- How George Soros Singlehandedly Created The European Refugee Crisis – And Why
By David Galland and Stephen McBride, Garret/Galland Research
How George Soros Singlehandedly Created the European Refugee Crisis – And Why
George Soros is trading again.
The 85-year-old political activist and philanthropist hit the headlines post-Brexit saying the event had “unleashed” a financial-market crisis.
Well, the crisis hasn’t hit Soros just yet.
He was once again on the right side of the trade, taking a short position in troubled Deutsche Bank and betting against the S&P via a 2.1-million-share put option on the SPDR S&P 500 ETF.
More interestingly, Soros recently took out a $264 million position in Barrick Gold, whose share price has jumped over 14% since Brexit. Along with this trade, Soros has sold his positions in many of his traditional holdings.
Soros had recently announced he was coming out of retirement, again.
First retiring in 2000, the only other time Soros has publicly re-entered the markets was in 2007, when he placed a number of bearish bets on US housing and ultimately made a profit of over $1 billion from the trades.
Since the 1980s, Soros has actively been pursuing a globalist agenda; he advances this agenda through his Open Society Foundations (OSF).
What is this globalist agenda, and where does it come from?
The Humble Beginnings
The globalist seed was sowed for young George by his father, Tivadar, a Jewish lawyer who was a strong proponent of Esperanto. Esperanto is a language created in 1887 by L.L. Zamenhof, a Polish eye doctor, for the purpose of “transcending national borders” and “overcoming the natural indifference of mankind.”
Tivadar taught young George Esperanto and forced him to speak it at home. In 1936, as Hitler was hosting the Olympics in Berlin, Tivadar changed the family name from Schwartz to Soros, an Esperanto word meaning “will soar.”
George Soros, who was born and raised in Budapest, Hungary, benefited greatly from his father’s decision.
Allegedly, in 1944, 14-year-old George Soros went to work for the invading Nazis. It is said that until the end of the war in 1945, he worked with a government official, helping him confiscate property from the local Jewish population.
In an 1998 interview with 60 Minutes, Soros described the year of German occupation as “the happiest time in my life.”
Soros’s Venture into Finance
When the war ended, Soros moved to London and in 1947 enrolled in the London School of Economics where he studied under Karl Popper, the Austrian-British philosopher who was one of the first proponents of an “Open Society.”
Soros then worked at several merchant banks in London before moving to New York in 1963. In 1970, he founded Soros Fund Management and in 1973 created the Quantum Fund in partnership with investor Jim Rogers.
The fund made annual returns of over 30%, cementing Soros’s reputation and putting him in a position of power—one he utilizes to this day to advance the agenda of his mentors.
The Currency Speculations That Threw Britain and Asia into Crisis
In the 1990s, Soros began a string of large bets against national currencies. The first was in 1992, when he sold short the pound sterling and made a $1 billion profit in a single day.
His next big currency speculation came in 1997. This time Soros singled out the Thai baht and, with heavy short-selling volume, destroyed the baht’s artificial peg to the US dollar, which started the Asian financial crisis.
“Humanitarian” Efforts
Today, Soros’s net worth stands at $23 billion. Since taking a back seat in his company, Soros Fund Management, in 2000, Soros has been focusing on his philanthropic efforts, which he carries out through the Open Society Foundations he founded in 1993.
So who does he donate to, and what causes does he support?
During the 1980s and 1990s, Soros used his extraordinary wealth to bankroll and fund revolutions in dozens of European nations, including Czechoslovakia, Croatia, and Yugoslavia. He achieved this by funneling money to political opposition parties, publishing houses, and independent media in these nations.
If you wonder why Soros meddled in these nations’ affairs, part of the answer may lie in the fact that during and after the chaos, he invested heavily in assets in each of the respective countries.
He then used Columbia University economist Jeffrey Sachs to advise the fledgling governments to privatize all public assets immediately, thus allowing Soros to sell the assets he had acquired during the turmoil into newly formed open markets.
Having succeeded in advancing his agenda in Europe through regime change—and profiting in the process—he soon turned his attention to the big stage, the United States.
The Big Time
In 2004, Soros stated, “I deeply believe in the values of an open society. For the past 15 years I have been focusing my efforts abroad; now I am doing it in the United States.”
Since then, Soros has been funding groups such as:
- The American Institute for Social Justice, whose aim is to “transform poor communities through lobbying for increased government spending on social programs”
- The New America Foundation, whose aim is to “influence public opinion on such topics as environmentalism and global governance”
- The Migration Policy Institute, whose aim is to “bring about an illegal immigrant resettlement policy and increase social welfare benefits for illegals”
Soros also uses his Open Society Foundations to funnel money to the progressive media outlet, Media Matters.
Soros funnels the money through a number of leftist groups, including the Tides Foundation, Center for American Progress, and the Democracy Alliance in order to circumvent the campaign finance laws he helped lobby for.
Why has Soros donated so much capital and effort to these organizations? For one simple reason: to buy political power.
Democratic politicians who go against the progressive narrative will see their funding cut and be attacked in media outlets such as Media Matters, which also directly contribute to mainstream sites such as NBC, Al Jazeera, and The New York Times.
Apart from the $5 billion Soros’s foundation has donated to groups like those cited above, he has also made huge contributions to the Democratic Party and its most prominent members, like Joe Biden, Barack Obama, and of course Bill and Hillary Clinton.
Best Friends with the Clintons
Soros’s relationship with the Clintons goes back to 1993, around the time when OSF was founded. They have become close friends, and their enduring relationship goes well beyond donor status.
According to the book, The Shadow Party, by Horowitz and Poe, at a 2004 “Take Back America” conference where Soros was speaking, the former first lady introduced him saying, “[W]e need people like George Soros, who is fearless and willing to step up when it counts.”
Soros began supporting Hillary Clinton’s current presidential run in 2013, taking a senior role in the “Ready for Hillary” group. Since then, Soros has donated over $15 million to pro-Clinton groups and Super PACs.
More recently, Soros has given more than $33 million to the Black Lives Matter group, which has been involved in outbreaks of social unrest in Ferguson, Missouri, and Baltimore, Maryland, in 2015. Both of these incidents contributed to a worsening of race relations across America.
The same group heavily criticized Democratic contender Bernie Sanders for his alleged track record of supporting racial inequality, helping to undercut him as a competitive threat with one of Hillary Clinton’s most ardent constituencies.
This, of course, greatly enhances the clout Soros wields through the groups mentioned above. It is safe to assume that he is now able to drive Democratic policy, especially in an administration headed by Hillary Clinton.
Simply, what Soros wants, he gets. And it’s clear from his history that he wants to smudge away national borders and create the sort of globalist nightmare represented by the European Union.
In recent years, Soros has turned his attention back to Europe. Is it a coincidence that the continent is currently in economic and social disarray?
Another Home Run: the Ukrainian Conflict
There’s no doubt about Soros’s great influence on US foreign policy. In an October 1995 PBS interview with Charlie Rose, he said, “I do now have access [to US Deputy Secretary of State Strobe Talbott]. There is no question. We actually work together [on Eastern European policy].”
Soros’s meddling reared its ugly head again in the Russia-Ukraine conflict, which began in early 2014.
In a May 2014 interview with CNN, Soros stated he was responsible for establishing a foundation in the Ukraine that ultimately led to the overthrow of the country’s elected leader and the installation of a junta handpicked by the US State Department, at the time headed by none other than Hillary Clinton:
CNN Host: First on Ukraine, one of the things that many people recognized about you was that you during the revolutions of 1989 funded a lot of dissident activities, civil society groups in Eastern Europe and Poland, the Czech Republic. Are you doing similar things in Ukraine?
Soros: Well, I set up a foundation in Ukraine before Ukraine became independent of Russia. And the foundation has been functioning ever since and played an important part in events now.
The war that ripped through the Ukrainian region of Donbass resulted in the deaths of over 10,000 people and the displacement of over 1.4 million people. As collateral damage, a Malaysia Airlines passenger jet was shot down, killing all 298 on board.
But once again Soros was there to profit from the chaos he helped create. His prize in Ukraine was the state-owned energy monopoly Naftogaz.
Soros again had his US cronies, Secretary of the Treasury Jack Lew and US consulting company McKinsey, advise the puppet government of Ukraine to privatize Naftogaz.
Although Soros’s exact stake in Naftogaz has not been disclosed, in a 2014 memo he pledged to invest up to $1 billion in Ukrainian businesses, but no other Ukrainian holdings have since been reported.
His Latest Success: the European Refugee Crisis
Soros’s agenda is fundamentally about the destruction of national borders. This has recently been shown very clearly with his funding of the European refugee crisis.
The refugee crisis has been blamed on the civil war currently raging in Syria. But did you ever wonder how all these people suddenly knew Europe would open its gates and let them in?
The refugee crisis is not a naturally occurring phenomenon. It coincided with OSF donating money to the US-based Migration Policy Institute and the Platform for International Cooperation on Undocumented Migrants, both Soros-sponsored organizations. Both groups advocate the resettlement of third-world Muslims into Europe.
In 2015, a Sky News reporter found “Migrant Handbooks” on the Greek island of Lesbos. It was later revealed that the handbooks, which are written in Arabic, had been given to refugees before crossing the Mediterranean by a group called “Welcome to the EU.”
Welcome to the EU is funded by—you guessed it—the Open Society Foundations.
Soros has not only backed groups that advocate the resettlement of third-world migrants into Europe, he in fact is the architect of the “Merkel Plan.”
The Merkel Plan was created by the European Stability Initiative whose chairman Gerald Knaus is a senior fellow at none other than the Open Society Foundations.
The plan proposes that Germany should grant asylum to 500,000 Syrian refugees. It also states that Germany, along with other European nations, should agree to help Turkey, a country that’s 98% Muslim, gain visa-free travel within the EU starting in 2016.
Political Discourse
The refugee crisis has raised huge concern in European countries like Hungary.
In response to 7,000 migrants entering Hungarian territory per day in 2015, the Hungarian government reestablished border control in order to keep the hordes of refugees from entering the country.
Of course this did not go down well with Soros and his close allies, the Clintons.
Bill Clinton has since come out and accused both Poland and Hungary of thinking “democracy is too much trouble” and wanting to have a “Putin-like authoritarian dictatorship.”
Seeing through Clinton’s comments, Hungarian Prime Minister Viktor Orbán responded by saying, “The remarks made about Hungary and Poland … have a political dimension. These are not accidental slips of the tongue. And these slips or remarks have been multiplying since we are living in the era of the migrant crisis. And we all know that behind the leaders of the Democratic Party, we have to see George Soros.”
He went on to say that “although the mouth belongs to Clinton, the voice belongs to Soros.”
Soros has since said of Orbán’s policy toward the migrants: “His plan treats the protection of national borders as the objective and the refugees as an obstacle. Our plan treats the protection of refugees as the objective and national borders as the obstacle.”
It’s hard to imagine that he could be any clearer in his globalist intentions.
The Profit Motive
So why is Soros going to such lengths to flood Europe with hordes of third-world Muslims?
We can’t be sure, but it has recently come to light that Soros has taken a large series of “bearish derivative positions” against US stocks. Apparently, he thinks that causing chaos in Europe will spread the contagion to the United States, thus sending US markets spiraling downward.
The destruction of Europe through flooding it with millions of unassimilated Muslims is a direct plan to cause economic and social chaos on the Continent.
Another example of turmoil equaling profit for George Soros, who seems to have his tentacles in most geopolitical events.
We all understand correlation is not causation. However, given Soros’s extraordinary wealth, political connections, and his long track record of seeing and profiting from chaos, he is almost certainly a catalyst for much of the geopolitical turmoil now occurring.
He is intent on destroying national borders and creating a global governance structure with unlimited powers. From his comments directed toward Viktor Orbán, we can see he clearly views national leaders as his juniors, expecting them to become puppets that sell his narrative to the ignorant masses.
Soros sees himself as a missionary carrying out the globalist agenda taught to him by his early mentors. He uses his vast political connections to influence government policy and create crises, both economic and social, to further this agenda.
By all appearances, Soros is conspiring against humanity and is hell-bent on the destruction of Western democracies.
To any rational thinker, some global events just don’t make sense. Why, for example, would Western democracies take in millions of people whose values are completely incompatible with their own?
When we look closely at the agenda being actively promoted by the leading globalist puppet master, George Soros, things become a little clearer.
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On Soros & Gold
David, again.
While I’m not a conspiracy theorist per se, I do believe there is a naturally occurring and constant collaboration about shared interests occurring amongst the heads of governments, corporations, investment managers and all of the bottom feeders that survive off their scraps.
What I find most interesting about Soros is that he is so obvious in his intentions and persistent in their pursuit. Given the consequences of his actions, it is also clear he’s a believer in moral relativism and that the ends justify the means.
That he turns a nice buck in his crusade for what certainly rhymes with a one-world government is a Soros hallmark.
“It allows me the money needed to fund my philanthropies” he might answer to the charges he is profiting from blood in the streets he was instrumental in spilling.
Going forward when something big is happening geopolitically, I am going to start my analysis by checking under rocks for signs of Soros.
At the beginning of this article we noted that Soros has gone big into American Barrick (ABX), a leading gold producer. As of the end of March it was his single largest holding at 7.36% of his overall portfolio.
As telling, he has dumped a lot of his more conventional stocks in recent months.
Given the man’s inside track – and active manipulations – you might want to take the hint and pick up some physical gold as an insurance policy against a systematic shock.
If you already own gold, I probably wouldn’t chase it here as it has had a good run of late. Ditto silver which is up 46% year to date. But if you don’t own some, adding precious metals to your portfolio as a long-term holding, even at today’s prices, makes sense.
Per last week, I continue to believe the gold stocks have probably gotten ahead of themselves and could be in for a pretty significant correction. If so, I would be inclined to up my allocation to the sector to 20% of my total portfolio.
That said, no one can predict the future and gold could continue to power ahead, with the gold shares a more leveraged way to play the sector.
As always with gold shares, it is important to remember a few things:
- In most cases, these are speculations. That’s because their financial metrics often don’t line up with anything looking like a good value. What you are really betting on is a revaluation of the ounces of gold or silver a company is sitting on. Thus, if a company is sitting on one million ounces of gold and gold goes up by $100, the company just got a lot more valuable.
- Never fall in love with a gold stock. Set a rational return goal and once hit, at least scrape your original investment off the table. That way you are playing with the casino’s money.
Also per my article last week, keep in mind that should gold stocks buck the trend in a future global equities correction, the money managers who own big positions in gold stocks will almost certainly dump their holdings in order to dress up the rest of their portfolios. As the trading volume in precious metals share is relatively thin, you want to beat them out the door.
- Embrace the volatility. The low trading volume of most of these stocks is a key reason they have such explosive upside. Any significant uptick in investor interest can send a stock soaring.
However, the flipside is also true. In the bear market that started in 2011, the majority of the precious metals stocks lost upwards of 75% of their value and many simply dried up and went away. Enjoy the ride, but don’t stay too late at the party.
Earlier this week I commented to a friend that if the EU was going to remain relevant, there had to be some major financial pain dished out post-Brexit. To let that seminal event pass with nothing more than the equivalent of a global shrug would entirely change how people view the European Union.
The bottom line, I’m expecting some volatility, perhaps triggered by Soros taking a second run at crushing the British pound, the source of much of his fortune and fame.
It’s promising to be a long, hot summer.
Here Come the Clowns
Nothing comes close to the Get Out of Jail card handed by the clowns at the FBI to Hillary over her private email servers. This despite pretty much no one disputes she broke any number of federal laws of the sort which would have landed a lesser clown in jail.
To quote FBI Director James Comey, “Although there is evidence of potential violations of the statutes regarding the handling of classified information, our judgment is that no reasonable prosecutor would bring such a case.”
There is nuance in that statement. For starters, that there is evidence of violations. But also the stark political reality that no “reasonable prosecutor” would enforce the laws, considering who the perp is: the standard bearer for the Democrats going into this election.
Besides, going after Clinton means crossing swords with Soros and no “reasonable prosecutor” would want to do that.
Just saying…
- A Portrait Of Quantitative Failure
Simply put, it's not working stupid!
Especially in Japan…
But, as BofAML's Michael Hartnett notes, the details of what has been done and the consequences of those actions is, simply put, just embarrassing for all the central planners…
- Dec’17: first FOMC meeting which market assigns >40% probability of rate hike
- 659: number of global rate cuts since Lehman bankruptcy
- $12.9tn: outstanding amount of bonds currently yielding <0% (= 29% of total)
- $24.6tn: outstanding amount of global central bank holdings of financial assets
- -1.1%: the most negative bond yield in the world (3-year Swiss government bond)
- 107 years: time it takes to double your savings in 1-year US deposit account
- 1387 years: time it takes to double your savings in 1-year German deposit account
- 6932 years: time it takes to double your savings in 1-year Japanese deposit account
- 5.7%: level of investor cash as % AUM (Jul’16 FMS), highest since Nov’01
- $1.6tn: level of cash at US corporate sector, near record high
- 1978: the year US labor market participation rate was as low as it is today
- 21,084,000: current number of unemployed men and women in Europe
- 49%, 45%, 39%: youth unemployment rate in Greece, Spain & Italy
- 0.16%: the infinitesimal increase in Japan’s real GDP in the past 8 years
- 25%: annualized YTD return from global government bonds in 2016, a 30-year high
Eisteinian Yellenian madness… "doing the same thing over and over again and expecting different results."
- 26 Million Americans Are Now "Too Poor To Shop" Study Finds
A new study finds that roughly 26 million Americans remain "too poor to shop". The study, performed by America's Research Group, found that about 26 million Americans work on average two or three jobs at a time which, when added together, nets just shy of $30,000 in annual income. All while supporting anywhere from two to four children.
The chairman of ARG, Mr. Britt Beemer, said in an interview with the NY Post that he first started looking into data when he was tracking a different indicator. Beemer first started tracking a group and surveying roughly 15,000 people to determine who had not finished Christmas shopping in 2014. During that year, the number was 21 percent but recently ran as high as 29%. From there Beemer decided to analyze the data further and learned American's are seeing increasing numbers of fellow citizens who are simply just too poor to shop.
Beemer told the Post: "The poorest Americans have stopped shopping, except for necessities" and "It's scary when you start to see things that you've never seen before"…"People are so pessimistic about their future"
Just this past April we wrote: "most Americans' savings continue to decline, and millions of US households not only don't have any money left over to save away, but are forced to resort to credit to fund day to day expenses."
Recall from January the piece from the Atlantic that review that weak state of American's finances. The Atlantic learned that nearly 50% of Americans were not in a position to find $400 to pay of a doctor visit without reaching out to friends So not only are 26 million Americans too poor to shop, there are also 2/3 of Americans who have no savings.
"Various surveys that I have talked about in the past have found that more than 60 percent of all Americans are living to paycheck to paycheck, but I didn’t realize that things were quite this bad for about half the country. If you can’t even come up with $400 for an unexpected emergency room visit, then you are just surviving from month to month by the skin of your teeth. Unfortunately, about half of us are currently in that situation."
As The NY Post details, retailers have blamed the weather, slow job growth and millennials for their poor results this past year, but a new study claims that more than 20 percent of Americans are simply too poor to shop.
These 26 million Americans are juggling two to three jobs, earning just around $27,000 a year and supporting two to four children — and exist largely under the radar, according to America’s Research Group, which has been tracking consumer shopping trends since 1979. “The poorest Americans have stopped shopping, except for necessities,” said Britt Beemer, chairman of ARG.
Beemer has been tracking this subgroup for two years, ever since his weekly surveys of 15,000 consumers picked up that 21 percent of consumers did not finish their Christmas shopping in 2014 due to being too busy working.
That number grew to 29 percent last year, and Beemer dug in to learn more about them, calling them on holidays. He estimates that this group has swelled from 6 million households four years ago, because their incomes have not kept pace with expenses like medical costs.
Nearly half of all Americans have not seen an increase in salary over the last five to seven years, and another 28 percent have seen their take-home pay reduced by higher medical insurance deductions or switching to part-time jobs, ARG found. “It’s scary when you start to see things that you’ve never seen before,” said Beemer.
“People are so pessimistic about their future.” Most of those living on the edge — 68 percent are women between the ages of 28 and 38 — work in retail or in call centers, according to Beemer.
Another sign that a chunk of the population has pulled back its spending is that discounters like Walmart and the Dollar Store have been “holding their own,” said Richard Church, managing director of Discern Securities.
The story of the increasing difficulty facing Americans in maintaining their standard of living continues… even after almost 10 years of Federal Reserve market-based intervention.
- Breakdown Of US Citizens Killed By Cops In 2016
In the U.S. a total of 509 citizens have been killed this year alone by police. The body count for the previous year stands at a grand total of 990 people shot dead, according to the Washington Post. As the below infographic from Statista shows, most of those killed by police are male and white. 123 of those shot were Black Americans. This is a relatively high share, keeping in mind that close to 13 percent of Americans belong to that ethnic group.
You will find more statistics at StatistaWhat’s also disturbing is that according to the data compiled by the Washington Post a big proportion of those killed obviously showed signs of mental illness. Of the 509 killed this year at least 124 were thought to be suffering from such conditions.
Many of those killed carried guns according to police records. In at least 22 cases officers mistook toy guns for the real thing.
- From Cops To Clinton: Impunity Corrupts
Submitted by Dan Sanchez via AntiWar.com,
Wednesday, two shocking videos of police officers fatally shooting civilians (Alton Sterling and Philando Castile) surfaced. The day before, many were appalled to hear the Director of the FBI announce that Hillary Clinton would not be charged for mishandling classified information. The two events may seem unrelated, but at bottom, they concern the same fundamental problem: impunity.
Impunity is the essence of power. What, after all, is power? Is it simply the capacity to exert unjust force? The ability to impress one’s will upon the flesh or belongings of another? No, it’s more than that.
Most anyone can wield unjust force. Anyone could walk out onto the street right now and exert their will on somebody weaker: say, pushing over an old lady or stealing candy from a baby. And the toughest, or most heavily-armed guy in town can strong-arm just about any other single person.
But isolated incidents of aggression do not constitute power. The “reign” of the rogue rampager is generally short-lived. It only lasts until the community recognizes him as the menace to society that he is and neutralizes him.
Power isn’t simply about the exertion of unjust force. It is about what happens next, after the exertion. Does the perpetrator generally get away with, or not? Systematically getting away with it – or impunity – is where power truly lies. And that is what makes agents of the State different from any other bully. State agents can violate rights with reliable impunity because a critical mass of the public considers the aggression of state agents to be exceptionally legitimate. Impunity is power, and as Lord Acton said, power corrupts.
The Impunity of the Badge
State impunity is at the root of the problem of police violence. As agents of the exalted State, the police are seen as paladins of public order. The populace grants cops a special dispensation to commit violence that would be considered criminal if perpetrated by anybody else. This privilege is enshrined in law most clearly as the doctrine of “qualified immunity.” As Evan Bernick of the Institute for Justice wrote:
In the 1967 case of Pierson v. Ray, the Supreme Court held that police officers sued for constitutional violations can raise ‘qualified immunity’ as a defense, and thereby escape paying out of their own pockets, even if they violated a person’s constitutional rights.
When victims of police violence or their heirs seek redress and are awarded monetary payments, it is taxpayers, and not the cops, who pick up the tab. Police officers are rarely even prosecuted for violence inflicted while they’re on the clock. The worst that an offending officer can generally expect to face is getting fired, but he will more likely just get a paid suspension.
Thus insulated from responsibility, officer treatment of “mundanes” is predictably often grossly irresponsible. Confident in being sheltered from consequences by their “blue privilege,” officers are far more prone to indulge in lethal cowardice: to place “officer safety” so far above civilian rights that they are willing to gun down a stranger at the slightest whiff of potential danger. Alton Sterling and Philando Castile each carried a gun, as they have the natural right to do. Neither threatened the officers with his weapon, or even brandished it. Yet in both cases, merely becoming aware of the guns sent a cop into a murderous panic. Both Sterling and Castile were fatally shot multiple times in the chest.
The Impunity of High Office
State impunity not only corrupts the regime’s low-level enforcers, but its elite policy makers as well. The FBI let Hillary Clinton off the hook for secrecy violations she committed as Secretary of State, even though these were much more egregious than violations that have earned lower-level personnel decades in prison. She used technology that was more open to being compromised by spies and hackers, while at the same less open to legal and public scrutiny.
But the kinds of activities she was hiding are far more criminal than the fact that she hid them. As Secretary of State, Hillary Clinton played a key role in bringing war to such places as Libya, Syria, and Honduras, and in escalating the war in Afghanistan. She is complicit in causing untold death and misery.
Yet, thanks to her connections and her position in the state power apparatus, she faces no consequences for her crimes, and is free to acquire even more immunity and power as a likely President of the United States.
It is the “sovereign immunity” she enjoys as an officeholder that has made Hillary Clinton so reckless and cavalier about the havoc she has wreaked around the world. If she thought she might ever be held accountable for upending entire countries, she would have likely been far less warlike in her policies.
From policing to foreign policy, impunity corrupts, and absolute impunity corrupts absolutely.
- What Happens When This Chart Hits Zero?
- The Decline & Fall Of The Biggest Bond Market In The World Has Only One Inevitable Ending
Government bonds are themselves becoming more illiquid, most particularly, as CLSA's Chris Wood notes, in a country like Japan where the Bank of Japan has been buying more than the net issuance. Monthly trading of JGBs by lenders and insurers has collapsed from a peak of ¥123tn in April 2012 to a record low of ¥15tn in May 2016.
This raises the pertinent issue of whether the Bank of Japan has reached the practical limit of its government buying programme in terms of its current purchase programme of ¥80tn relative to estimated annual JGB net new issuance of ¥34tn.
In this respect, the Japanese central bank has from a potentially monetisation standpoint always defended the integrity of its JGB purchase programme by stressing that it only buys JGBs in the secondary market, which means that the seller of the JGB to the BoJ forfeits a claim to that asset. This is contrasted to what would happen if the BoJ bought JGBs in the primary market on an open-ended basis.
Such a process would be highly inflationary and, sooner or later, would be viewed by the market as such.
And as Wood concludes, the next step is obvious…
This is why Japan, as well as America, is also a candidate for monetisation of infrastructure stimulus or for what Bernanke has called a “money-financed fiscal programme”, or what has been called in other quarters “overt monetary financing”. This is because Bank of Japan governor Haruhiko Kuroda is now looking for a new alternative form of monetary easing, given he has probably reached the practical limits of responsible JGB buying, as already discussed, while his initial move to impose negative rates in January led to the opposite market reaction than expected (ie, a stronger yen and a weaker stock market, see Figure 8) while also proving politically very unpopular. This probably explains why Kamikaze Kuroda has not expanded the negative rate policy further since January even though inflation and inflation expectations have moved in the opposite direction of what he has been targeting.
…
The latest data will make it harder for Kuroda to do nothing at the next BoJ policy meeting due to be held on 28-29 July given the stress he has put on monitoring inflation expectations. That is unless he just admits he has failed!
Given the unattractive options of buying still more JGBs or ETFs, or risking an undoubtedly unpopular expansion of negative rates, Kuroda and indeed Abe will be looking for a new approach. Monetisation of infrastructure stimulus may be the option.
Meanwhile, in an effort to calm potential concerns about the integrity of the fiscal budget central bankers implementing such a future monetisation of infrastructure spending will doubtless be at pains to describe the process as a “one off” though, as the ever theoretical Bernanke stated in his blog: "To have its full effect, the increase in the money supply must be perceived as permanent by the public."
…
a policy of “helicopter money” is only likely to work if it is done on an ongoing basis and in continuing and growing amounts. But at that point the risk of a policy mistake grows exponentially, in terms of a potentially destabilising pickup in inflation expectations and a related pickup in velocity.
The above discussion on how future experiments with unconventional policy could impact markets is far from theoretical since all the evidence is that central bankers are not prepared to acknowledge the overwhelming empirical evidence that their policies are not working and, indeed, are having the opposite effect of what is intended. Instead they remain obsessed with policy frameworks influenced by inflation targeting and monitoring inflation expectations. It is, therefore, critical for investors to focus on what could be the next version of the monetary laboratory experiment with the obvious catalyst for that turning point market realisation that the Federal Reserve is not going to be able to normalise monetary policy.
Source: CLSA's Greed & Fear
- When Narratives Go Bad
By Ben Hunt Of Epsilon Theory
When Narratives Go Bad (pdf link)
How many things served us yesterday as articles of faith, which today are fables for us?
– Michel de Montaigne, The Complete Essays (1580)
* * *
That same night, I wrote my first short story. It took me thirty minutes. It was a dark little tale about a man who found a magic cup and learned that if he wept into the cup, his tears turned into pearls. But even though he had always been poor, he was a happy man and rarely shed a tear. So he found ways to make himself sad so that his tears could make him rich. As the pearls piled up, so did his greed grow. The story ended with the man sitting on a mountain of pearls, knife in hand, weeping helplessly into the cup with his beloved wife’s slain body in his arms.
– Khaled Hosseini, The Kite Runner (2003)
A fable for our times, the ultimate disposition of extraordinary monetary policy. Bad news is good news until bad news is all we know. Global growth is the wife.
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The idea of negative interest rates strikes many people as odd. Economists are less put off by it. … The anxiety about negative interest rates seen recently in the media and in markets seems to me to be overdone. Logically, when short-term rates have been cut to zero, modestly negative rates seem a natural continuation; there is no clear discontinuity in the economic and financial effects of, say, a 0.1 percent interest rate and a -0.1 percent rate.
– Former Fed Chair Ben Bernanke, “What Tools Does the Fed Have Left?”, March 18, 2016
Bernanke is right – economists are not put off by the idea of negative rates. And that’s exactly the problem. There’s a huge discontinuity between a 0.1 percent interest rate and a -0.1 percent interest rate, but economists don’t see it because it’s a BEHAVIORAL discontinuity. Positive rates permit investing behaviors based on fundamentals and compounding. Negative rates require investing behaviors based on hope for a greater fool.
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My Sunday school teachers had turned Bible narrative into children’s fables. They talked about Noah and the ark because the story had animals in it. They failed to mention that this was when God massacred all of humanity.
– Donald Miller, Blue Like Jazz: Nonreligious Thoughts on Christian Spirituality (2003). The condescension of modern status quo Narrative construction is staggering. It’s a mistake to do this with kids, and it’s a bigger mistake to do this with voters and investors
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A major European power, a longtime defender of liberal democracy, pluralism and free markets, falls under the sway of a few cynical politicians who see a chance to exploit public fears of immigration to advance their careers. They create a stark binary choice on an incredibly complex issue, of which few people understand the full scope — stay in or quit the E.U.
– New York Times columnist Tom Friedman, doing his part to create a status quo protecting Narrative post-Brexit, where government “unforgivably” abdicated its responsibility by “allowing” foolish citizens who can’t possibly know their own self-interest to vote on something that’s “incredibly complex” and can only be understood by wise men … like Tom Friedman.
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He spotted the entourage and security personnel that signaled another important person’s plane. With the temperature over 103 degrees, Mr. Clinton, rather than chatting on the scorching cement, climbed aboard to say hello to Attorney General Loretta E. Lynch.
– New York Times “reporter” Amy Chozick, in a yeoman effort to maintain the status quo protecting Narrative. Nothing to see here folks, move along, just a sociable man trying to get out of the heat.
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Stooges: Simple Simon met a pieman,
Going to the fair;
Says Simple Simon to the pieman,
Let me taste your ware.
Said the pieman to Simple Simon,
Show me first your penny.
Said Simple Simon to the pieman:Moe: Scram! Ya don’t get any! [throws pie in face]
You can learn a lot about political Narrative creation by looking at dominant forms of satire and comedy. Satire today is as arch and elitist as the status quo institutions it defends, in sharp contrast to the populist, slapstick comedy of the Marx Brothers or the Three Stooges. I’ll bet there’s a 99% correlation between UK Leave voters and people who think Benny Hill is funny, and the same between UK Remain voters and people who think John Oliver is funny. For the Tom Friedmans of the world, the solution is simple: “educate” people that John Oliver is hilarious, but you’re a racist dope if you laugh at Benny Hill. Yeah, that’ll work.
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I wrote my way out of hell.
I wrote my way to revolution.
I was louder than the crack in the bell.
I wrote Eliza love letters until she fell.
I wrote about The Constitution and defended it well.
And in the face of ignorance and resistance,
I wrote financial systems into existence.
And when my prayers to God were met with indifference,
I picked up a pen, I wrote my own deliverance.
– Lin-Manuel Miranda, Hamilton (2015)Why does Hamilton work? Because it’s not arch and it’s not elitist. Because it takes one of the most powerful and long-lived Narratives in modern history — the Founding Fathers — and tells the story without irony, without condescension, and without the (literal) whitewashing of other storytellers.
The Old Stories still work when you play them straight. Thank you, Lin-Manuel.* * *
Choronzon: I am a dire wolf, prey-stalking, lethal prowler.
Morpheus: I am a hunter, horse-mounted, wolf-stabbing.
Choronzon: I am a horsefly, horse-stinging, hunter-throwing.
Morpheus: I am a spider, fly-consuming, eight legged.
Choronzon: I am a snake, spider-devouring, poison-toothed.
Morpheus: I am an ox, snake-crushing, heavy-footed.
Choronzon: I am an anthrax, butcher bacterium, warm-life destroying.
Morpheus: I am a world, space-floating, life-nurturing.
Choronzon: I am a nova, all-exploding… planet-cremating.
Morpheus: I am the Universe — all things encompassing, all life embracing.
Choronzon: I am Anti-Life, the Beast of Judgment. I am the dark at the end of everything. The end of universes, gods, worlds … of everything. Sss. And what will you be then, Dreamlord?
Morpheus: I am hope.? Neil Gaiman, The Sandman, Vol. 1: Preludes and Nocturnes (1991)
There was a tale he had read once, long ago, as a small boy: the story of a traveler who had slipped down a cliff, with man-eating tigers above him and a lethal fall below him, who managed to stop his fall halfway down the side of the cliff, holding on for dear life. There was a clump of strawberries beside him, and certain death above him and below. What should he do? went the question.
And the reply was, Eat the strawberries.
The story had never made sense to him as a boy. It did now.
– Neil Gaiman, American Gods (2001)
The fin of any siècle is almost always a rough ride, even if we end up dreaming a better dream. In investing as in life there’s never enough time, and we are beset on all sides. Eat the strawberries
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Here’s my most basic view on everything that’s happening in the world right now, politically, economically, socially … all of it: the Fix is still in, but it’s getting harder and harder to maintain.
The Fix is the status quo, and it goes by different labels of identity depending on what you’re talking about. “European Union” is one of those labels. “Central Banking” is one. “Clinton” is another. They aren’t real things at all, but are statements of shared identity that channel our behavior in highly predictable patterns that are, in turn, highly useful to The Powers That Be, and are maintained by expressions of Common Knowledge such as “everyone knows that everyone knows that Brexit was a grievous mistake” or “everyone knows that everyone knows that low interest rates spur the economy.” Those expressions of Common Knowledge are also called Narratives, and the Narratives are dying.
And yes, I know that this all sounds suspiciously philosophical and divorced from our investing reality, but bear with me for a moment, because the punchline here is going to be that I think what I’m describing is the ONLY thing that matters for our investing reality. Our reality is not determined by the antics of the flesh-and-blood Hillary Clinton or Donald Trump, but by the status quo ideas and institutions represented by and threatened by the human-shaped cartoons we call “Hillary Clinton” and “Donald Trump”. To figure out what’s next for markets, we have to figure out why “Clinton” – shorthand for globalism (it’s not called The Clinton Global Initiative for nothing) and a sort of technocratic, condescending, principle-less, democracy-suspicious manner of governing – is failing. We have to figure out why Bill Clinton’s stroll across the Phoenix tarmac to chat up the Attorney General was a) reported at all, and b) greeted by derision and despair within his own party. If you don’t like my use of the label “Clinton” or if you think I’m being too political, replace it with “Brussels” or “Beijing”. It’s all the same thing, just three different shades of gray.
And I really couldn’t care less, professionally at least, what actually transpired between Bill Clinton and Loretta Lynch, or what Hillary Clinton actually believed about her email security classifications. What I care deeply about, however, is how the Narrative around these events is being shaped and reshaped, because that Narrative will determine the path and outcome of every election and every market on Earth. And what I can tell you is that I am shocked by the diminishing half-life of status quo protecting Narratives, by the inability of Big Institutions and Big Money and Big Media and Big War and Big Academia to lock down an effective story that protects the State, even when their competition is primarily comprised of clowns (dangerous clowns, but clowns all the same) like Donald Trump and Nigel Farage. There’s a … tiredness … to the status quo Narratives, a Marie Antoinette-ish world weariness that sighs and pouts about those darn peasants all the way to the guillotine.
We’ve seen this before. History is littered with failed Narratives, once-powerful arrays of Common Knowledge that somehow lose their ability to compel human behavior and eventually become mere myth. That’s where Narratives go to die. They become fables, stories that we chuckle at, stories that we shake our heads at and ask “did people really believe in all that?” Michel de Montaigne – who invented the essay as a literary form and was the first blogger, albeit more than 400 years before Al Gore invented the Internet – wrote about the devolution of faith to fable back in the 16th century. It’s a phenomenon as old as humanity itself. Manifest Destiny … Cultural Revolution … these were Narratives every bit as powerful in their day as European Union or Clinton in ours. Now they’re historical curiosities, something you come across on a Wikipedia bender.
The rarity isn’t the Narrative that dies and fades into myth, but the Narrative that survives by re-inventing itself, by finding its words and stories repurposed and retold for a modern ear. For example, the Narrative of the American Founding Fathers is as potent today as it was 100 years ago, maybe more so, and that was before Hamilton gave it a new telling and a new power chord.
Why are the status quo protecting Narratives faltering so badly? I think it’s because status quo political and economic institutions – particularly Central Banks – have failed to protect incomes and have pushed income and wealth inequality past a political breaking point. They made a big bet: we’re going to bail-out/paper-over the banks to prevent massive losses in the financial sector, we’re going to inflate the stock market so that the household sector feels wealthier, and we’re going to make vast sums of money available for the corporate and government sectors to borrow really cheaply. And as the McKinsey chart here shows, by Q2 2014 they had largely succeeded on all counts, certainly in getting the corporate and government sectors to borrow trillions in new debt.
The result, or so the thinking went, of all this pump-priming or bridge-building or whatever metaphor you please would be for all four basic sectors of the global economy – households, corporations, governments, and financial institutions – to consume more and invest more and fail never, which would in turn create a virtuous, self-sustaining cycle of risk taking, real growth, and real wealth creation.
It was a reasonable bet to make. But the bet failed. Why? There’s a book or two to write on this, but I’ll sum it up this way: you can no more force corporations to invest for growth if they don’t believe it’s safe than you can force people to watch John Oliver if they don’t think he’s funny. Sure, they’ll tell you that they think he’s funny, because everyone knows that everyone knows that John Oliver is funny, and they need to go along with the Common Knowledge to be successful social animals. But in their heart of hearts, they don’t think John Oliver is funny. Now to be clear, I’m picking on John Oliver to make a point. Personally, I think he’s funny. Some of the time. Well … kind of funny. I guess. Okay, I don’t really think he’s very funny. Sorry. And the truth is that if you paid me to watch HBO, just as Central Banks are basically paying corporations to borrow money, I’m going to watch 20 Game of Thrones re-runs before I watch a single episode of Last Week Tonight with John Oliver, just as corporations are going to buy back stock and hoard cash 20 times more than invest in new jobs or new equipment.
So what does this have to do with incomes? Two things.
First, little of the increased corporate or government borrowing trickled down into jobs or wage income growth. We’ve all seen the charts. Real wage growth is nonexistent in the Western world. Second, to make it feasible for corporations and governments to borrow these trillions of dollars in the first place, every bit of Central Bank balance sheet expansion (buying bonds) and balance sheet “twist” (buying longer duration bonds) and expansion of allowable securities for purchase (buying more kinds of bonds) and imposition of negative rates (charging you interest if you don’t buy longish-term bonds) was designed to – you guessed it – buy more bonds and thus drive up bond prices and drive down interest rates, particularly longish-term bond prices and longish-term interest rates. That’s great if you’re an investor looking for a percentage return on your bond portfolio. That’s terrible, however, if you’re an investor looking for an income from your bond portfolio. Over the past seven years, Central Banks have rewarded the return-seeking bond buyer many times over, and they’ve done nothing but punish the income-seeking bond buyer.
Put these two income squelchers together – zero wage income growth because corporations aren’t investing for growth and less-than-zero investment income growth because Central Banks have crushed rates – and you have a vast swath of the voting public in every developed nation on Earth that (rightfully!) feels aggrieved and left behind by the gleaming economic recovery that the status quo Narrative Missionaries tout at every turn. Notably, the failure of wage income growth skews younger and Democrat/left. The failure of investment income growth skews older and Republican/right. The status quo Narratives could survive (and have many times) an assault from one wing of the electorate or the other. But from both simultaneously? It’s going to be a close call.
But here’s the even larger problem lurking in the not-so distant future, and it’s found in the behavioral WHY of return-seeking bond buyers versus income-seeking bond buyers. These are two entirely different investor populations from a behavioral perspective, with different languages and different investment genotypes. When I hear an investor or financial advisor ask, “Why in the world would I buy a Swiss bond with a -0.5% interest rate?” I know that I’m talking to an income-seeking bond buyer. The return-seeking bond buyer, on the other hand, says “Hey, if you’re right about the world, those Swiss bonds currently yielding -0.5% are going to -1.0%, which means that the price is going up. Where can I buy one of those?”
The only rational owner of a negative rate bond is a pure return seeker; there are zero income seekers holding negative rate bonds. Why is this a problem? Because income seekers will continue to own bonds even if the price goes down (for a while, anyway; at the very least, they are sticky owners). Return seekers, on the other hand, are not sticky owners at all. They will only own a bond if they think that the price is going up – meaning in this case that yields will continue to become even more negative, i.e., that there’s a greater fool (probably in the form of a Central Bank) willing to pay higher and higher prices for these income-destroying bonds – and they will sell in a heartbeat if they think this dynamic is changing.
There is, to cop a phrase from the People’s Bank of China, a massive “one-way bet” on negative rate sovereign debt today. The momentum trade has crystallized to perfection in negative rate bonds, which has grown to become a $10+ trillion (yes, that’s trillion with a T) asset class. I think it’s the most crowded trade in the world from a behavioral or investment DNA perspective, and the moment you get even a whiff of the ECB or BOJ backing down from or reaching its limit of greater foolishness, you are going to get a rush to the exit on ALL sovereign bonds that will shake global capital markets to their core. It’ll be good times till then, as it always is, and I am seeing zero signs of Central Bankers backing down from their greater foolishness. But we have once again set up the global financial system as an inverted pyramid, with a $10 trillion asset class poised on a single, solitary piece of Common Knowledge —– what everyone knows that everyone knows. In 2008, the $10 trillion asset class of residential mortgage backed securities (RMBS) was entirely based on the Common Knowledge that it was impossible to have a nationwide decline in U.S. home prices. When that Narrative failed, the entire inverted pyramid came crashing down. In 2016, the $10 trillion asset class of negative rate sovereign bonds is entirely based on the Common Knowledge that there is no limit to the greater foolishness of Central Banks. If this Narrative fails, the entire inverted pyramid will come crashing down again. Hence my punchline: monitoring this and related status quo protecting Narratives (like the concerted effort to paint Brexit as a one-off blunder, just like Bear Stearns was painted in 2008) is the only thing that really matters for our investment reality.
What to do? Convexity, convexity, convexity. Our portfolios should minimize the maximum risk the world actually presents, not maximize the reward our crystal ball models predict. Timing, timing, timing. We need to pay attention to what matters, and right now that’s all policy and all Narrative all the time. In a negative rate world, you’ve got to think in terms of catalysts, not “stocks for the long haul”. And one more thing. To paraphrase Groucho Marx in Duck Soup, if a four-year-old can’t understand what you’re doing in your portfolio, don’t do it. For me, that means real assets and real yield, fractional ownership in real companies with real cash flows from real economic activity with real people. You know, what a stock market used to mean before it became a Central Bank casino. For more on all these points, I’d point you directly to the recent Epsilon Theory notes “Hobson’s Choice“ and “Cat’s Cradle“.
I know that this all comes across as very negative about the world and our investing future, and that’s because it is. To use a poker analogy, we were dealt some bad cards, the Central Banks waaay overplayed the hand, and now we’ve got to figure out how to extricate ourselves without losing our entire stake. But is this a hopeless situation? No. The most important lesson I ever learned from my mentors in this business is this: always live to fight another day. We can do that. It won’t be fun and it won’t be pretty and we’ll have some scars to show for it, but we can do that. The useful lesson from the Biblical Flood Narrative isn’t a pleasant fable about Noah saving the cute and cuddly animals. The useful lesson is that hubris must be confronted, hope is always present, and that preparation and honest actions will see us through any storm. Yes, we can do that.
- Dramatic Footage Shows Dallas Shooter Engage In Firefight With Policeman
As more and more video emerges following Thursday night’s deadly Dallas shoot out, we get a new understanding of just how intense last night was.
The video embedded below is 1:16 in length and shows an SUV with flashers on in the foreground. The suspect in the background is distracted with someone who starts out off camera and eventually comes into the scene. The suspect appears to hide behind a pillar while looking off to the right hand side of the shot:
A few moments pass and coming in off the right hand side of the shot we see a person in black clothing appear before a shootout begins:
A close range shootout takes place, with sparks from shots hitting metal spraying in the background. It is unclear though if this shootout involved a police officer or an armed citizen providing some line of defense:
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FULL VIDEO:
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