- Trump's Cunning Plan Revealed
Donald Trump – Bigot, zealot, xenophobe, racist, hitler-ite? Or Donald Trump – cunning strategist who knows Americans better than the "leave us alone up here on our Hill" career politicians and their lackey liberal media partners?
You decide…
As YouGov reports, a majority of Americans say that they view Islam unfavorably, and even Democrats are almost twice as likely to view Islam negatively than positively.
One week ago the United States saw the deadliest terrorist attack it has seen since 9/11, after 14 people were killed in San Bernadino by Syed Farook and his wife Tashfeen Malik. In the wake of the attack Republican presidential candidate Donald Trump took his most aggressively anti-Muslim stance so far by calling for Muslims to be barred from entry into the United States. Though the United States has millions of Muslims, anti-Muslim sentiment has become increasingly common in public discourse.
YouGov/HuffPost's latest research shows that most Americans have an unfavorable opinion of Islam. 58% of Americans have an unfavorable opinion of Islam, and just over a third (35%) say that they have a 'very unfavorable' opinion of the religion. Only 17% of Americans view it positively. Democrats (27%) are the most likely to have a favorable opinion of Islam, but even they tend to say that they view Islam negatively. Among independents (58%) and Republicans (75%) most people have a negative view of Islam.
Under-30s (45%) are the least likely to have unfavorable opinions of Islam, but 65% of over-65s view Islam unfavorably.
So, is Trump merely reflective of the real American "values"?
Finally, here is Patrick Buchanan, of Buchanan.org, explaining the odd hypocrisy in the establishment's unhinged response to Trumps' call:
Calling for a moratorium on Muslim immigration “until our country’s representatives can figure out what the hell is going on,” Donald Trump this week ignited a firestorm of historic proportions.
As all the old hate words — xenophobe, racist, bigot — have lost their electric charge from overuse, and Trump was being called a fascist demagogue and compared to Hitler and Mussolini.
The establishment seemed to have become unhinged.
Why the hysteria? Comes the reply: Trump’s call for a temporary ban on Muslim immigration tramples all over “American values” and everything we stand for, including the Constitution.
But is this really true?
The Constitution protects freedom of religion for U.S. citizens. But citizens of foreign lands have no constitutional right to migrate. And federal law gives a president broad powers in deciding who comes and who does not, especially in wartime.
In 1924, Congress restricted immigration from Asia, reduced the numbers coming from southern and Central Europe, and produced a 40-year moratorium on most immigration into the United States.
Its authors and President Coolidge wanted ours to remain a nation whose primary religious and ethnic ties were to Europe, not Africa or Asia.
Under FDR, Truman and JFK, this was the law of the land.
Did this represent 40 years of fascism?
Why might Trump want a moratorium on Muslim immigration?
- Reason one: terrorism. The 9/11 terrorists were Muslim, as were the shoe and underwear bombers on those planes, the Fort Hood shooter, the Times Square bomber and the San Bernardino killers. And as San Bernardino showed again, Islamist terrorists are exploiting our liberal immigration policies to come here and kill us. Thus, a pause, a timeout on immigration from Muslim countries, until we fix the problem, would seem to be simple common sense.
- Second, Muslims are clearly more susceptible to the siren call of terrorism, and more likely to be radicalized on the Internet and in mosques than are Christians at church or Jews at synagogue. Which is why we monitor mosques more closely than cathedrals.
- Third, according to Harvard’s late Samuel Huntington, a “clash of civilizations” is coming between the West and the Islamic world. Other scholars somberly concur. But if such a conflict is in the cards, how many more millions of devout Muslims do we want inside the gates?
Set aside al-Qaida, ISIS and their sympathizers. Among the 1.6 billion Muslims worldwide are untold millions of followers of the Prophet who pray for the coming of a day when sharia is universal and the infidels, i.e., everyone else, are either converted or subjugated.
In nations where Muslims are already huge majorities, where are the Jews? Where have all the Christians gone?
With ethnic and sectarian wars raging in Afghanistan, Iraq, Syria, Turkey, Yemen, Libya, Nigeria and Somalia, why would we bring into our own country people from all sides of these murderous conflicts?
Many European nations — Germans, French, Swedes, Brits — appear to regret having thrown open their doors to immigrants and refugees from the Islamic world, who have now formed unassimilated clusters and enclaves inside their countries.
Ought we not explore why, before we continue down this road?
In some countries of the Muslim world, Americans who embrace “Hollywood values” regarding abortion, adultery and homosexuality, can get their heads chopped off as quickly as converts to Christianity.
In what Muslim countries does Earl Warren’s interpretation of the First Amendment — about any and all religious presence being banned in public schools and all religions being treated equally — apply?
When is the next “Crusade for Christ” coming to Saudi Arabia?
Japan has no immigration from the Muslim world, nor does Israel, which declares itself a Jewish state. Are they also fascistic?
President Obama and the guilt-besotted West often bawl their apologies for the horrors of the Crusades that liberated Jerusalem.
Anyone heard Muslim rulers lately apologizing for Saladin, who butchered Christians to take Jerusalem back, or for Suleiman the Magnificent, who conquered the Christian Balkans rampaging through Hungary all the way to the gates of Vienna?
Trump’s surge this week, in the teeth of universal denunciation, suggests that a large slice of America agrees with his indictment — that our political-media establishment is dumb as a box of rocks and leading us down a path to national suicide.
Trump’s success tells us that the American people really do not celebrate “globalization.” They think our negotiators got snookered out of the most magnificent industrial machine ever built, which once guaranteed our workers the highest standard of living on earth.
They don’t want open borders or mass immigration. They want people here illegally to be sent back, the borders secured, and a moratorium imposed on Muslim immigration until we fix the broken system.
As for the establishment, they are saying pretty much what The Donald is saying. To paraphrase Oliver Cromwell’s speech to the Rump Parliament: You have sat here too long for any good you have done here. In the name of God, go!
* * *
And if you still need further proof.. here are the numbers…
- Visualizing The World's "Hot" Money
Every year, roughly $1 trillion flows illegally out of developing and emerging economies due to crime, corruption, and tax evasion. This amount is more than these countries receive in foreign direct investment and foreign aid combined.
This week, a new report was released that highlights the latest data available on this “hot” money. Assembled by Global Financial Integrity, a research and advisory organization based in Washington, DC, the report details illicit financial flows of money from developing countries using the latest information available, which is up until the end of 2013.
Courtesy of: Visual CapitalistThe cumulative amount of this “hot money” coming out of developing countries totaled just over $7.8 trillion between 2004 and 2013. On an annual basis, it breached the $1 trillion mark each of the last three years of data available, which is good for a growth rate of 6.5% rate annually.
In Asia, illicit financial outflows are growing even quicker at an 8.6% clip. It’s also on the continent that five of the ten largest source economies for these flows can be found, including the largest offender, which is Mainland China.
How does this “hot” money leave these countries? Global Financial Integrity has calculated that 83% of illicit financial flows are due to what it calls “trade misinvoicing”.
It’s defined as the following:
The misinvoicing of trade is accomplished by misstating the value or volume of an export or import on a customs invoice. Trade misinvoicing is a form of trade-based money laundering made possible by the fact that trading partners write their own trade documents, or arrange to have the documents prepared in a third country (typically a tax haven), a method known as re-invoicing. Fraudulent manipulation of the price, quantity, or quality of a good or service on an invoice allows criminals, corrupt government officials, and commercial tax evaders to shift vast amounts of money across international borders quickly, easily, and nearly always undetected.
Trade misinvoicing accounted for an average of $654.7 billion per year of lost trade in developing markets over the data set covered by the report.
- White House Unable To Explain How Gun Control Will Stop Mass Shootings
Authored by Steve Watson, originally posted at PrisonPlanet.com,
The White House cannot name one single shooting incident that would have been prevented by gun control legislation.
As President Obama prepares executive action to pass further gun control legislation, one errant reporter asked the White House press secretary exactly how such proposals would have prevented any recent mass shootings.
Josh Earnest couldn’t directly answer the question and floundered around repeating the same talking points over and over again.
Reporter Byron Tau referred to a statement made by Sen. Marco Rubio that no mass shootings in recent memory would have been prevented by gun legislation, which even the Washington Post fact-checked as true.
“If not a single recent mass shooting would have been stopped by the kind of gun control measures you champion, are those the right approach to this problem?” Tau asked.
“Well, Byron, I think we’ve been pretty direct and upfront,” replied Earnest, not being very direct and upfront.
“…there is no piece of legislation that Congress can pass that would prevent every single act of gun violence,” Earnest added, avoiding the question.
“I think the case that we have made is one that rests primarily on our concern about national security and our careful consideration of common sense.” he stated, again avoiding the question entirely.
Earnest then diverted the talking point to the terrorist no-fly-list, prompting Tau to follow up, “Were any of the recent mass shooters on the ‘no-fly’ list?”
“Not that I’m aware of,” Earnest admitted. “You’ll probably have to ask the director of national intelligence to confirm that.”
The reporter stuck to the central issue at hand – that gun control legislation is not a fix for mass shootings.
“Can the White House point to a recent mass shooting that would have been stopped by a expanded assault weapons ban or stricter background checks?” Tau asked.
“The evidence seems to be that in all these recent mass shootings, these folks either passed background checks or were very determined to circumvent the strict gun laws that are already on the books.” the reporter added.
Indeed, The shooters at Virginia Tech, the Aurora Colorado movie theater, Fort Hood, Isla Vista, the Washington Navy Yard, the attempted mass killing at Arapahoe High School ALL passed background checks.
The shooter at Washington Navy Yard even managed to buy his firearm after the background check system was supposedly strengthened following the incident at Virgina Tech.
The BATF has also determined that Syed Rizwan Farook, one of the two shooters in San Bernardino, also legally purchased two of the weapons at a gun shop in Corona.
The reporter pressed Earnest, asking “Can you point to any that would have been prevented or stopped by the kind of proposals the White House is championing?”
Earnest again repeated the “common sense” talking point without addressing the actual question and threw in a smattering of empty “national security” rhetoric.
Last week when addressing the same line of questioning, Earnest admitted that further gun control legislation would not have prevented the San Bernardino shooting, and that it is purely “hypothetical” that terrorist incidents could be prevented with such new laws.
While the Obama administration is seemingly hell bent on going after stricter gun control, research from Pew Research Center, the FBI, and the Centers for Disease Control and Prevention, reveals that gun violence in the US is actually on the decline, and is at its lowest since the 1960s.
In addition, gun crime, despite an exponential increase in privately owned firearms over the same period, has steadily declined for about 20 years, except for high-profile shootings in gun-free zones.
- Bitcoin Breaks Out Higher After China Announces Crackdown On UnionPay POS Devices
When we first detailed the link between a devaluing currency, increasing restrictions on outflows of China capital, and Bitcoin, the virtual currency soared (driven by Chinese flows, just as predicted). The last few days, as China has once again started devaluing its currency, authorities once again moved to tighten capital outflows – this time through caps on credit-card withdrawals (as warned here) – and sure enough, Bitcoin has been soaring recently. Specifically, a nationwide crackdown on illegal UnionPay point-of-sale devices, has sparked capital flight (on heavy volume) through the vurtual currrency.
Having previously documented Beijing’s mad dash to tighten up capital controls in China in order to stem outflows in the wake of the PBoC’s move to transition towards a new FX regime; increasing expectations that a (much) deeper devaluation is on the horizon (blessed by The IMF) coupled with China’s efforts to manage the fallout from those expectations by liquidating hundreds of billions in FX reserves to support the onshore and offshore spots have understandably put authorities on edge, leading directly to efforts to stop the bleeding.
As we put it a few weeks ago, “while China may succeed in maintaining an orderly pace of FX depreciation, if the local population is concerned it will lose substantial purchasing power in the coming months and years, it will accelerate the capital flight from the country, forcing even greater reserve liquidation as the government finds itself defending not only the capital but also the current account, not to mention the sheer capital flight panic resulting from the crashing stock market.”
However, as we detailed here, one of the more straightforward ways of circumventing China’s official capital controls has been by “abusing” UnionPay cards. Roughly speaking, the process works like this (via Reuters):
Growing numbers of Chinese are using the country's state-backed bankcards to illegally spirit billions of dollars abroad, a Reuters examination has found.
This underground money is flowing across the border into the gambling hub of Macau, a former Portuguese colony that like Hong Kong is an autonomous region of China. And the conduit for the cash is the Chinese government-supported payment card network, China UnionPay.
In a warren of gritty streets around Macau's ritzy casino resorts, hundreds of neon-lit jewellery, watch and pawn shops are doing a brisk business giving mainland Chinese customers cash by allowing them to use UnionPay cards to make fake purchases – a way of evading China's strict currency-export controls.
On a recent day at the Choi Seng Jewellery and Watches company, a middle-aged woman strode to the counter past dusty shelves of watches. She handed the clerk her UnionPay card and received HK$300,000 ($50,000) in cash. She signed a credit card receipt describing the transaction as a "general sale", stuffed the cash into her handbag and strolled over to the Ponte 16 casino next door.
The withdrawal far exceeded the daily limit of 20,000 yuan, or $3,200, in cash that individual Chinese can legally move out of the mainland. "Don't worry," said a store clerk when asked about the legality of the transaction. "Everyone does this."
Yes, “everyone does this,” but not for long because now that the yuan deval debacle has served to accelerate the capital outflows, Beijing is set to double down on efforts to curb the degree to which capital controls are openly subverted and as WSJ reported, China “put a new annual cap on overseas cash withdrawals using UnionPay.”
Which leads us to the past week, where, as Bloomberg reports, China is now cracking down on illegal use and manipulation of UnionPay point-of-sale devices to cirumvent the limits…
A nationwide crackdown targets use of illegal UnionPay “point of service” devices used by retailers which have been altered to mask cash transactions to circumvent China’s strict currency control, South China Morning Post reports, citing a UnionPay internal memo.
Illegal use involves customers purchase goods, only to return them to retailer and receive cash, minus retailer’s commission: report
New measures require mobile POS transaction devices across China to be properly registered.
We note this is a mainland version of the previous 'tricks' that the ultra-wealthy used in Macau and these newly reported UnionPay measures may prompt greater scrutiny on Macau pawnshop business model in which cash transactions are recorded as goods purchases, analysts led by Vitaly Umansky write in Dec. 10 note. Use of illegal POS devices in Macau pawnshops, and on some casino floors, have occurred in the past, but represent only "a minuscule fraction" of dealings in Macau’s pawnshops.
Will this help to reverse the momentum? No, probably not.
The problem here – and this is something that quite a few people are still struggling to understand – is that Beijing has telegraphed a much larger devaluation, which means the pressure on the yuan will likely continue.
So yes, as difficult as this is to come to terms with, this is a scenario where China played the deval card and is looking to ever-so-gradually move from a 3% deval to an export-boosting double-digit deval, but in the meantime, Beijing must manage the pace, which means supporting the yuan via direct interventions. But the last week it appears that The IMF's decision to include the Yuan in the SDR basket has green lit another round of devaluation…
* * *
And the result is obvious, virtual currencies are surging once again as the Chinese find another route to get their savings out of the country…
It appears the moves are becoming increasingly aggressive among those wishing to get their capital out, as we detailed here, it is starting to directly correlate with Yuan movements…
And most clearly on increasingly heavy volume… Notice the surge in October and again now as capital controls increase once again…
So, evidently, the last week or two suggest, perhaps more importantly, that China easing (and outflows implict from further devaluation) now appears to go straight to Bitcoin.
As Overstock's Chairman noted previously: gold is great, but tough to transport; thus, forcing Chinese into Bitcoin as we previously explained:As we concluded previously, while China is doing everything in its power to not give the impression that it is panicking, the truth is that it is one viral capital outflow report away from an outright scramble to enforce the most draconian capital controls in its history, which – as every Cypriot and Greek knows by now – is a self-defeating exercise and assures an ever accelerating decline in the currency, which authorities are trying to both keep stable while also devaluing at a pace of their choosing. Said pace never quite works out.
So what happens then: well, China's propensity for gold is well-known. We would not be surprised to see a surge of gold imports into China, only instead of going to the traditional Commodity Financing Deals we have written extensively about before, where gold is merely a commodity used to fund domestic carry trades, it ends up in domestic households.
However, while gold has historically been the best store of value in history and has outlasted every currency known to man, it is problematic when it comes to transferring funds in and out of a nation – it tends to show up quite distinctly on X-rays.
Which is why we would not be surprised to see another push higher in the value of bitcoin: it was earlier this summer when the digital currency, which can bypass capital controls and national borders with the click of a button, surged on Grexit concerns and fears a Drachma return would crush the savings of an entire nation. Since then, BTC has dropped (in no small part as a result of the previously documented "forking" with Bitcoin XT), however if a few hundred million Chinese decide that the time has come to use bitcoin as the capital controls bypassing currency of choice, and decide to invest even a tiny fraction of the $22 trillion in Chinese deposits in bitcoin (whose total market cap at last check was just over $3 billion), sit back and watch as we witness the second coming of the bitcoin bubble, one which could make the previous all time highs in the digital currency, seems like a low print.
Charts: Bloomberg
- Kinder Morgan – Poster Boy For Bubble Finance
Submitted by David Stockman via Contra Corner blog,
The graph below belongs in the “what were they thinking category”.
After Tuesday’s dividend massacre, it’s plain as day that Kinder Morgan (KMI) wasn’t the greatest thing since slice bread after all. That is, a “growth” business paying rich dividends out of rock solid profit margins and flourishing cash flow.
In fact, it was just a momo stock on a borrowing spree.
During the 27 quarters since the beginning of 2009, the consolidated entities which comprise KMI generated $20.8 billion of operating cash flow, but spent $24.3 billion on CapEx and acquisitions.
So the “growth” side of the house ended-up in the red by $3.5 billion. Presumably that’s because it was “investing” for long haul value gains.
But wait. It also had to finance those juicy dividends, and there was a reassuring answer for that, too. The payout was held to be ultra safe owing to KMI’s business model as strictly a toll gate operator in the oil and gas midstream, harvesting risk-free fees from gathering systems, transportation pipelines and gas processing plants.
Accordingly, even when its stock price was riding high north of $40 per share, the yield was 5%. So over the last 27 quarters KMI paid out $17.3 billion in dividends from cash it didn’t have.
It borrowed the difference, of course, swelling its net debt load from $14 billion at the end of 2009 to $44 billion at present. And that’s exactly the modus operandi of our entire present regime of Bubble Finance.
Kinder Morgan is the poster boy.
Yes, you can chalk this off to another “lesson learned” in the Wall Street casino. After all, some definable group of investors and speculators thought they owned $98 billion of market cap a few months ago, and now their accounts are suddenly $60 billion lighter—–including about $7 billion of bottled air that evaporated from the net worth of its founder and indefatigable promoter, Richard Kinder.
But in the alternative, perhaps its time to recognize that healthy, properly functioning free markets do not make egregious $60 billion “mistakes” such as this one over and over. What surely led to the insane peak valuation of KMI is the relentless scramble for yield that has been triggered by 84 months of ZIRP and endless coddling of the stock market by the Fed and other central banks.
The fact is, during the last 31 quarter (i.e. since Q1 2008) KMI has posted the grand total of $900 million in cumulative net income. This means that at its peak April valuation it was trading a 100X the totality of what it had earned during nearly an entire decade; and that during that period it paid out 17 times more in dividends than it earned.
That’s right. The Wall Street gamblers and punters had followed the pied piper of Houston right out of Enron, and into an even greater bubble predicated on the same old scam.
Indeed, KMI is a pipeline company just like Enron. It’s original building block, Enron Liquids Pipeline, was purchased by Richard Kinder and his partner for $40 million back in the late 1990s.
Yet it had no more chance of being worth $100 billion than Enron had of being worth $60 billion before its implosion. It didn’t even have the razz mataz of a fiber optics trading business or a franchise to bring power and light to impoverished villages of India.
The apologists are want to argue, of course, that net income doesn’t mean anything when it comes to valuation. Perhaps we should therefore dispense with the several billions spent annually by the SEC, DOJ and sundry state attorneys general hauling business executives to court and jail for violating GAAP.
On the other hand, there is a reason why GAAP accounting statements require that asset write-offs, goodwill impairments, restructuring charges and stock option costs be charged to net income. At one point or another every one of these charges involved the waste of cash or other corporate assets.
They are not merely “non-recurring” expenses. They always and everywhere generate a recurring loss of value because these charges reflect a business mistake or the impact of Mr. Market’s penchant for “creative destruction”.
Even then, clamber on board with the LBO boys and consider the LTM results for KMI on a so-called cash flow basis. During the year ended September, it posted $5.89 billion of EBITDA and spent $3.9 billion on CapEx and $1 billion on acquisitions. So its free cash flow was a round $1 billion.
Let’s see. At its April stock market peak, Kinder Morgan’s total unlevered enterprise value (TEV) was $140 billion. So the casino was valuing the company at 24X EBITDA, 70X EBITDA less CapEx and 140X free cash flow!
If you have another pipeline company in Houston, I’ve got some swampland in Florida that I will swap for it.
If not, at least believe this. Two decades of Wall Street coddling by the Fed and 84 months of free carry trade money means that the casino is riddled with momo plays and debt-fueled scams like Kinder Morgan.
Now would be an excellent time to get out of harm’s way – as any sensible KMI shareholder would have done long before Bloody Tuesday.
- Bank of America: "Sadly, It Took World War II…"
One week ago, we explained what happened to both the US economy and the stock market the last time the Fed tightened financial conditions back in 1936 when it, like now, erroneously thought the economy was strong enough to sustain it:
“The Fed exit strategy completely failed as the money supply immediately contracted; Fed tightening in H1’37 was followed in H2’37 by a severe recession and a 49% collapse in the Dow Jones.”
This is what it looked like courtesy of BofA strategist Michael Hartnett:
We concluded with the following:
As can be seen on the above, in 1938, the stock market began to recover some. However, despite the easing stocks didn’t fully regain their 1937 highs until the end of the war nearly a decade later.
It needed a world war for that.
Alas, the sad reality that a war is what will be needed to get out of the ridiculous broken market/record debt state the world finds itself in due to the unprecedented central bank intervention over the past 7 years to make the rich richer, is spreading.
Today we read from none other than the same Bank of America strategist who points out that while the Fed’s next step may well be the opposite of success, i.e., quantitative failure, the resulting shock to the system will have to endure the same type of catharsis, as what “saved” the US financial system from the first Great Depression.
To wit:
The rotation from growth to value, DM to EM and so on, could occur in a bad way, following a potential Quantitative Failure.
The clash between a tightening Fed, QE in Europe & Japan, and potential devaluations in China & Saudi Arabia mean 2016 “tail risks” are high in our view. BofAML forecasts a 10% devaluation of the Chinese renminbi in 2016, and regards a de-pegging of the Saudi riyal as a potential “black swan”. Like a game of Jenga, a bull market built by central banks can collapse if further BoJ/ECB QE and Fed hikes engender US dollar spikes and EM/commodity swoons, FX-wars and volatility. 1937, 1987 & 1994 were all years of “policy divergence” and all years of market crashes.
If deflation intensifies, causing bear markets and recessions, investors should ultimately anticipate a major policy shift in 2016…in US/EU/Japan from QE to fiscal stimulus. A flip to fiscal stimulus is the most likely catalyst for a Great Rotation out of “deflation plays” into “inflation plays”, undoubtedly the biggest investment decision of 2016. Sadly it took the New Deal and WW2 to end the dominance of “growth” over “value” in the 1930s.
What Mr. Hartnett failed to mention, is that in addition to forcing the rotation out of “growth” and into “value” stocks – hardly the most important consequence of, well, a global war – it also took World War 2 to pull the US out of the Second Great Depression.
Which may also explain why currently in the Syria proxy war there already are US, British, French, German, Saudi, Turkish, Russian, Iranian (and shortly Chinese) forces in the air and on the ground. Because if the $200 trillion in global debt will not inflate itself on its own, it may just need the “push” of a few million tons of TNT to get it rolling.
- BRaCe YouRSeLVeS…
- 3 Signs We've Reached 'The Top' In The Financial System
Submitted by Simon Black via SovereignMan.com,
It was 1720, and Paris was completely mad.
The city’s brand new stock exchange, located at the ultra-swanky Hotel de Soissons, swarmed with citizens of all stripes looking to get rich.
Stocks were still a novel concept back then, and the allure of getting rich overnight was so appealing that people lined up for hours to buy shares.
The most popular was the ill-fated Mississippi Company, whose share price frequently rose up to 20% in the course of a single morning.
It was said fortunes changed so quickly that people often woke up poor and went to bed rich.
Newfound wealth was visible everywhere. Luxury home construction boomed. Lucky speculators erected statues of themselves. The jewelry market surged.
Of course, it didn’t last. Within a few years, the market crashed, and the Mississippi Company went down in history as one of the greatest bubbles of all times.
Looking back it should have been obvious.
In fact, all great financial bubbles often have watershed moments that in many ways signify the height of lunacy.
Joseph Kennedy, for example, famously sold all of his stocks right before the great crash in 1929 after a shoeshine boy started giving him investment advice.
Pets.com, a symbol of the 1990s tech bubble, IPO’d just two years after it was founded with a $300 million market capitalization.
They were so flush with capital that they spent $2 million on a tacky Superbowl ad, only to go bust 268 days later.
Duh. It’s so obvious looking back.
I’ve long believed our entire financial system is in a similar position.
Western banking systems are dangerously illiquid and in many cases undercapitalized.
Meanwhile the central banks and governments meant to support them are nearly insolvent and bankrupt themselves.
There are a lot of flashing warning signs right now that the system is quickly running out of steam.
China’s vast, multi-trillion dollar stockpile of foreign reserves is dropping rapidly, down by $87 billion in November, the third highest decline on record.
A whopping $1.2 trillion worth of corporate bonds in the United States has just been downgraded by rating agencies.
Median home prices in over a third of major American cities have once again surpassed all-time highs from the last bubble.
US government debt is at an all-time high after rising an astounding $674 billion just in the month of November.
It’s pretty clear there’s an incredible amount of risk in the system.
And in the future when we look back and say, “It should have been so obvious,” here are a few events that may become famous watershed moments:
1) The $75 billion loan
AB InBev just secured an astonishing $75 BILLION loan to buy rival SABMiller.
This is the biggest commercial loan in the history of the world, roughly equivalent to the GDP of Azerbaijan.
It’s incredible that anyone is able to borrow an amount like this, let alone at the low rate of just 1.1% above LIBOR.
It’s not a stretch to think that we may look back at this and say, ‘that was the top… what an obvious example of how much money central bankers have printed.’
2) The junk bond collapse
Back in 2013, the yield on ‘high yield corporate bonds’ aka junk bonds dipped below 5% for the first time in history.
It shouldn’t have taken a rocket scientist to figure out how absurd that was, but now that the trend is reversing and the junk bond market is stalling investors are losing their shirts.
One hedge fund that had invested heavily in junk bonds just suspended redemptions for its investors, something only really done in times of crisis.
This could be the historical watershed moment that signals the beginning of the end of our massive financial bubble.
3) The POPPY Loan [my favorite]
San Francisco Federal Credit Union wants to help its customers buy unaffordable homes in the astonishingly overpriced region of northern California.
So they just rolled out a new loan program called the Proud Ownership Purchase Program for You, or POPPY for short.
POPPY loans allow customers to borrow up to $2 MILLION with absolutely no money down.
And no, I am not making this up.
$0 down. $2 million. At 4% interest.
Oh, and you don’t have to take out private mortgage insurance (PMI) either.
If you’re not familiar, PMI is something that banks typically require when borrowers don’t contribute a sufficient down payment; it insures the bank against loss in case the borrower defaults.
So here the bank is taking 100% of the financial risk lending against property in an overpriced market that’s near its all-time high.
And they’re doing it with your money.
This is a story so familiar it’s as if they ripped it from the playbook of the 2006 housing bubble.
We know what happened. We know how that bubble ended.
Central banks have printed so many trillions of dollars that there’s hardly anything that makes sense in the financial system anymore.
This is not a consequence-free environment… it’s time to find safety.
Gold and silver are traditionally great hedges against systemic risk.
Physical cash, as we’ll discuss next week, may also be a good option. Especially given that there’s minimal downside in doing so.
Private equity investments in productive, undervalued companies are also traditionally safe bets in both good times and bad.
Most of all, don’t ignore the risks or assume everything’s going to be OK because our politicians and central bankers are so smart that they can solve anything.
They’re not.
And they’ve obviously missed the message that 2006 called: he wants his bubble back.
- What Drives Gun Sales In America
Several days after releasing a historic front-page Op-Ed calling for gun control in the aftermath of the San Bernardino shooting, the NYT decided to actually do the analysis to find out just what it is that drives gun sales.
In an article title “What Drives Gun Sales“, the NYT tries to spread the blame around, accusing everything from loose restrictions, to higher handgun sales, to hurricanes, but the real reason is a simple one. It begins with the letter O, ends in bama, and has made the crusade for gun control one of the core prerogatives of its presidency, as the following chart from the NYT itself shows.
Which, incidentally, is what we showed just a few days ago:
So in case Smith & Wesson, whose stock just hit an all time high today, wants to thank someone, just thank the top gun salesman of the century.
- "Inconvenient Truth" Chart Of The Day
Submitted by Jim Quinn via The Burning Platform blog,
The three quotes below sum up my views on the chart below.
“Facts do not cease to exist because they are ignored.” – Aldous Huxley
“That men do not learn very much from the lessons of history is the most important of all the lessons that history has to teach.” – Aldous Huxley
“Sooner or later we all sit down to a banquet of consequences” – Robert Louis Stevenson
The stock market is the most overvalued in history.
You’ve been warned.
- Is This What Happens On Monday?
Four months ago, China decided to devalue the Yuan sending a shudder up and down collateral chains globally and forcing carry trade unwinds and derisking everywhere. Friday August 21st saw notable weakness as that weakness washed ashore in US equities.. and then Black Monday struck. The ensuing debacle stalled The Fed and shocked markets.
The last week, we have seen China devalue the Yuan very significantly, EM capital markets turmoiling, and today, that was ashore in US equities… what happens next?
Deja vu?
Deja vu?
As a reminder, JPMorgan’s “seer” Marko Kolanovic warned this week that…
“As for near-term risks—we believe the most imminent market catalyst will be the December Fed meeting in which we are likely to see the first rate hike of the cycle.“
But to a market which has traded mostly on technicals and program buying (and selling) in recent months, there is something far more troubling than just what the Fed will announce:
This important event falls at a peculiar time—less than 48 hours before the largest option expiry in many years. There are $1.1 trillion of S&P 500 options expiring on Friday morning. $670Bn of these are puts, of which $215Bn are struck relatively close below the market level, between 1900 and 2050. Clients are net long these puts and will likely hold onto them through the event and until expiry. At the time of the Fed announcement, these put options will essentially look like a massive stop loss order under the market.
What does this mean? Considering that the bulk of the puts have been layered by the program traders themselves, including CTA trend-followers, and since the vol surface of the market will be well-known to everyone in advance, there is a very high probability the implied “stop loss” level will be triggered, and the market could trade to a level equivalent to the strike price, somewhere in the 1,800 area, or nearly 200 points below current levels.
Which would be a tragedy for the Fed: after all, nothing is more important to Yellen, Draghi et al, than affirmative market signaling – pointing to the (surging) market’s reaction and saying “look, we did the right thing”, just as Draghi did on Friday when he explicitly talked the market higher in the aftermath of the ECB’s disastrous announcement.
The irony will be if, regardless of what the Fed does, the subsequent move is driven not by the market’s read through of monetary policy but by the “pin” in this massive $1.1 trillion option expiry, the biggest in many years, one which if recent market action is an indicator, suggests the stop loss strike level will be taken out in the process setting the “psychological” stage for market participants who will look at the drop in the market, and equate it with a vote of no confidence in what the Fed is doing, potentially forcing the Fed to backtrack in less than 2 days!
Whether this happens remains to be seen, and we are confident the Fed’s “arm’s length” market-moving JV partner, Citadel, is currently scrambling to prevent any imminent selloff. However, considering Kolanovic’ track record of hinting at key risk inflection risk, it is quite likely that whatever the ultimate closing price on December 16 and, more importantly, December 18, volatility may very soon have an “August 24” type event.
Charts: Bloomberg
- Why Liberals Oppose a Gun Ban for People On Terror Watchlist
Everyone agrees – other than ISIS and a handful of crazies – that we have to stop the epidemic of mass shootings (mass shootings have skyrocketed under Obama; 5 of the 12 deadliest mass shootings in history took place during Obama’s first term alone).
President Obama plans to introduce – through executive action – a gun ban on those on no-fly lists. So does the governor of Connecticut.
Sound like a no-brainer … stopping terrorists from having guns?
But as Daily Beast points out, in an article called “My Fellow LIBERALS, DON’T Support Obama’s Terror Watch List Gun Ban“:
As Americans we understand well how important due process is. No one, for instance, should be thrown in jail just on the say-so of some government official who declares they deserve it. Such is the behavior of tyrants, the Founding Fathers understood, and so we enshrined in our Constitution the right to counsel, the right against being compelled to testify against oneself, the right to trial by jury, etc.All of these rights are checks to ensure the government can’t simply pluck innocent people out of their lives and strip them of their life, liberty, or property. Only after fairly testing the charges against them can the government punish people with such deprivation.
But none of these hurdles must be overcome for the government to put someone on a list, especially not a list like this, which is a watch list. It is a list of people that for whatever reason (a reason that no one outside the government knows) the government has decided deserve closer scrutiny of their actions.
Is the government right to be concerned about these people? Maybe yes, but maybe not, and there is no way for ordinary citizens to know. Which means there is also no way for ordinary citizens to know whether any of them, even people who in no way intend to commit acts of terrorism, are also on that list.
In other words, there is no way to know whether you are on that list. Nor is there any way to know how to get off it.
That there is any list at all should give us all pause. It has not historically been the hallmark of a healthy democracy when governments have kept lists of people they didn’t like. It is hard to be a government of the people, by the people, and for the people when the government keeps track of the people, including those dissidents who would challenge it (which is something that in a democracy they are allowed, and even supposed, to do).
***
What this proposal calls for is the government using the list as a basis to deny the people on it a right to which they were otherwise entitled.
***
Based on the plain text of the Second Amendment and subsequent jurisprudence it is clear that some right is in there somewhere, and what this proposal calls for is for the government to arbitrarily and un-transparently deny this right to certain people without any sort of the due process ordinarily required. And that’s a problem.
***
With this proposal we would be authorizing the government to act capriciously and unaccountably for any reason, including—and this point cannot be emphasized enough—bad reasons or no reasons at all, and against anyone, including—and this point cannot be emphasized enough, either—people just like you. There would also be no reason why, if the government could take away this right this way today, it couldn’t take away other rights you depend on having tomorrow the same way.
Liberal journalists Jeremy Scahill and Ryan Devereaux document:
The Obama administration has quietly approved a substantial expansion of the terrorist watchlist system, authorizing a secret process that requires neither “concrete facts” nor “irrefutable evidence” to designate an American or foreigner as a terrorist, according to a key government document obtained by The Intercept.
The “March 2013 Watchlisting Guidance,” a 166-page document issued last year by the National Counterterrorism Center, spells out the government’s secret rules for putting individuals on its main terrorist database, as well as the no fly list and the selectee list, which triggers enhanced screening at airports and border crossings. The new guidelines allow individuals to be designated as representatives of terror organizations without any evidence they are actually connected to such organizations, and it gives a single White House official the unilateral authority to place entire “categories” of people the government is tracking onto the no fly and selectee lists. It broadens the authority of government officials to “nominate” people to the watchlists based on what is vaguely described as “fragmentary information.”
***
The document’s definition of “terrorist” activity includes actions that fall far short of bombing or hijacking. In addition to expected crimes, such as assassination or hostage-taking, the guidelines also define destruction of government property and damaging computers used by financial institutions as activities meriting placement on a list. They also define as terrorism any act that is “dangerous” to property and intended to influence government policy through intimidation.
This combination—a broad definition of what constitutes terrorism and a low threshold for designating someone a terrorist—opens the way to ensnaring innocent people in secret government dragnets. It can also be counterproductive. When resources are devoted to tracking people who are not genuine risks to national security, the actual threats get fewer resources—and might go unnoticed.
“If reasonable suspicion is the only standard you need to label somebody, then it’s a slippery slope we’re sliding down here, because then you can label anybody anything,” says David Gomez, a former senior FBI special agent with experience running high-profile terrorism investigations. “Because you appear on a telephone list of somebody doesn’t make you a terrorist. That’s the kind of information that gets put in there.”
***
In 2004, [liberal] Sen. Ted Kennedy complained that he was barred from boarding flights on five separate occasions because his name resembled the alias of a suspected terrorist. Two years later, CBS News obtained a copy of the no fly list and reported that it included [liberal] Bolivian president Evo Morales and Lebanese parliament head Nabih Berri. One of the watchlists snared Mikey Hicks, a Cub Scout who got his first of many airport pat-downs at age two. In 2007, the Justice Department’s inspector general issued a scathing report identifying “significant weaknesses” in the system. And in 2009, after a Nigerian terrorist was able to board a passenger flight to Detroit and nearly detonated a bomb sewn into his underwear despite his name having been placed on the TIDE list, President Obama admitted that there had been a “systemic failure.”
***
The rulebook appears to invert the legal principle of due process, defining nominations as “presumptively valid.”
Left-leaning Nation tells how two middle-aged, lesbian peace activists got put on the no-fly list.
Bleeding heart Huffington Post noted last year:
You could post something on Facebook or Twitter that raises “reasonable suspicion.”
***
Or somebody else could just think you’re a potential terror threat.
***
You could be a little terrorist-ish, at least according to someone.
***
Or you could just know someone terrorist-y, maybe.
***
Finally, you could just be unlucky.
***
A federal judge ruled in June that the government must develop a new process under which individuals can challenge their inclusion on the no-fly list. The judge found the current process “wholly ineffective.”
Progressive Salon reports:
In fact, the rules for putting someone on the list are so weak that it’s acceptable for entire “categories” of people to be considered threats at a White House official’s choosing.
***
Scahill told HuffPost Live. “The government will not tell you if you are on the list, but it will share its labeling of you as a ‘known or suspected terrorist’ with foreign governments and private contractors. These policies make it nearly impossible to challenge your secret designation. The American public has a right to understand the policies of what amounts to a shadow legal system.”
Liberal Slate writes:
The U.S. government’s reliance on “predictive judgments” to deprive Americans of their constitutionally protected liberties is no fiction. It’s now central to the government’s defense of its no-fly list—a secretive watch list that bans people from flying to or from the United States or over American airspace….
Worse, the U.S. government launched its predictive judgment model without offering any evidence whatsoever about its accuracy, any scientific basis or methodology that might justify it, or the extent to which it results in errors. In our case, we turned to two independent experts to evaluate the government’s predictive method: Marc Sageman, a former longtime intelligence community professional and forensic psychologist with expertise in terrorism research, and James Austin, an expert in risk assessment in the criminal justice system. Neither found any indication that the government’s predictive model even tries to use basic scientific methods to make and test its predictions. As Sageman says, despite years of research, no one inside or outside the government has devised a model that can predict with any reliability if a person will commit an act of terrorism.
***
Because the government’s predictive model results in the blacklisting of people who are not terrorists, individuals on the no-fly list need a meaningful method of redress—a fair way to demonstrate their “innocence” of crimes they will never commit. The government refuses to provide these safeguards in its current so-called redress system, which violates the due process guarantees of the Constitution. It refuses to tell our clients all the reasons the government has for predicting future misconduct, leaving them to guess. It won’t provide the evidence underlying those reasons, including government evidence that would undermine its predictions. And it refuses to provide a hearing for our clients to press their case to a neutral decision-maker and challenge government witnesses’ hearsay or biases.
Indeed, the government has a history of labeling dissident as terrorists. Any type of criticism of the fatcats may get you labeled as a terrorist in post-9/11 America.
Are any of the government’s so-called “terrorism” programs really only focused on stopping terrorism? Of course not.
Liberals might remember that George W. Bush said that “you’re either with us or against us” … and stripped Americans of many of our liberties.
One specific example: spying on Americans is all about power, control and money … not protecting Americans from terrorists.
Another example: indefinite detention.
So we've got to stop mass shootings … but using a Kafkaesque, fatally flawed watchlist system is not the way.
Postscript: What does the Daily Beast article linked above mean when it says that – while liberals may dislike the Second Amendment – it’s still a Constitutional right?
A top liberal Constitutional law expert explains:
Like many academics, I was happy to blissfully ignore the Second Amendment. It did not fit neatly into my socially liberal agenda.
***
It is hard to read the Second Amendment and not honestly conclude that the Framers intended gun ownership to be an individual right. It is true that the amendment begins with a reference to militias: “A well regulated militia, being necessary to the security of a free state, the right of the people to keep and bear arms, shall not be infringed.” Accordingly, it is argued, this amendment protects the right of the militia to bear arms, not the individual.
Yet, if true, the Second Amendment would be effectively declared a defunct provision. The National Guard is not a true militia in the sense of the Second Amendment and, since the District and others believe governments can ban guns entirely, the Second Amendment would be read out of existence.
***
More important, the mere reference to a purpose of the Second Amendment does not alter the fact that an individual right is created. The right of the people to keep and bear arms is stated in the same way as the right to free speech or free press. The statement of a purpose was intended to reaffirm the power of the states and the people against the central government. At the time, many feared the federal government and its national army. Gun ownership was viewed as a deterrent against abuse by the government, which would be less likely to mess with a well-armed populace.
Considering the Framers and their own traditions of hunting and self-defense, it is clear that they would have viewed such ownership as an individual right — consistent with the plain meaning of the amendment.
None of this is easy for someone raised to believe that the Second Amendment was the dividing line between the enlightenment and the dark ages of American culture. Yet, it is time to honestly reconsider this amendment and admit that … here’s the really hard part … the NRA may have been right. This does not mean that Charlton Heston is the new Rosa Parks or that no restrictions can be placed on gun ownership. But it does appear that gun ownership was made a protected right by the Framers and, while we might not celebrate it, it is time that we recognize it.
And liberal icons Gandhi and the Dalai Lama accept gun ownership as moral.
- Watch Jimmy Carter Ban Iran Immigrants And Deport Students During The Hostage Crisis
One of Donald Trump’s recurring refrains ever since the San Bernardino shooting, ostensibly the one which prompted him to declare he would bar Muslims from entering the country – an announcement which has unleashed an unprecedented media scandal – is that the “US is at war.” Whether or not that is the case remains to be seen (we expect tens of thousands of US troops to be deployed soon, this time without the protective cloak of CIA “covert ops”) but what is certain is that Trump is merely proposing to do what Democrat Jimmy Carter did back on April 7, 1980, when he banned Iranians from the US and deported Iranian students during the Iran hostage crisis – a time when some could argue the US was likewise in war with the Iranian regime.
Courtesy of the Gateway Pundit, here is a screengrab from the ABC News report of President Carter’s Iran speech regarding US cutting relations with Khomeini’s regime in Iran.
The full video of Carter’s speech is below:
ABC Breaking News | Latest News Videos
And here is the full transcript from ABC News:
Ever since Iranian terrorists imprisoned American Embassy personnel in Tehran early in November, these 50 men and women—their safety, their health, and their future—have been our central concern. We’ve made every effort to obtain their release on honorable, peaceful, and humanitarian terms, but the Iranians have refused to release them or even to improve the inhumane conditions under which these Americans are being held captive.
The events of the last few days have revealed a new and significant dimension in this matter. The militants controlling the Embassy have stated they are willing to turn the hostages over to the Government of Iran, but the Government has refused to take custody of the American hostages. This lays bare the full responsibility of the Ayatollah Khomeini and the Revolutionary Council for the continued illegal and outrageous holding of the innocent hostages. The Iranian Government can no longer escape full responsibility by hiding behind the militants at the Embassy.
It must be made clear that the failure to release the hostages will involve increasingly heavy costs to Iran and to its interests. I have today ordered the following steps.
First, the United States of America is breaking diplomatic relations with the Government of Iran. The Secretary of State has informed the Government of Iran that its Embassy and consulates in the United States are to be closed immediately. All Iranian diplomatic and consular officials have been declared persona non grata and must leave this country by midnight tomorrow.
Second, the Secretary of the Treasury will put into effect official sanctions prohibiting exports from the United States to Iran, in accordance with the sanctions approved by 10 members of the United Nations Security Council on January 13 in the resolution which was vetoed by the Soviet Union. Although shipment of food and medicine were not included in the U.N. Security Council vote, it is expected that exports even of these items to Iran will be minimal or nonexistent.
Third, the Secretary of Treasury will make a formal inventory of the assets of the Iranian Government, which were frozen by my previous order, and also will make a census or an inventory of the outstanding claims of American citizens and corporations against the Government of Iran. This accounting of claims will aid in designing a program against Iran for the hostages, for the hostage families, and other U.S. claimants. We are now preparing legislation, which will be introduced in the Congress, to facilitate processing and paying of these claims.
Fourth, the Secretary of Treasury [State] and the Attorney General will invalidate all visas issued to Iranian citizens for future entry into the United States, effective today. We will not reissue visas, nor will we issue new visas, except for compelling and proven humanitarian reasons or where the national interest of our own country requires. This directive will be interpreted very strictly.
- Here Is "Gate" #2: $1.3 Billion Hedge Fund Founded By Ex-Bear Stearns Traders, Just Suspended Redemptions
Yesterday, in the aftermath of the shocking news that the Third Avenue Focused Credit Fund was liquidating and had gated investors due to its “illiquid” portfolio, we had one simple prediction:
“What this means is that now that the dreaded “gates” are back, investors in all other junk bond-focused hedge funds, fearing they too will be gated, will rush to pull what funds they can and submit redemption requests, in the process potentially unleashing a liquidity – and liquidation – scramble within the hedge fund community, which will first impact bonds and then, if the liquidity demands continue, equities as well.“
We had to wait just over 24 hours to be proven correct, because moments ago Dow Jones reported that the $1.3 billion Manhattan-based Stone Lion Capital, a distress-focused hedge fund, has just suspended redemptions after “substantial requests.”
The WSJ adds:
It is the latest example of the sudden crunch facing traders across Wall Street looking to sell beaten-down positions.
Stone Lion manages around $1.3 billion and specializes in distressed debt and other risky investments that have plunged in value lately.
It received “substantial redemption requests” in its oldest hedge fund, the $400 million Stone Lion Portfolio LP, precipitating the decision, the firm said.
At least the had a pretty logo:
The management team via CapIQ:
And here is the punchline:
- Alan Jay Mintz, CPA, a co-founder of Stone Lion Capital was Co-Head of the Distressed Debt and High Yield trading group at Bear Stearns
- Gregory Augustine Hanley, a co-founder of Stone Lion Capital was Co-Head of the Distressed Debt and High Yield trading group at Bear Stearns
One really couldn’t make this up.
- Putin Orders Military To "Immediately Destroy" Any Threat To Russian Forces
Russian President Vladimir Putin has ratcheted up the rhetoric in what appears to be one step closer to the potential for direct conflict with The West. While not detailing 'who' he was focued on, amid the obvious Turkey-Russia tensions, Putin told a session of the Defense Ministry's collegium that "I order to act extremely tough. Any targets that threaten Russian forces or our infrastructure on the ground should be immediately destroyed."
During the meeting of the most senior defense officials, ITAR TASS reports that Putin also warned against "those who will again try to organize any provocations against our servicemen."
"We have already taken additional measures to ensure security of Russian servicemen and air base. It was strengthened by new aviation groups and missile defense systems. Strike aircraft will now carry out operations under cover of fighter jets,"
Putin said that the Russian military have caused a substantial damage to terrorists in Syria, adding that the actions of the Russian Armed Forces are worthy of praise.
"The combined operation of the Aerospace Defence Forces and the Navy, the use of newest high precision weapons systems has caused a serious damage to the terrorist infrastructure, thus qualitatively changing the situation in Syria," the president said.
The president also ordered the defense ministry to coordinate actions in Syria with Israel’s command post and the US-led international coalition.
"It’s important to develop cooperation with all countries really interested in destroying terrorists. I am talking about contacts on ensuring flight safety with the command post of Israel’s air force and forces of the US-led coalition," Putin said.
According to the official, terrorists in Syria pose a direct threat to Russia and Moscow’s actions are carried out to protect the country rather than due to abstract interests.
"Our soldiers in Syria are, first and foremost, defending their country. Our actions there aren’t motivated by some obscure and abstract geopolitical interests or a desire to train our forces and test new weapons – which is of course an important goal as well. Our main objective is to avert a threat to the Russian Federation,"
As we noted previously, The Kremlin looks prepared not only to stay the course, but to ramp up the deployment. Not only is Moscow hitting terrorist targets with cruise missiles from Russia’s Caspian Fleet, but now, Moscow is shooting at ISIS from a submarine in what can only be described as an effort by Putin to use Syria as a testing ground for Russia’s long dormant military juggernaut (after all, you don’t really need to shoot at a group that doesn’t have an air force or a navy from a sub).
On that note, we present the following update graphic prepared by Louis Martin-Vézian of CIGeography as post at The Aviationst. It documents the scope of Russia’s operation in the Mid-East and should give you an idea of just how committed Moscow is to the fight.
- Prince Of World Beheading Champion Saudi Arabia Calls Trump "A Disgrace To America"
You know you’ve ‘made it’ when the prince of one of the world’s biggest human rights abuser (and leading ‘beheader’) nations calls you a “disgrace to America.”
From “respected investor” – just ask him about Citi and Twitter – Prince Alwaleed bin Talal…
Prince Alwaleed slams @realDonaldTrump, calls him a “disgrace” & says he should withdraw from the presidential race.
https://t.co/Zk6G1uNwzE— CNBC Now (@CNBCnow) December 11, 2015
We wonder if all these detractors and critics realize they are all, massively boosting Trump’s case? Probably not.
Meanwhile, we anxiously await Trump’s twitter response.
- Stocks Slammed To Worst Week Since Black Monday Amid Crude & Credit Carnage
Some folks were suddenly forced to sell…
And for those "shocked" that credit markets sparked this…
Before we start, summarizing the bloodbath…
- Russell 2000 (Small Caps) Down 4.8% – worst week since May 2012
- Trannies Down 4.8% – worst week in 4 months (Black Monday)
- S&P 500 Down 3.5% – worst week in 4 months (Black Monday)
- FANGs Down 3.75% – worst week in 3 months
- HYG (HY Bond ETF) Down 3.75% – worst week since March 2009
- HY CDX Up 60bps – biggest weekly spike in spreads since Dec 2014
- USD Index Down 2.5% – worst 2-week drop in 4 months
- JPY Stronger by 1.9% – worst week in 4 months
- CAD Weaker by 2.75% – worst week in 5 months
- EUR Stronger by 3.75% – best 2 week gain since Sept 2012
- Yuan down 6 weeks in a row to weakest since July 2011 – longest losing streak in history
- WTI Crude Down 10.9% – worst week since Dec 2014
- 5Y Yield Drops 13bps – biggest absolute drop in 2 months
- 30Y Yield Drops 13bps – biggest absolute drop since March 2015
The biggest news of the day/week was the sudden awakening of the rest of the world that credit's collapse is real…
This was the biggest weekly collapse in High-Yield Bonds since March 2009… with today's move, HYG wipes out all total return back to 12/12/2012 (assuming divs reinvested)
(h/t @groditi)
Weakness in US equities began early this morning after the IEA report sent crude crashing…Dow Futs down 400 from overnight highs!
Ugly day with high beta Nasdaq and Small Caps smashed lower…
On the week Trannies and Small Caps were the biggest losers…
Financials and Energy were butchered this week…
Dow joins S&P, Russell, and Trannies in red post-Paris… we're gonna need more radicals!!
Small Caps were monkey-hammered…
FANGs had their worst week in 3 months…
Led by NFLX..
But Guns were in great demand…
VIX term structure inverted short-term…
HYG had its worst day since Aug2011…
Treasury yields collaped…
2Y Yields dropped 6.5bps today… the biggest drop in 3 months…
The FX markets also turmoiled… USD weakness against all the majors (but EM FX and commodity producers crushed)…
The Yuan plunged for the 6th week in a row…
EM FX crashed by most since June 2013 (Taper Tantrum)…
Gold rallied today, but ended the week lower (along with silver) despite a weaker dollar. Copper rallied, crude didn't…
Black Gold Baumgartner'd…
Charts: Bloomberg
Bonus Chart: What Happens Next?
- Weekend Reading: Risk – That Is All
Submitted by Lance Roberts via RealInvestmentAdvice.com,
While the world patiently waits for Janet Yellen to raise interest rates this month, the markets have been unable to decide as of yet whether such an event is good or bad thing.
As I discussed earlier this week, there is an ongoing belief that despite the rest of the world struggling with deflationary pressures and weak economic growth pushing Central Bankers globally toward further negative interest rate environments and more liquidity, the U.S. can remain an “island of economic prosperity.” To wit:
“International And Emerging Market Divergence. As I stated above, there is currently a belief that the U.S. can remain isolated from the rest of the world. Given the global interconnectedness of the world today, there is little ability for the U.S. to permanently diverge from the rest of the world. As shown below, historically when international and emerging markets have declined, the U.S. has been soon to follow.”
The reality is that such divergences have rarely lasted for very long and the ultimate reversion to reality have been brutally painful to investors.
This week’s reading list is a compilation of articles and research notes dedicated to understanding more clearly the “risks” that are currently building within the financial markets and economic environment. What you choose to do with that information is entirely up to you, however, ignoring it has generally never worked out well.
1) Give Me Only The Good News by Jeremy Grantham via GMO
“This is more or less the best I can do to prove the point. We in the U.S. have a broad and heavy bias away from unpleasant data. We are ready to be manipulated by vested interests in finance, economics, and climate change, whose interests might be better served by our believing optimistic stuff ‘that just ain’t so.’
We are dealing today with important issues, one so important that it may affect the long-term viability of our global society and perhaps our species. It may well be necessary to our survival that we become more realistic, more willing to process the unpleasant, and, above all, less easily manipulated through our need for good news.”
But Also Read: Voters Know The American Dream Is Over by Charles Hugh-Smith via OfTwoMinds
2) Reasons “Not To Hike” Pile Up by Caroline Baum via MarketWatch
“What do Larry Summers, market monetarists, gold bugs and other hard-money types have in common?
No, it’s not a trick question, but it yields a surprising answer. Three different economic philosophies are aligned in challenging the wisdom of the Federal Reserve’s stated intention to raise interest rates next week.
The better question is why the Fed is determined to raise rates now. The world’s major economies are diverging, with Europe, Japan and China requiring additional stimulus from their central banks. The dollar is likely to strength further, crimping U.S. exports and restraining import prices. A renewed decline in oil prices is going to prevent inflation from moving up to the Fed’s 2% target, a premise for any Fed action.
The 5% unemployment rate remains the only reason for starting to normalize rates, and that’s based on the Fed’s flawed Phillips-Curve thinking. A sustained increase in wages is more hope than reality at this point. And since wages lag prices, not the other way around, forecasts of higher compensation may have to wait.”
But Also Read: OK Jobs Report Paves Way For $6.8B Fed Giveaway by Louis Woodhill via Real Clear Markets
3) Rare Data Point Sighting Sends Warning by Tim Mullaney via CNBC
“The S&P 500 has a big performance issue that should be a focus for investors: Too much of the index return is coming from too few of its stocks.
The 10 most valuable companies in the market are up roughly 21.4 percent as a group this year, versus a loss of 2.6 percent for the rest of the stock market.
That 24 percentage-point spread between the biggest stocks and the index as a whole is the widest since 1999, heading into the dot-com bust.”
But Also Read: A 20-Year-Old Perversion In The Stock Market Is Ending by Sam Ro via Business Insider
Contra-Take: Is It Time To Go Full Zero Hedge? by Cam Hui via Humble Student Of The Markets
4) The Junk Bond Market’s Early Warning Signals by Ben Wright via The Telegraph
“The relatively high global equity prices point to expectations of strong economic growth; the historically very high bond prices point to expectations of weak economic growth. How does one reconcile these two wildly inconsistent worldviews? The short answer is quantitative easing, which has pumped up asset values far beyond what the fundamentals would justify. Any bad news that comes along – and there has been a fair bit of that in recent months – merely serves to highlight that growing disconnect.
With the paths of the US Federal Reserve, the Bank of England and the European Central Bank starting to diverge as we enter the new year, it is clear that, at the very least, investors are in for a bumpy ride in 2016.”
But Also Read: Corporate Loan Charge-Offs & Delinquencies Surge by Pater Tenebrarum via Acting-Man Blog
And Also Read: This Time Is Not Different For Credit by David Keohane via FTAlphaville
5) When Forward Guidance Leads To Misdirection by Joe Calhoun via Alhambra Partners
“As we approach the Fed meeting expect markets to get more volatile. While the odds favor a move, it isn’t a sure thing until it is actually done. We found out last week what happens when forward guidance turns out to be forward misdirection. All those traders who thought they had a sure thing, who assumed that Draghi wouldn’t dare disappoint the market, got whipped. Whipped good.”
But Also Read: Fed’s Decisions Really Come Down To Guessing by Alex Pollock via AEI
MUST READS
- Jason Zweig: Wall Street’s Big Lie by Matt Phillips via Quartz
- American’s Self Deception About Debt by Catey Hill via MarketWatch
- Likelihood Of A Correction Has Increased by John Hussman via Hussman Funds
- American Prosperity Requires Capital Freedom by J. Giancarlo via Cato Institute
- What Are The Odds Stocks Rise In 2016 by Mark Hulbert via MarketWatch
- How Companies Massage Their Earnings by Buttonwood via The Economist
- The Apex Of Market Stupidity by Charles Gave via John Mauldin/ZeroHedge
- A Whole Lotta New Lows With Near Market Highs by Dana Lyons via Tumblr
- Like Clockwork They’re Bashing Buffett Again by Jesse Felder via Felder Report
- A Compendium Of Market Wisdoms For November by Meb Faber via Meb Faber Research
“There are few things more important than the preservation of capital” – Dick Davis
- Carl Icahn Warns "Meltdown In High Yield Is Just Beginning"
Amid the biggest weekly collapse in high-yield bonds since March 2009, Carl Icahn gently reminds investors that he saw this coming… and that it's only just getting started!
As we warned here, and confirmed here, something has blown-up in high-yield…
With the biggest discount to NAV since 2011…
The carnage is across the entire credit complex… with yields on 'triple hooks' back to 2009 levels…
As fund outflows explode..
And here's why equity investors simply can't ignore it anymore…
If all of that wasn't bad enough… the week is apocalyptic…
Icahn says, it's only just getting started…
If you haven’t seen ‘Danger Ahead’ watch it on https://t.co/4rVAcLBsH9. Unfortunately I believe the meltdown in High Yield is just beginning
— Carl Icahn (@Carl_C_Icahn) December 11, 2015
He followed up with a brief appearance on CNBC:
As we detailed previously, to be sure, no one ever accused Carl Icahn of being shy and earlier this year he had a very candid sitdown with Larry Fink at whom Icahn leveled quite a bit of sharp (if good natured) criticism related to BlackRock’s role in creating the conditions that could end up conspiring to cause a meltdown in illiquid corporate credit markets. Still, talking one’s book speaking one’s mind is one thing, while making a video that might as well be called “The Sky Is Falling” is another and amusingly that is precisely what Carl Icahn has done.
Over the course of 15 minutes, Icahn lays out his concerns about many of the issues we’ve been warning about for years and while none of what he says will come as a surprise (especially to those who frequent these pages), the video, called “Danger Ahead”, is probably worth your time as it does a fairly good job of summarizing how the various risk factors work to reinforce one another on the way to setting the stage for a meltdown. Here’s a list of Icahn’s concerns:
- Low rates and asset bubbles: Fed policy in the wake of the dot com collapse helped fuel the housing bubble and given what we know about how monetary policy is affecting the financial cycle (i.e. creating larger and larger booms and busts) we might fairly say that the Fed has become the bubble blower extraordinaire. See the price tag attached to Picasso’s Women of Algiers (Version O) for proof of this.
- Herding behavior: The quest for yield is pushing investors into risk in a frantic hunt for yield in an environment where risk free assets yield at best an inflation adjusted zero and at worst have a negative carrying cost.
- Financial engineering: Icahn is supposedly concerned about the myopia displayed by corporate management teams who are of course issuing massive amounts of debt to fund EPS-inflating buybacks as well as M&A. We have of course been warning about debt fueled buybacks all year and make no mistake, there’s something a bit ironic about Carl Icahn criticizing companies for short-term thinking and buybacks as he hasn’t exactly been quiet about his opinion with regard to Apple’s buyback program (he does add that healthy companies with lots of cash should repurchases shares).
- Fake earnings: Companies are being deceptive about their bottom lines.
- Ineffective leadership: Congress has demonstrated a remarkable inability to do what it was elected to do (i.e. legislate). To fix this we need someone in The White House who can help break intractable legislative stalemates.
- Corporate taxes are too high: Inversions are costing the US jobs.
Ultimately what Icahn has done is put the pieces together for anyone who might have been struggling to understand how it all fits together and how the multiple dynamics at play serve to feed off one another to pyramid risk on top of risk. Put differently: one more very "serious" person is now shouting about any and all of the things Zero Hedge readers have been keenly aware of for years.
Full video below.
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Finally, here is Bill Gross also chiming in:
Gross: HY Fund closes exit doors. Who will get in if you can't get out? Risk off.
— Janus Capital (@JanusCapital) December 11, 2015
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