Oct 25

Today’s News 25th October 2017

  • India 'Elites' Mimic Washington: Claim Russian 'Twitter Troll' Is Backing Opposition Party

    Authored by Andrew Korybko via Oriental Review,

    The US-Indian Strategic Partnership has rapidly evolved to such a point that the Indian government is now obliquely hinting that Russian twitter trolls are backing the country’s opposition leader, showing that New Delhi is willing to say and do anything in order to further ingratiate itself with Washington even if this means demolishing its decades-long relationship with Moscow.

    Indian Information and Broadcasting Minister Smriti Irani sent shockwaves through the diplomatic community over the weekend when she indirectly accused Russian “Twitter trolls” of supporting opposition leader Rahul Gandhi.

    The government official tweeted an article from ANI Digital which purports that Gandhi’s Twitter popularity is partly due to automated bots located in Indonesia, Kazakhstan, and Russia, snidely remarking in her post that “Perhaps @OfficeOfRG planning to sweep polls in Russia, Indonesia & Kazakhstan ??” The report in question is nothing more than unfounded speculation, but the strong symbolism behind it in trying to capitalize on the US’ anti-Russian hysteria shouldn’t be overlooked. Furthermore, the very fact that a high-ranking member of the Indian government, a woman who plays an indispensable role in the projection of the country’s soft power within its borders and beyond, would publicly retweet such a ridiculous claim and even add her own snarky commentary to it is very scandalous, to say the least.

    What it isn’t, however, is surprising, since India already launched a failed infowar against Russia a little over a year ago when it spread the fake news that the first-ever joint military drills between Russia and Pakistan were cancelled by Moscow due to Indian pressure. The author wrote about this in depth at the time in an article titled “India’s First-Ever Infowar Against Russia Was A Failure”, which concluded that New Delhi decided to crudely backstab its partners in Moscow due to American pressure and the vindictive sentiment prevalent in the Indian capital nowadays to “pay Russia back” for its game-changing rapprochement with Pakistan. What the ruling BJP party apparently fails to understand is that India’s much-trumpeted policy of “multi-alignment” isn’t exclusive to their country, and that other states could also seek to rebalance and diversify their foreign partnerships as the Multipolar World Order progressively becomes a reality. Leading the way on the Russian front are the foreign policy “progressives,” like Moscow’s top Afghan envoy Zamir Kabulov, who strongly believe that Russia must pioneer non-traditional geopolitical partnerships in order to fulfill its 21st-century grand strategic vision in functioning as the supreme balancing force in Eurasia.

    On the Indian side, though, there doesn’t seem to be much enthusiasm for practicing “multi-alignment” in the manner that it was publicly presented as, since New Delhi has lately been pivoting away from multipolar Eurasia and towards the unipolar Atlantic in decisively furthering the an unprecedented military-strategic partnership with the US. The author chronicled all of India’s moves in this direction in a series of articles listed under his 2017 Forecast for South Asia, and the reader is encouraged to skim through them if they’re unfamiliar with the pace and magnitude of what happened in this regards all across last year. The highlight event of this year was the artificially manufactured Donglang Drama that India and the US both exploited in order to “justify” New Delhi’s de-facto membership in the Washington-led “China Containment Coalition”. The US hasn’t made a secret out of this either, despite some Indian voices trying to downplay it in an unsuccessful attempt to “save face” before the eyes of the anti-imperialist “Global South”, as the American Secretary of State Rex Tillerson proudly boasted right before departing for his first South Asia trip that India is his country’s preferred partner for the 21st century.

    This pivotal announcement only formalized what was already known for some time, but it seems to have encouraged the Indian government to do away with its erstwhile halfhearted attempt to hide its newfound pro-American policies behind the slogan of “multi-alignment”. After all, it was right after Tillerson’s declaration of the 21st-century US-Indian military-strategic partnership that Indian Information and Broadcasting Minister Smriti Irani felt confident enough to publicly imply that Russian trolls are supporting an opposition candidate in order to swing the 2019 elections. This, of course, is a categorically false suggestion which was only made in order to smear Russia and demonstrate India’s fealty to its new American overlord. It also deliberately fails to acknowledge the billions of dollars in military and nuclear energy deals that the Modi government has signed with Moscow, and it also doesn’t recognize the reasons why Russia has more warmly embraced India in recent years in spite of its fast-moving and comprehensive strategic partnership with China. Such deceptive information warfare is typically the domain of the “ModiMob”, or government-backed ultra-jingoist trolls, and usually directed against non-state targets, but this is the first time that an Indian state actor employed such tactics against a seemingly friendly state.

    Bearing in mind the pro-American backdrop in which this anti-Russian Twitter troll accusation was made, it shouldn’t be seen as a coincidence that reports also started streaming in over the weekend around the same time stating that India was thinking about abandoning its planned $10 billion fifth-generation fighter jet deal with Russia. There’s been talk about this for a while, but the revival of these reports in the current context of Tillerson’s proclamation of a century-long military-strategic partnership, the Indian Information and Broadcasting Minister’s false suggestions that Moscow is coordinating a social media bot operation to unseat the BJP in 2019, and now the talk that India might pull out of what was supposed to have been the cornerstone deal of its partnership with Russia altogether indicate that New Delhi no longer views Moscow as the “brother” (“bhai”) that it claimed it was during the Old Cold War. Instead, India sees Russia as being no different than any other partner aside from the US, which has now replaced Moscow as New Delhi’s preferred patron given the paradigm-changing geopolitics of the New Cold War.

    The New Delhi-initiated “normalization” of what was hitherto regarded as the “special relationship” between India and Russia is further proof that India has agreed to become the US’ main proxy force for “containing China”, breaking BRICS, and dismantling multipolarity. Furthermore, this negative trend in bilateral relations and the unfriendly moves against Russia over the weekend also point to India’s desire to “play hardball” against its former ally, in that it no longer has any reservations about resorting to crude measures in order to squeeze as beneficial of a deal as possible from Moscow. India is infuriated that Russia won’t transfer high-end and ultra-classified military-technical information to it as part of any forthcoming weapons deals, something which is mandated by its “Make In India” policy, so it’s apparently decided to employ dirty tricks against its negotiating partner in the hopes that it can intimidate Moscow into complying. To the contrary, however, no matter if the jet deal ultimately goes through or not, Russia isn’t likely to forget what has happened, and this unpleasant experience will surely be used as an instructive example which will powerfully influence the course of the country’s future South Asian policy, most likely to Pakistan’s comparative benefit.

    The recent appointment of master strategist Nikolai Kudashev as the new Russian Ambassador to India will be very useful in helping Moscow navigate this uncertain period of relations with New Delhi, and the envoy’s prior history of working with China should help Russia become the consummate geopolitical balancer that it desires to be in Eurasia. It will probably be impossible to repair the damage that India’s ultra-jingoist BJP government has wreaked to the bilateral relationship over the past year, but that doesn’t mean the two Great Powers can’t pragmatically find some common ground between them even in the context of the US’ domineering influence over Indian policy nowadays. At the end of the day, the maintenance of cordial ties with Russia is important to India because it needs access to Russian resources and overland trade routes to Europe (the North-South Transport Corridor), and New Delhi also wants to establish a “soft” presence in the Russian Far East in order to give off the perception that it’s “strategically flanking” China. That said, the fact that an Indian minister would publicly mimic the US’ slanderous accusations against Russia by implying that Moscow is using Twitter bots to support the opposition is worrisome and suggests that pro-American sentiment in New Delhi is even stronger than the most vocal critics imagine it to be.

  • Democrats Distance Themselves From Hillary: "New" DNC Denies Knowledge Of Trump Dossier Funding

    Following the shocking (to some) revelations from WaPo with regard Hillary Clinton and the 'old' Democratic National Committee's financing of the infamous "Trump Dossier," the 'new' DNC has rushed out a press release denying any involvement as Democrats begin rapidly distancing themselves from this un-fake news.

    In a brief statement from DNC Comms Director Xochitl Hinojosa,

    "Tom Perez and the new leadership of the DNC were not involved in any decision-making regarding Fusion-GPS, nor were they aware that Perkins Coie was working with the organization."

    Of course, the DNC then added – for good measure…

    "But let's be clear, there is a serious federal investigation into the Trump campaign's ties to Russia, and the American public deserves to know what happened."

    All of which is quite ironic following Perez' comments during the week:

    “We have the most dangerous president in American history and one of the most reactionary Congresses in American history,” Democratic Chairman Tom Perez said during his speech.

     

    Perez also labeled Trump an “existential threat” with no apparent worry that his words could be taken, along with those by Waters and other liberals in the media, as ammunition for a crazy leftist to once again attack Congress or even the White House.

    And even more ironic in light of the increasing evidence and investigation surrounding Hillary Clinton's dealing with the Russians over Uranium One.

    But back to the Hillary Clinton crisis of the night, Fox News' Brooke Singman noted:

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    As The 'New' DNC itself said: "the American people deserve to know what happened."

    While it is unclear whether CNBC's John Harwood, or anyone on MSNBC, will touch this topic, The White House is already asking questions…

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    …which must mean "it's a vast right wing conspiracy."

  • A $500bn Mega City – Saudis Try To Turn Country Into Dubai 20 Years Too Late

    A promotional video released on Tuesday features a lifestyle so far unavailable in Saudi cities. It showed women free to jog in leotards in public spaces, working alongside men and playing instruments in a musical ensemble. (Bloomberg – see below)

    Today the Saudi regime took another step forward in its effort (Vision 2030) to save itself by launching a $500bn project to build a futuristic mega city spanning three countries. From an Al Arabiya report:

    Saudi Crown Prince Mohammed bin Salman (MBS) announced the launch of NEOM on Tuesday, a project that aspires to be the “safest, most efficient, most future oriented, and best place to live and work” in the kingdom.

     

    NEOM’s land mass will extend across the Egyptian and Jordanian borders, rendering NEOM the first private zone to span three countries.

     

     

    The project will be backed by more than $500 billion over the coming years by Saudi Arabia. Wind and solar power will allow NEOM to be powered solely by regenerative energy, while 70 percent of the world’s population will be able to reach it within eight hours.

    Like us, you might have been wondering why such an uninspiring name was chosen? Fortunately, Al Arabiya had the answer to that one.

    From the moment Saudi Crown Prince Mohammed bin Salman announced the launch of NEOM project on Tuesday, a project representing the next generation city and global center for innovation, trade and creativity in the kingdom, people wondered what does the project’s name stand for. According to Al Arabiya the first three characters "NEO" comes from the Latin word which means “new”. The fourth character "M" is the abbreviation of the Arabic word “Mostaqbal” which means “future.”

    We can’t argue with the Saudis needing a new future.

    The Crown Prince also announced that Bilderberg Steering Committee member, Klaus Kleinfeld, former CEO of Siemens and Alcoa, had been appointed CEO of NEOM.

    Al Arabiya provided a handy, bullet point summary of the project.

    • NEOM aspires to be the safest, most efficient, most future oriented, and best place to live and work
    • NEOM is developed independent of the Kingdom’s existing governmental framework with investors, businesses, and innovators consulted at every stage of development
    • NEOM's unique location connects Asia, Europe, and Africa, will include the world’s most significant and promising economic sectors
    • NEOM land expands over 26,500 km2; its location will facilitate NEOM's rapid emergence as a global hub that has the potential to bring together the best of Arabia, Asia, Africa, Europe and America
    • NEOM will be backed by more than $500 billion over the coming years by the Kingdom of Saudi Arabia, the Saudi Arabian Public Investment Fund, local as well as international investors

    It seems that, unlike some of his predecessors, Crown Prince MbS has a high opinion of “human capital”.

    Saudi Arabia’s Crown Prince Mohammed bin Salman said on Tuesday that the kingdom’s human capital will represent the kingdom’s biggest element to the success of NEOM…”the NEOM project is a huge economic undertaking and it is only meant for dreamers. Our human capital will be the biggest element to its future success. We want to secure our place in the future of the world and we'll bring together creative, talented people from all over the world to make something unique,” the crown prince told the conference on Tuesday…Softbank Group CEO Masayoshi Son said at an investment conference in Riyadh on Tuesday that Saudi’s Crown Prince Mohammed bin Salman had asked him to get involved.

    This was Bloomberg’s take:

    Saudi Crown Prince Mohammed bin Salman announced plans to build a new city on the Red Sea coast, promising a lifestyle not available in today’s Saudi Arabia…The new project will likely surprise investors still trying to take stock of a series of major announcements made by the prince during his meteoric rise to power as he seeks to prepare Saudi Arabia for the post-oil era. In less than two years, he’s revealed plans to sell a stake in oil giant Saudi Aramco and create the world’s largest sovereign wealth fund, and has ended a long-standing ban on female drivers. The prince, 32, made a rare public appearance at the conference to promote the project, telling the bankers and economic policy makers in attendance that the kingdom is moving to a “new generation of cities.” NEOM will be powered by clean energy, he said, and will have no room “for anything traditional.” It will likely be met with the same mixture of optimism and doubt that has greeted his previous headline-grabbing announcements. His supporters can be expected to cheer what they see as a bold drive to transform the kingdom, while others will point to past failed attempts to overhaul the Saudi economy that also included industrial cities in the desert.”

    We know which side of that debate we’d be on. Where are we on that $10bn project to create a financial district in Riyadh, again?

    Here are some more details on the project courtesy of Bloomberg.

    International Connections

    The ambitious plan includes a bridge spanning the Red Sea, connecting the proposed city to Egypt and the rest of Africa. Some 10,000 square miles (25,900 square kilometers) have been allocated for the development of the urban area that will stretch into Jordan and Egypt. The project “seems to be broadly modelled on the ‘free zone’ concept pioneered in Dubai, where such zones are not only exempt from tariffs but also have their own regulations and laws, hence operating separately from the rest of government,” said Steffen Hertog, a professor at the London School of Economics and longtime Saudi-watcher. “In Dubai, this has worked well, but attempts to copy it have done less well in the region.”

    Conservative Clerics

    A promotional video released on Tuesday features a lifestyle so far unavailable in Saudi cities. It showed women free to jog in leotards in public spaces, working alongside men and playing instruments in a musical ensemble. The one woman wearing a hijab had her head covered with a patterned pink scarf. The kingdom has already announced a plan to transform hundreds of kilometers of Red Sea coast into a semi-autonomous world-class tourism destination and governed by laws “on par with international standards.”  

    Details Needed

    “Saudi Arabia has announced a number of mega-projects recently, but what investors will ultimately look for is greater details, progress with plans and initial investment,” said Monica Malik, chief economist of Abu Dhabi Commercial Bank. And while the planned, more liberal, regulatory framework for the city “could be positive for streamlining investment,” it didn’t gain traction with previous economic cities developed in the kingdom…Hertog said investors will want to see whether “circumventing some of the slow mainline bureaucracy and general social restrictions in Saudi Arabia in a special zone” can work. “If this is to be an international hub, it needs to offer something better than Dubai, which is a high bar to cross,” he said.

    The crown prince indicated he understood the challenge. “Dreaming is easy, achieving it is difficult,” he said. Charlie Munger has an expression for that.

    They also released this lovely emblem…

  • Paul Craig Roberts To The American Left: R.I.P.

    Authored by Paul Craig Roberts,

    Once upon a time the leftwing of the political spectrum was committed to the advancement of the working class and its protection from political and economic abuse by the owners of the means of production. Consequently, the leftwing was politically potent and reached a pinnacle of power when Henry Wallace was selected by Franklin D. Roosevelt as his third term vice president. Despite his wealth from the company he founded, Wallace stood for the farmer and the working class.

    The Democratic Party power brokers refused to accept Wallace as the vice president candidate until FDR told them he otherwise would decline the presidential nomination.

    Wallace was Roosevelt’s and the Democratic voters’ choice for vice president in Roosevelt’s fourth term. But Wallace’s progressive views had alienated the party bosses, Wall Street bankers, anti-union businesses, and America’s British and French allies with his support for labor unions, women, minorities, and victims of colonialism. When he called for the emancipation of colonial subjects and for working with the Soviet Union in the cause of peace and working class justice, he sealed his fate. Despite a Gallup Poll released during the Democratic national convention in July 1944 showing that Wallace was the favorite with 65% of the vote and Roosevelt’s announcement that if he were a delegate, he would choose Wallace, the party bosses chose Harry Truman who was preferred by only 2% of Democratic voters.

    This was a turning point in US politics and world history. If the people had prevailed over the corrupt Democratic party bosses, Wallace instead of Truman would have become the first postwar US president. Most likely, there would have been no Cold War, no Korean War, no Vietnam War, no NATO, and no decades of mutual distrust between the US and Russia that today threatens life on earth.

    Moreover, in place of today’s highly skewed income and wealth distribution toward the very rich fraction of one percent, there would be an equitable distribution that would support a strong consumer market instead of declining real incomes and debt expansion that threatens economic growth, business profits, employment, and high equity values.

    Oliver Stone and Peter Kuznick in their best seller, The Untold History of the United States, describe the Clinton-style Democratic Party corruption that was used to block Wallace as the vice presidential candidate:

    “Party insiders made sure they had an iron grip on the convention. Yet the rank-and-file Democrats would not go quietly, staging a rebellion on the convention floor. The groundswell of support for Wallace among the delegates and attendees was so great that despite the bosses’ stranglehold over the proceedings and strong-arm tactics, Wallace’s supporters almost carried the day as an uproarious demonstration for Wallace broke out on the convention floor. In the midst of the demonstration, Florida Senator Claude Pepper realized that if he got Wallace’s name into nomination that night, Wallace would sweep the convention. Pepper fought his way through the crowd to get within five feet of the microphone when the nearly hysterical Mayor Kelly, purporting that there was a fire hazard, got the Chairman, Senator Samuel Jackson, to adjourn the proceedings. Had Pepper made it five more feet and nominated Wallace before the bosses forced adjournment against the will of the delegates, Wallace would have become president in 1945 and the course of history would have been dramatically altered.”

    The next day Senator Jackson apologized to Senator Pepper:

    “I had strict instructions from Hannegan not to let the convention nominate the vice president last night. So I had to adjourn the convention in your face.”

    Thus was the power of interest groups to prevail over democracy 73 years ago when there was still a press that would on occasion speak for the people. Dave Kranzler and Brett Arends describe the power of the interests and the degeneration of the media today:

    “It’s been my view since circa 2003 that [the oligarchs] would hold up the system with printed money and credit creation until every last crumb of middle class wealth was swept off the table and into the pockets of those in position to do the sweeping.

     

    “Obama delivered nothing on his original campaign promises. He was going to “reform” Wall Street.  But the concept of Too Big To Fail was legislated under Obama, and Wall Street indictments/prosecutions fell precipitously from the previous Administration.

     

    “Obama left office and entered into a world of high six-figure Wall Street-sponsored speaking engagements and to live in a $10 million estate in Hawaii paid for by the Chicago elite (Pritzkers etc).  Now Obama will be paid off $10’s of millions for his role in aiding and abetting the transfer of trillions from the middle class to the elitists. Look at Bill and Hillary – need I say more?  Trump has reversed course on his campaign promises twice as quickly as Obama.  Almost overnight after his inauguration, Trump became a war-mongering hand-puppet for the Deep State’s ‘Swamp’ creatures.

     

    “The media has been willingly complicit in this big charade. Much to my complete shock, Brett Arends has published a commentary on Marketwatch which, from an insider, warns about the media:

     

    ‘Do you want to know what kind of person makes the best reporter? I’ll tell you. A borderline sociopath. Someone smart, inquisitive, stubborn, disorganized, chaotic, and in a perpetual state of simmering rage at the failings of the world. Once upon a time you saw people like this in every newsroom in the country. They often had chaotic personal lives and they died early of cirrhosis or a heart attack. But they were tough, angry SOBs and they produced great stories.

     

    ‘Do you want to know what kind of people get promoted and succeed in the modern news organization? Social climbers. Networkers. People who are gregarious, who “buy in” to the dominant consensus, who go along to get along and don’t ask too many really awkward questions. They are flexible, well-organized, and happy with life. And it shows.’

     

    “This is why so many reporters are happy to report that U.S. corporations are in great financial shape, even though they also have surging debts, or that a ‘diversified portfolio’ of stocks and bonds will protect you in all circumstances, even though this is not the case, or that defense budgets are being slashed, when they aren’t, or that the U.S. economy has massively outperformed rivals such as Japan, when on key metrics it hasn’t, or that companies must pay CEOs gazillions of dollars to secure the top ‘talent’ when they don’t need to do any such thing and such pay is just plunder.” 

    The American leftwing has been transmogrified. The left, which formerly stood for “peace and bread,” today stands for Identity Politics and war. The working class has been redefined as “the Trump deplorables” and splintered into separate “victim groups”—women, racial minorities, homosexuals, transgendered. The oppressors are no longer oligarchs who own the means of production. The oppressor is the sexist, misogynist, homophobic, heterosexual, fascist, white supremacist male working class.

    The rise of Identity Politics has brought with it politically controlled speech. Primarily white people, especially heterosexual white males, are subject to this control. The limits on their free speech are growing ever more severe, and no one has to be concerned about white heterosexual males being offended by offensive or threatening speech. White males can be called anything and they are.

    By splintering the working class into victim groups, Identity Politics has made opposition to war and income inequality impossible. In place of unity, Identity Politics has dismembered the working class and directed its energies into internal disputes. We now have fistfights in London’s Hyde Park between radical feminists and transgendered activists.

    Diana Johnstone has shown how Antifa, the violent arm of Identity Politics, has turned the leftwing into a suppressor of free speech and a supporter of war.

    A splintered society cannot recognize or resist its oppression by a ruling elite.

    Feminism turns wives and husbands from complements into rivals. Indeed, Sarah Knapton, science editor for the London Telegraph, reports on the rise of “bromance,” strong emotional relationships between heterosexual men. Feminist attacks on men and political correctness have reduced millennial heterosexual males’ relationships with women to sex only. Their emotional commitments are to their male friends.  This doesn’t seem like a victory for women.

    The cultivated hyper-sensitivity of political correctness, which arises from Identity Politics, is destroying language, history, and free speech. The UK government opposes the term “pregnant woman” because it excludes and offends transgender people.

    The British Medical Association has issued guidelines that doctors should not use the word “mother” to refer to a pregnant woman as the term could offend transgender people. Instead, the term “pregnant people” should be used. This has led to more conflict between feminists and the transgendered. Feminists see it as a plot to make “women” unmentionable.  British National Health Service doctors are no longer to use the term “expectant mother” because it is “non-inclusive.”

    Identity Politics, together with the rising American police state, have just about destroyed the First Amendment. A professor at one of America’s research universities told me that he was dressed down by a dean because he used the word “girls” in class and a woman was offended. Google fired one of its senior software engineers because he wrote a memo that men and women have different traits that make them suitable for different kinds of jobs. This statement of ordinary common sense got the engineer fired for “gender stereotyping.”

    Economic commentator Marc Faber was removed from the board of the investment company, Sprott, and banned from CNBC and the Fox Business Network for expressing his views against monument removal and that white Americans have done a better job of building an economy than black Zimbabwe.

    Free speech is not supposed to be limited to words that give no offense to anyone. What this definition of free speech does is to eliminate all criticism of wrong or criminal activity and all dissent against war, police brutality, and political, social, and economic programs. In other words, political correctness silences a population. Silencing is permitted regardless of whether the “offensive” statement is true or false. Just expressing a truth, as the Google engineer did, can destroy a person’s career. There is no freedom in such a system. As George Orwell said, “If liberty means anything at all, it means the right to tell people what they do not want to hear.”

    Universities themselves, traditionally dependent on free speech, are now themselves banning free speech. Controversial speakers likely to offend some “victim group” are simply prevented from speaking at universities. For example, speakers in favor of multiculturalism are welcomed even though the speech might offend those who believe the US is a white Christian society, but a white supremacist, whose speech at the University of Florida could not be blocked, caused the Florida governor to declare a state of emergency.

    It seems simple enough that if a person doesn’t want to be offended by a speaker, don’t go to the speech. On the other hand, if a person wants to learn what the opposition is up to, why miss the chance? In the end, political correctness is about regulating what can be said and controlling explanations, not about protecting the hyper-sensitive from hurtful words.

    What Identity Politics and political correctness are doing is demonizing white people and heterosexual males. Only white people are racists. Only heterosexual males – essentially white gentile ones except for Bill Cosby and Harvey Weinstein – commit sexual violence. As David Rosen writes in CounterPunch, “Male sexual violence: as American as cherry pie.”

    Rosen defines sexual abuse as “a form of sexual terror, an all-American male sport” that is “as old as the country.” In other words, all or most American males practice sexual terror on women. We have reached the point where a wife who gets angry at her husband can accuse him of rape and have him imprisoned, a far departure from the days when husband and wife were legally regarded as one and neither could testify against the other. When the most intimate personal relationship is subject to outside intervention, how does marriage prosper?

    It doesn’t. According to the American Psychological Association, “about 40 to 50 percent of married couples in the United States divorce. The divorce rate for subsequent marriages is even higher.”

    If husband and wife, mother and father, can’t stay together, how does society stay together?

    How does society stay together when Identity Politics teaches hate and inflames social divisiveness?

    How does society stay together when thugs claiming to be offended offend others by destroying historical monuments that are associated with the memory or identity of others?

    How does society stay together when its history is erased, its schools, streets, and public buildings are renamed?

    As George Orwell said, “The most effective way to destroy people is to deny and obliterate their own understanding of their history.” The next monuments to be removed are those of the Founding Fathers, racists all who adopted a Constitution that permitted slavery, an inherited institution that they had no power to reform.

    In the United States history is being rewritten and language corrupted in order to foster hatred of white “oppressors,” especially white heterosexual males.

    Little wonder Russia responds diplomatically to Washington’s aggression. No need to reply in kind when an enemy is destroying itself.

  • More Real-Estate Insanity: Owner Asking $800,000 For Burned-Out San Francisco Home

    A ‘fixer upper’ is a charitable term for what this is.

    In a story that exposes just how obscenely overvalued San Francisco’s housing market has become, Business Insider reports that one motivated real estate agent in San Francisco is seeking a buyer for a home in the tony Bernal Heights neighborhood that was completely gutted in a fire last year, and needs to be demolished and completely rebuilt – a project that would likely run into the millions of dollars.

    The asking price? A not-unreasonable $800,000. And that’s a bargain, according to real estate agent Jim Laufenberger, who is seeking a buyer for the home at 121 Grant Street, because in all likelihood, the paucity of new housing stock in the city means it will likely sell for more – not less – than the ask.

    121 Grant Street, a one-bedroom, one-bathroom house in the desirable Bernal Heights neighborhood, hit the market in late October. The home was "completely gutted" in a fire in 2016, and the new owners will need to demolish what's left, according to realtor Jim Laufenberg.

     

    "I suspect it will sell for more than what I'm asking," Laufenberg told Business Insider, adding that the seller listed the property below market value to incite interest in the first few weeks.

     

    The price tag attached to the 1,700-square-foot lot shows the extent of the housing bubble in San Francisco, where tech workers create demand faster than the city can build new housing.

    While rebuilding the home would be a massive hassle, Laufenberger suggested that 121 Grant Street's location just north of Cortland Street — a main drag populated by small markets, cafes, restaurants, and nail salons — would make it worth the effort.

    Bernal Heights, like the rest of San Francisco, has seen housing prices soar to unprecedented heights driven by demand from well-compensated tech employees.

    As we’ve reported previously, the lack of affordable housing is affecting the local economy in profound ways. Data from California’s Employment Development Department show the Bay Area lost nearly 5,000 jobs in September – its worst month for employment since 2010, and the second straight month that jobs disappeared from a region that was formerly an engine of labor market growth.

    "It's the location, it's the land, it's the opportunity to build," Laufenberg said.

    As Axios noted, jobs are disappearing not for want of work, but because employers are finding it hard to fill positions due to limited housing and sky-high prices. Housing prices in the city are so out of whack, that a couple earning nearly $140,000 a year (more than double the median income for American families) qualifies for affordable housing.

    “The economy in the Bay Area has pushed up against the physical limits of a lack of housing and a lack of places for workers to live,” Jeffrey Michael, director of the Stockton-based Center for Business and Policy Research at University of the Pacific, told the San Jose Mercury News.

    Workers who can't find or afford housing close to their offices are pushed out of the area, and many of them don't want to bother with long commutes. "Housing is the chain on the dog that is chasing a squirrel," economist Christopher Thornberg told the Merc. "Once that chain runs out, it yanks the dog back."

    Elon Musk, who recently laid off some 700 employees at Tesla’s Fremont factory in hopes of replacing them with cheaper contract labor, won’t be happy to hear this.   
     

  • Illinois Eyes 30 Cent Gas Tax Hike, Chicago Faces Yet Another Property Tax Hike

    Authored by Mike Shedlock via TheMaven.net/MishTalk,

    The Illinois legislature is in recess right now. Other than disbanding the body, that's the best place for them.

    When they return, they are going after your pocketbook in the form a gas tax hike. Not to be outdone, Chicago Mayor Rahm Emanuel is pondering property tax hikes.

    In July, the State legislature overrode Governor Rauner's veto and passed the largest tax hike in history. The hike raised the individual rate to 4.95 percent from 3.75 percent and the corporate rate to 7 percent from 5.25 percent.

    With those hikes, households making about $100,000 will pay an additional $1,200 in taxes each year.

    But that was not enough. It never will be.

    Today, the Illinois Policy Institute CEO John Tillman emailed, "The Illinois General Assembly will be back in session next week. And guess what? They’re already talking about raising your taxes again. This time, they’re discussing increasing gas taxes. Lawmakers haven’t released specific numbers yet, but talks have ranged anywhere from an additional $0.05 to $0.30 a gallon."

    Tax Hikes in Chicago

    Chicago taxpayers face yet another property tax increase for police and fire pensions in 2020 — and another hike the following year in the tax tacked onto water and sewer bills to save the Municipal Employees pension fund, aldermen learned on the first day of City Council budget hearings.By the city’s own estimate, police and fire pension costs will rise by $297.3 million, or 36 percent, in 2020. The Municipal and Laborers plan costs will grow by $330.4 million, or 50 percent, in 2022.

     

    “We’ve done the biggest [property tax] increases,” Chicago Chief Financial Officer Carole Brown said Monday.

     

    “But there will be an increase in 2020 for police and fire. The increase for Muni and Laborers will happen a couple years later.“

     

    When this Council passed the water and sewer tax last year, there were assumed increases in the tax from the first year to correspond to increases in the ramp. We would anticipate that if those were the revenue sources assigned on a going-forward basis after we got to actuarial funding, there would need to be increases in those revenues.”

    Big Round of Thanks

    Neighboring governors are offering their thanks to Illinois.

    In a fundraiser for Rauner, three neighboring GOP governors, Scott Walker of Wisconsin, Eric Greitens of Missouri, and Eric Holcomb of Indiana each delivered a sarcastic “thank you” to Illinois House Speaker Mike Madigan for “raising Illinois taxes” and “helping create new jobs” in their states.

    • "For raising Illinois' taxes, our economy's on fire," Scott Walker stated.
    • Missouri Governor Eric Greitens chided Madigan, "We’re growing good jobs."
    • Indiana Gov. Eric Holcomb offered, "We’re growing union jobs faster than Illinois. So, we owe you."
    • Holcomb added, "Hoosiers love you, Mike Madigan."

     

  • Bombshell NSA Memo: Saudi Arabia Ordered Attack On Damascus International Airport With US Knowledge

    The Intercept has just released a new top-secret NSA document unearthed from leaked intelligence files provided by Edward Snowden which reveals in stunning clarity that the armed opposition in Syria was under the direct command of foreign governments from the early years of the war which has now claimed half a million lives.

    The US intelligence memo – marked "Top Secret" – is arguably the most damning piece of evidence to date which gives internal US government confirmation of the direct role that both the Saudi and US governments played in fueling an armed insurgency which launched massive and well-coordinated attacks on civilians, civilian infrastructure, as well as military targets in pursuit of regime change. The NSA report is sourced to the intelligence agency's controversial PRISM program – which gives the NSA the ability to sweep up all communications and data exchanged through major US internet service providers like Google. The memo focuses on events that unfolded outside Damascus in March of 2013.

    Damascus International Airport: a major civilian transport hub targeted by the Saudi government with knowledge of US intelligence. Image source: AFP/Getty

    One of the videos that Saudi-backed FSA fighters uploaded to YouTube identified by The Intercept as showing rockets launched on civilian areas of Damascus on March 18, 2013. US intelligence knew of the secret operation three days in advance yet did not stop it.  

    According to the document, the Free Syrian Army (FSA) was ordered to "light up Damascus" and "flatten" the Syrian capital's international airport by Prince Salman bin Sultan – a prominent member of the Saudi royal family tasked with overseeing operations in Syria as a top Saudi intelligence officer. The document further reveals that the "Saudis sent 120 tons of explosives/weapons to opposition forces" – presumably in the lead up to the operation.

    The report not only confirms that the assault happened, but that the Saudi government was "very pleased" with the outcome: "Attacks against airport, Presidential palace and other locations occurred on 18 March," the memo reads. Also significant is that the memo confirms US intelligence foreknowledge of the attack on a major civilian airport: "Reports gave U.S. three days warning about 18 March 2013 attacks (2 year anniversary of revolution)."

    Prince Salman bin Sultan, who is currently the Saudi Deputy Defense Minister. Image source: Wikimedia Commons

    According to The Intercept, various news reports from the time confirmed significant attacks and damage from FSA-fired rockets upon civilian areas. Not only is Damascus International Airport Syria's main civilian transport hub – which was used by millions each year before the war – but it remained in daily operation for commercial flights in March 2013, when Saudi intelligence ordered the attacks with knowledge of US intelligence.

    As The Intercept reports:

    A number of videos posted by Syrian opposition media on the day of the attacks purport to show rebel fighters firing rockets at the same sites mentioned in the U.S. document. The March 2013 attacks in Damascus provide a concrete example of the role that foreign powers played in the day-to-day reality of the conflict. A number of videos posted by Syrian opposition media on the day of the attacks purport to show rebel fighters firing rockets at the same sites mentioned in the U.S. document. Local media reports from that day described an attack in which rockets struck within the areas of the presidential palace, a local government security branch, and the airport. A representative of the U.K.-based Syrian Observatory for Human Rights quoted in a story the next day reporting the attacks, stating that they were unable to confirm whether they resulted in casualties. 

    However, The Intercept's commentary is inaccurate in claiming that the Syrian Observatory (SOHR) did not report casualties from the attack as one of the Arabic news sources it links to above (Middle East based Alwatan News), reports:

    "The Free Syrian Army targeted Kafr Sousa [an area of Damascus near Mezzeh] and they fired 24 missiles on Damascus airport… 60 people died in yesterday's attacks, according to the Syrian Observatory." [as translated by Zero Hedge]

    And intense attacks continued through April and into the summer of 2013 according to international media reports from the time, also confirmed by a photo circulated through the AFP showing civilian passengers waiting in airport lounges the month following the initial March 2013 rocket attacks. 

    While the Saudi-US role in fueling the jihadist insurgency from the earliest days of the war in Syria has long been thoroughly documented, this latest leaked NSA bombshell report provides astoundingly clear proof that the relationship between the anti-Assad insurgents and foreign intelligence was even more direct, and existed earlier in time than most analyst and mainstream pundits led the public to believe. 

    *****

    Below is the leaked National Security Agency document published by The Intercept earlier today:

    Leaked NSA document contents in text format: 

  • Passive Should Never Laugh At Active

    Authored by Kevin Muir via The Macro Tourist,

    I have been meaning to write this post for quite some time. As an ex-ETF trader, I have watched with bemusement as investors have both embraced and shuddered at the wide adoption of ETFs. But most pundits are missing the larger picture. ETFs are just a symptom of the bigger phenomenon. The true battle lies in the passive versus active debate.

    Let me get this out of the way right off the bat. I have no dog in this hunt. I see both the benefits and the negatives to each side. Yet as a trader, I definitely have a view on which end of the boat is leaning lopsided right now.

    *  *  *

    Lessons from triple witching

    But first, let me tell you a story. I was lucky enough to have a ringside seat for the coming of age of equity index derivatives. Sure they existed before my time, but the true widespread global adoption occurred in the 1990’s. In Canada, when I first sat down on the institutional desk, clients had little interest in what the young kids with their fancy SUN workstations were doing. Yet as money flowed into the derivatives complex, what had first just been a strange little science experiment, suddenly started moving the underlying market. Our index arbitrage flows became significant, and regular plain vanilla clients began took notice.

    Along with the increased index arbitrage flows came this bizarre triple witching expiry. When open interest was small, these expiries were minor. But as the usage of derivatives expanded, one morning we experienced an imbalance that was uncomfortably large. Being index traders, we instantly understood what had happened. Someone was letting a whole bunch of exposure expire into the open, and therefore there was a very large, and very real, index sell basket to execute at the open.

    Many institutional clients were not used to trading on the open. Most often, they let retail orders and market makers set the price, and then after it settled down, they would give us their orders.

    Given that institutional clients were not interested in trading at the open, there was little liquidity for the large expiring sell basket. Sensing an opportunity, we bid spec for a decent portion of the sell imbalance, hoping to get a good fill which we could then offset in the futures market. The trouble was, not nearly enough market participants joined us, and the market gapped down huge. It was a terrific trade as the opening settlement was many hundreds of basis points below the previous close.

    There was no fundamental reason for the market dislocation. It was simply a matter that not enough participants understood what was happening.

    Rest assured, immediately after the violent open, our phones were ringing off the hook with clients wanting to understand what the hell happened.

    With some education, active managers learned how they could take advantage of this liquidity demand at expiry, and from then on, these fundamentals clients lined up to offset the morning imbalances.

    And that’s how markets work. Opportunities are arbitraged away by market participants attempting to take advantage of mis-pricings.

    *  *  *

    End zone dances are a bad idea

    When I see a passive manager making fun of a fundamental investor, I am perplexed. The passive manager’s very existence relies on fundamental investors keeping markets efficient. You can’t claim the market is too efficient to beat, therefore you shouldn’t try, and then laugh at everyone who does. The paradox is that your success as an indexer depends on everyone else continuing to try. The passive investor should be thanking the active guys, not mocking them.

    Which brings me to a twitter exchange that I watched this weekend. I won’t name names because it isn’t important, but it was between two popular market pundits – an extremely well known money manager (and social media star), and the other, a semi-retired macro manager, revered within the hedge fund community. What struck me as odd was that the money manager, seemingly-out-of-the-blue, posted an article from last year where the macro manager had forecasted an increased chance of a recession in the coming year. The problem was that he had included a big LOL with the date on it to show how badly this macro guy had whiffed.

    Now my immediate reaction was what a dick move. We all get it wrong sometimes. This macro manager is no perma-bear. He had a solid line of reasoning on why the economy might roll over. Shoving his nose in it like an ignorant dog owner might toilet train his puppy seemed mean spirited.

    Now, both of these guys are way out of my league. I am pretty sure either could buy me over many, many multiple of times (at least I assume so given the out-of-reach-for-most-humans classic sports cars the regular money manager posts on his blog with little tidbits about which one he is buying.) And I am sure, the last thing the macro manager needs is me defending him. He runs with the big dogs and probably just had a good chuckle at the cheap shot slung from the social media star.

    But I think their exchange represents the perfect analogy for what is happening in the market right now. It epitomizes the epic battle between passive and active, and clearly demonstrates which side is feeling smug and sure of themselves.

    Climbing the ultimate wall of worry

    The 2008 Great Financial Crisis scared a lot of people. I remember my old man telling me how his father’s generation was scarred by the Great Depression. They were constantly worried it would occur again, and to a large extent, they were always saving and preparing for its return. Well, our generation is not that different. In 2008, investors abandoned the stock market, and were extremely reluctant to return.

    Have a look at this chart of the investment flows over the past decade:

    Investors fled stocks faster than Lindsay Lohan leaving rehab, and rushed into bonds. This chart is a little bit dated, so it doesn’t show the recent surge into equities, but it gives a picture of the attitude that prevailed in the years following the Great Financial Crisis.

    The important thing to realize is that most everyone was scared following the GFC. There were precious few equity bulls.

    Armed with a stack of blue tickets, Central Banks were determined to not let the Great Depression repeat. So they bought, and they bought, and they bought. It started with the Fed. Then the Bank of Japan joined the party. The ECB tried to resist, but that just caused all the deflation to be exported to the EU, and eventually even the Germans acquiesced and allowed the ECB to expand their balance sheet. It has become an orgy of Central Bank buying. It’s so obscene I think even Caligula would blush.

    I am not here to tell you how this will cause some end-of-the-world collapse. In fact, I think this will eventually cause a monster melt-up in all prices (including non-financial ones), as opposed to some deflationary crash. But what I would like to stress is that Central Banks have pushed financial asset prices higher. No doubt about it. Whether it was by the lowering of the risk free rate to mind boggling low levels (forcing investors out the risk curve), or by the actual purchase of risk assets (ala SNB and BoJ), financial assets have not been rising because of sound fundamentals, but instead because the economy has been so sluggish, causing even more Central Bank monetary stimulus.

    Investors have been reluctant to embrace risk assets. They have reluctantly bought, not because they felt it was a compelling bargain, but because they had no choice. Faced with ever increasing life spans, combined with less and less government retirement plans, individuals realize they have not saved enough, and with the horrendous financial repression, they have no alternatives.

    Markets always climb a wall of worry, but this was no wall. This was a mountain. And no regular mountain, but an Everest type imposing monolith.

    The one type of manager who got it right

    All of this uncertainty made passive-rule-based-long-term managers the stars of this cycle. Everyone else was reluctant to climb aboard the Central Bank fueled rally, but not this crew. Their rules forced them to be long, regardless of all the negativity surrounding markets. Managers that embraced this strategy are now geniuses and heroes melded into one.

    These managers were unique in that they were a member of the elite few brave enough to be fully invested. Low bond yields didn’t scare them. Record equity valuations didn’t stopped their buying. They had a plan, and they stuck with it.

    And hats off to them. Any level of cash or under-weighting of beta has been nothing but a drag on performance. Not only that, but since this group often advocates passive investing, they were concentrated in the highest market capitalization stocks. Which also happens to be the perfect vehicle for Central Bank risk asset buying.

    Think back to the rally of the previous couple of years. Was anyone buying because stocks were outright cheap? Not a chance. Sure you could make the argument stocks were inexpensive when compared to the risk free rate, but for the past few years, buying stocks was somewhat a leap of faith.

    I would argue the only group that fully caught this move were the disciples of “stocks/bonds in a diversified portfolio” for the long haul. Unless you were systematically executing a fully invested portfolio management strategy, this was an extremely difficult market to stay fully invested.

    Nothing is new

    Which brings me back to our money manager who is busy taking pot shots at macro managers who attempt to make fundamental calls about the economy’s prospects in the coming year. This money manager happened to have the perfect strategy for the past few years. Given his beliefs, I assume he was fully invested, concentrating on market capitalized stock index ETFs, with some low cost broad based bond ETFs for diversification. I don’t know this for sure, but given his comments, I would be surprised if this wasn’t his MO.

    But the real dangerous part? Since this is the only strategy that seems to have worked over the past few years, investors are chasing this investing style with a zeal last seen in Phoenix real estate in 2006.

    Active investing has become a punch line for a bad joke. Why bother picking stocks? Central Banks and the ETF buying public are just sending up the biggest ones as they make up the majority of the ETFs. And even when there is some “fundamental” analysis occurring, it mostly consists of some young data scientist putting the latest three years of data into a “factor” model and choosing more of the names that have been working for the previous three years.

    Financial assets have been goosed higher through Central Bank balance sheet expansion, and at the very moment where fundamental analysis is most needed, investors have completely abandoned it. Active managers are being fired left and right. They are being replaced with passive ETF strategies. Hedge funds of all stripes are being stripped of assets, and in their place, more beta fueled indexing.

    This story is as old as time. As much as everyone thinks they don’t chase the hot investing fad, the crowd always piles in at the end.

    We have seen this play out each and every market cycle. Don’t forget that in 1999 Warren Buffett was some old codger who needed to be put out to pasture because he didn’t understand the new economy. Or how about GMO having a majority of their assets flow out the door in 2006 because they weren’t participating in the frothy market, only to see their performance crush most of their competitors in the next couple of years.

    The fact that fully invested passive managers are doing over-the-top-victory-dances in the end zone should come as no surprise. This is the kind of behaviour we should expect at the top.

    The Greatest Short Squeeze of all time

    The Market Gods are not a lenient bunch. They have a way of knocking down the cockiest amongst us.

    I find it ironic that investors are embracing the idea that Central Bank buying will keep propelling financial assets higher at the very moment that these flows are set to decline.

    I am not some doomsdayer who thinks the world must implode in some deflationary collapse to cleanse the financial system of our over-indebted sins.

    Yet I am a realist who understands that markets go too far one way, and when that happens, they inevitably correct, and right the ship.

    There is no doubt in my mind that too many investors have abandoned fundamental analysis, and in one of the greatest short squeezes of all time, have piled into financial assets at the worst possible moment. They are not buying because assets are cheap, but instead because they are going up.

    Markets are always changing – change with it.

    Instead of complaining, true long term value investors should be welcoming this mad scramble. It is sowing the seeds for the next opportunity.

    So yeah, fully invested passive index investors might be having laughs at our expense right now, but as Harry Hogge used to tell Cole Trickle, “he didn’t slam you, he didn’t bump you, he didn’t nudge you… he rubbed you. And rubbin, son, is racin’.”

    No sense getting all sanctimonious about either side. For sure – ETFs and passive investing is way, way too popular right now. Just like my story of the triple witching expiry, there will be an event that catches market participants off guard. Then fundamental investors will step in and correct the mis-pricing.

    Too much indexing will be self-defeating. Indexers should never, ever, laugh at fundamental investors as they are essential to their survival. But neither should fundamental investors treat ETFs like the scourge of the world.

    The famous recluse trader Ed Seykota once said, “the markets are the same now as they were five or ten years ago because they keep changing – just like they did then.” Ed is spot on.

    Markets are always changing. Debating about it is like arguing with the wind.

    Rather than digging my heels in on some philosophical debate about the best direction for markets, I prefer to attempt to figure out where it is heading, irrespective of my opinion of where it should go. I have nothing against fully invested passive strategies – at the right time. But I beg to differ that fundamental analysis never works and that you should simply lap up whatever returns the market returns you regardless of valuations. I feel like there has never been a worse time to just blindly clasp this sort of strategy.

    We are on a cusp of a major turning point, and active managers are about to have their day in the sun. Here is my prediction. Within the next year the hedge fund manager will be able to return the favour to the over-confident passive money manager.

    And I will leave you with some immortal words from legendary strategist Bob Farell:

    • Markets tend to return to the mean over time.
    • Excesses in one direction will lead to an opposite excess in the other direction.
    • There are no new eras – excesses are never permanent.
    • Exponential rapidly rising or falling market usually go further than you think, but they do not correct by going sideways.
    • The public buys the most at the top and the least at the bottom.

    I wonder what Bob would say about the current group of exultant passive money managers?

  • BofA: "The Market Implies There Is No Way A Shock Can Happen"

    For today’s moment of volatility zen, we go to BofA’s Nikolay Angeloff who drew the short straw to be the (un)lucky pundit whose comments on record complacency, low volatility, etc publicized.

    Angeloff starts with pointing out what we noted over the weekend , namely that we have now recorded 334 days without a 5% or more pullback (and 335 after today’s close), the fourth longest period on record since 1928.

    In another market distortion, whether due to ETFs or central banks, equity vol has fallen so far in October, historically the most volatile month of the year, and if it continues at this pace, it will be the least volatile October in history…

    … and third least volatile month ever.

    Looking at the above two charts, it is no surprise that at this 30yr anniversary of the ’87 crash, the BofA analyst concludes that “the market seems to currently imply there is no way a shock can happen. However, in part due to today’s low realized volatility creating a steep implied term-structure, along with higher fragility driving steeper skew across tenors, the entry point for “S&P fragility hedges” in the form of put ratio calendars has never been more attractive.”

    We’ll have more to say on his (costless) hedge recommendation tomorrow, but first here is some more on what the ongoing market distortions mean in practical terms:

    Markets mark the 30Y anniversary of Black Monday midst chatter of fragility. On 19-Oct-1987, the S&P 500 experienced its worst day in history (since 1928) when the index plummeted 20.5% in a single trading session. The total loss over the month leading to and including the market crash amounted to 27.6%, a 6.6-sigma event.

     

     

    Counter to many peoples’ common belief, a shock of this magnitude would be unprecedented today. Our previous work has shown that there is historically a limit of how large shocks can be based on the prevailing realized volatility. With today’s much lower levels of realized vol, a 6.6 sigma event would correspond to a lesser monthly selloff of only 11.5%

    Well, as long as it is “only” 11.5%, one can probably count the number of central banker suicides on “only” one hand as these central-planning mandarins watch the fruit of their centrally-planned labor go up in smoke.

    Angeloff’s conclusion:

    “generally, the longer time passes without an abrupt market correction, the higher the likelihood of it happening. Markets pricing very little potential for a shock seems at odds with still elevated geopolitical and policy risk globally. Additionally, some have increasingly refocused on quant fund positioning risks, and as we have argued previously CTA and risk parity flows (and the fear of them) can add fuel to (but not cause) a potential sell-off. Notably we see their equity allocations likely at a high (for CTAs this is due to the coincidental occurrence of a strong trend in performance and record-low vol). Thus, an equity sell-off or an uptick in volatility could cause these portfolios to de-lever their equity allocations and so could exacerbate an equity market correction (Charts 14 & 15). However, we still do not believe they would be the sole drivers of an ’87 style crash.

    * * *

    Two final observations:

    For Oct-17, the VIX settled at 10.53, which is 10.6 points below the 2004-2016 October average of 21.2 (less than half). This is the greatest difference between a monthly settlement and monthly average so far in 2017. For comparison, Sep-17’s settlement of 9.87 was 9.82 points below the September average, the second largest discrepancy so far this year. What’s more, on an absolute level October has the second highest monthly settlement on average (21.2), second only to November (22.0). Regardless, Oct-17’s 10.53 was the second lowest monthly settlement realized thus far in 2017.

    In stark contrast with historical trends, realized volatility on SPX has dropped in the month of September and if volatility does not pick up materially from here, the month of October will mark the second monthly drop in a row. Indeed, realized volatility in the month of October thus far is 3.5 vol pts. If realized volatility remains flat for the remainder of the month, this would be the third lowest monthly volatility in the history of the index, which realized less volatility only in Feb-64 and Aug-65. Historically SPX realized volatility tends to drop in the month of November. However, this year may witness a break of that pattern given the likely low level for the month of October. In addition the real battle over tax reform will likely start in early November and that the process from here will neither be pretty or smooth…

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