WWII with recessions shown by the grey bars. In the last two expansions (during the 1990s and again in the 2000s), the stock market was uninterrupted by a bear market posting solid and steady returns until the economic recovery ended with a recession. So far, despite some volatility in 2011, this has also characterized the contemporary bull market. Without a bunny market in more than 20 years (as shown in Exhibit 1, the last bunny market was in the mid-1990s), most investors currently seem to accept that either the bull market will soon resume or we are nearing the end of this expansion. Since there has not been one in some time, few consider that stocks could simply be headed for another bunny market.”

  

  “Most bunny markets occur in the latter part of an economic recovery. Stocks initially recover aggressively after a recession. However, as the recovery matures, cost-push pressures, inflation, and higher interest rates begin to pressure the bull market. This often resolves into a bunny market for the balance of many economic recoveries.“

  I have modified his chart to notate both secular bull and bear market periods. During secular bear markets, as we most likely currently remain in, volatility swings and prices declines are substantially larger than during secular bull market periods. This elevates the risk of emotionally driven investment mistakes during periods of markedly higher volatility which leads to lower rates of investor returns longer term.

  Just some things to think about.

  

  

  

  

  

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