- Paths of Glory
From the Slope of Hope: A couple of Thursdays ago, we were all wringing our hands (or at least I was) about the powerful bureaucrat and lifetime government employee Haruhiko Kuroda and what his next move would be. He dropped a big bomb – negative interest rates – and created precisely the kind of market reaction he wanted………….for less than a single day. Since then, his world has once again fallen to pieces, since the cold fact of the matter is that Japan is doomed to be an old age colony, hopelessly mired in debt, with its economic glory of the 1980s an increasingly distant memory.
Even though these moronic central bankers are becoming increasingly impotent (a trait normally assigned merely to those who dared gaze at the hideous visage of Janet Yellen), we’re all still afraid of them and what they might do, simply because the horrid memories of 2009-2014 are too painful to forget. The latest chatter is about the Chinese government, and whatever falsified data they intend to trot out Sunday night. I personally wish they’d all choke on their chopsticks.
What we must remember, however, is this: we are in a bear market, and the risk of a countertrend rally is present, but confined. Looking at the Dow Jones Composite, for example, I’ve tinted in my view as to the worst risk scenario. God forbid even this happening:
Context is important, however, because the big picture shows global mayhem, economic cataclysm, and a plunge that would push Draghi, Yellen, Kuroda, and the unnamed stooges of China to seek out the cleanest, sharpest razor blades available to slit their collective wrists. I have, as a way to emphasize the contrast between bearish and bullish risk, tinted in green below the same area as I did above. Magnifying glasses may be required:
As you might have divined, I deeply resent these bankers and the fact they have any say-so in market movement, even if this effect is short-lived. My belief in the importance of organic markets flows through every molecule of my being, and what these government flunkies are doing is grotesquely offensive to every concept I have of decency and natural order.
These clowns are going to keep dicking with the markets, but the three words to remember are: They. Will. Fail.
- "Fukushima Class Disaster" – L.A. Gas Leak Spewing Lethal Levels Of Breathable Nuclear Material
Submitted by Mac Slavo via SHTFPlan.com,
In a breaking development that has been completely ignored by mainstream news sources, the leaking natural gas well near Los Angeles, California is now reportedly spewing lethal levels of radioactive material, according to a report from Steve Quayle and a group with expertise in nuclear material.
A leaking natural gas well outside Los Angeles is spewing so much naturally-occurring Uranium and Radon, that “breathable” radiation levels have hit “lethal levels” according to a Nuclear Expert group.
Hal Turner of Super Station 95 reports that the well is releasing 1.91 Curies (Ci) of radiation per hour.
This rogue well is spewing huge amounts of natural gas and about 1.91 curies an hour of natural radioactive material in the natural gas… 1.91 curies an hour is about 45.9 curies per day… It’s a really, really big leak.
A curie is a unit of measure in the U.S. to describe very large radioactive releases.
The French utilize a unit of measure called a Becquerel to measure radiation levels. A single Becquerel measures the activity of a quantity of radioactive material in which one nucleus decays per second.
To put things into perspective, Turner explains that a single Curie is equivalent to about 37 Billion Becquerels (Bq) of radiation:
A Becquerel is a much more human sized unit of measure… it’s one radioactive burst of energy per second… One Curie is 37 billion Becquerels per second.
That’s 1.7 trillion Becquerels per day coming out of that natural gas well.
This is a real Fukushima class disaster and it’s happening right here in the USA.
…
In 80 days of fumes at a pace of 1,115 tons per day coming out of that ground… could carry with it 301.2 terra-Becquerels of natural radioactivity… This converts to a resperable… a breathable emanation of 12 million Sieverts (Sv)… 2.4 million times the lethal dose by inhalation.
Full audio report via Hal Turner (begins at approximately 49:00 minutes)
In short, the leak is massive and researchers at UC Davis have indicated that they have never encountered as much methane in the air as they have over suburban Los Angeles in recent months.
While resident complaints of feeling ill, vomiting and nausea have been chalked off by officials as the result of breathing in the natural gas, it is quite possible and increasingly likely that what they are experiencing is actually radiation poisoning.
According to one report, the radiation levels in the Chernobyl control room following the 1986 disaster reached about 300 Sv per hour. That was enough to provide a lethal dose to anyone in the room within 1-2 minutes.
While the Los Angeles leak is widespread with radiation disbursing across the city, the fact remains that millions of Sieverts of radiation have been released and will continue to be released until such time that the well is permanently sealed.
The following map shows the spread of methane over the Los Angeles area and researchers from Eco Watch report that elevated levels of natural gas have been detected as far as 10 miles from the leak:
For those living in the area, be warned: you are inhaling deadly radiation. And while the dose is not immediately lethal, prolonged inhalation and exposure may lead to a spike in cancer-related disease and deaths over coming years.
- And Now "Some Important News About JPMorgan's New Cash Policies"
Want to deposit cash at JPMorgan Chase? Then prepare to be treated if not like a criminal, then certainly a suspect of a very serious crime. The charge: being in possession of that “barbarous relic” known as cash.
Soon, as cash becomes increasingly frowned upon, cash deposits will be slowly but surely phased out in their entirety forcing those few savers left in Obama’s grand economic “recovery” experiment, to engage in commerce only in a way that allows the government to keep track of every single transaction.
- Visualizing The World's Most Famous Case Of Deflation, Part 1
The Great Depression was the most severe economic depression ever experienced by the Western world.
As VisualCapitalist notes, it was during this troubled time that the world’s most famous case of deflation also happened. The resulting aftermath was so bad that economic policy since has been chiefly designed to prevent deflation at all costs.
Courtesy of: The Money ProjectSetting the Stage
The transition from wartime to peacetime created a bumpy economic road after World War I.
Growth has hard to come by in the first years after the war, and by 1920-21 the economy fell into a brief deflationary depression. Prices dropped -18%, and unemployment jumped up to 11.7% in 1921.
However, the troubles wouldn’t last. During the “Roaring Twenties”, economic growth picked up as the new technologies like the automobile, household appliances, and other mass-produced products led to a vibrant consumer culture and growth in the economy.
More than half of the automobiles in the nation were sold on credit by the end of the 1920s. Consumer debt more than doubled during the decade.
While GDP growth during this period was extremely strong, the Roaring Twenties also had a dark side. Income inequality during this era was the highest in American history. By 1929, the income of the top 1% had increased by 75%. Income for the rest of people (99%) increased by only 9%.
The Roaring Twenties ended with a bang. On Black Thursday (Oct 24, 1929), the Dow Jones Industrial Average plunged 11% at the open in very heavy volume, precipitating the Wall Street crash of 1929 and the subsequent Great Depression of the 1930s.
The Cause of the Great Depression
Economists continue to debate to this day on the cause of the Great Depression. Here’s perspectives from three different economic schools:
Keynesian:
John Maynard Keynes saw the causes of the Great Depression hinge upon a lack of aggregate demand. This later became the subject of his most influential work, The General Theory of Employment, Interest, and Money, which was published in 1936.
Keynes argued that the solution was to stimulate the economy through some combination of two approaches:
1. A reduction in interest rates (monetary policy), and
2. Government investment in infrastructure (fiscal policy).“The difficulty lies not so much in developing new ideas as in escaping from old ones.” – John Maynard Keynes
Monetarist:
Monetarists such as Milton Friedman viewed the cause of the Great Depression as a fall in the money supply.
Friedman and Schwartz argue that people wanted to hold more money than the Federal Reserve was supplying. As a result, people hoarded money by consuming less. This caused a contraction in employment and production since prices were not flexible enough to immediately fall.
“The Great Depression, like most other periods of severe unemployment, was produced by government mismanagement rather than by any inherent instability of the private economy.” ? Milton Friedman
Austrian:
Austrian economists argue that the Great Depression was the inevitable outcome of the monetary policies of the Federal Reserve during the 1920s.
In their opinion, the central bank’s policy was an “easy credit policy” which led to an unsustainable credit-driven boom.
“Any increase in the relative size of government in the economy, therefore, shifts the societal consumption-investment ratio in favor of consumption, and prolongs the depression.” – Murray Rothbard
The Great Depression and Deflation
Between 1929 and 1932, worldwide GDP fell by an estimated 15%.
Deflation hit.
Personal income, tax revenue, profits and prices plunged. International trade fell by more than 50%. Unemployment in the U.S. rose to 25% and in some countries rose as high as 33%.
These statistics were only the tip of the iceberg. Learn about the full effects, the stories, and the recovery from the Great Depression in Part 2.
The Money Project aims to use intuitive visualizations to explore ideas around the very concept of money itself. Founded in 2015 by Visual Capitalist and Texas Precious Metals, the Money Project will look at the evolving nature of money, and will try to answer the difficult questions that prevent us from truly understanding the role that money plays in finance, investments, and accumulating wealth.
- Facebook's War On Freedom Of Speech
Submitted by Douglas Murray via The Gatestone Institute,
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Facebook is now removing speech that presumably almost everybody might decide is racist — along with speech that only someone at Facebook decides is "racist."
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The sinister reality of a society in which the expression of majority opinion is being turned into a crime has already been seen across Europe. Just last week came reports of Dutch citizens being visited by the police and warned about posting anti-mass-immigration sentiments on social media.
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In lieu of violence, speech is one of the best ways for people to vent their feelings and frustrations. Remove the right to speak about your frustrations and only violence is left.
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The lid is being put on the pressure cooker at precisely the moment that the heat is being turned up. A true "initiative for civil courage" would explain to both Merkel and Zuckerberg that their policy can have only one possible result.
It was only a few weeks ago that Facebook was forced to back down when caught permitting anti-Israel postings, but censoring equivalent anti-Palestinian postings.
Now one of the most sinister stories of the past year was hardly even reported. In September, German Chancellor Angela Merkel met Mark Zuckerberg of Facebook at a UN development summit in New York. As they sat down, Chancellor Merkel's microphone, still on, recorded Merkel asking Zuckerberg what could be done to stop anti-immigration postings being written on Facebook. She asked if it was something he was working on, and he assured her it was.
At the time, perhaps the most revealing aspect of this exchange was that the German Chancellor — at the very moment that her country was going through one of the most significant events in its post-war history — should have been spending any time worrying about how to stop public dislike of her policies being vented on social media. But now it appears that the discussion yielded consequential results.
Last month, Facebook launched what it called an "Initiative for civil courage online," the aim of which, it claims, is to remove "hate speech" from Facebook — specifically by removing comments that "promote xenophobia." Facebook is working with a unit of the publisher Bertelsmann, which aims to identify and then erase "racist" posts from the site. The work is intended particularly to focus on Facebook users in Germany. At the launch of the new initiative, Facebook's chief operating officer, Sheryl Sandberg, explained that, "Hate speech has no place in our society — not even on the internet." She went to say that, "Facebook is not a place for the dissemination of hate speech or incitement to violence." Of course, Facebook can do what it likes on its own website. What is troubling is what this organization of effort and muddled thinking reveals about what is going on in Europe.
The mass movement of millions of people — from across Africa, the Middle East and further afield — into Europe has happened in record time and is a huge event in its history. As events in Paris, Cologne and Sweden have shown, it is also by no means a series of events only with positive connotations.
As well as being fearful of the security implications of allowing in millions of people whose identities, beliefs and intentions are unknown and — in such large numbers — unknowable, many Europeans are deeply concerned that this movement heralds an irreversible alteration in the fabric of their society. Many Europeans do not want to become a melting pot for the Middle East and Africa, but want to retain something of their own identities and traditions. Apparently, it is not just a minority who feel concern about this. Poll after poll shows a significant majority of the public in each and every European country opposed to immigration at anything like the current rate.
The sinister thing about what Facebook is doing is that it is now removing speech that presumably almost everybody might consider racist — along with speech that only someone at Facebook decides is "racist."
And it just so happens to turn out that, lo and behold, this idea of "racist" speech appears to include anything critical of the EU's current catastrophic immigration policy.
By deciding that "xenophobic" comment in reaction to the crisis is also "racist," Facebook has made the view of the majority of the European people (who, it must be stressed, are opposed to Chancellor Merkel's policies) into "racist" views, and so is condemning the majority of Europeans as "racist." This is a policy that will do its part in pushing Europe into a disastrous future.
Because even if some of the speech Facebook is so scared of is in some way "xenophobic," there are deep questions as to why such speech should be banned. In lieu of violence, speech is one of the best ways for people to vent their feelings and frustrations. Remove the right to speak about your frustrations, and only violence is left. Weimar Germany — to give just one example — was replete with hate-speech laws intended to limit speech the state did not like. These laws did nothing whatsoever to limit the rise of extremism; it only made martyrs out of those it pursued, and persuaded an even larger number of people that the time for talking was over.
The sinister reality of a society in which the expression of majority opinion is being turned into a crime has already been seen across Europe. Just last week, reports from the Netherlands told of Dutch citizens being visited by the police and warned about posting anti-mass-immigration sentiments on Twitter and other social media.
In this toxic mix, Facebook has now — knowingly or unknowingly — played its part. The lid is being put on the pressure cooker at precisely the moment that the heat is being turned up. A true "initiative for civil courage" would explain to both Merkel and Zuckerberg that their policy can have only one possible result.
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- "A Key Technical Indicator Just Rang The Bell On The Cyclical Bull Market"
While the primary topic of Albert Edwards’ most recent note is the question how long China can sustain its FX intervention before tapping out and letting the hedge funds win with their short Yuan bets once total reserves drop below the critical redline of $2.7 trillion (the answer incidentally is between 5 months and 10 months assuming monthly reserve burn rates of $130BN to $60BN), we will skip that part as we have discussed it extensively in the past, and instead will fast forward to some chart porn by the SocGenarian.
Here is Albert Edwards showing that the S&P had breached key moving averages normally seen at the start of a bear market.
Back in the mid-1990s I spent three memorable years working at Bank America Investment Management, among some of the industry’s finest. Having previously spent three years as an economist at the Bank of England, I was new to markets and I let my economic enthusiasm often get the better of me when making recommendations to fund managers.
I remember the head of fixed income explaining to me it was far better not to try and pick market tops or bottoms but to wait and observe the market turn, making the trade late rather than prematurely trying to pick the bottom or top.
So the chart below is notable, showing that key 200d and 320d moving averages for the S&P have just been breached to the downside. If one is looking for key technical indicators to ring the bell on the cyclical bull market- maybe it has just rung loud and clear.
A renminbi devaluation will only sever an already badly frayed safety rope.
Check to you, “data-dependent” Fed
- These Vancouver Homes Sold For Millions In 2011 And Have Been Vacant And Rotting Since: Here's Why
Five years ago, in July of 2011, the house at 4182 West 8th Avenue in Vancouver in sold for $4.6 million. It now rests vacant, abandoned and rotting.
Six years ago this $6.2-million Point Grey home boasted unobstructed vistas of the North Shore mountains, English Bay and Vancouver’s skyline. A park sits across a quiet street. The home represents everything a family could aspire to.
As the National Post reports, it too is vacant and rotting. Windows have been left open and debris sits in the yard. Like a symbol of futility, a June 2015 City of Vancouver “untidy-premises” order remains pinned to the door.
The two formerly multi-million mansions devolving to derelict status is not the only thing they share in common: a second uniting feature is what they were meant to become once they were purchased half a decade ago – a store of wealth to Chinese investors eager to park “hot money” outside of their native country, and bid up any Canadian real estate they could get their hands on.
And then the investors disappeared.
The Point Grey property stopped functioning as a home and became a storage of wealth six years ago, according to property documents and a neighbour’s account.
It was well-cared for in 2010 when it was sold to an investor. Since then it has been flipped through a property transfer in a Beijing law office and left unoccupied.
Current owners of the other vacant property residing on the 4100-block 8th Avenue West home are Huai Can Ren and Xue Pei Sun. They bought the home from Wei Min Zhang in July 2011 for $4.6 million.
The couple’s occupations were both listed as “business person.” Wei Min Zhang had bought the home in July 2010 for $3.35 million.
Since the purchase, the current “owners” have not been seen.
City hall is currently trying to estimate how many Vancouver homes are vacant. And these online communities are anecdotally gathering photo evidence and coming to conclusions that offshore investment is to blame.
In other words, the “Chinese.”
“That is what is driving everything,” said Caroline Adderson, whose website, Vancouver Vanishes, has over 8,000 followers. “It is sickening on all levels.”
City of Vancouver spokesman Tobin Postma said a 2015 order to clean up the property was “remedied.” However the order remains pinned to the property and messy conditions appear to continue, according to a reporter’s observations Wednesday.
Postma said city departments respond to safety and mess complaints at vacant homes and issue cleanup orders in warranted cases.
If owners don’t respond, the city will clean up and issue a bill. In 2014, there were 213 actions taken against 85 properties, Postma said.
Huai Can Ren and Xue Pei Sun are also owners of a $3.57-million Arbutus Ridge home in the 2300-block 21st Avenue West, records show.
The home also appears to be unoccupied: on Wednesday, a Postmedia reporter found that the windows were shuttered, a phone book was left on the doorstep and a mailbox was stuffed with letters. No one answered the door and the home’s external condition seemed degraded.
Huai Can Ren, then listed as “businessman,” and Xue Pei Sun, as “homemaker,” bought the home in 2006 for $1.75 million from transferees Zhaohong Su and Xin Li.
In transfer documents, Xin Li was listed as lawyer for Su, who had bought the home in 2005 for $778,000.
Needless to say the locals are furious with this increasing incidence of derelict houses, which destroy neighborhood character. They are also confused how this is allowed to go on.
And in case it is unclear what “this”, what is happening is quite simple:
- Chinese investors smuggled out millions in embezzled cash, hot money or perfectly legal funds, bypassing the $50,000/year limit in legal capital outflows.
- They make “all cash” purchases, usually sight unseen, using third parties intermediaries to preserve their anonymity, or directly in perso, in cities like Vancouver, New York, London or San Francisco.
- The house becomes a new “Swiss bank account”, providing the promise of an anonymous store of value and retaining the cash equivalent value of the original capital outflow.
- Then the owners disappear, never to be heard from or seen again.
As more Chinese scramble to engage and repeat if only the first three steps, the price of local housing, which is merely a store of value to price indiscriminate foreign buyers, soars while it makes home purchases for the domestic population prohibitively expensive and virtually impossible.
The end result, in the case of Vancouver, is this:
We, and the local residents of Vancouver wonder, “how much longer will such money laundering fraud be permitted?“
- Video Shows Tens Of Thousands Massing At Turkey Border As Russia, Iran Bear Down On Key Syrian City
On Thursday we brought you the latest from Syria, where Hezbollah and the IRGC have encircled Aleppo and cut off rebel supply lines to Turkey.
It was months in the making, but it now appears that the city – Syria’s second largest – will soon be retaken by forces loyal to Bashar al-Assad. As we’ve explained in the past, that would effectively restore the President’s grip on power as he would effectively control most of the country’s urban centers – even if that “control” is tenuous.
Eastern Syria is of course a different story entirely, as ISIS is dug in at Raqqa, the group’s self-styled capital. If the rebels lose Aleppo, it will represent a huge blow to the effort to topple Assad’s government. Saudi Arabia and Turkey know this, which is presumably why Erdogan was busy criticizing the Russian airstrikes that have facilitated the Hezbollah advance yesterday and why Riyadh now says it’s prepared to send in ground troops (to “fight ISIS”).
Now, as the Russian air campaign continues unabated and Shiite fighters advance on the city, civilians are fleeing what they anticipate will be a bloody battle.
“The Russian (air) cover continues night and day, there were more than 250 air strikes on this area in one day,” Hassan Haj Ali, head of Liwa Suqour al-Jabal, a group that fights under the umbrella of the Free Syrian Army, said.
“Tens of thousands of Syrians fled an intensifying Russian assault around Aleppo on Friday, and aid workers said they feared the city which once held two million people could soon fall under a full government siege,” Reuters writes. “The last 24 hours saw government troops and their Lebanese and Iranian allies fully encircle the countryside north of Aleppo and cut off the main supply route linking the city – Syria’s largest before the war – to Turkey [who says] the aim is to starve the population into submission.”
Now obviously that’s ridiculous. The “aim” is to keep the rebels (some of whom are ISIS fighters) from obtaining guns and TOWs from Turkey where the government in Ankara is desperate to salvage whatever’s left of the effort to oust Assad.
In any event, the fighting looks set to create a new wave of refugees bound first for Turkey and ultimately for a beleaguered Western Europe.
“Video footage showed thousands of people, mostly women, children and the elderly, massing at the Bab al-Salam border crossing,” Reuters continues. “Men carried luggage on top of their heads, and the elderly and those unable to walk were brought in wheelchairs.”
Here are the visuals:
- 22 Signs That The Global Economic Turmoil We Have Seen So Far In 2016 Is Just The Beginning
Submitted by Michael Snyder via The Economic Collapse blog,
As bad as the month of January was for the global economy, the truth is that the rest of 2016 promises to be much worse. Layoffs are increasing at a pace that we haven’t seen since the last recession, major retailers are shutting down hundreds of locations, corporate profit margins are plunging, global trade is slowing down dramatically, and several major European banks are in the process of completely imploding. I am about to share some numbers with you that are truly eye-popping. Each one by itself would be reason for concern, but when you put all of the pieces together it creates a picture that is hard to deny.
The global economy is in crisis, and this is going to have very serious implications for the financial markets moving forward. U.S. stocks just had their worst January in seven years, and if I am right much worse is still yet to come this year. The following are 22 signs that the global economic turmoil that we have seen so far in 2016 is just the beginning…
1. The number of job cuts in the United States skyrocketed 218 percent during the month of January according to Challenger, Gray & Christmas.
2. The Baltic Dry Index just hit yet another brand new all-time record low. As I write this article, it is sitting at 303.
3. U.S. factory orders have now dropped for 14 months in a row.
4. In the U.S., the Restaurant Performance Index just fell to the lowest level that we have seen since 2008.
5. In January, orders for class 8 trucks (the big trucks that you see shipping stuff around the country on our highways) declined a whopping 48 percent from a year ago.
6. Rail traffic is also slowing down substantially. In Colorado, there are hundreds of train engines that are just sitting on the tracks with nothing to do.
7. Corporate profit margins peaked during the third quarter of 2014 and have been declining steadily since then. This usually happens when we are heading into a recession.
8. A series of extremely disappointing corporate quarterly reports is sending stock after stock plummeting. Here is a summary from Zero Hedge of a few examples that we have just witnessed…
- SHARES OF LIONS GATE ENTERTAINMENT FALL 5 PCT IN EXTENDED TRADE AFTER QUARTERLY RESULTS – RTRS
- TABLEAU SOFTWARE SHARES TUMBLE 40 PCT IN AFTER HOURS TRADING – RTRS
- YRC WORLDWIDE SHARES DOWN 16.4 PCT AFTER THE BALL FOLLOWING RESULTS – RTRS
- SPLUNK INC SHARES DOWN 7.6 PCT IN AFTER HOURS TRADING – RTRS
- LINKEDIN SHARES EXTEND DECLINE, DOWN 24 PCT AFTER RESULTS, GUIDANCE – RTRS
- HANESBRANDS SHARES FURTHER ADD TO LOSSES IN EXTENDED TRADE, LAST DOWN 14.9 PCT – RTRS
- OUTERWALL SHARES FALL 11 PCT IN EXTENDED TRADING AFTER QUARTERLY RESULTS – RTRS
- GENWORTH SHARES DOWN 16.5 PCT AFTER THE BELL FOLLOWING RESULTS, RESTRUCTURING PLAN
9. Junk bonds continue to crash on Wall Street. On Monday, JNK was down to 32.60 and HYG was down to 77.99.
10. On Thursday, a major British news source publicly named five large European banks that are considered to be in very serious danger…
Deutsche Bank, Credit Suisse, Santander, Barclays and RBS are among the stocks that are falling sharply sending shockwaves through the financial world, according to former hedge fund manager and ex Goldman Sachs employee Raoul Pal.
11. Deutsche Bank is the biggest bank in Germany and it has more exposure to derivatives than any other bank in the world. Unfortunately, Deutsche Bank credit default swaps are now telling us that there is deep turmoil at the bank and that a complete implosion may be imminent.
12. Last week, we learned that Deutsche Bank had lost a staggering 6.8 billion euros in 2015. If you will recall, I warned about massive problems at Deutsche Bank all the way back in September. The most important bank in Germany is exceedingly troubled, and it could end up being for the EU what Lehman Brothers was for the United States.
13. Credit Suisse just announced that it will be eliminating 4,000 jobs.
14. Royal Dutch Shell has announced that it is going to be eliminating 10,000 jobs.
15. Caterpillar has announced that it will be closing 5 plants and getting rid of 670 workers.
16. Yahoo has announced that it is going to be getting rid of 15 percent of its total workforce.
17. Johnson & Johnson has announced that it is slashing its workforce by 3,000 jobs.
18. Sprint just laid off 8 percent of its workforce and GoPro is letting go 7 percent of its workers.
19. All over America, retail stores are shutting down at a staggering pace. The following list comes from one of my previous articles…
-Wal-Mart is closing 269 stores, including 154 inside the United States.
-K-Mart is closing down more than two dozen stores over the next several months.
-J.C. Penney will be permanently shutting down 47 more stores after closing a total of 40 stores in 2015.
-Macy’s has decided that it needs to shutter 36 stores and lay off approximately 2,500 employees.
-The Gap is in the process of closing 175 stores in North America.
-Aeropostale is in the process of closing 84 stores all across America.
-Finish Line has announced that 150 stores will be shutting down over the next few years.
-Sears has shut down about 600 stores over the past year or so, but sales at the stores that remain open continue to fall precipitously.
20. According to the New York Times, the Chinese economy is facing a mountain of bad loans that “could exceed $5 trillion“.
21. Japan has implemented a negative interest rate program in a desperate attempt to try to get banks to make more loans.
22. The global economy desperately needs the price of oil to go back up, but Morgan Stanley says that we will not see $80 oil again until 2018.
It is not difficult to see where the numbers are trending.
Last week, I told my wife that I thought that Marco Rubio was going to do better than expected in Iowa.
How did I come to that conclusion?
It was simply based on how his poll numbers were trending.
And when you look at where global economic numbers are trending, they tell us that 2016 is going to be a year that is going to get progressively worse as it goes along.
So many of the exact same things that we saw happen in 2008 are happening again right now, and you would have to be blind not to see it.
Hopefully I am wrong about what is coming in our immediate future, because millions upon millions of Americans are not prepared for what is ahead, and most of them are going to get absolutely blindsided by the coming crisis.
- Volcano Erupts "Spectacularly" 50km From Japanese Nuclear Plant
Last August, in a hilarious example of bad timing, Japan restarted its first nuclear reactor since the Chernobyl redux at Fukushima just as a nearby volcano was set to erupt.
Sakurajima, one of the country’s most active volcanos, erupts almost constantly, but experts warned the next eruption could be “the big one”, so to speak.
At the time, The Japan Meteorological Agency raised the warning level from 3 to 4.
4 means “prepare to evacuate.”
“The possibility for a large-scale eruption has become extremely high for Sakurajima,” the Agency said. As for what fate would befall someone who failed to heed an evacuation warning, well let’s just say that molten stones “could rain down on areas near the mountain’s base.”
As we noted, the real problem is Sakurajima’s location – it’s just 50 kilometers from the Sendai nuclear power plant.
On Friday Sakurajima erupted at 7 p.m. local time.
“The Meteorological Agency banned entry to the area, expanding an existing no-go zone around the crater to a 2-kilometer (1.2-mile) radius,” AP reports, adding that “Friday’s eruption, while dramatic, was average compared to Sakurajima’s past eruptions” including the last incident in September.
Here are the visuals.
?????????????? pic.twitter.com/DBkQX9uS1T
— ???????? (@nhk_seikatsu) February 5, 2016
For now no injuries have been reported and there’s apparently no threat to Sendai which RT reminds us is only “built to withstand a tsunami of 15 meters, well below 2011’s peak tsunami height of 40 meters.”
Kyoto University volcanologist Kazuhiro Ishihara says everything should be fine, but “of course we must keep monitoring the volcanic activity.”
Yes, “of course” we should. Because as we documented last year, Sendai’s operators and local authorities have no comprehensive plan to evacuate residents in the event of a meltdown. We close with a quote from Yoshitaka Mukohara, a representative of a group who opposed the Sendai restart:
“There are schools and hospitals near the plant, but no one has told us how children and the elderly would be evacuated.
“Naturally there will be gridlock caused by the sheer number of vehicles, landslides, and damaged roads and bridges.”
- Get Ready… For The Pogrom!
Submitted by Raul Ilargi Meijer via The Automatic Earth blog,
The best way it was put came from a German newspaper, the Leipziger Volkszeitung, on Tuesday, in an article that describes 5 separate incidents in two days in which buildings occupied by asylum seekers are targeted with rocks and home-made explosives. The headline quotes Leipzig’s head of police as saying: A pogrom mood prevails (Es herrscht Pogromstimmung). The full line further down in the article says: “Across the whole country, a pogrom mood prevails that is gathering an explosive intensity.”
It is early February in Europe. 62,000 more refugees reached Greece in January. Over 360 drowned trying, or 12 every single day. At least a quarter of them were children. About 90% of these people came from Syria, Iraq and Afghanistan, and are therefore considered ‘real’ refugees, no matter how often you read the word ‘migrants’ instead. It’s funny that someone wrote on our Facebook page that the word ‘refugee’ is often abused, because so many are really ‘migrants’.
Funny, because it’s the other way around: the word migrant is the one that is used wrongly, and often for political purposes. Dutch uber assclown Frans Timmermans, right hand man to EC President Juncker, claimed in Dutch media recently that 60% of ‘arrivals’ were people from countries “where you can assume they have no reason to apply for refugee status”.
The UNHCR, and even Frontex, say the correct number is 10% are ‘migrants’. 39% Syrian, 24-25% each Iraqi and Afghani. And just like not all migrants are refugees, the group ‘migrants’ does not have a subset called ‘refugees’. Confusing the terms is derogatory. Timmermans is just plain lying.
Staying in that vein, EU border cops Frontex stated the other day that there were “more than 880,000 illegal border crossings detected” in Greece in 2015. That at once raises the question whether refugees are illegals. An interesting question, because according to the Geneva convention they are not: they have the right to seek asylum, and executing one’s rights cannot per definition be illegal. Frontex, like Timmermans, uses insinuations to create an atmosphere, a mood.
And before you know it that turns into a pogrom mood. But Europe’s politicians, overwhelmed as they are with the combination of the refugee influx and their own incompetence, have apparently decided that it may play into their hands to steer their people’s moods against refugees. At that point, the entire issue becomes a cattle trade, something we’ll see more of.
Back to Timmermans and his lie about 60% being ‘migrants’: that’s more than a little mistake. That’s false insinuation. Timmermans became very popular in Holland because of his handling of the MH-17 aftermath (he was -the Dutch equivalent of- secretary of state at the time). Which is also funny, because what he did was accuse Russia of shooting down the plane mere minutes after is was shot, and way before any evidence could possibly have been gathered.
And he never stopped. He held a tearjerker of a speech at the UN and kept on hammering on the guilt of the Russians, carried on the waves of the ‘objective’ western media.
Of course, the US did the same, and never substantiated a single word either. It has taken the Dutch a year and a half to question their government’s account of the event, but the anti-Russia sentiment is now firmly in place. Since most victims were Dutch, Holland leads the investigation into the disaster. It has not brought one shed of proof to light, only innuendo.
Lately, Dutch people and media have started asking (it’s a miracle!) how it’s possible that all of Ukraine’s groundradar systems happened to be switched off when the plane came down, and why it has taken so long to find this out. Switching off groundradar must be reported internationally -to Eurocontrol, in this case- for obvious (safety) reasons. This was not done. When will they begin to wonder if maybe it was Ukraine all along? That would mean letting go of the Putin as bogeyman meme, so it may take a while.
Meanwhile the Dutch government -minus Timmermans, whose Putin bashing gave him almost as good a Brussels job as Donald Tusk got for his as PM of Poland- is chairing the EU until July 1. With youthful fervor, they started out by suggesting a sort of ferry service that would take refugees straight back from Greece to Turkey.
At the same time, the Times in Britain wrote about an EU plan to make it illegal to help refugees at sea. See, now they’re flaunting Geneva, and they’re flaunting international maritime law too. The latter says it’s illegal to NOT help people in distress at sea, and the EU is a signatory -or at least its member states. The former says specifically that ‘push-back’ of refugees is not allowed. The European Commission itself warned Greece about this in 2013.
Back to the drawing board. Or perhaps not quite: at the same time the government in The Hague came with their nonsensical ferry plan, the Dutch parliament -a few doors down- voted to let Holland start bombing Syria. You know, to support one’s partners. So you bomb the crap out of them, and then send them back when they seek to flee your bombs. Holland’s been bombing Iraq for a long time.
And that kind of tomfoolery is why there are international agreements in place, meticulously articulated after earlier disasters and vowing to never make the same mistakes again. But you don’t have to know law to be a politician, or be smart, or have a conscience. The job’s basically open to anyone who can successfully sell a second-hand car.
Being an outright sociopath ticks off a few boxes too, but people will say I shouldn’t say that. Dutch PM Mark Rutte looks like such a decent guy, after all. But the shrewd observer’s already seen that he’s merely another body-double dummy sprouted from the same egg as Cameron and Osborne, Harper in Canada, Renzi, you name them, know the type, early 40’s ideal sons in law but with a bit too much ambition.
Works well in times of plenty, but has no idea what to do in case of a headwind. And then goes berserk without knowing what that is.
* * *
The two things that stood out for me when I was making notes were that German police chief talking about a pogrom, and our dear friend Wolfgang Schäuble, German FinMin, who of all people was the only one who made sense about 10 days ago when he said that what Syria would take was a Marshall Plan, and it would cost the world a whole lot more than anyone realized.
For once, he was right. Apparently, the people he was with when he said it, and Rutte was one, didn’t even react to what he said. “Cost? Is that going to cost me votes back home?” It was hilarious to see, today, that Gordon Brown -yeah, they let him out- was talking about a Marshall Plan for Syria -they let him read papers again, too- in connection with a high-level meeting on the issue that takes place in London -oh, wait, that’s how Gordon managed to sneak in-.
World leaders are going to promise away billions of dollars to ‘help’ the Syrian people. The problem here is obvious. These are the same leaders who have been responsible for bombing the region to smithereens. And now take the lead in doling out other people’s money -yours- to ‘help’ the people who survived, and have often fled thousands of miles from home.
That’s who I would like help from if I had lost half my family, seen a bunch of my kids drown, and get my few remaining possessions taken away from me by the ‘authorities’ of a country that tells me I should be really awfully grateful they’ll accomodate me. Grateful? You guys bombed my home to the ground! Grateful for what, exactly?
Oh, but the accomodation is only temporary. Says ‘poor’ Angela Merkel, she of short-lived Mother Teresa fame. When the war is over, they have to return. Right. Return to what? How about this?:
And when do you think the war will be over, Angela? What? It’s all Assad’s fault? Oh, Putin again. Yeah. Pray tell, what’s the combined take of the US, UK, France and Germany arms industries every day after day that this wholly psychopathic use of a formerly beautiful nation for target practice goes on? Yeah, right, you’re fighting that evil ISIS. Well, so is Assad. While some of ‘our’ friends, Saudi Arabia, Turkey, to name a few, are helping them out. And ‘we’ at least sort of gave birth to them.
It’s not that hard, is it? Syria=Libya=Iraq. 2003 is not the beginning, but it very much IS when this utter destruction really took off. 12 and a half years of target practice and rising defense expenditures, and ‘we’ are nowhere near done yet. But we’ll throw the poor dogs some scraps. We’ll promise $10 billion with wide sociopath smiles at the camera and aim for $3 or $4 max. While knowing it’ll cost a $trillion just to rebuild a few cities in Syria. But then we can pretend we have no such money.
So when will the war stop? Not a soul will address that issue in the London conference this weekend (“Supporting Syria – And The Region”, they have less than zero shame). They all profit from that war, while blaming its existence on others. What they will do is shove a few scraps off their rich tables to the subhumans whose drowned children they have never expressed nor felt any sympathy for.
Well, here come the refugees, Europe. 62,000 in January points to well over a million in 2016. And that’s lowballing it. An estimate in late 2015 said 3 million. A Bulgarian Red Cross leader went for 3 million just this spring.
Get ready. For the pogrom.
PS: Oh, and I haven’t even mentioned Erdogan, who makes money off of ISIS oil, and off EU refugee cattle trade money, and off ‘people smugglers’ taking off from Turkey for Greece. A $4 billion industry last year. Think he doesn’t demand his cut? Ideal son in law. Well, next time, then.
PS 2: Who wrote this?: “Nightsticks and Water Cannons, Tear Gas, Padlocks, Molotov Cocktails And Rocks, Behind Every Curtain.”
PS 3: I wrote a year ago that the only way to approach a crisis like this is to put the people first. How many children have been sacrificed on the Brussels altar since then? Grow a pair, Europe.
PS 4: There’ll be a huge amount of violence against refugees in Europe this year, It will get very ugly, and many people will die. And your ‘leaders’ are the ones who have instigated this. Again, grow a pair. Be someone. Someone real.
- As Madoff Airs On TV, Two Anonymous Whistleblowers Are Pounding On The SEC's Door Again
Submitted by Pam Martens and Russ Martens via WallStreetOnParade.com,
Last night ABC began its two-part series on the Bernie Madoff fraud. Viewers will be reminded about how investment expert, Harry Markopolos, wrote detailed letters to the SEC for years, raising red flags that Bernie Madoff was running a Ponzi scheme – only to be ignored by the SEC as Madoff fleeced more and more victims out of their life savings.
Today, there are two equally erudite scribes who have jointly been flooding the SEC with explosive evidence that some Exchange Traded Funds (ETFs) that trade on U.S. stock exchanges and are sold to a gullible public, may be little more than toxic waste dumped there by Wall Street firms eager to rid themselves of illiquid securities.
The two anonymous authors have one thing going for them that Markopolos did not. They are represented by a former SEC attorney, Peter Chepucavage, who was also previously a managing director in charge of Nomura Securities’ legal, compliance and audit functions. We spoke to Chepucavage by phone yesterday. He confirmed that two of his clients authored the series of letters. Chepucavage said further that these clients have significant experience in trading ETFs and data collection involving ETFs.
Throughout their letters, the whistleblowers use the phrase ETP, for Exchange Traded Product, which includes both ETFs and ETNs, Exchange Traded Notes. In a letter that was logged in at the SEC on January 13, 2016, the whistleblowers compared some of these investments to the subprime mortgage products that fueled the 2008 crash, noting that regulators and economists were mostly blind to that escalating danger as well. The authors wrote:
“The vast majority of ETPs have very low levels of assets under management and illiquid trading volumes. Many of these have illiquid underlying assets and a large group of ETPs are based on derivatives that are not backed by physical assets such as stocks, bonds or commodities, but rather swaps or other types of complex contracts. Many of these products may have been designed to take what were originally illiquid assets from the books of operators, bundle them into an ETP to make them appear liquid and sell them off to unsuspecting investors. The data suggests this is evidenced by ETPs that are formed, have enough volume in the early stage of their existence to sell shares, but then barely trade again while still remaining listed for sale. This is reminiscent of the mortgage-backed securities bundles sold previous to the last financial crisis in 2008.”
The authors also note in this same letter that they have been presenting their evidence of “significant red flags” and “fundamental flaws” to the SEC since March 2015 and that the industry has not disputed the evidence. However, disclosures of these risks in the product offerings has not been forthcoming either.
To underscore to the regulators just how serious they are about cleaning up the ETP market, in a cover letter dated March 24, 2015, Chepucavage copied every member of the Financial Stability Oversight Council (F-SOC), the body created under the Dodd-Frank financial reform legislation to monitor financial stability in the U.S., including Federal Reserve Chair Janet Yellen, U.S. Treasury Secretary Jack Lew, and SEC Chair Mary Jo White.
The detailed March 24, 2015 letter from the whistleblowers pointed out that the very act of allowing some of these illiquid product offerings to be listed on U.S. stock exchanges is lending an air of legitimacy to them since stock exchanges in the U.S. are also mandated to police their own markets. The whistleblowers wrote:
“Whether it is realized or not, authorizations to trade exchange traded products by exchanges/self-regulatory organizations (‘SROs’) suggests legitimacy of the product to investors, which is evidenced by the growing interest in ETFs (supplemented through the massive ETF advertising campaigns to investors…)”
Another letter raised the issue that Wall Street On Parade wrote about on December 15, 2015 — the role of “Authorized Participants,” which are mainly the big Wall Street banks.
The whistleblowers noted:
“The market trading discussed herein… is being executed between investors and counterparties mostly consisting of Authorized Participants, market makers or clearing firms (which may be the same firms), which in many cases is not causing a net creation of shares (purchasing underlying assets) for certain important ETFs. In some ETPs, there is a conflict of interest between the investor and the contra parties in the secondary market.
“Anyone that has been critical of ETPs has been immediately attacked by the industry, without any factual data from the industry to support their positions. The strategy has simply been ‘attack the messenger,’ which does not address the underlying problems within ETPs.”
The most recent letter from the whistleblowers to the SEC came just nine days ago in advance of the SEC holding a February 2 meeting of its Equity Market Structure Advisory Committee to discuss the bizarre collapse in market prices in the opening minutes of stock market trading on August 24, 2015. In their latest letter, the whistleblowers detailed the role of Exchange Traded Products on that day, writing:
“Of the 1,278 individual circuit breaker trading halts in U.S. traded securities on August 24th, 83% were ETPs. This equated to the trading in 327 different ETPs being halted, with most of them being halted more than once.
“The halted ETPs were across various sectors and had different investment objectives. For example, there were ETPs halted that were based on broad indexes, financials, consumer staples, health care, small capitalization, large capitalization (including the S&P 500 Index), currencies and U.S. Treasury bonds. In addition to ETPs based on equities, some of the ETPs were inverse and/or leveraged, which include other derivative instruments as underlying holdings.
“This is not the first time many of these same ETPs have experienced problems. During the May 2010 Flash Crash there were 227 ETPs that had trades busted when the prices fluctuated greater than 60% (many collapsed to virtual zero). On August 24th, there were 81 of these same ETPs that triggered circuit breakers.
“The SPDR S&P 500 ETF (Symbol: SPY) and its sister ETF, the iShares S&P 500 ETF (Symbol: IVV), both tracking the same blue chip companies, deviated from each other. Trading in the IVV triggered two circuit breakers, while the SPY tracked the underlying S&P 500 Index from the opening bell. At the lowest, the SPY priced the S&P 500 Index at 1,829 and the IVV priced the same index at 1,480; a 349 point difference, which would have resulted in an approximate additional loss to all markets of $3.2 trillion based on the IVV’s price.
“This is similar to the 2010 Flash Crash, when the IVV became unhinged from the S&P 500 Index and the SPY, causing IVV trades to be busted, while the SPY traded without significant disruption.”
These two anonymous whistleblowers are not the only individuals that are calling attention to the threat to the markets posed by ETFs. While the whistleblowers are providing troves of statistical data and academic reasoning to the SEC, the hedge fund billionaire, Carl Icahn, appeared on CNBC last summer and compared what is happening in the junk bond ETF market to a party bus full of drinking revelers who are about to go over a cliff.
The Office of Financial Research (OFR), a unit of the U.S. Treasury which was created under the Dodd-Frank financial reform legislation to provide research to F-SOC on emerging risks in financial markets, included a special section on looming dangers in the ETF market in its 2015 Financial Stability Report. The section was titled: “The Potential Role of ETFs in Generating and Propagating Liquidity Stress.” The report raised an additional troubling aspect in regard to how little regulators actually know about what is going on behind the scenes of the ETF structure. The report notes the following:
“The high concentration of ETF market-making activity reinforces this risk; the top three dealers account for 50 percent of reported trading volume…We note a paucity of reliable data regarding ETF market-making activity, which prevents regulators from fully identifying potential vulnerabilities in this sector. At present, we rely on self-reported statistics that cover approximately half of all ETF trades and do not include ETF liquidity providers other than registered market makers. We point out that market maker concentration and identities of the most active market makers may shift across funds. Also, ETF trading outside exchanges is difficult to track and little data about this segment are available.”
The report goes on to highlight other breathtaking concerns:
“Some of the larger market makers in the ETF market also appear to gain access to liquidity by placing ETF shares as collateral in the repo market. This finding is based on the Securities and Exchange Commission’s (SEC’s) Form N-MFP data on money market fund portfolio holdings. (Incomplete collateral information limits our visibility on the financing of ETF shares in relation to other types of cash investors.) Consequently, a disruption in the dealer funding markets could affect a market maker’s ability to finance its inventory in ETF shares and decrease the amount of liquidity it provides to support ETF trading. In May 2015, the SEC released a proposal to collect more granular data from investment companies on their repo market activity, as well as ETF trading activity. This information may provide better visibility into the use of ETF shares as collateral in repo markets.”
The ETF market has now grown to $2.9 trillion, according to PwC. Should the SEC still be fumbling around in the dark? This time around, it’s going to be very hard for the SEC to say it had no way to anticipate what was coming.
- World Succumbs To Zika Panic: Puerto Rico Declares Emergency; Plane Cabins Sprayed; CDC Says "Use A Condom"
Just like the global panic that gripped the world in October 2014 when the Ebola virus had spread from western Africa to many nations around the globe, including several isolated cases in the US, so a year and a half later, the world is urgently scrambling to unleash a sense of panic surrounding the Zika virus which, just like Ebola, came out of nowhere and is fast becoming the latest scapegoat for collapsing global commerce this year’s invisible bogeyman.
Here are some of the latest developments.
At Least 54 People Infected in the U.S.
There are at least 54 people infected with the Zika virus in the U.S. In all except one case, the infection was acquired while out of the country, according to health officials. In one case in Dallas, Texas, the virus is believed to have been transmitted through sexual contact from an infected traveler to a partner.
Florida has the highest number of cases in the U.S., with 12 people infected. Florida Gov. Rick Scott has declared a state of emergency in five counties and ordered thousands of tests that will help identify the disease.
Use a Condom to Avoid Zika, CDC Tells Travelers
According to the Centers for Disease Control, men who have traveled to Zika-affected zones should use a condom if they want to be absolutely sure they don’t infect sex partners, federal health officials advised Friday.
And men with a pregnant sex partner who have been to Zika-affected zones should just use a condom or abstain from sex until the baby is born, the Centers for Disease Control and Prevention said.
“Our priority here is to prevent a pregnant woman from becoming infected with Zika,” CDC chief Dr. Tom Frieden told reporters. “The bottom line for most people in the U.S. is that pregnant women should postpone travel to Zika-affected areas. Our new guidance is that pregnant women should use condoms during sex or abstain if their partner has traveled to an area where Zika has been spreading.”
U.K. to Spray Planes on Routes From Zika-Affected Countries
The U.K. is to order airlines flying from countries affected by the Zika virus, which has been linked with birth defects, to spray insecticide inside plane cabins. As currently happens on flights leaving countries affected by malaria, attendants will use the spray with the aim of killing any mosquitoes that might have joined the flight.
“I want to reassure people that the risk to the U.K. population is extremely low,” Public Health Minister Jane Ellison said in an e-mailed statement Friday. “We advise people traveling to affected areas to reduce the risk of themselves being bitten by wearing mosquito repellent, long sleeves and trousers. Pregnant women should consider avoiding travel to countries with the Zika virus.”
Brazil reports Zika infection from blood transfusions
Brazilian health officials have confirmed two cases of transmission of Zika through transfusions of blood from donors who had been infected with the mosquito-borne virus that is spreading rapidly through the Americas. Marcelo Addas Carvalho, director of the Blood Center at the Sao Paulo state University of Campinas, said genetic testing confirmed that a man who received a blood transfusion using blood from a donor with Zika in March 2015 became infected with the virus, although the patient did not develop symptoms.
Earlier, the health department of Campinas, an industrial city near Sao Paulo, said a man with gunshot wounds became infected with Zika after multiple blood transfusions in April 2015 that included blood donated by an infected person.
World Health Organization Seeks $25 Million For Six-Month Fight Against Zika
The World Health Organization will seek $25 million for a six-month program to fight the Zika virus linked to birth defects, including studies on whether it is spread by sex or by blood transfusion, a senior WHO official told Reuters on Friday.
New Zika Virus Cases Include Pregnant Woman, Man With Paralysis Syndrome
In Puerto Rico, a pregnant woman in her first trimester was diagnosed with the disease, health officials said. In addition, a man has also been diagnosed with Zika and has developed a rare paralysis syndrome sometimes associated with viral or bacterial infection.
Called Guillain-Barre syndrome, it is an immunological reaction that has been associated with influenza, among other illnesses. At least 22 people who have been reported to have been infected with the Zika virus in Puerto Rico, health officials said.
Puerto Rico Declares State of Emergency
Puerto Rico has declared a state of emergency due to the ongoing Zika virus outbreak. The U.S. territory has at least 22 people who have been reported to have been infected with the Zika virus, health officials said.
The State Emergency and Disaster Administration is creating a task force for both federal and state officials to deal with the crisis. Additionally, a price freeze has been ordered for products needed to prevent the disease, according to government officials.
And so on.
But the highlight of the panic push comes from the outbreak epicenter Brazil, where the website of the central bank has not only three flying “mosquitos” but a solemn warning to eradicate the Zika plague.
Guess who will be blamed in a few months when global trade, commerce, and growth – not to mention stock markets – all tumble.
- China's 3 Trillion Dollar Mistake
Submitted by Eugen Bohm-Bawerk via Bawerk.net,
When looking at the current state of the Chinese economy it is important to note what happened leading up the ongoing predicament. By managing the USD/CNY exchange rate the Chinese factory worker was essentially funding excess consumption in the United States. One of the many perks enjoyed by global reserve issuer. The factory worker obviously did not do this out of his own volition; on the contrary, he was duped into it by swallowing the propaganda spewed out by party apparatchiks in Beijing. It is all for the common good.
Capital inflows emanating from its persistent trade surpluses could and should be allocated more efficiently and obviously equitably, but the party believed that disproved age-old mercantilism was the way to prosperity, and for a very long time it actually appeared to be the case. New emerging markets with semi-dictators gloated as the “Washington Consensus” of the invisible hand seemed to break down in favour of a very visible and state-directed hand.
But it was all a charade. The Americans emitted debt throughout the globe and the PBoC essentially issued dollars to maintain the peg. In other words, the deeper Americans went into debt, both private and public, the more China inflated their own currency. More specifically, as dollars made its way into China to pay for their manufactured goods, the PBoC issued Yuan to buy dollars and hence kept the peg stable. To avoid runaway inflation the PBoC raised reserve requirements on domestic banks, but needless to say China was in the midst of a massive credit expansion long before 2009. Foreign exchange reserves piled up and were promptly re-circulated back into US capital markets. This parasitical symbiosis was obviously unsustainable and it came crashing down in 2008.
Source: Bloomberg, Bawerk.net
At this point in our history, Chinese authorities enter panic mode because the drop-off in external demand was so swift and dramatic that it threatened internal stability. The solution was a massive spending spree, funded by fiat through a willing state owned banking system. All the imbalances that had been growing as a cancer in the Chinese economy was not fought tooth-and-nail as it should upon the realisation it was eating away at the core of Chinese prosperity, but rather spoon fed exactly what it thrived on in the first place – namely fiat issuance. Already saturated with fixed asset investments, the new spending spree only added to excess capacity with no chance of ever turning a profit.
New lending thus funded internal consumption, and paradoxically, just as the hard working factory toiler are allowed to enjoy the fruits of his labour it is done under the the worst possible circumstances. The credit multiplier obviously collapses as consumptive debt issuance consumes scarce capital without providing any value back to the economic system. For each dollar of new loans, GDP now grows by 5 cents. Stated differently, Chinese debt to GDP ratio sky-rockets and are probably in the vicinity of 300 per cent already.
Source: Bloomberg, Bawerk.net
Obviously, the banking system gorges on all the new “assets” being created, adding more than 22 trillion dollar worth in only seven years. The increment alone is more than the entire conventional US banking system. An increase of almost 300 per cent.
Source: Bloomberg, Federal Reserve, Bawerk.net
It should be abundantly clear that China is heading straight into a banking cycle where NPLs will be increasing to 10 – 20 per cent (minimum). If we assume around 70 per cent of assets are loans and further assuming they will recover 20 cents on the dollar, total losses will be in the trillions. The massive war chest represented by the FX reserves China bulls always seem to be thumping, as the cure to all ills, will be gone before you can say ghost town.
Source: Bloomberg, Bawerk.net
Within this framework, people are naturally shorting the Yuan. Offshore CNH repeatedly diverge from onshore CNY and the PBoC has found themselves forced to intervene several times in the Hong Kong market, at times driving HIBOR CNH to more than 60 – 70 per cent.
Source: Bloomberg, Bawerk.net
Capital controls are not working. A Chinese can move 50.000 dollars abroad every year, but most people do not do that, but they can “sign the paper” for others with more money. Macau “jewelry” sales have been through the roof as people move money abroad. Importers falsify their import bills while exporters chose not to repatriate their earnings. Foreign real estate and business purchases are exempt from capital control rules. In other words, capital moves relatively freely across the Chinese border despite repeated crackdowns. Bitcoin’s seem to respond to positively to every new measure to stop capital from flowing out. Gross outflows, as indicated by the chart above, is probably running close to a trillion dollars on an annualised basis.
China is in an untenable situation. Their exports are hurting through a strong dollar (and by extension a strong CNY), while devaluation will increase their import bill and the value of the US$1 trillion dollar denominated corporate bonds outstanding. However, with 1 trillion dollar in gross annual capital outflows it is only a matter of time before they have to act. Rumour has it that only US$1 – 1.5 trillion of Chinese reserves are truly liquid and can thus be used to prop up the Yuan. If that’s the case they will devalue (20 – 40 per cent) before we enter 2017.
Unsurprisingly other emerging market find themselves in the same dire situation. The trouble in China, which is a consequence of the global “dollar” collapsing on back of economic imbalances and capital consumption, impact commodity producers directly. They have all been forced into selling FX reserves to essentially provide the “dollar” liquidity needed and prop up their own currencies. Many have given up and devalued, and more will follow suit. Madam Lagarde will soon realise that her itinerary for 2016 be quite different that what she is used to. A flight to Baku to save BP will be her first mission.
Source: Bloomberg, Bawerk.net
All the FX selling have the opposite effect than that of QE, notably dubbed quantitative tightening or QT for short. With the FOMC hiking into the QT cycle the effect is compounded and that is why we see the FOMC now guiding Fed funds lower. NY Fed President Dudley said recently that there will be no hike in March and Goldman concurred. Fed funds futures have made an abrupt about turn and as we have said for quite some time now, there will be no more hikes in 2016. As a matter of fact we would not be surprised to see a cut and lower dollar, which cet par is good for commodities (as recent dollar collapse – oil rally proves all too well)
- Bloodbathery
Don't just blindly follow someone else's path… (FF to 40 seconds for today's analogy)…
The Nasdaq's collapse now turns it red since the end of QE3 – joing the rest of the US equity party poopers…
Since The Fed hiked rates, things have not gone according to plan…
As The "Growth" dream is over…
On the week, Nasdaq was boodbath'd but Trannies jumped…
NOTE: Amid all this carnage – VIX remains under 24 and the term structure not inverted – i.e. No Panic
Quite a week for The Dow…
And Nasdaq was the biggest loser on the day… the biggest single-day drop since August's Black Monday plunge… (Nasdaq lowest close since Oct 2014)
The reaction across asset classes to today's jobs report…
Financials disappointed as systemic risk surges and Materials' big mid-week squeeze held its gains…
FANGs are FUBAR…
And Biotechs were battered to 2 Year lows… down 37% from its July 2015 highs…
And finally this happened…
Treasury yields jerked higher on the jobs data only to tumble as traders rotated out of growth stocks…
The USDollar Index crashed by the most since June 2009 this week (despite a bounce today) led by JPY strength (biggest week since Oct 2008!)…
A total fail for The BoJ…
Commodities were mixed on the week with USD weakness sending PMs higher but growth scares driving copper and crude lower..
Gold is "off the lows"
Gold's best 3-week gain in over a year to near 4-month highs and Silver's best 3-week run since May 2015…
Stocks and Crude remain highly correlated…
With China closed for a week, we wonder if the buying in gold is perhaps – just perhaps – anticipating a major devaluation by PBOC with public bank holidays already planned… but of course, this weekend will have all eyes glued to China FX outflows.
Charts: Bloomberg
Bonus Chart: Topping Pattern?
- NWO (revisited)…
- Pros & Cons Of Obama's $10/Barrel Oil Tax
With President Obama unveiling his $10/Barrel tax plan to fund government-subsidized public transportatation (versus an individual’s choice over his method transportation), we thought a glimpse at the pros and cons of such a choice may be useful…
Weighing factors such as convenience, time commitment, and enviornmental impact, deciding whether to commute via your own fossil-fuel-powered car or government-provided unicorn-fueled public transportation can be difficult.
Here is a side-by-side comparison of the two options…
- Weekend Reading: The Awakening
Submitted by Lance Roberts via RealInvestmentAdvice.com,
Over the last two months, the deterioration in the economic data has become much more prevalent despite the ongoing hopes of the more “bullishly biased” mainstream media.
Furthermore, as I predicted early last year, the Federal Reserve likely made a mistake in hiking interest rates when the economic and inflationary backdrop were exceedingly weak. To wit:
“The real concern for investors and individuals is the actual economy. There is clearly something amiss within the economic landscape, and the ongoing decline of inflationary pressures longer term is likely telling us just that. The big question for the Fed is how to get out of the potential trap they have gotten themselves into without cratering the economy, and the financial markets, in the process.
It is my expectation, unless these deflationary trends reverse course in very short order, that if the Fed raises rates it will invoke a fairly negative response from both the markets and economy.”
And so…that has come to pass. Of course, for me, since I am deemed a “bear” for being a “realist”, my writings are more like a “tree falling in the woods.” The only problem is that just because no one hears it, doesn’t mean the damage to individuals isn’t just as real.
This weekend’s reading list is a compilation of articles discussing “The Awakening” by many to the real problems currently plaguing the economy, the markets, and the Fed.
While it is said “it is better to be late than never,” such sentiment doesn’t sit well with individuals when they are told after the fact what they should have known before hand. But then again, since the turn of the century, “getting back to even” has apparently become a new investing strategy.
1) It’s Time To Worry About The Economy by Matt Phillips via Quartz
“And now the brightness in the US appears to be dimming, at least a bit. The latest benchmark update on the US manufacturing sector shows activity continued to decline in January, marking four straight months of contraction. The strong US dollar—it’s up about 13% against the currencies of major trading partners—is a key culprit.”
But Also Read: Citi’s Crash Clock Is 5-Minutes To Midnight by Jim Edwards via Business Insider
But Then There Is: BofA Says Markets Poised For 24% Gain by Jeff Cox via CNBC
2) Why The Fed Must Go Negative by Ron Insana via CNBC
“But even the simple act of doing nothing, as other central banks ease further, would strain foreign exchange values, accelerate capital outflows from countries whose currencies are plunging against the dollar, and rapidly increase the debt servicing costs of those countries – like Russia, China and other emerging markets, which have heavy dollar-denominated debt loads.
In other words, if global monetary policies continue to diverge dramatically, there will likely be unintended consequences that lead to a rupture in world markets, strained by wildly fluctuating currency values, a further crash in commodity prices and a rush of capital out of the world’s weakest economies.”
Also Read: Trucks & Trains Barely Rolling by Buttonwood via The Economist
Opposing View: Taking Oil Is Just Noise by James Surowiecki via The New Yorker
And Also: The US Is Not In Recession by Econobrowser
3) Blaming The Fed by Ed Yardeni via Yardeni Research
“How did we get into this mess? Despite all the easy money provided by the Fed and the other major central banks, global economic growth is subpar. Indeed, it may be heading into a recession. Inflation remains below the 2% target of the major central banks. Commodity prices are crashing, and stock prices have been weak since the start of the year. Consider the following:
High price of easy money. Today’s problems may be traced to the termination of the Fed’s QE program on October 29, 2014 and the subsequent anticipation of a mere 25bps hike in the federal funds rate, which finally happened on December 16, 2015.
The Fed’s easy monetary policies at the beginning of the previous decade certainly contributed to the subprime mortgage mess. This time, the Fed’s easy money in recent years encouraged borrowers in emerging markets (EMs) to borrow lots of money from banks and in the bond markets to expand commodity production. A significant amount of that debt was in dollars. The prospect of the tightening of US monetary policy after so many years of near-zero interest rates caused EM borrowers to scramble to sell their own local currencies to buy dollars to pay off their dollar-denominated debts.”
Also Read: Welcome To The Profits Recession by Chris Brightman via Research Affiliates
4) Recession Risks Warn Of Severe Market Drop by Tomi Kilgore via MarketWatch
“Based on current valuations, the prices of most stocks don’t appear to have factored in a recession scenario, “hence the downside should we see a recession could be rather severe,” RBC Capital Markets’ global equity team wrote in a research note to clients.
Applying a stress test to their coverage universe, using worst-case, price-to-earnings valuations seen during the 2008-to-2009 recession, RBC analysts said they believe the shares of most companies could still fall another 50% or more from current levels.”
Also Read: Will Stocks Remain Diverged From Global Weakness by Michael Gayed via MarketWatch
Further Read: What The Next Recession May Look Like by Matthew Klein via FT AlphaVille
5) Bounce In Stocks May Be A “Siren’s Song” by Joe Calhoun via Alhambra Partners
“With no improvement in the economic outlook yet – the yield curve is still flattening, credit spreads still moving wider – the move in stocks last week may last a bit longer but I wouldn’t get too excited about it unless you still have some stock to unload. We are still in the transition period I wrote about two years ago – see here – the strong dollar positives not yet apparent. Intermediate and long term momentum is still negative; only short term indicators are turning higher and those only feebly. More monetary stimulus, wherever it is in the world, isn’t the answer for a global economy still trying to find a new growth path. Pay attention to bonds and ignore the sirens of the stock market.”
But Also Read: If It’s A Recession, Stocks Will Fall by George Perry via Real Clear Markets
And: Bonds Suggests Further Correction by Eric Bush via GaveKal Research
MUST READS
- Apple, FANG’s & Monetary Fools by David Stockman via Contra Corner
- Misdiagnosing Again? by John Sumner via The Money Illusion
- The New Normal Is Now Just Normal by Mohamed El-Erian via Project Syndicate
- How The Fed Confirmed A Recession by Tyler Durden via Zero Hedge
- There Is No Freedom Without Truth by Paul Craig Roberts
- BOJ Warning! by Michael Lebowitz via 720 Global
- The Risk Passive Investors Take On by Jesse Felder via The Felder Report
- Global Shipping Runs Aground! by Dana Lyons via Tumblr
- Dividend Cuts Are Escalating Quickly by IronMan via Political Calculations
- An Escalator Of Optimism by Salil Mehta via Statistical Ideas
“Should you find yourself in a leaky boat, devote your efforts to changing vessels rather than patching leaks.” – Warren Buffett
- BofA: "The Sense Of Calm Which Had Descended On Markets Has Come To An Abrupt End"
The centrally-planned party is over. Here is BofA’s Kama Sharma explaining why
The sense of calm which had descended on markets in recent weeks has come to an abrupt end.
This time it has been the USD which has been the focal point. Investors continue to rotate through a vicious circle of concerns on China, commodities and US growth and with a still large long position, further near-term USD losses are likely as broader US data momentum remains weak.
Until positioning becomes cleaner, bad news on the US economy will be bad news for the USD. China will once again be back in focus next week with the release of its FX reserves data and though our estimates are for a more modest decline, any relief rally would be an opportunity to sell into.
FX: Financial conditions to hold back the Fed again?
The DXY is on pace for its worst weekly performance since 2009. A weaker-than-expected non-manufacturing ISM report (representing 80% of the US economy) challenged the presumption that the US could weather a contraction in the much smaller manufacturing sector. The dollar has been resilient to slower growth readings and the re-pricing of the Fed Funds curve since end-2015 (Chart 1) which pushed rate differentials against it.
This dislocation suggests there is further room to run, particularly as FOMC members are showing sensitivity to tighter financial conditions, and, a stronger USD. Persistent trade-weighted USD strength in recent months has been a key factor driving tighter financial conditions (Chart 2).
The divergence with rate differentials suggests non-fundamental factors (such as flight-to-quality) could be driving USD strength, making it more likely Fed officials will speak more frequently about it. This poses further downside dollar risk.
The continued wedge between the dollar and rate differentials continues to leave asymmetric risks in the near-term as the market will need to see sustained signs of a US growth turnaround before rethinking Fed policy. Chair Yellen’s Humphrey Hawkins testimony will be a key focus in this regard. Short positioning in CAD, EUR, GBP, and MXN (according to the latest CFTC data dated January 26th). Should Chair Yellen emphasize the theme of the risks from financial conditions and the USD, we would expect further long USD position unwinds in these pairs.
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So much for the “most crowded trade of all time”, as recently as Dec. 15.
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