Aug 07

Today’s News August 7, 2015

  • GOP Debates Post-Mortem: Fiorina Wins Undercard; Trump Takes Title, Threatens Independent Run

    17 Entered… Despite the onslaught of attacks from the other 16 GOP Presidential nominee candidates, Donald Trump came out the 'winner' in his usual brash manner threatening to run as an independent and able to dominate the conversation, pitbull back at any jibes, and shrug off cozy Clintonite comments. Ted Cruz and Rand Paul appeared to have a strong showing but "had a tough night" in Trump's words. Rick Perry blew up again, calling the former President Ronald 'Raven' – which his team vehemently denied the entire FOX watching audience heard. Carly Fiorina easily won the undercard against a field of has-beens and wannabes and surely deserves some more top-billing in the next Republican death-match. In the immortal words of Kenny Rogers, we hope a few of the 17-strong gaggle now "know when to fold 'em," and can we suggest Rick Perry's corner "throws in the damn towel."

     

     

    The Main Event..

    Trump came out swinging hard…

    • *TRUMP ONLY CANDIDATE WHO DOESN'T PLEDGE TO BACK GOP NOMINEE
    • *TRUMP SAYS WON'T RULE OUT INDEPENDENT BID FOR PRESIDENT

    As AP reports,

    The first Republican primary debate got off to a contentious start Thursday, with billionaire businessman Donald Trump declaring he could not commit to supporting the party's eventual nominee — unless it's him — and would not rule out running as a third-party candidate.

     

    "I will not make the pledge at this time," Trump said. He also refused to apologize for making insulting comments about women, saying, "The big problem this country has is being political correct."

     

    Kentucky Sen. Rand Paul immediately jumped in to challenge Trump on his answer to the question about supporting the nominee.

     

    "He's already hedging his bets because he's used to buying politicians," Paul said.

    *  *  *

    Trump spoke the most…

     

     

    • *TRUMP, ASKED ON COMMENTS ON WOMEN, SAYS NOT POLITICALLY CORRECT
    • *TRUMP REITERATES NEED TO BUILD A WALL ON U.S.-MEXICO BORDER
    • *TRUMP: MEXICO SENDS `THE BAD ONES OVER' TO THE U.S.
    • *TRUMP SAYS HAS USED U.S. BANKRUPTCY LAWS TO HIS ADVANTAGE
    • *TRUMP: `I HAD THE GOOD SENSE TO LEAVE ATLANTIC CITY'
    • *TRUMP: `I'VE EVOLVED ON MANY ISSUES' OVER YEARS
    • *TRUMP: IF IRAN WAS A STOCK, YOU SHOULD GO OUT AND BUY IT
    • *TRUMP: IRAN IS A `DISGRACE'; SAYS WOULD BE STRONGER THAN OBAMA

     

    Headlines for rest of field… (based on Bloomberg Politics)

    • *CHRISTIE, ASKED ON NJ DOWNGRADES, SAYS WORSE BEFORE HIS TENURE
    • *KASICH DEFENDS MEDICAID EXPANSION IN OHIO AS COST-SAVING

     

    • *RUBIO: U.S. NEEDS E-VERIFY SYSTEM TO BOLSTER IMMIGRATION LAWS
    • *SCOTT WALKER SAYS IMMIGRATION SYSTEM SHOULD FAVOR U.S. WORKERS
    • *PAUL SAYS CHRISTIE FUNDAMENTALLY MISUNDERSTANDS BILL OF RIGHTS
    • *CHRISTIE SAYS RAND PAUL BLOWS `HOT AIR' ON PRIVACY, TERRORISM
    • *BUSH: KNOWING WHAT WE KNOW NOW, STARTING WAR IN IRAQ A MISTAKE
    • *WALKER: U.S. NEEDS TO STOP `LEADING FROM BEHIND' IN MIDDLE EAST
    • *HUCKABEE: COULD GET RID OF IRS WITH TAX ON CONSUMPTION
    • *CARSON: U.S. TAX CODE SHOULD BE MODELED ON 10% BIBLICAL TITHE
    • *HARPER SAYS OPPOSITION PLANS WILL LEAD TO PERMANENT DEFICITS
    • *JEB BUSH ON KEYSTONE PIPELINE: `OF COURSE WE'RE FOR IT'
    • *BUSH SAYS 2% U.S. GROWTH A DANGEROUS `NEW NORMAL'; HE SEEKS 4%
    • *CHRISTIE: RAISE U.S. RETIREMENT AGE 2 YRS PHASED OVER 25 YRS
    • *CHRISTIE SAYS SOCIAL SECURITY SHOULD BE MEANS-TESTED
    • *RUBIO: NEVER ADVOCATED FOR ABORTION IN VIOLENT CASES
    • *BUSH: NOT TRUE THAT HE CALLED TRUMP `BUFFOON'
    • *KASICH: IF MY KIDS WERE GAY, WOULD `LOVE AND ACCEPT' THEM
    • *WALKER SAYS PUT FORCES ON EASTERN BORDER OF UKRAINE, BALTICS
    • *WALKER SAYS WOULD SHOW `STEEL' TO RUSSIA, NOT `MUSH' SOFTNESS
    • *RAND PAUL SAYS HE'S ONLY CANDIDATE W/ 5-YR BALANCED BUDGET PLAN
    • *PAUL: U.S. MUST STOP BORROWING MONEY TO AID OTHER COUNTRIES
    • *PAUL: U.S. COULD AID ISRAEL FROM SURPLUS, NOT BORROWED FUNDS

     

     

     

     

    The attacks were varied…

     

    The result…

     

    Candidate Mentions (by minute)…

    *  *  *

     

    The Undercard….

    Carly Fiorina's coming out party but the pre-debate debate was summarized as an attack on Trump and Clinton…

     

    The 'biggest losers" debate was won by a landslide by Carly Fiorina…

    Though Santirum spoke the most…

     

    Artist's impression of Rick Perry's team…"Throw the damn towel!!"

     

    And The Other Not-So-Magnificent-Seven… (via Bloomberg)

    Here’s a look at how each candidate fared under circumstances like nothing they’ve ever faced before, and like nothing they hope to ever go through again.

    Carly Fiorina 

    Easily the most polished of anyone on the stage; you can see why she’s been impressing early audiences, and just how much of a difference she could make if she ever gets promoted to the adult’s table. She was assured and strong throughout, even when she connected Donald Trump to Bill Clinton. Moderator MacCallum mocked her for comparing herself to the “Iron Lady” Margaret Thatcher, but if you had no context for either woman and were just tuning in, you could almost see it. She also has the vital political skill of being able to deliver a shiv with a smile, even making an angry phone call to the Supreme Leader of Iran–“on Day One of the Oval Office!”–sound like a phone call you’d look forward to, even while you were shaking. Interestingly: She was the only candidate to consistently reference God. Though should be more careful about where she leaves her notes.

    Jim Gilmore 

    He hasn’t even been in the race a week, so, understandably, he spent his first question just rattling off his biography. He did it a little too fast, though; he actually ran out of factoids three-quarters of the way through his answer, which was a bit awkward. Every question directed toward him had an audible sigh before it, like a Little League coach who has to give an at-bat to every kid, even when they know the other kids are the only ones who can hit the ball. He didn’t embarrass himself, but he didn’t do anything to distinguish himself either, which adds up to a big net negative. Also, his suit looked too big for him.

    Lindsey Graham 

    You won’t find many Republican presidential candidates answering their first question at a Republican primary by going into extensive detail on fossil fuels, but hey, he’s been a Senator for a long time. Graham attempted to make up for by turning into the world’s most polite hawk the rest of the way: Graham turned every question after that into a diatribe against ISIS and Al Qaeda and our need to be aggressive in the Middle East. (No man has ever looked so genteel while vowing to secure the violent deaths of his enemies.) He even batted away a Planned Parenthood question, saying that the Middle East is the real “War on Women.” He remains a party attack dog to the end, particularly when it comes to Bill and Hillary, saying he’s “fluent in Clinton-speak; I’ve been dealing with it for 20 years.” Were you excited to hear the revival of the “definition of what ‘is” is” Clinton chestnut in the year 2015? If so, Lindsey Graham was here for you tonight. 

    Bobby Jindal 

    If anything, he succeeded in being a lot less Kenneth Parcell than in his infamous response to President Obama’s State of the Union, which is a start. It’s still disconcerting seeing such sharp rhetoric coming out of the mouth of such a friendly looking guy; he says he’s “taking the handcuffs off the military” to go after ISIS, but it feels more like the waterboy giving a big speech rather than the coach. (His “Obama and Hillary want to turn the American Dream into the European night” felt decidedly unapocalyptic.) He definitely scores points for being the only person in the debate to go after Jeb Bush, both a sign of the strength of Donald Trump and the weakness of Bush at this point; two months ago, this debate would have been seven people a race to call Bush the “establishment” the way Jindal, and Jindal alone, did this time. On the whole, though, he spoke the way a lot of voters in his party think, even if he doesn’t seem like the candidate they imagine speaking for them. Also, if elected, he is absolutely going to waste his first Executive Order, saying, he’d sign one “protecting religious liberty.” Who wants to tell him?

    George Pataki

    Well, George Pataki was here. He hasn’t really done anything, or even been in the public eye, since he was governor of New York, so he kept bringing that up like a middle-aged soft-in-the-middle jock who can’t stop telling you about the time he hit the game winner against Hickory South back in high school. Did you know Pataki was the governor on September 11? Pataki is happy to remind you several times. It was probably wise for him to focus on that, because his handling of the abortion question–he’s the only pro-choice candidate running for the Republican nomination–was muddled, defensive and weak, though, really, in this primary, and with those recent Planned Parenthood tapes, how could it not be? He was also the only candidate who consistently talked longer than the buzzer. It’s difficult to blame him.

    Rick Perry 

    No one knows the perils of a poor debate showing better than Perry, so he seemed determined, almost over-determined, to show off his debate bona fides here. He stiffened his jaw, he dialed back the Texas homespunisms, he even threw in a “I’d say HELL NO” for good measure. (To the Ayatollah of Iran, no less, a guy who knows, in conservative minds, from Hell.) He may have been a little too fired up for the room; it’s difficult to be too much of a tough guy when there are more people on stage than in the audience. It was particularly strange to see him go so aggressively after Donald Trump, considering Trump wasn’t in the room; it’s odd to stand up to a guy who doesn’t even need to bother to show up yet. He definitely wanted Trump’s mojo, though. His answers on immigration were as forceful as anyone said on stage all night, tripling down to the point that he actually claimed his primary purpose in office would be to enforce the fight against illegal immigration, getting into so much detail that he even mentioned specific helicopters. Also: Good to know someone still uses Wite-Out. 

    And then there's this…

    Rick Santorum 

    Santorum, who was as angry as anyone about these debate rules, went after them even further, pointing out (while inexplicably lapsing into the first person plural) that “we were even further behind four years ago than we are today.” (A salient point for a guy who won Iowa last time.) His answer on immigration—pointing to how his own father, an Italian immigrant, was separated from his father under Mussolini, said “America was worth the wait”—was personal but also underlined that he’s for separating families if it means following the letter of the law. Interestingly, Santorum, the supposed holy roller, didn’t say the word “God” once. He also brought up his “20-20 Perfect Vision of America” plan, which, when it comes to catchiness, isn’t quite 9-9-9.

    *  *  *

    So in summary.. Fiorina #winning… Perry #RonaldRaven… and this…

    Finally where the moneyis being bet… (via PaddyPower)

  • America's Biggest Lie – Dictatorship Or Democracy?

    Authored by Eric Zuesse,

    The Deceit About Being A 'Republic' Versus A 'Democracy'

    One of my recent articles at several sites, "Jimmy Carter Is Correct That the U.S. Is No Longer a Democracy” generated many reader-comments (such as here) saying things like, "The US has always been a republic. There are no true democracies in the modern world.” This will be my response to all who expressed that view:

    You miss the point that Carter made, and that I there documented to be true, which is no semantic issue (“democracy” versus “republic”), but which instead concerns the basic lie about what the United States of America really is now:

    Is this a representative democracy, such as its Founders intended and such as it was famous and honored throughout the world for being, until at least around 1980?

     

    Or, is it instead a nation that’s ruled by a tiny elite, an aristocracy, which in this country consists of its 500 or so billionaires, who buy the politicians whom ‘we’ ‘elect’?

    Is the U.S. now, basically, a fraud? Is it a dictatorship, instead of a democracy? Is it some kind of aristocracy, which controls the government here?

    That’s not a semantic issue, at all. America’s first political party was called the “Democratic Republican Party,” but could as well have been called the Democratic Party or the Republican Party, because those two terms are essentially synonymous in any nation that has a large population, in which the public elect representatives to represent them, instead of directly vote on the policies that the government is to pursue — to place into its law, and to enforce by its duly authorized police or otherwise, and to adjudicate by democratically appointed judges and/or juries.

    The only democracies that can exist, except for tiny ones, are representative democracies: they are republics. Republics are the only type of democratic nations that exist, practically speaking.

    Where, then, does the apparently common misconception that there is a difference between the two terms arise?

    I shall here present a theory about that: This widespread misconception arises because the rulers in a dictatorship — i.e., in an elite-controlled or “aristocratic” government, as opposed to in a government that authentically does  represent the public — can thereby fool many people into misconceiving what the real issue, the real problem, there is. 

    The real issue is whether the country is controlled by its aristocracy (a dictatorship), or instead by its public (its residents).

    Let’s be frank and honest: an aristocratically controlled government is a dictatorship, regardless of whether that “aristocracy” is in fascist Italy, or in Nazi Germany, or in Communist USSR, or in North Korea, or in the United States of America.

    That’s what Jimmy Carter was talking about, and it's what I was documenting to be true.

    To varying and rather extraordinary degrees throughout earlier U.S. history, this nation really was a democracy; that is to say, a republic. But we’re not actually like that any more (as I documented there).

    If this problem is not faced — and honestly, not by means of semantic games and misdirections — then surely there will be not even a possibility to restore the democracy, the republic, the democratic republic, or whatever one prefers to call it, which our Founders had intended, and which lasted for around two centuries on these shores, and was widely admired and even (by some) envied throughout the world.

    The aristocracy and its many fools might not want this enormous problem to be addressed, but Jimmy Carter clearly does. And so do I.

    One of the ways to misdirect about this problem is to obsess about “good residents” (“citizens”) versus “bad residents” (“aliens”), because that nationalistic way of viewing things enables the aristocracy to split the public against itself and thereby to maintain its own grip on power against, actually, that entire public. Nazi Germany did this.

    Another way they misdirect it is to buy control over all of the political parties that stand a chance of dominating the government, and so to create basically a ‘democratic’ or ‘republican’ controlled government which, in any case, is actually controlled by that aristocracy, even if, perhaps, by a different faction within it. Even if a different faction within the aristocracy takes control, it’s still the same dictatorship. Because the public is not  in control.

    There are many ways to deceive the public. There are many ways to rule the public. But all of them are aristocratic; all of them are elite — and typically monied-elite — dictatorships.

    In a democracy (or republic) the government does not rule, the government represents. It represents honestly, because it doesn’t need to do so by misdirection, by deceits.

     

    In an aristocracy (or dictatorship) the government does not represent — at least not honestly — because they don’t want the people to see how their sausages are made

    Will a violent revolution be required to overthrow it? If so, then won’t the likelihood be high that it will merely replace one group who rule by force, by a different group who rule by force? For example: isn’t that what happened in the Russian Revolution and its aftermath?

    Jimmy Carter challenged America to restore democracy. And he was right to do so. But can it be done? And, if so, then how?

    It’s the great issue in 2016. Because if it’s not dealt with then, the dictatorship, the aristocracy that controls it, will become so deeply lodged that it won’t be able to be dislodged without great violence. And the outcome of that would not solve the problem, at all. It would be hell. But avoiding that hell by means of accepting continuance of aristocratic control would also be hell, because aristocracy would then become even more deeply entrenched.

    America needs to deal with it, not postpone solving it.

    *  *  *

     

  • $60 Trillion Of World Debt In One Visualization

    Today’s visualization breaks down $59.7 trillion of world debt by country, as well as highlighting each country’s debt-to-GDP ratio using colour. The data comes from the IMF and only covers external government debt.  

    It excludes the debt of country’s citizens and businesses, as well as unfunded liabilities which are not yet technically incurred yet. All figures are based on USD.

     

     

    Courtesy of: Visual Capitalist

     

     

    The numbers that stand out the most, especially when comparing to the previous world economy graphic:

    • The United States constitutes 23.3% of the world economy but 29.1% of world debt. It’s debt-to-GDP ratio is 103.4% using IMF figures.
    • Japan makes up only 6.18% of total economic production, but has amounted 19.99% of global debt.
    • China, the world’s second largest economy (and largest by other measures), accounts for 13.9% of production. They only have 6.25% of world debt and a debt-to-GDP ratio of 39.4%.
    • 7 of the 15 countries with the most total debt are European. Together, excluding Russia, the European continent holds over 26% of total world debt.

    Combining the debt of the United States, Japan, and Europe together accounts for 75% of total global debt.

    Source: Visual Capitalist

  • What Kind Of Investor Are You? The Market Doesn't Care!

    Via ConvergEx's Nick Colas,

    Our monthly look at asset price correlations finds it’s getting just a little bit easier to beat the U.S. stock market with savvy sector bets. OK, not by a lot: average correlations for the 10 sectors of the S&P 500 to the index itself are down to 79.9% versus the year’s typical reading of 80.7%. The best hunting grounds have been in Technology (84.9% correlation, down from +90% the last three months) and, surprisingly, Utilities (32.9% correlation, down from 47-77% in the last three months).  Both have beaten the overall market over the last month as well. Looking forward, the quickest way to even lower correlations (which are good for active managers and passive investors alike) is for the Federal Reserve to move on rates sooner rather than later.  By our reckoning, the currently still-high correlations show that markets don’t quite think the Fed is moving in September.  If they did, correlations would be dropping more quickly.

    In my 25 years doing just about every job in finance I have had the chance to meet a wide array of money managers. This experience has taught me that there are only three kinds of people that can reliably “Beat” the market once you put aside obvious inputs like competent risk management and a stress-resistant personality. These are:

    The savant.  There is a certain type of person that can read price movements and consistently extrapolate signal from noise.  You could plop them on a desert island with little more than a Bloomberg machine, some dip, a Chinese takeout menu and some way to make trades and they would still make money.  A lot of it.  They tend to read to the New York Post, never miss a free meal, and will die between 4pm and 9:30am because during trading hours nothing will deter them from seeing the close.

     

    The information hound.  This breed makes it their business to know every single important source of knowledge about the companies in which they invest.  They don’t know everything, but they know where to find any piece of information necessary to price a security.  Twenty years ago this type of investor visited every single company they followed every quarter. Now, they do that AND they hire satellites to fly over production facilities AND use online tracking software to monitor company fundamentals in real time.  Effective activists fall into this camp, by the way.

     

    The big picture thinker. Some people are just better than the population as a whole at assimilating large quantities of information and synthesizing it into profitable action.  The advent of computerized trading over the last decade has pushed a lot of these individuals into routinizing their approach into systematic algorithms, of course.  But the best of the bunch see linkages through the capital markets the way spiders feel their webs – in analog waves, not digital bits and bytes. If the butterfly flaps its wings in Thailand, they know to get short insurers in Texas.

    All three types of investors/traders need the same thing to deliver the best results: asset prices that move at least somewhat independently of each other.  After all, their special set of skills is in separating the wheat from the chaff, the good from the bad, or the stars from the airplane lights. The more those differences cause divergent prices, the higher the potential profit.  For example, consider the S&P 500 – how many names in this index are up more than 20% on the year?  The answer is 70 by our count, or just over 1 in 7.  Only one name is a clean double in 2015: Netflix. Conversely, there are 60 names in the index that are down more than 20% but only three – Freeport-McMoRan, Consol Energy and Chesapeake Energy – are down by 50% or more. That leaves 372 names in the S&P 500 in a performance band of +20% to -20%.  Close down the range to +10/-10%, and we count 197 names in that range.  That’s 40% of the entire S&P 500 clinging to a pretty narrow band around the “Unchanged on the year” line.

    Another way to consider the question of how much opportunity there is in the S&P 500 and other asset classes is to look at stock price correlations – how much the individual sectors of the index move in tandem with the market as a whole.  We look at this data on a monthly basis, and there are several tables and charts at the end of this note.  Here’s our summary of this month’s numbers:

    The average price correlation of the 10 sectors of the S&P 500 to the index was 79.9% last month.  On the good news front, that’s less than the YTD average of 80.6% so asset prices have been moving a touch more independently over the last 30 days than the year as a whole.  As for the bad news, that’s still far higher than the textbook 50% correlation a sector “Should” have to the market as a whole.

     

    The two standout sectors last month were technology and utilities. Tech saw its correlation to the S&P 500 drop from 93.4% to 84.9% and the group also outperformed the broad market (+1.8% versus 1.1%).  The utilities group, left for dead on the thesis of ever-rising interest rates, also outperformed last month (+3.3% versus 1.1%) and managed to cut their correlation to the market to 32.9% from 47.6% at the same time.

     

    Emerging markets had a tough time over the last month, down 7.9%, but as any trader will tell you the moves between the U.S. market and far flung bourses were tied at the hip.  As a result, the correlation between the two was quite high – 71.7% – but no higher than the last few months combined. Developed markets, as represented by the MSCI EAFE (Europe, Asia, Far East) index also showed high correlations to the S&P 500 at 83.6%.

     

    Correlations between the high yield corporate bond market and equities have been tightening up over the last three months, an unwelcome development for those who worry about the structure of that market if general asset price volatility picks up.  Correlations between “Junk” bonds and U.S. stocks were 66.5% last month, up from 55.7% the month before and 49.7% the month before that.

     

     

    Gold has been a brutally tough investment over the last month, sinking to multi-year lows.  The best thing you can say about this trend is that at least the yellow metal still hews to its own path. Correlations to stocks here were -25.3% last month.

    Now, the #1 question we get after we review correlations every month is “Why are they so high relative to long term historical norms?”  Our answer is that Federal Reserve policy has been an unusually important factor in asset prices since 2009. The unusually easy monetary policy since that time (and its planning, implementation, and effect on the economy) has been a powerful unifying story in capital markets. Now, as the Federal Reserve moves to return the economy to a more “Normal” policy stance, correlations should drop. That they have not yet moved convincingly lower is a sign that equity markets may want to see the Fed actually pull the trigger. 
     

  • "Teflon Don" Holds Court – GOP Debates Begin

    (Click picture to watch live. Note that Fox requires a cable subscription log-in)

    Now that Carly Fiorina has thoroughly dominated the “B-team” GOP roster, all eyes will now turn to the prime time event where Donald Trump, the surprise frontrunner whose vitriolic campaign rhetoric has inexplicably translated into ever stronger poll numbers, will make his debate debut and attempt to dismiss critics who question how long the flamboyant billionaire’s popularity can last once the proverbial rubber meets the road. 

    And while some are expecting plenty of fireworks on Thursday evening, Trump himself is looking to play down the hype. “Maybe my whole life is a debate in a way, but the fact is I’m not a debater, and they are,” Trump told ABC News.

    And if you can’t make sense of that, here’s something less convoluted: “I don’t think I’m going to be throwing punches.”

    So it looks like we can scratch “fist fight” off the list of possible debate outcomes, but there’s still plenty of fun to be had, and for those wondering what to expect from each candidate, here’s a simple preview from NBC:

    • Donald Trump: With all eyes on him, he’s smartly downplayed expectations and has emphasized that he intends to play nice. But he also has to deliver the same toughness and channel the same anger fueling his rise in the GOP polls.
    • Jeb Bush: As we wrote yesterday, maybe no one has more on the line than Bush does. He’s had a rough last week — especially as Hillary Clinton has used him as a punching bag. And here’s the thing: He’s the most well-known unknown person (due to his last name) on that debate stage.
    • Scott Walker: He has the buzz and the record, but does he look the part? That will be his biggest challenge of the night.
    • Marco Rubio: Ditto. And he can’t afford to disappear at the debate — as he has disappeared from the 2016 scene these past few weeks.
    • Mike Huckabee: If you want to place an early bet on the best performer of the night, Huckabee would be a smart call. He is the only one of the 10 who has actually participated in a presidential debate before. And he was routinely the best performer in the 2007-2008 debates.
    • Ted Cruz: Can he handle the 60-second time limits and come across a bite more likeable than his perception, especially in DC?
    • Ben Carson: His low-key demeanor could be a weakness. Can he display some fire and passion that don’t come across in his interviews?
    • Chris Christie: He’s used to being the center of attention, but can he handle being on the outside looking in? How does he assert himself?
    • John Kasich: Ditto.
    • Rand Paul: Make no mistake: The Jesse Benton indictment has rocked the Ron/Rand Paul World, and the campaign needs a major pick-me-up from this debate.

    And here’s a Bingo card which should serve as a nice primer on the issues:

    Finally, here’s a bit of color from Bloomberg’s Joshua Green on Trump’s transformation from belicose billionaire to Republican frontrunner: 

    When Donald Trump takes center stage at Thursday’s Fox News debate in Cleveland, it will be a critical moment for the Republican Party. Until recently, Americans mentally categorized Trump as a celebrity entertainer and interpreted his madcap antics and controversial pronouncements accordingly. But on Thursday, voters will experience Trump in a much different context: as the standard-bearer of the Republican Party, who not only leads the presidential field by a wide margin but, as a new Bloomberg Politics poll shows, has a powerful appeal to every segment of the Republican electorate.

     

    Not every Republican worries about a “Trump effect” harming the GOP’s electoral fortunes. “Trump is a flash in the pan,” says Republican strategist John Feehery. “He’s not a serious candidate, no matter what the polls say. He will self-implode.”

     

    Others are hopeful that Trump will “grow into the role” and comport himself in a manner more befitting a presidential frontrunner. “The question is,” says Norquist, “is he capable of turning on a dime when the camera shines on him and saying, ‘Here are my standard, boring traditional Republican views’ with maybe a couple of colorful additions?”

     

    But Trump’s broad popularity and enduring strength among Republicans lend credence to a different interpretation: that his candidacy has become the preferred vehicle for Republican voters to express maximal outrage at their own party’s leaders for failing to carry out the agenda they keep promising. It’s one that many conservatives ardently desire: to deport undocumented immigrants, kill Obamacare, overturn Roe v. Wade, and return the GOP to a position of primacy in American politics.

     

    “If you look at the whole Republican Party, from libertarians to evangelicals to the Tea Party,” says Steele, “you have a group of people who’ve been lied to for 35 years. Republican [presidential candidates] have said, ‘Elect us and we’ll do these things.’ Well, they haven’t. And that frustration is manifesting itself in Trump.”

     

    Bonus: BBC’s “Fun Guide” to the debate

    Donald Trump

    Who is he? Billionaire, reality television star, golf and real estate mogul, rider of golden escalators. The Donald is the one man who really needs no introduction. He exists whether you acknowledge him or not. He’s at the top of the polls in the Republican Party, and the establishment’s attempts to strike him down have only made him more powerful than you can possibly imagine.

    Expected strategy: Trump will be Trump. If he’s attacked by one of the other candidates, expect him to hit back. Donald says he doesn’t start fights, he finishes them. Maybe he’ll say something crazy, and everyone will laugh. Maybe he’ll stay serious, and everyone will be impressed with his gravitas. Either way, he comes out ahead.

    Win a point if: He promises to “make America great again”. He believes he’s the man to do it, and he’s got the hat to show it.

    Win a million points if: He wears the hat on stage.

    Lose a point if: He says “you’re fired”. That Apprentice catchphrase is so 2004.

    Jeb Bush

    Who is he? Former governor of Florida, son of one president and brother to another, the man with 99 problems but having enough campaign money isn’t one. Bush started the year expected by many to emerge as the clear frontrunner, but that hasn’t happened. Jeb! – as his logo exclaims – is just one of several upper-tier candidates getting lapped in the polls by Trump.

    Expected strategy: Bush will likely try to be the grown-up in the room. If other candidates get mired in a slug-fest with Trump, he can try to stay above the fray and pitch himself as the mature, presidential alternative. It was a plan that worked (eventually) for Mitt Romney in 2012.

    Win a point if: He vows to boost US growth from 2% to 4% as president. Call it the “seven-minute abs” campaign promise. Who wants two when you can have four?

    Win a million points if: He says he agrees with his brother on anything. “George W Jeb” is getting hammered on his familial ties to the 43rd president, and proving he’s “his own man” has been one of his most daunting tasks.

    Lose a point if: He mentions his campaign “swag store”, as he did in New Hampshire Monday night. There are a lot of words that can sound presidential. “Swag” isn’t one of them.

    Scott Walker

    Who is he? Governor of Wisconsin, Kohl’s discount store shopper, bane of public employee unions everywhere. Walker made a big splash in an Iowa presidential forum back in January, and he’s become a popular pick as a candidate who can appeal to both conservative activists and the Republican establishment.

    Expected strategy: This will be a big test for Walker as a top-tier candidate. He’s been criticised in the past for lacking presidential timbre, so his goal will be to look and act like a serious, informed politician, while avoiding any major gaffes.

    Win a point if: He mentions Ronald Reagan. He got married on the late president’s birthday and every year throws a Reagan-themed anniversary party. He’s a big fan.

    Win a million points if: He talks about his fitness tracker. He wears one all the time and credits it with keeping him in shape. You may not see it under the sleeve of his debate-night suit jacket, but trust us, it’s there.

    Lose a point if: He cites heading the Wisconsin National Guard in a foreign policy answer. Every time governors trot this line out they sound only slightly less ridiculous than when Sarah Palin mentioned how close Alaska is to Russia.

    Mike Huckabee

    Who is he? Ordained minister, former Arkansas governor, former conservative radio and television talk host, model for awkward family photos. Huckabee was the surprise of the 2008 presidential race after winning the first-in-the-nation Iowa caucuses. Now he hopes to recapture that old campaign magic.

    Expected strategy: Eight years ago Huckabee ran as a conservative with a heart. After years as a Fox talking head, he now seems to be running as a conservative who eats hearts. Expect lots of blanket condemnations of liberal orthodoxy, particularly when it comes to Barack Obama’s foreign policy.

    Win a point if: He doesn’t make a reference to Nazi Germany. The candidate is a walking embodiment of Godwin’s law.

    Win a million points if: He bursts out into song. He and Democrat Martin O’Malley are the only presidential hopefuls who front rock bands.

    Lose a point if: He makes a joke that bombs. He styles himself as a good-natured cut-up, but as the old saying goes: “Dying is easy. Comedy is hard.”

    Marco Rubio

    Who is he? Florida senator, son of Cuban immigrants, former college football player, parched-mouth sufferer. Rubio is considered a rising star in Republican circles, but many were surprised that he decided to eschew a sure-thing second term in the US Senate for a presidential bid, particularly with Floridian Bush already in the race.

    Expected strategy: Rubio became a popular pick as a campaign dark horse, but after an early bounce in the polls he’s become mired in the crowded middle of the pack. He’s the youngest candidate on the stage, so he’ll have to project maturity and remind everyone of his potential.

    Win a point if: He mentions the American Dream. His child-of-immigrants story is compelling and he isn’t shy about recounting it, so you can probably go ahead and pencil this in the plus column.

    Win a million points if: He gets caught on camera drinking water. For a long time Rubio’s awkward attempt at hydration during a 2013 State of the Union response was all anyone knew about him.

    Lose a point if: He talks about immigration. He supported Senate immigration reform in 2013 before it became radioactive among much of the conservative base. Any time he spends on the subject will remind Republicans of this.

    Ben Carson

    Who is he? Paediatric neurosurgeon, best-selling author, child of urban poverty, separator of conjoined twins. Carson was in double digits in opinion polls for much of the year but has slipped of late. He has a loyal following that’s helped him nab several conservative straw poll victories.

    Expected strategy: This is the first time Carson has been in a political debate, so his goal is to prove he belongs there – which is a pretty low bar among this crowded field. He’s the “other” non-politician on the stage and could seek to offer himself as a less abrasive, more thoughtful choice for disaffected Trump supporters.

    Win a point if: He tells the story about the patient who mistook him for a hospital orderly.

    Win a million points if: He compares Obamacare to slavery. It wouldn’t be the first time, but he’s toned down his bombastic rhetoric recently.

    Lose a point if: He says progressive taxation is socialism. If it is, then the US has been a socialist state since 1913.

    Ted Cruz

    Who is he? Senator from Texas, former Supreme Court clerk, Canadian-American, aspiring Simpsons voice actor. Cruz beat a heavily favoured Republican in his 2012 Senate race and quickly made waves in Washington, spearheading multiple high-profile filibusters and government shut-downs

    Expected strategy: Cruz is a former college debate national champion, so he enters Thursday night with rhetorical knives sharpened and high expectations. He’s pitching his campaign to evangelical conservatives and grass-roots Tea Party true-believers, so expect him to spend plenty of time throwing them chunks of fresh red meat.

    Win a point if: He attacks “the Washington cartel”. Although it sounds like a minor-league soccer franchise, it’s his term for the insiders and establishment politicians he’s made life difficult for during his Senate tenure

    Win a million points if: He attacks Donald Trump. While other candidates have been going after the top dog, Cruz has showered him with praise, perhaps hoping to pick up the pieces if the billionaire flames out.

    Lose a point if: He talks about cooking bacon on the barrel of a machine gun. OK, he likes guns and he likes bacon. But his latest attempt at creating a viral video was just cringe-worthy.

    Rand Paul

    Who is he? Senator from Kentucky, opthalmologist, son of former presidential candidate Ron Paul, libertarian (sort of), enemy of hairbrushes everywhere. Paul launched his campaign as the candidate who could combine the grass-roots support of his father’s libertarian true believers with a more mainstream Republican appeal. So far, however, it seems he’s alienated both groups.

    Expected strategy: Paul will likely play up the anti-big government, surveillance-state positions that prompted Time magazine to once label him “the most interesting man in politics”. Given how his campaign has struggled in the past few months, he could come out swinging at the other candidates. At this point, he has little left to lose.

    Win a point if: He mentions the “Washington machine”. Like Cruz’s Washington cartel, Paul’s machine is the windmill he tilts at.

    Win a million points if: He’s wearing cowboy boots. The Texan has a penchant for fancy footwear, but such a debate fashion statement may be a bit too unorthodox even for Paul.

    Lose a point if: He has to talk about the Iran nuclear deal. It’s the kind of foreign policy topic that will only hurt him, no matter how he answers it.

    Chris Christie

    Who is he? Governor of New Jersey, former US attorney, bellicose YouTube star, Dallas Cowboys superfan. Christie could have presented a serious challenge to Romney in 2012, but he chose to sit out the race. He may have missed the presidential boat, as his popularity both in New Jersey and nationwide has precipitously dropped since then.

    Expected strategy: Donald Trump has stolen Christie’s “tell it like it is” mojo, so the debate may be his chance to win some of it back. Look for him to try to be blunt but not blustery, touting his ability to get things done in liberal-leaning New Jersey.

    Win a point if: He talks about his late Sicilian mother. He cites her as his “moral compass” – the way he tries to soften his brash image.

    Win a million points if: He mentions Bruce Springsteen. He used to be a huge follower, but the New Jersey musician very publicly skewered the governor in a January 2014 Tonight Show musical satire.

    Lose a point if: Hurricane Sandy comes up. The only thing Republicans remember from the natural disaster is Christie’s pre-2012 election embrace of Mr Obama – and they have never forgiven him for it.

    John Kasich

    Who is he? Ohio governor, former congressman, friend of U2’s Bono, 2000 presidential candidate who was beaten by a guy named Bush. Kasich is a late entry into the Republican field, but his post-announcement bounce was enough to sneak him into the final spot on the debate stage.

    Expected strategy: Kasich’s goal will be to appeal to the moderate, establishment Republican crowd, which puts another Bush squarely in his cross-hairs. If he contrasts favourably with the Floridian, and he could become the choice as the anti-Trump.

    Win a point if: He talks about finding God after his parents were killed by a drunk driver. It’s Kasich at his most heartfelt.

    Win a million points if: He leads the home-state Cleveland crowd in an O-H-I-O football chant.

    Lose a point if: Someone mispronounces his last name. The ch in Kasich is a hard k.

  • One Third Of All Chinese 'Gamblers' Have Shut Their Equity Trading Accounts

    It turns out making money trading stocks is not "easier than farmwork" and, as China Daily reports, a stunning 24 million Chinese 'investors' have shuttered their trading accounts since the end of June. Unlike in the U.S., where institutions dominate stock trading, retail investors are king in China, owning around 80% of listed stocks’ tradable shares, according to investment bank CICC. With the number of small investors holding stocks in their accounts sliding to 51 million at the end of July from 75 million at the end of June, it appears some grandmas and farmers have learned their lesson (for now).

     

    A-Share accounts with transactions have plunmged over 20% in the last few weeks…

     

    But, as The Wall Street Journal reports, China’s market selloff can safely be declared a rout.

    Nearly a third of the country’s individual investors—more than 20 million people—fled the plunging stock markets last month.

     

    The number of retail investors holding stocks in their accounts slid to 51 million at the end of July from 75 million at the end of June, according to China Securities Depository & Clearing Corp., the government agency that tracks accounts.

    But bank deposit is still the favorite investment tool for Chinese families. As China Daily notes,

    Up to 50 percent of disposable income will end up in families' saving account, according to data from World Bank. Due to recent volatility, it is unlikely that many families will move their money from saving account to stock market.

    As one newly minted stock trader explained…

    “Now I realize I can lose a lot of money very quickly,” he said, noting that threats to stocks include China’s slowing growth and the eventual end of government rescue efforts.

    But – there remains some who will never learn…

    “Where else can I put my money?” said Helen Lu. “Real estate is so expensive and beyond our reach, and there are no other good investment channels.”

    Sound familiar?

  • Participation Trophy Nation

    Submitted by Jim Quinn via The Burning Platform blog,

    What a pathetic nation of entitled whiners we’ve become. When did participation in a sport or any competition deserve a trophy?

    Trophies are for winners. Trophies are for the people who excelled. Trophies are for the people who worked harder than their competitors and won. The bullshit about every child being a special snowflake has permeated our society and created generations of momma’s boys and girls. They think they deserve a trophy for showing up at their jobs now. They think they deserve automatic B’s for showing up at college classes. They think they deserve pay raises because they came to work.

    You get ahead in life by hard work, using your brain, and refining your social skills. The free shit army mentality permeating our culture drives the participation trophy bullshit. Real free market capitalism (not the crony capitalism/socialism) has winners and losers. Losers need to work harder to become winners. Not in America today. The losers have a million excuses and think they deserve exactly what the winners have achieved. 

     

     

    Via The Daily Caller's Alex Pfeiffer,

    On HBO’s return of “Real Sports with Bryant Gumbel” Tuesday night, Bernard Goldberg looks into the current culture of handing out trophies to children just for showing up, and how this trend potentially leads to damaging psychological effects.

     

    “We want to make each child feel special,” says Brian Sanders, president of i9 Sports, the largest youth sports franchise in the nation.

     

    How does he make them feel special? By giving them all trophies.

     

    At an event outside Tampa, Fla. with 650 kids in attendance all will receive trophies, there is a division champion award and everyone else receives an “All-Star” trophy, both prizes are the same size.

     

    This isn’t just a phenomenon with his sports league. Janet Anderson is the regional commissioner in Los Angeles for AYSO Soccer and she told Goldberg for her 1,200 under-eight players, “If there name is on the roster, they get a trophy.”

     

    This means that players who don’t even show up can receive an award. On top of that, her league doesn’t keep score, no one is a loser.

     

    And what happened when Anderson decided to stop giving trophies to all participants for players over age eight? “Some parents went out and bought their own trophies for the whole team,” explained Anderson to Goldberg.

     

    It isn’t just children who are winners. The trophy industry now has sales around $2 billion at the retail level, says Scott Sletten of JDS Industries, one of the world’s largest trophy wholesalers. Sletten’s parents started the South Dakota business in 1972. Then, the mom-pop shop had sales of $20,000 to $40,000 a year. JDS now has sales of over $50 million a year.

     

    This culture arises out of a movement beginning in the late 20th Century to push the importance of self-esteem in education. “The state of California had a task force in the 1980s to study self-esteem, and we thought especially for kids in struggling communities if we just told them they were great, they would believe it, and then they could achieve more because they were certain they were great,” said researcher Ashley Merryman.

     

    This movement has apparently spiraled out of control. “Preschoolers sometimes now sing a song to the tune of ‘Frère Jacques’ that goes like this, ‘I am special I am special look at me look at me,’” according to San Diego State University professor Jean Twenge.

     

    This push to make every child feel special leads to problems in college. A study highlighted in Goldberg’s report shows that a third of college students say they deserve a B grade as long as they attend most classes in a course.

     

    Dr. Robert Cloninger, professor of psychiatry at Washington University in St. Louis School of Medicine has been studying the effects of rewards with rats in mazes. He found that rats that received food just for working their way through the maze were lazy. “They will not be fast runners to get to the trophy, and they will quit easily the moment they are no longer getting rewarded.”

     

    He concludes that children won’t be able to succeed if we pretend that they don’t fail. Cloninger says, “We have to get over the notion that everyone has to be a winner in the United States, it just isn’t true.”

    *  *  *

    Trophies for all. Do it for the chilrun. We must boost the self-esteem of losers so they think they are winners.

  • Payrolls Preview: Goldman Expects Seasonal Bounce In Jobs But Warns Wage Growth May Disappoint

    Via Goldman Sachs' Karen Heichgott,

     We forecast nonfarm payroll growth of 225k in July, in line with consensus expectations. Many labor market indicators were softer in July, but some important service sector indicators, such as ISM nonmanufacturing employment, were significantly stronger. On balance, we expect job growth roughly consistent with the 223k increase in June.

     

     

    We expect the unemployment rate to hold steady at 5.3%. Participation should at least partially rebound following an unexpected dip in June that likely reflected calendar effects. Finally, average hourly earnings are likely to rise 0.2% month-over-month in July.

    We forecast nonfarm payroll job growth of 225k in July, in line with consensus expectations. Reported job availability, the employment components of most manufacturing surveys, and ADP employment growth softened, but the employment components of most service sector surveys improved, particularly the ISM nonmanufacturing survey, which surged to its strongest level since 2005. Overall, the July data point to a gain roughly in line with the 223k increase in June.

    Arguing for a stronger report:

    •     Service sector surveys. The employment components of service sector surveys were broadly positive in July. The employment components of the ISM nonmanufacturing (+6.9pt to 59.6), Dallas Fed (+4.5pt to +10.1), Richmond Fed (+2.0pt to +12.0), and Markit PMI surveys rose, while the employment component of the New York Fed index (-2.9pt to +17.2) declined. Service-sector employment gains rose to 222k in June and averaged 195k over the last year.

    Arguing for a weaker report:

    •     Manufacturing employment indicators. The employment components of almost all of the major manufacturing surveys weakened in July. The employment components of the ISM manufacturing (-2.8pt to 52.7), New York Fed (-5.5pt to +3.2), Richmond Fed (-5.0pt to +1), Kansas City Fed (-10.0pt to -19), Dallas Fed (-2.1pt to -3.3), Philly Fed (-4.2pt to -0.4), and Markit PMI surveys declined, while the employment component of the Chicago PMI survey improved slightly. Payroll employment growth in the manufacturing sector picked up a bit to 4k in June, just below the average gain of 6k per month seen over the last year. Given that the manufacturing sector is more exposed to international trade than the services sector, the recent softness in manufacturing indicators could in part reflect the appreciation of the dollar.
    •     Job availability. The Conference Board's labor differential—the net percent of households reporting jobs are plentiful vs. hard to get—worsened by 1.2pt to -6.0 in July but remains near its post-recession high.
    •     ADP report. ADP employment rose 185k in July, below consensus expectations. In general, initial print ADP estimates have not been strong predictors of initial print totalpayroll gains reported by the Labor Department. However, we have found somewhat stronger correlations between ADP and nonfarm payrolls for some industries, in particular trade, transportation and utilities, which saw a relatively small gain of 25k in the July ADP report.

    Neutral factors:

    •     Jobless claims. The four-week moving average of initial jobless claims in the payrolls reference week remained roughly unchanged at 279k.
    •     Online job ads. According to the Conference Board's Help Wanted Online (HWOL) report, which we mainly see as a leading indicator, both new and total online job ads rebounded in July following large decreases in June. Although online job ads have risen over the past year, the trend over the past three months has slowed.

    We expect the unemployment rate to hold steady at 5.3% in July, from an unrounded 5.285% in June. The headline U3 unemployment rate declined by 0.2pp in June, while the broader U6 underemployment rate declined by 0.3pp to 10.5%. Looking further ahead, we expect U3 to reach 5% by early 2016 and U6 to reach our 9% estimate of its full employment rate by the end of 2016. The participation rate showed a surprising drop of 0.3pp in June to 62.6%. However, the decline likely resulted in large part from a calendar effect caused by the timing of the reference week relative to the end of the school year (Exhibit 1), and we therefore expect an at least partial rebound in July.

    Exhibit 1: Calendar Effects Probably Depressed Participation in June

    We expect a 0.2% increase in average hourly earnings for all workers. While the July print should reflect some bounce-back from the flat read in June, this will likely be offset by the late timing of the reference week within the month. Average hourly earnings for all workers rose 2.0% over the year ending in June, while average hourly earnings for production & nonsupervisory workers rose 1.9%. Our Wage Tracker also stands at 2.0% year-on-year as of 2015Q2. While we expect wage growth to pick up somewhat by year-end, it will likely remain well below our 3.5% estimate of the full employment rate.

    Recent data on wage growth have disappointed expectations. Our GS Wage Tracker stands at 2.0% year-on-year, showing no improvement from its average value over the past six years. Although some special factors in recent ECI and average hourly earnings data might have resulted in an unduly pessimistic view of wage growth in Q2, the broader trend remains quite subdued. We think the Fed would take comfort from a pickup in wages, as the level of wage growth provides a useful cross-check on the amount of slack remaining in the labor market. Fundamentals argue for at least a modest improvement in wage growth in coming quarters, in our view. Upcoming changes to state minimum wage laws will probably not move the needle on national aggregate wage metrics.

  • Let The Kool Aid Flow: Bank Of America "Predicts" No Recession In The Next Decade

    One year ago, as part of its always entertaining long-run forecasting exercise, Bank of America predicted that GDP growth in 2015 and 2016 would be 3.3% and 3.4% respectively.

    Fast forward one year, when in its updated “long-run” forecast, Bank of America’s crack economist Ethan Harris admits he was off by “only” 30% in his prediction of next year’s GDP, and instead of 3.3%, he now “forecasts” 2015 GDP to be… 2.3%.

    Not only that, but BofA has now also taken down all over its medium-term GDP forecasts lower by 0.4% and its terminal growth rate is now down 10% from 2.2% to 2.0%. Expect next year to see the first sub 2% potential growth rate of the US.

    This is how he justified his dramatic overestimation of US growth in just 12 months:

    1.We expect real GDP growth to converge to potential growth after 2016, which we expect to be around 2.0%.
    2. We expect that the long-run unemployment rate (the NAIRU) resides around 5.0%, due in part to demographic factors.
    3. We expect the Fed to hit its 2% target for the PCE deflator by 2018.
    4. We expect interest rates to converge to slightly lower long-run levels due to ongoing fiscal headwinds and lower potential growth.

    Compare these revised assumptions to what he penned just one year ago here.

    But the biggest laugh line, like last year, is the following:

    Obviously, there is considerable uncertainty in forecasting many years out, so these should be viewed as rough baseline numbers. For example, if history is our guide, at some point in the next decade the US will experience a recession, but predicting a recession far in advance is almost impossible. We plan to update this table on a regular basis.

    So to summarize, the chief economist of a TBTF bank was off in his one year forward “forecast” by 30%, but because prediction a recession “far in advance”, even if in reality one may very well already be taking place, he would rather just assume 2% or greater growth for the next decade, and just leave it at that.

    Because clearly Bank of America’s clients don’t pay with millions of soft dollars for someone to actually tell them the truth.

  • Mapping The Rising Poverty Of The U.S.

    Concentrated poverty in the neighborhoods of the nation's largest urban cores has exploded since the 1970s.

    The number of high poverty neighborhoods has tripled and the number of poor people in those neighborhoods has doubled according to a report released by City Observatory…

    As Gizmodo explains, the following maps created by Palmer use red and green arrows to indicate growth in wealth and poverty between 1970 and 2010. Green lines point down to indicate a decrease in poverty, while red lines slope up to represent a growth in poverty. Their length indicates the size of the change.

    Map source: LabratRevenge.com

    As City Observatory concludes,

     To be poor anywhere is difficult enough, but a growing body of evidence shows the negative effects of poverty are amplified for those who live in high-poverty neighborhoods – places where 30 percent or more of the population live below the poverty line. Quality of life is worse, crime is higher, public services are weaker, and economic opportunity more distant in concentrated poverty neighborhoods.

     

     

    Critically, concentrated poverty figures prominently in the inter-generational transmission of inequality: children growing up in neighborhoods of concentrated poverty have permanently impaired economic prospects.

    *  *  *

    Read the full dismal report here (and remember stocks are at record highs and initial jobless claims at 40 year lows)…PDF here

    *  *  *

    While there are obvious patterns of green and red in very city, the overall trend is telling: poverty is very much on the rise.
     

  • The Sweet, Sickly Stench Of QE 'Success'

    Submitted by Grent Williams via TTMYGH.com,

    Six years ago, hardly anybody outside financial circles had any idea what Quantitative Easing was – hell, many within financial circles had no idea what QE entailed.

    The Fed, and the BoE did the heavy lifting in explaining it to Western audiences (Japan had been doing it so long that its citizens were bored of it and paid little attention when iterations 16, 17 and 18 were rolled out in recent years) with then-Chairman of the Federal Reserve, Ben Bernanke, leading the way as only he could:

    (Jackson Hole Speech, 2010): The channels through which the Fed’s purchases affect longer-term interest rates and financial conditions more generally have been subject to debate. I see the evidence as most favorable to the view that such purchases work primarily through the so-called portfolio balance channel, which holds that once short- term interest rates have reached zero, the Federal Reserve’s purchases of longer-term securities affect financial conditions by changing the quantity and mix of financial assets held by the public.

    Specifically, the Fed’s strategy relies on the presumption that different financial assets are not perfect substitutes in investors’ portfolios, so that changes in the net supply of an asset available to investors affect its yield and those of broadly similar assets. Thus, our purchases of Treasury, agency debt, and agency MBS likely both reduced the yields on those securities and also pushed investors into holding other assets with similar characteristics, such as credit risk and duration. For example, some investors who sold MBS to the Fed may have replaced them in their portfolios with longer-term, high-quality corporate bonds, depressing the yields on those assets as well.

    Yeah, I know.

    Others took a swing at explaining QE in terms more accessible to the layman (and woman):

    (The Economist): To carry out QE central banks create money by buying securities, such as government bonds, from banks, with electronic cash that did not exist before. The new money swells the size of bank reserves in the economy by the quantity of assets purchased—hence “quantitative” easing. Like lowering interest rates, QE is supposed to stimulate the economy by encouraging banks to make more loans. The idea is that banks take the new money and buy assets to replace the ones they have sold to the central bank. That raises stock prices and lowers interest rates, which in turn boosts investment.

    But the general narrative that the general public was beaten over the head with by central bankers and politicians was, essentially this:

    We are going to pull a few levers and create money which is going to solve all the problems we face. Don’t worry, there will be no negative effects as a result of this policy. We will be able to maintain full control of everything and, when the time comes, we will gracefully exit the program and go back to the way things used to be just as soon as everything is fixed. In the meantime, carry on with your lives, go out, spend money, borrow more and leave the worrying to us.

    The campaign to take a complicated concept and dumb it down sufficiently for a public that really didn’t want to have to do the mental gymnastics required to understand its implications had one significant tailwind – complicity on the part of the public. They wanted to be told it was all going to be OK and they were positively inclined towards the idea of ‘free’ money being printed which would, in turn, lessen their own chances of being directly impacted by the economic downturn which had come so perilously close in 2008.

    Those in charge of designing and implementing QE programs knew that it was all too hard for the public to understand and they played that knowledge brilliantly.

    Unfortunately for them, they were wildly successful.

    The public neither knows nor cares what QE actually is. All they know is that, optically at least, it has worked because a) they are being told it has and b) the stock market is going up.

    That’s essentially been the extent of the burden of proof.

     

    They don’t understand this:

    Or this:

    But here’s where the success in creating the narrative that free money does no harm and has no unintended consequences turns into a potential disaster.

    In the UK, left-winger Jeremy Corbyn was a last-minute addition to the leadership ballot for the Labour Party (US readers can think in terms of the Democratic Party nomination) – thrown into the mix to supposedly ‘broaden the debate’.

    Well he’s broadened it alright:

    (UK Daily Telegraph): the joke has backfired. Mr Corbyn is now the clear front-runner, and on Thursday the bookies installed him as the favourite.

    Oops!

    Corbyn’s own understanding of economics is on par with that of the average British citizen – which is perfectly fine – however, it’s what he’s doing with that knowledge that makes him far more dangerous.

    Ladies and gentlemen, I give you; People’s QE:

    (UK Independent): Jeremy Corbyn said that future rounds of the monetary stimulus should be redirected from the financial sector to brick-and-mortar projects.

    “I am calling for a people’s quantitative easing – and asking my fellow candidates to join me in that call,” he wrote in an article for Huffington Post UK.

    “The Bank of England must be given a new mandate to upgrade our economy to invest in new large scale housing, energy, transport and digital projects.

    Jeremy Corbyn, MP for Islington North“This would give our economy a huge boost: upgrading our outdated infrastructure and creating over a million skilled jobs and genuine apprenticeships.”

    Corbyn has been convinced that QE is a free ride, just like the majority of the electorate and so, of course, he will promise them more of what he knows appeals to them.

    And, if they get the chance, they will vote for him. Of course.

    (Jeremy Warner): …It sounds a bit like The X Factor – perhaps we could get Simon Cowell to chair the MPC live on TV and we could all text in to say how much cash we want the Bank of England to print this month. It turns out, however, that the idea is for the Bank to “be given a new mandate to upgrade our economy to invest in new large-scale housing, energy, transport and digital projects”. 

    Mark Carney might well feel he has enough to do already, what with controlling interest rates, inflation and regulating the City. But, heck, in a few spare hours on a Friday afternoon, he could just print a couple of hundred extra billion, and use the money to start building publicly-owned housing estates. Yet a few hundred years of history suggest that central banks financing governments directly creates inflation, and another few hundred suggest that state-owned companies don’t usually work well.

    Jeremy Warner’s warning was stark – its implications terrifying:

    (Jeremy Warner): Everything about “Corbyn-omics” is delusional. Unfortunately, that does not mean it does not have an audience. By September, Mr Corbyn might well be leading the Opposition – or at least be shadow chancellor under Mr Burnham.

    The success of the narrative created around QE; that it is the mythical ‘free lunch’ that we all intuitively know can’t exist but secretly hope does, has played perfectly to the public and now, having endured for two electoral cycles, the next wave of politicians also believe it will have no consequences and are actually using it when planning the message they feel will endear them to the electorate.

    What plays better than free money?

    The same phenomenon will be front and center again tonight when the first GOP debate takes place with billionaire reality TV star, Donald Trump front and centre.

    Nobody is better equipped to pander to a public who desire impressive promises of handouts which bear little or no scrutiny, as this remarkable excerpt from The Guardian demonstrates:

    (UK Guardian): “Asked recently what he would replace Obama’s signature healthcare law with, [Trump] replied: “Something terrific.”

    Who wouldn’t vote for something terrific?

  • Oil Trading "God" Loses $500 Million In July On Commodity Rout

    Back in December 2014, when crude oil first crashed into a bear market and traders were desperately looking under nook and cranny for the first casualty of the commodity collapse, they found it in the face of oil trading “god”, Andy Hall, best known for seeking $100 million in compensation in 2008 from Phibro’s then-owner Citigroup, who would leave his long-term employer Phibro by the end of 2014 for the simple reason that after 113 years of operation, Phibro would liquidate in the US, having been unable to find a buyer (with rumors circulating that Hall’s trading P&L did not exactly help the company’s long or short-term prospects).

    While Hall did sever his relationship with the liquidating Phibro (and may have accelerated its collapse with his bullish oil bets), he would keep running his own personal hedge fund, the $3 billion Astenbeck Capital, which may have been Hall’s Phibro bearish oil “hedge” and emerged largely unscathed from the 2014 commodity rout because “Hall curtailed bets and shifted to holding cash.”

    However, 8 months later, with oil crashing again, and without Phibro to serve as a natural hedge, suddenly Andy Hall is in trouble. Again.

    It appears that after the great collapse of 2014, the oil trading “god” refused to learn from his mistakes, and was convinced that oil would promptly rebound up to its historic levels. His bullishness was evident in his latest letter to investors (attached below) in which we found that both his long-term oil price outlook…

    The U.S. shale oil resources which are profitable at $65 WTI simply are not large enough to offset the declining production in these other areas that will result from oil being at that level. At $65 WTI, the economically recoverable oil resource of the lower 48 states in the U.S. is about 70 billion barrels of oil. This would support production of between 9 and 9.5 million bpd – about today’s level. To grow production meaningfully would require prices closer to $80. (Interestingly though, prices much higher than $80 do not significantly increase the economically recoverable resource.)

     

    In summary, global oil prices will not be capped by the average cost of producing U.S. shale oil. U.S. shale oil production costs lie along a spectrum and while the best producers can make adequate returns at $65 WTI many others cannot. Furthermore, in the longer term a significant proportion of non-U.S. shale oil production require prices higher than $65 WTI to sustain investment. Finally, U.S. shale oil producers cannot produce enough oil at $65 to offset the production decline that would occur elsewhere in the world over time at that price.

    … as well as short-term…

    The second half of the year will see a strong seasonal uptick in global oil demand. Oil demand in Q3 and Q4 of 2015 should be some 1.7 and 2.9 million bpd higher respectively than in Q2. Meanwhile year over year U.S. production growth has slowed and production is now starting to decline sequentially. It will continue to decline through the balance of the year (barring significantly higher prices). Non-OPEC production growth elsewhere in the world will also slow through the balance of 2015. By December of 2015 year over year non – OPEC production growth will be a negative 1.7 million bpd compared to a positive 2.7 million bpd in December of 2014.

     

    With global oil consumption rising through the second half of the year at the same time as non-OPEC supply growth is stalling and with OPEC essentially at full capacity, the call on OPEC production will exceed their ability to meet it. This will result in falling global oil inventories during the balance of 2015 and in 2016.

     

    Meanwhile, Saudi Arabia is fighting a proxy war with Iran in neighboring Yemen. It is also facing an existential threat from ISIS which is endeavoring to stir up sectarian unrest in the oil producing east of the country – home to most of Saudi Arabia’s large Shiite minority. Much of the rest of MENA is in turmoil. It’s not unreasonable to say that the geopolitical risks in the major oil exporting region have  seldom been higher. Yet oil prices currently have little or no risk premium and are – furthermore – below the longer run marginal cost of production. Because of this and given that the underlying fundamentals continue to improve, price risks are skewed to the upside in our view.

    … were quite bullish. They have also been, so far, dead wrong. And as Reuters reports, after two consecutive months of 3% losses in May and June at which point he was up just 2% for the year, July was by far the cruelest month in history for the oil trader, a month in which he suffered a whopping 17% loss. To wit:

    Oil trader Andy Hall’s hedge fund lost about 17 percent in July after failing to anticipate sliding crude prices as U.S. inventories piled up, a letter to its investors showed on Thursday.

     

    The monthly loss was the second largest in the history of his Connecticut-based Astenbeck Capital Management firm, performance data accompanying the letter showed. The decline cut total assets under management at Astenbeck to about $2.8 billion, down about $500 million from June.

    So after being up just barely up for the year in June and suddenly down 15% for 2015 a month later, having lost half a billion in just one month, it is a virtual certainty that the redemption requests are coming in. Worse, with Hall no longer having any hedges to cushion the ongoing oil crash (and in fact, it appears he is levered to the upside), his fund may be margin called to death soon enough even in the absence of major redemptions.

    Which begs the questiton: will Hall no longer be seen as an oil trading “god” if Astenbeck is promptly shut down, and the “god” blows up twice in less than a year? Perhaps instead of “god”, a more appropriate animalistic comparable is “pony” with an undiversified bag of tricks.

    His June letter to investors is below.

  • Is Trump The Democrat 'Wolf' In GOP Clothing?

    When we earlier noted the change of course for the GOP as RNC Chair Riebus showed Donald Trump much love, we wondered why the sudden shift of attitude and comment on being a Republican nominee? Well, perhaps, just perhaps, there is a reason why Republican leadership is vying for Trump's 'support'… As WaPo reports, former president Bill Clinton had a private telephone conversation in late spring with Donald Trump as he neared a decision to run for the White House, according to associates of both men. While there are no specifics about the call, we are reminded that Trump has also donated to Hillary Clinton’s Senate campaigns and to the Clinton Foundation.

    Trump, a longtime acquaintance of the Clintons, both of whom attended the businessman’s third wedding in 2005, reportedly had a private telephone conversation in late spring with former President Bill Clinton at the same time that the billionaire investor and reality-television star was nearing a decision to run for the White House, according to associates of both men. As The Washington Post reports,

    The talk with Clinton — the spouse of the Democratic presidential front-runner and one of his party’s preeminent political strategists — came just weeks before Trump jumped into the GOP race and surged to the front of the crowded Republican field.

     

    The revelation of the call comes as many Republicans have begun criticizing Trump for his ties to Democrats, including past financial donations to the Clintons and their charitable foundation.

     

    …

     

    “Mr. Trump reached out to President Clinton a few times. President Clinton returned his call in late May,” a Clinton employee said. “While we don’t make it a practice to discuss the president’s private conversations, we can tell you that the presidential race was not discussed.”

     

    One Trump adviser said Clinton called Trump, but the adviser did not provide specifics about how the call came about.

     

    People with knowledge of the call in both camps said it was one of many that Clinton and Trump have had over the years, whether about golf or donations to the Clinton Foundation. But the call in May was considered especially sensitive, coming soon after Hillary Rodham Clinton had declared her own presidential run the month before.

     

    …

     

    Clinton has reserved her sharpest attacks for former Florida governor Jeb Bush and other candidates she has called out by name for their policies on immigration, abortion and other issues.

     

    For his part, Trump said little about Clinton until recent weeks.

    *  *  *

    The Hill's Brent Budowsky also noted…

    What could Trump do in the campaign that would help the Clintons the most? First, he would personally attack leading GOP candidates in 2016, using derisive language that would almost surely find its way into Hillary Clinton campaign ads if she were to become the Democratic nominee. Check that box, right? Next, Trump could deeply offend Hispanic voters who widely respect Hillary Clinton already. Check that box, too!

     

    Similarly, if Trump tied the GOP in knots by prolonging the Republican nominating process, and prolonged the process of Republicans attacking Republicans, that would be a huge benefit for Hillary Clinton. Check that box. And to the degree that newer faces in the Republican Party who could become the strongest challengers to the Democratic nominee in November, such as Sen. Marco Rubio (R-Fla.) and Wisconsin Gov. Scott Walker (R), found their message drowned out by Trump, the big winner would be Hillary Clinton! Check that box, too.

     

    Of course the grand slam for Hillary Clinton would be if Donald Trump were to run as a third-party candidate in 2016. Remember how H. Ross Perot running in 1992 was vital to the election of Bill Clinton and set the stage for his highly successful and fondly remembered two-term presidency? It would be highly unlikely that this box will ultimately be checked by Team Clinton, but stranger things have happened.

     

    Does this suggest that Donald Trump is a Clinton plant in the current campaign? Of course not, but my tongue is only halfway planted in my cheek by raising this thought, which is delightful for Democrats and deep down must be scary for Republicans.

    *  *  *

    With Hillary facing plunging poll numbers and FBI probes, is The Donald the Democratic nominee in waiting?

  • Republican "Losers" Debate Pits Rick Perry Against Other "B List" GOP Hopefuls

    (Click picture to watch live. Note that Fox requires a cable subscription log-in)

    The “main event” GOP debate isn’t until 9 p.m. ET on Thursday, but for some, the anticipation surrounding Donald Trump’s debate debut will be too much to handle.

    For those folks, there’s the so-called “undercard”, which kicks of four hours earlier and should suffice as an appetizer until the Trump-sized entree is served up piping hot on Fox later this evening. The candidates below the blue cut-off point in the following chart will be participating.

    (Chart: National Journal)

    And while they’ll be no Donald in the “losers’ debate”, they’ll be plenty of Rick (actually there’s two of them), and for those who remember Governor Perry’s famous “oops” moment, that should be enough to guarantee that the consolation round of the first Republican debates of the 2016 election cycle still provides for plenty of entertainment. 

    Here’s a preview from Politico:

    How can you not feel a little bit sorry for Rick Perry? Arguably the most successful governor—certainly the longest serving—of a major state crucial to whatever presidential electoral prospects the GOP has left, and he’s relegated to the losers’ round of the 2016 debates, a forum undoubtedly sponsored by Tyrion Lannister and the Bad News Bears.

     

    But the former Texas governor is not alone.  An impressive array of talent will be alongside him, trying to pretend that they don’t feel like the kid picked last for the dodge ball team.  (Some people still haven’t gotten over it these days—but we try.) 

     

    There’s the only woman in the race, and one of the few with practical business experience that does not include firing Dennis Rodman on TV: Carly Fiorina. There’s Gov. Bobby Jindal, another accomplished governor and a onetime top-tier vice presidential contender whose staunch conservatism and moving son-of-immigrants story should stand out in a political party that’s knocked for being whiter than a Kenny Rogers concert in Vermont.  And next to him will be Sen. Lindsey Graham,  a seasoned legislator and John McCain clone, joined by his now famous cellphone and his bizarre Bill-Clinton-wishes-he’d-thought-of-that rotating first lady proposal. 

     

    Then there’s Rick Santorum, a finalist in 2012, who is about a point away from former Virginia Governor Jim Gilmore, whose poll numbers for the moment suggest he’d have a hard time beating Bill Cosby.  And let’s not forget New York’s George Pataki—one of the few if not the only Republican ever elected statewide in New York since the invention of the iPhone. No, there’s nothing to be embarrassed about by being in this crowd.

     


     

    Meanwhile in the “winners circle” are two guys who’ve never worked a single day in public office, a senator who wears baseball uniforms to display his qualifications for the White House and a former governor best known these days for writing about his yo-yo dieting and his love of gravy (I think there may be a connection there.)

     

    As you can see from the following graphic, the difference between making the prime time debate versus the “dinner time” version came down to the thinnest of margins for some participants:

    (Graphic: National Journal)

    *  *  *

    Bonus: “Oops“

  • 3 Warnings For Market Bulls

    Submitted by Lance Roberts via STA Wealth Management,

    Lowry Sees Bull Market Ending 

    There is a very interesting podcast at Financial Sense with Richard Dickson, who is the Senior Market Strategist at Lowry Research. The reason that this particular interview is so interesting is that Lowry Research has been one of the primary supports for Jeff Saut's uber bullish view on the markets over the last couple of years. To wit:

    "[May 2, 2014] In fact, the SPX has been in a flat-line pattern for almost two months, having only gained 0.03% since March 7th, causing many Wall Street wags to proclaim a major "top" is at hand. However, as Lowry's writes:

     

    'The 88-year history of the Lowry Analysis shows that such stalemates are relatively common developments during most bull markets. They simply reflect periods in which investor buying enthusiasm is temporarily fatigued, at the same time that sellers are reluctant to part with their stocks, in anticipation of eventually higher prices. Thus, there is not enough Demand to push prices up to new bull market highs, and there is not a strong enough desire to sell to drive prices sharply lower. Eventually, sideways trading patterns are usually resolved through the process of a short-term correction, in which investors become impatient and sell, pushing prices low enough to revitalize buying enthusiasm and launch the next leg of the bull market.'

     

    Obviously I agree with the astute Lowry's organization, and I will say it again, 'It is too early to know if this is the beginning of a 10%-12% correction.'"

    That was so last year. However, very similarly this year, markets have once again been locked in a stalemate with "buyers" fatigued and "sellers" unwilling to part with stocks from fear of missing the next leg higher. 

    So what is Mr. Dickson saying now? 

    Dickson says when the broader indexes are approaching a top, the advance is led by fewer and fewer stocks, which has been seen at every major market peak they've studied.

     

    This phenomenon registers in the market's widely followed advance-decline line, however, Dickson points out that relative under-performance by small-cap stocks often provides an earlier warning signal to potential trouble ahead. He notes that small-cap stocks began to deteriorate almost a year ago, and many have already entered bear market territory. This is not healthy action, he says.

     

    Based on research conducted at Lowry, this predicts a market top within 4 to 6 months. In the interim, Dickson will be watching a variety of other technical indicators for confirmation, such as buying power and selling pressure.

    Here is a chart of the advance-decline line and small-cap performance relative to the S&P 500. 

    SP500-Adv-Decline-080615

     

    McClellan: Market Lacking "Escape Velocity"

    Tom McClellan, a family famous for the "McClellan Oscillator" recently issued a note discussing the importance of the number of advancing and declining issues and "escape velocity." To wit:

    "To understand this important point, we need to explore and define a principle of rocketry known as 'escape velocity.' This term is variously (and sometimes confusingly) defined as the velocity which a projectile needs in order to escape the gravitational field of a planet or other body, and/or the velocity needed to achieve stable orbit as opposed to falling back down to Earth. My purpose here is not to defend either definition; for our purposes, the idea is the same, that there needs to be sufficient energy to keep from falling back down.

     

    The Summation Index can show us that. For this discussion I will be using the Ratio-Adjusted Summation Index (RASI), which factors out changes in the number of issues traded… the RASI gives comparable amplitude levels with which to evaluate available financial market liquidity."

    RASI July2015

    "The +500 level for the RASI is the important go/no-go threshold for this concept of 'escape velocity.'

     

    Since the 2009 bottom, the Federal Reserve has made sure that there was liquidity available to the financial markets, at least for the most part. The cutoffs of liquidity after both QE1 and QE2 led to vacuums in the banking system, and stock prices fell into those vacuums. The question for 2015 is whether Fed actions are going to take away the liquidity punch bowl, and create a problem for the next rally's ability to achieve escape velocity.

     

    We saw this principle of diminished liquidity back in 1998-2000, and again in 2007-08, as highlighted in this historical chart. When the RASI failed to climb back up above +500, it said that there were liquidity problems which ended up keeping the stock market from being able to continue itself higher."

    RASI 1998-2008bb

    "My leading indication from the eurodollar COT data says that we should expect a major top in August 2015, and so there is not all that much time left for the RASI to get back up above +500. An upturn from this oversold condition should be able to produce a marginally higher price high, but if it cannot produce a RASI reading above +500, then we will know that the end has arrived for the bull market."

    Effron: M&A Activity Looks A Lot Like 2007

    In a recent interview on CNBC, Blair Effron, co-founder of Centerview Partners and one of Wall Street's biggest dealmakers, highlighted the similarities between the current M&A environment to that of 2007. 

    Currently, M&A activity is at its highest level since 2007 with global volumes hitting $2.9 Trillion since the beginning of 2015. According to data from Dealogic, that is a surge of 38% as compared to the same period in 2014. 

    Importantly, Effron also notes that the high valuations paid for M&A deals are, in large part, being driven by the current low interest rate environment.

    Of course, with low interest rates, that means the majority of those deals are being funded by debt issuance. via WSJ:

    "According to Dealogic, the Americas accounts for 83% of global acquisition related bonds, with a record $241.7 billion issued so far this year, compared with just $62.6 billion this time last year. In Europe, 38% of all high-yield bond issuance in the first half of the year has been related to M&A activity, according to Credit Suisse."

    MA-DebtFinancing-080615

    That is an interesting point since that is the same argument for high stock valuations, stock buy backs and dividend issuance and the housing market. Given that the vast majority of analysts currently believe interest rates are on the verge of rising, logic would suggest that such will likely be a negative for the bullish mantra. 

    While we have seen this same game play out repeatedly before, this time is surely different…right?

  • Last Daily Show with Jon Stewart Airs Tonight

    Whether you love him or hate him, tonight marks Jon Stewart’s final taping of The Daily Show as he steps down as host – a position he’s held for 16 years. During that time, the show has won 20 Emmy Awards, two Peabody Awards, and Stewart even managed to win a Grammy for himself in 2005 for the recording of his audiobook, America, A Citizen’s Guide to Democracy Inaction.

    Despite the fact Stewart has always claimed The Daily Show is just a fake news show, the influence he’s had on politics and the media cannot be denied. 

    In October of 2004, Stewart appeared on CNN’s Crossfire where he heavily criticized the state of journalism and called the show’s hosts, Tucker Carlson and Paul Begala, “partisan hacks.” Stewart commented that the show failed to educate and inform its viewers by not taking politics seriously, stating that calling Crossfire a debate show is like “saying pro wrestling is a show about athletic competition.” In January of 2005, CNN announced the cancelation of Crossfire with CNN’s then-incoming president, Jonathan Klein stating, “I think he [Stewart] made a good point about the noise level of these types of shows, which does nothing to illuminate the issues of the day.”

    Stewart also announced a fake crowdfunding campaign to buy CNN back in July of 2014 after Rupert Murdoch offered $80 billion to buy its parent company, Time Warner. Stewart claimed that for a donation of $5 million, CNN would air a “24-hour, two-week hunt for your lost car keys.” 

    In March of 2009, The Daily Show lambasted CNBC for its shoddy reporting of the financial crisis of 2008. Stewart claimed the network dodged its journalistic duty by merely accepting information from corporations without bothering to investigate further into matters at hand. On March 12, Jim Cramer appeared on The Daily Show where Stewart told him, “I understand you want to make finance entertaining, but it’s not a fucking game. And when I watch that, I get, I can’t tell you how angry that makes me. Because what it says to me is: you all know. You all know what’s going on. You know, you can draw a straight line from those shenanigans to the stuff that was being pulled at Bear, and AIG, and all this derivative market stuff that is this weird Wall Street side bet.” That episode of The Daily Show garnered 2.3 million total viewers, and the next day The Daily Show website saw its highest day of traffic year-to-date.

    Stewart has also been an advocate for veterans and 9/11 first responders. He’s credited with breaking a Senate deadlock over a bill that would offer healthcare for 9/11 first responders, which passed three days after he featured a group of responders on the show. He also criticized a White House proposal to remove veterans with private insurance plans from the Department of Veterans Affairs rolls. The White House dropped the plan the next day.

    South African comedian, Trevor Noah, who has been a regular contributor to The Daily Show since December of 2014, will replace Stewart. He will begin his hosting duties on September 28. On Wednesday it was announced that Stewart’s Daily Show set will be put on display at the Newseum in Washington, D.C. 

    [original]

    EquityNet | The Leading Equity Crowdfunding Platform

  • Dow Dumps Almost 1000 Points From Highs To 6-Month Lows, Crude Carnage Continues

    Seemed appropriate…

    With 121 S&P 500 members now trading more than 20% off their highs…

    No real catalysts today – aside from Hilsenrath talking back Powell's dovishness, a terrible Challenger Jobs data point, moar crude carnage, and all the story stocks and media firms getting Baumgartner'd… Nasdaq was worst, Dow best but still a loser…

     

    The plunge was initially protected by a mysterious bid which failed and then anchored off JPY and WTI Crude…

     

    Desperate to get back to VWAP…

     

    Which left cash ugly on the day…Dow tested to 6mo lows – just short of 1000 points off the highs… Nasdaq worst on the day…

     

    And on the week… Small Caps are the biggest loser…

     

    Russell 2000 briefly went red for 2015

     

    Energy stock dip-buyers were out en masse….

     

    But credit was being dumped…

     

    Even as Energy credit risk is soaring – back near 2015 highs…almost 1000bps!

     

    VIX Soared on the day back above 14… (after an 11 handle just 2 days ago)

     

    Treasury yields tumbled today…leaving 30Y yields lower on the day…

     

    The US Dollar drifted very modestly lower… Cable saw a quick dump on BoE comments this morning….

     

    Commodities were mixed with gold and silver drifting higher and copper lower…

     

    Crude was clubbed again…

     

    Charts: Bloomberg

    Bonus Chart: Explain this 'signalling'!!

    h/t Jim A

    Bonus Bonus Chart: You Are Here…

  • TBTF Banks Lowering Down-Payments & Credit Standards To Keep High-End Housing Market Alive

    Submitted by Mike Krieger via Liberty Blitzkrieg blog,

    What do you do when even wealthy people begin to face an increasingly hard time purchasing a home in a vertical market completely disconnected from income trends? You reduce downpayments and lower credit standards, of course.

    Where have we seen this story before…

    From the Wall Street Journal:

    The nation’s largest bank by assets plans to announce Wednesday that it is lowering the minimum credit score and down payment it requires for mortgages as big as $3 million.

     

    The New York firm’s moves follow similar steps at Bank of AmericaCorp., Wells Fargo & Co. and other banks on requirements for “jumbo” mortgages—those that exceed $417,000 in most parts of the country or $625,500 in pricier markets. At the same time, some big banks are backing away from smaller loans where they see higher regulatory costs and litigation risks.

    Guess it’s gonna be shipping container apartments for everyone else.

     

    Since the financial crisis, a recovery in the mortgage market has faced several challenges, but the jumbo market—popular with well-heeled borrowers—has bounced back along with sales of higher-priced homes. In the second quarter, overall jumbo originations rose to an eight-year high of $93 billion, up 58% from a year ago, according to a preliminary estimate from industry newsletter Inside Mortgage Finance.

     

    By dollar volume, jumbo mortgages given out by lenders last year accounted for about 20% of all first-lien mortgages, used mostly to purchase or refinance a home, according to Inside Mortgage Finance. That is up from 5.5% in 2009. The last time jumbo mortgages accounted for a larger share was in 2005.

    2005…got it.

    For jumbo mortgages, J.P. Morgan plans to lower the minimum FICO credit scores it requires to 680 from 740 for loans on primary single-family purchases, second homes and certain refinances on those properties.

     

    The increase in jumbo lending underscores a housing recovery concentrated in higher-priced homes. Sales of existing single-family homes priced between $750,000 and $1 million, for example, increased 21% in June from a year prior, according to the National Association of Realtors.

     

    Sales of homes priced between $100,000 and $250,000, in contrast, increased 12.5%, while those priced lower fell 3%.

    I don’t call this the oligarch recovery for nothing.

    Rising home values have helped give lenders confidence that lower down payments won’t leave borrowers at risk of owing more on their homes than they will eventually be worth.

     

    J.P. Morgan’s changes, which go into effect Wednesday, will reduce minimum down payments for some borrowers to 15% of the purchase price for single-family homes serving as the borrower’s primary residence, down from 20% currently. That change applies to mortgages between $1.5 million and $3 million; the bank last year made the same change for jumbo mortgages up to $1.5 million.

     

    The bank also is lowering down-payment thresholds for jumbo mortgages used for second homes, such as vacation homes, and certain two- to four-unit properties. The bank says the changes simplify its offerings.

     

    Several large banks have recently lowered their jumbo-mortgage requirements. Wells Fargo last year cut the minimum down payment it requires to 10.1% from 15% for jumbo mortgages of up to $1 million.

     

    In June, Bank of America began allowing first-time home buyers, which it defines as people who haven’t owned a home for at least three years, to make 15% down payments for jumbo mortgages of up to $1 million. The bank previously excluded this group of buyers from its 15% down-payment option, which it rolled out in 2013.

    Gotta love these banks. They just make shit up. Somehow “not owning a home for three years” = first time homeowner. Aren’t you glad we bailed them out?

  • Analysts Give Up On "Man-Made" China Data: It's "A Fantasy" That "No One Believes"

    When China reported that its economy grew 7% in Q2 – spot-on Beijing’s target – virtually no one believed it.

    The veracity of the country’s economic data has long been the subject of debate and when FT called out the country’s National Bureau of Statistics for employing what we called “deficient deflator math” on the way to understating inflation and overstating output, China’s statistics bureau responded, saying that although there was “room for improvement,” the deflator wasn’t underestimated, GDP growth wasn’t overstated, and “both reflect the real situation.” 

    One could certainly be forgiven for insisting that the NBS is simply lying, because after all, the “real situation” looks like this:

    Charts: A. Gary Shilling’s Insight

    Given the above, it should come as no surprise that some analysts believe the actual rate of growth in China is closer to zero than it is to 7%. Here’s Reuters:

    China’s economy is growing only half as fast as official data shows, or maybe even slower, according to foreign investors and analysts who increasingly challenge how the world’s second largest economy can be measured so swiftly and precisely.

     

    But perhaps the biggest question is how a developing country of 1.4 billion people can publish its quarterly gross domestic product (GDP) statistics weeks before first drafts from developed economies like the United States, the euro zone or Britain, and then barely revise them later.

     

    “We think the numbers are fantasy,” said Erik Britton of Fathom Consulting, a London-based independent research firm and one of the more vocal critics of official Chinese data. “There is no way those numbers are even close to the truth.”

     

    The uncanny official calm in China GDP data may well be contributing to sceptics’ exit from Chinese assets just as the authorities struggle to manage a volatile stock market.

     

    Fathom, which decided last year to stop publishing forecasts of the official GDP release and instead publish what it thinks is really happening, reckons growth will be 2.8 percent this year, slowing to just 1.0 percent next year.

     

    Li Keqiang, now Chinese Premier, was cited in leaked U.S. diplomatic cables years ago from when he was Communist Party head in Liaoning province calling GDP figures “man-made” and unreliable. This remains a buttress for widespread scepticism.

     



    Fathom publishes a simple indicator based on three variables that Li said at the time he watched for a better view of how his local economy, and by extension the national one, was faring: electricity consumption, rail cargo volume, and bank lending.


    That implies a growth rate of 3.2 percent, and shows a significant decoupling from the official rate since late 2013 based on a plunge in rail freight volumes and below-trend growth in electricity production.


    “Clearly nobody believes the data,” said Sushil Wadhwani, a former Bank of England Monetary Policy Committee member and founder of Wadhwani Asset Management LLP.


    Wadhwani says he also looks at various proxies of China’s growth rate, which he deems are “pretty unreliable” as well and which suggest anywhere from 1.5 percent to about 5 percent growth.


     

    “I truly don’t know where we are in that range”, he said.

    Neither do we, but we suspect it’s closer to the low end and indeed, if the 35% rise in NPLs cited last week by Shang Fulin, chairman of China Banking Regulatory Commission, is any indication, things are getting a lot worse under the hood as the slumping economy causes loans to the manufacturing sector to sour at an unprecedented rate. 

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