Today’s News December 28, 2015

• Something Just Snapped Again In China

  We have seen this pattern before. In August, the first thing to tumble was Yuan FX rates, then money market rates exploded, and then the stock market tumbled. While it is a little premature, today's sudden plunge in Chinese stocks (as the afternoon session opens) following last week's spike in money market rates following the previous week's non-stop weakness in the Yuan does have a concerning smell of deja vu all over again.

   

  Just as we saw in August, Yuan weakness was followed by sudden surge in money market rates (which was followed by a collapse in stocks)

  

  (note – while we would expect some year-end window-dressing shenanigans in money-markets, the fact that 'panic' has not unspiked this time in 1 week HIBOR is concerning)

  And that has been followed by a serious slide in Chinese stocks as the afternoon session opens…

  

   

  The entire Chinese equity complex is being sold hard…

  

   

  That was then…

  

   

  And this is now…

  

   

  Time to call The National Team… or is this the inevitable blowback from The Fed's liquidty withdrawal rippling through the illiquid links of a holiday-stymied global collateral chain?

  US equity futures are below Christmas Eve's trading day lows (S&P 500 down 11 points from the late-day highs)

  Charts: Bloomberg

  

  

  

  

  

• Hey Goldman, Tell Us, Are These Countries Really That Stupid To Buy Gold?

  

  We’re nearing the end of this year, and that’s when the major banks come out with their Christmas shopping lists. And of course as you could have expected, not a single decent bank is even considering to add gold to the list, and the bearish voices are now stronger than ever before.

  

  Source: birchgold.com

  Goldman Sachs expects the price of the yellow metal to fall to $1000/oz whilst the Bank of America, BNP Paribas and ABN Amro all expect the gold price to fall below the $1000-level in 2016. That reminds us of the exact opposite stance just a few years ago when gold was skyrocketing. Back then everybody was saying the yellow metal was a very useful addition to a portfolio and even the common man in the street was considering buying gold.

  And of course, that has proven to be a good counter-indicator. The more gold is liked/hated by the common man, the higher the chance is its price will undergo a correction/put a bottom in place. And that might be exactly what we are seeing here at the $1080-1060-level. The gold price has tested this theoretical and technical bottom a few times but has repeatedly failed to fall towards a triple-digit number and always bounced slightly. Of course, that’s not a good enough reason to run out and increase your exposure to gold as we’re obviously not out of the woods just yet, but there’s a bigger picture we’d like to present here.

  

  Source: silverdoctors.com

  We all know the non-conventional countries are still keen on getting their hands on even more gold, and when the gold price falls, these countries are actually stepping up their buying pace. Russia, for instance, has purchased 5.27 million ounces in the first ten months of this year and will very likely end 2015 with a 6M oz higher gold position compared to the end of 2014. That by itself already is a very interesting and important fact as it shows that even when the Russian economy is falling apart it still considers gold to be a very important part of its strategic reserves. The next chart shows you how gold as a percentage of Russia’s official foreign assets has evolved.

  

  And Russia obviously isn’t alone. Its friends in Kazakhstan have increased their gold holdings by 13% YTD and gold now accounts for 28% of the total amount of official reserve assets.

  

  Source: bullionstar.com

  China also continues to buy more gold and is believed to have purchased no less than 35 tonnes of physical gold in just October and November alone, increasing the official stash by 1.1 million ounces in just two months. In fact, when the gold price was correcting in November, China stepped up its buying rate by a stunning 40%, and we wouldn’t be surprised to see the country having imported an additional 20-25 tonnes of gold in December.

  And no, it’s not just Russia & friends and China that are buying gold, but India has also confirmed it expects to import 1,000 tonnes of gold this year, roughly 100 tonnes more than originally anticipated as the jewelers are stepping up the plate to take advantage of the current low price.

  All of this leads us to one question. Please, Goldman Sachs, BNP Paribas, JP Morgan and other Bank of Americas, please tell us why these countries are so keen to destroy their own wealth? There’s no fundamental reason why the gold price should go further south and the country with probably the best long-term vision (China, which is also stockpiling as much oil as its strategic reserve tanks can hold) is filling the basement of its Central Bank with newly-smelted shiny bars.

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• Guest Post: Has There Ever Been A More Selfish Generation?

  Submitted by David Haggith via The Great Recession blog,

  It’s a good question to ask on the days after Christmas, when we have all used our credit cards to buy gifts for others. In spite of this seasonal gift buying, I think there has never been a more selfish generation.

  What is so selfish about this generation?

  What other generation has been so amenable toward letting future generations pay for their lavish lifestyles? Many live in MacMansions purchased with thirty-year loans they won’t live to repay. With minds at peace, they leave those mortgages to their children and grandchildren. Even those in the US who do not live in veneered mansions enjoy a lifestyle made possible only by compounding the greatest mountains of rotting, stinking national debt mankind has ever heaped. This rubbish is their gift to posterity as, again, they have no thought whatsoever of attempting to pay off this debt.

  It is not just politicians who are responsible for creating this debt. The average citizen slavishly votes for either Democrats or Republicans, knowing full well both parties have done their share to pile up debt. They either vote for the party that makes them feel generous to the poor or the party that makes them feel strong in defending our country; but the fact is they are not putting their own financial strength into either of those noble goals.

  Our generation has decided the next generation can pay the bill for all of our generosity. We create welfare programs that we finance far into the future. We do this so that we can feel like we take care of our poor, but we hand the actual burden of paying for our largess off to our children and grandchildren! We would never undertake these programs if we had to pay for them fully as we go. We also let the next generation pay for our security. We are not bravely defending ourselves by our own strength. We are sapping the strength of our grandchildren to defend ourselves now.

  We are generous with other people’s money — people who are not even alive today and who have no say in these decisions that they shall pay for. The majority remain committed to government that finances its love and war far into the future with piles of debt that no one can repay.

  Not a dime’s worth of difference between Republicans and Democrats

  The US Congress has stated over and over that it is just kicking the can further down the road, but that has never stopped them from doing it, no matter which parity is in charge! (Look at the latest Republican budget!) Both parties complain about kicking our national-debt problem further down the road, but they do it anyway. Democrats and Republicans are equally addicted to debt. US citizens who call themselves by either party monicker are part of a generation that wants to party but doesn’t want to pay for the punch. We are a nation drunk on debt.

  If you think the economy is in better hands with one party than the other, you are simply addicted to party ideology. Until you give up on the notion that either party attends to anything other than its own self-interest, this nation will never find a truly creative answer.

  Both parties are guardians of the status quo and defenders of the wealthy; and neither party has a genuinely creative idea in its collective head. The only difference between Democrats and Republicans economically is what things motivate them to spend other people’s money.

  The Welfare party, known as the the Democratic Party, enables its millions of members to feel generous by ordering their grandchildren to pay for the meals given today to hungry families. None of their generosity is paid for by present taxes. Lord knows how those grandchildren will afford to be charitable to the needs of their own generation when they are still footing the bill for the needs of our generation!

  We don’t care, of course. If we actually cared, we’d stop kicking the can down the road; but then we’d have to sell the MacMansion to fund our charity, and we are certainly not that charitable … to pay for welfare with our own mansions! Let the children pay! The next generation will just have to suck it up when the bill comes due. That is what our actions say, even though people may wince or even get angry at hearing it. (Anger is denial’s usual defense.)

  Republicans, on the other hand, like to pretend they are fiscally conservative; but they have always proposed budget deficits, too, and have repeatedly shown themselves willing to play brinksmanship games with the national credit rating. At one point (August 2011), they triggered what may have become the worst stock-market crash in US history because of their brinksmanship when they arrogantly failed to realize that credit-rating agencies might blink before the Democrats did. If you don’t think it could have been the worst stock-market crash in history, have you considered the fact that it took the world’s largest and most rapidly launched campaign of quantitative easing to spin the market back around?

  While Republicans claim they are against big government, they are really only against big-government regulations on businesses. They were more than willing to create an entire new department of government (Homeland Security) as their answer to intelligence agencies that weren’t communicating with each other prior to 9/11. They were more than willing to spend hundreds of billions of dollars to create a massive computer spying network to record every phone call and email in the nation. They have been more than willing to legislate against the constitutional requirements for search warrants. So, they have in every meaningful way expanded government’s intrusion into your daily life. They just don’t want to create more regulatory and welfare departments, but they are more than willing to expand the size of our military, which is entirely government.

  Republicans have created deficits to fund all of that government expansion. Why didn’t they create deficits to stimulate the economy with new jobs by building roads and improving dilapidated sewer systems, improving the efficiency of highways, upgrading infrastructure. At least, those kinds of projects would have given the next generation something for their money. Why? Because that kind of government spending actually does stimulate the economy by creating hundreds of thousands of jobs, and Obama might get the credit. It also is work that needs to be done and that is ordinarily the province of government, so it is work Republicans would normally be supportive of, but not if it’s going to make a Democrat president look good.

  So, you see, the only difference between the two parties fiscally is the things that make them willing to pile up mountains of debt. Republicans are the War Party, always ready and willing, since the days of Ronald Reagan, to pile up debt to finance a strong military. The size of their proposed debts are never any smaller than are those proposed by Democrats; the only difference is what they want to spend the money on.

  How pathetic and weak is it to defend your country with your children’s livelihood? If you’re going to do any of these Republican or Democrat programs, fine; but shoulder the full expense yourself! Work longer hours just so you can demand your government charge you more in taxes in order to fund the welfare or military that you believe are essential.

  If you’re a Republican, demand that your government tax you for every cent or that it reduce the military. If you’re a Democrat, demand that your government tax you for every cent or that it reduce its help to the handicapped and toward single mothers and toward aiding the drug-addicted and that it stop creating school programs for the underprivileged. Demand it!

  Just stop pretending that you are generous and thoughtful toward the poor or strong and wise in defending your country … if you are going to shove the cost of your largess or strength off to your grandchildren. Own your generosity. Pay for your strength.

  Democrats and Republicans, the BFF’s of banksters

  Both Democrats and Republicans leaped to the call to bail out bloated bankers when they got a bad case of the Wall Street Willies. Both created the lie that their bankster friends were “too big to fail,” even as they idly watched the banks made bigger by order of the Federal Reserve. The over-Fed solution to bankruptcy was repeatedly for one bank to consume another. Neither party has pressed hard to send busted bankers and broken brokers to jail, yet some have plenty of time on their hands to press on with lengthy campaigns to send the other party’s politicians to jail. They have time to jockey for political power but no time to make sure potbellied bankers go to debtors prison.

  If “too big to fail” was not a lie, why would both parties sit back all these years and allow the Fed to make those tipsy, top-heavy banks even bigger while it seemed to surreptitiously let a few banks fail? One has to wonder what secret vendettas were involved in letting Washing Mutual burn up and then selling its ashes, owned under receivership by the FDIC, to JP Morgan Chase while it chose to merge JP with Bear Sterns, rather than letting Bear Sterns burn up, too.

  What clandestine planning was involved in merging Bank of America with Merrill Lynch and Countrywide, creating a vastly bigger monstrosity? Why press Wells Fargo to acquire Wachovia when that match made in hell turned Wells Fargo into the largest bank in the nation? These are not the kinds of solutions put forward by people who genuinely believe institutions are already too big to fail. Wasn’t that just an excuse to get taxpayers to underwrite the full risk of those solutions?

  Your members of congress sat idly by as the largest mergers in the history of the world were encouraged and even force-fed by the Federal Reserve as the “necessary” solution to saving the little people from being bonked by banks. At the end of this program, the largest and most powerful banks in the Federal Reserve system are vastly larger.

  Democrats and Republicans equally participated in taking the status quo and amping it up on steroids. They have turned every major bank into a colossus. They took a national debt the size of Texas and turned it into a national debt the size of a continent. It seems the only solution to anything our greedy leaders understand is that bigger is better, even when they claim bigness is the problem.

  The Great Recession proved to be, as so often is the case (under the crony politics of both parties), a convenient opportunity for the fat-and-wealthy to become more rotund at fire-sale prices. While the largest banks on earth gobbled each other up in a government-encouraged feeding frenzy, the risks of such carnivorous ventures were underwritten by taxpayers.

  If we are not greedy and addicted to size as a generation, why did we willingly acquiesce to a size-matters solution? It is simply how we think. That’s why. Bigger is better in our collective mind, so the answer seems to make sense to the majority. Size is proof of success, and we want the successful people running things. We could have let large banks fail, and then we could have taken all that money that has been created out of thin air anyway and given it to small banks to create accounts for those who were FDIC insured; but putting all the new money into smaller banks didn’t fit our way of seeing success.

  “Oh, that would create terrible inflation!” you might say. Really? If the big banks were allowed to collapse, their money would simply disintegrate into the thin air from which it was originally created as the banks went up in smoke. In creating new fiat money, you are only making that lost, old fiat money back up. You are not expanding the total money supply; you are just relocating it … like double-entry bookkeeping.

  We created trillions in new money anyway through zero-interest expansion of our money supply and quantitative wheezing. That didn’t create any of the customary inflation we were concerned about because it all went to banks to invest in stocks and bonds and barely entered regular circulation. As a result, it inflated the stock and bond markets to the point of approaching collapse, which we will pay for dearly in the form of economic disruption.

  What is the inflationary difference between creating vast amounts of money in the reserve accounts of major banks as the Fed did via QE and creating that same amount of money, instead, in numerous smaller and healthier banks in the names of the people and institutions whose deposits would have been flushed away by the failure of colossal institutions? The difference is that the money would immediately flow into Main Street’s economy, instead of Wall Street, which might have actually created a little of the inflation the Fed has said it wants.

  That would still serve the interest of our wealthy patricians, as all money bubbles up. You cannot buy pajamas on Main Street at Christmas with the money in your newly recreated bank account without that money transferring to Macy’s or Walmart and eventually to bank accounts of their stockholders. So, the money always trickles up, but the Federal Reserve is owned by big banks, and they greedily wanted the money directly. Thus, the new money all bypassed Main St. and went straight to Wall St. where the wealthy bid up stock, which benefited only themselves.

  If “too big to fail” was a problem, why don’t we solve it now … before the next collapse?

  Why don’t we break apart big banks now, while they are healthy and can be divided into healthy segments? If they were too big to fail so that George Bush had a legitimate cause to put tax payers at risk in massive bailouts (perpetuated by Barrack Obama), then why has neither party lifted a finger to break them up as “Ma Bell” was broken up? Once they started to fail, they were apparently the greatest financial danger known to mankind because George Bush said he had to give up his capitalist principles in order to save capitalists from their own greed. So, why aren’t we solving the problem, instead of waiting for it to happen again?

  Apparently the Republicans and Democrats who stepped on to that program only like capitalism so long as it is creating wealth; they don’t like its “self-regulating” mechanisms for correcting greed when we fail to regulate people away from greedy actions in the first place. At that point, suddenly all the capitalists became collectivists and socialized the cost of their financial experiments. If you want a true Commie plot, there’s one: socialize the cost of bank failures!

  There is nothing to stop the government from breaking up big banks into healthy, smaller institutions now that we have “recovered.” The Federal Reserve says we have recovered, so why are we not taking the next step of making sure there is nothing hanging over our heads that is “too big to fail?” If these oligarchs are so big that they threaten the civilian populace by their morbid obesity, then they can be broken up by the government on the same basis that Ma Bell was broken up. Is the government leaving room to use the “too big to fail” excuse all over again?

  Perhaps more importantly, where is the outrage that this never happened? Is it possible that US society doesn’t want to express outage because we are not brave enough or self-sacrificing enough to endure the pain of economic reform from the problems we created?

  The fact is, we’ve done NOTHING to rectify those dangers. We’ve had seven years and have done nothing at all! Republicans and Democrats alike twiddle their thumbs and pretend they do not see that the banks that were too big to fail are now twice as large as they were back then. One has to conclude they were lying when they told us these institutions were too big to fail because they have presided over a process that guaranteed those institutions would become much bigger.

  Because we squandered our opportunity to correct our own problems, our problems shall be our legacy

  When recovery efforts began after the crashes of the Great Recession, I said we were just pushing the snow straight ahead. Snowplows are built to push the snow off to the side when they are set right. If you set the blade to push the snow straight ahead, you cannot move forward for long because you will build up such a mountain of snow in front of the plow that the plow loses traction and can no longer push the load forward.

  I’m afraid we are at that point. Congress, unwilling and unable to make brave decisions, was too willing to believe the Fed could engineer recovery on its own. Congress abdicated its authority and responsibility. The Fed sometimes warned congress it could not solve the problem on its own and that fiscal policy must be put in place to create a more sound economy, but those warnings were faint … I suspect because the Fed’s head was inflated by the idea that people thought the Federal Reserve could save the world. The Federal Reserve, in its pride, came to believe that itself.

  What the Fed gave us was anesthesia. Had we diligently used the past seven years we had under anesthesia to restructure our economy away from debt, it could have saved us a painful transition. Instead, we let the anesthesia numb us to the mending that needed to be done and then left the injuries untreated.

  Now the anesthesia has run out, but we still have all the corrections to make. Because we have piled up mountains of debt, we have no reserve strength left. We have squandered our opportunity for change in order to maintain the status quo by financing everything with even more debt so that we’d never have to feel the pain of correction.

  We continued with adjustable-rate mortgage traps. We continued our sloppy terms of credit. We continued to allow deregulated banks to speculate in the stock market. We don’t allow people with 401k’s to operate outside of the services of fund managers by letting them buy and hold actual bonds under tax advantages of a 401k plan. We instituted interest rates that discourage savings as if they were the plague. We tried to re-inflate the housing market with those same zero interest base rates, instead of letting housing prices deflate back to a level where people can afford a home without ridiculous terms of credit. We repeated the sloppiness of auto financing that extends years beyond the collateral value of the automobile with no downpayment required.

  It’s wretched how dumb we are in our greed to have everything right now in the cheapest way possible and how willing we are to force the debts of that consumption upon our grandchildren and to pretend that won’t hurt them. We live in economic denial. However, if you’re a regular reader of this blog, you’re a different kind of person because you’re willing to hear and think about such things and probably agree that this is no way to run a society. No way to build an economy for future strength. No way to treat those who must follow in our footsteps.

  

  

  

  

  

• Why Driving Behind Chinese Trucks May Be Hazardous To Your Health

  In one of the greatest analogies for China’s slow-moving, pollution-puking economy, the impact of this small bump in the road sums up the fragility of the credit-fueled slow-motion truck-wreck that the central planners have created…

  …and then the wheels fell off…

  And there are some ‘crashes’ that just cannot be manipulated back together again.

  

  

  

  

  

• Meanwhile, Over At The "New York" Stock Exchange… Many Lasers

  Back in March, when looking at the main antenna array at the real “New York” Stock Exchange located off Route 17 and MacArthur Boulevard in Mahwah, New Jersey, we noticed something peculiar: instead of just housing various now traditional microwave dishes…

  

   

  … a new device had quietly appeared.

  

  

   

  The “device”, as Extremetech explained in early 2014, was the AOptix IntelliMax laser (used in various US defense programs), and now generously provided by Anova to various very wealthy HFT clients – in exchange for a very generous installation and recurring monthly fee – who desired to eliminate the 0.18 millisecond microwave latency between the NYSE and Nasdaq, by going straight to laser.

  High-frequency trading — the practice of making thousands of algorithmic stock trades per minute — is about to get a big boost in the USA. Anova, a company that specializes in deploying low-latency networks for stock trading, is completing an ultra-high-speed laser network between the New York Stock Exchange (NYSE) and the NASDAQ. The link will be just a few nanoseconds faster than the current microwave and fiber-optic links — but in the world of high-frequency trading (HFT), those nanoseconds could result in millions of dollars in profits for the trading companies. Such is the insanity of the stock markets; such is the unbelievable capacity of HFT to create money out of almost nothing.

   

  If you want to get a signal quickly from point A to point B, you basically have three options: fiber-optic cables, a network of microwave dishes, or laser links. Electrical (copper wire) networks are feasible over short runs, but their reduced functionality and bandwidth over longer runs makes them less desirable than fiber. Microwave (and even higher-frequency millimeter wave) networks also aren’t very high-bandwidth, but because they’re purpose-built, they can take a very direct route, significantly undercutting the latency of an oft-congested and round-about fiber network. Laser networks have all the advantages of microwave/millimeter wave networks, but they have higher bandwidth, and some very clever adaptive optics means they’re not impacted by bad weather. (Microwaves really hate inclement weather.)

   

  Last year, Anova completed a laser network link between the London and Frankfurt stock exchanges, and now, it seems the company is nearing completion on a similar laser network between the NYSE and NASDAQ data centers in Mahwah and Carteret, New Jersey. In the case of both networks, Anova is using equipment provided by AOptix, an American company that is contracted by the US military to produce similar laser-based systems for ground-to-aircraft communications. Each AOptix base station is capable of “carrier-grade” availability (five nines, 99.999%) over a distance of 10 kilometers (6.2 miles). The route, which is about 35 miles as the crow flies and skirts the center of Newark, will probably feature around six or seven base stations, each of which will have a direct line of sight with its two nearest neighbors. The link speed, according to the AOptix tech specs, will be around 2Gbps — not exactly massive by fiber-optic standards, but more than enough for a few thousand trades per second.

   

  The cost of building the network won’t have been cheap — probably a few million dollars — but that’s absolutely pennies for stock traders. (The new fiber link between London and Tokyo, which is also primarily for stock traders, will cost $1.5 billion.)

   

  The exact latency improvement of the NYSE-NASDAQ laser network isn’t yet known, but over a distance of just 35 miles we’re probably talking about nanoseconds. A microwave system currently in place between Chicago and NYC — a straight-line distance of around 800 miles — has a latency of 4.13 milliseconds. Scaling that down to 35 miles (dividing it by 23), you get a latency of 0.18 milliseconds between the NYSE and NASDAQ. I don’t know how fast the existing fiber/microwave links are, but even a difference of a few nanoseconds would be enough to beat out other high-frequency trading companies that are using older, slower networks. Anova, unsurprisingly, says it has dozens of trading firms who want to use the new laser network, all of which could stand to boost their profits. Though, as with all HFT technology, once everyone is using it (or something comparable) profit levels will revert.

   

  And thus the craziness that is high-speed trading continues unabated, faster and more profitable than ever before

  The WSJ also chimed in:

  In 2011, [Anova CEO] Michael Persico read an article in a trade journal describing how a Silicon Valley company called AOptix Technologies Inc. had designed military technology using lasers to communicate in battlefield conditions. His first thought: “I wonder if they can put those on a tower?” The technology traced back to the 1990s, when two scientists designed a method to gather images from outer space that corrected for atmospheric distortions. They developed technology for telescopes with flexible mirrors that could adjust thousands of times a second.

   

  Soon, they realized the technology could also be used to transmit data using lasers. They formed AOptix and contracted with the U.S. government to provide communication devices for military aircraft.

   

  Mr. Persico asked AOptix whether its laser system could be used to send stock-market data. The company was confident it could, because stock data would only have to move from one fixed spot to another.

   

  “Finding a tower isn’t hard for us, because we can find airplanes” with the lasers, said the CEO of AOptix, Dean Senner.

  * * *

  The Treasury Department’s Office of Financial Research in December labeled high-speed trading a “key source of operational risk across all markets.”

  * * *

  “Speed makes markets way more efficient,” said Peter Nabicht, a former high-speed trader who is now a senior adviser to Modern Markets Initiative, a trade group.

  * * *

  Mr. Persico set about securing rooftops and other spots to place his lasers between the New Jersey communities housing the NYSE and Nasdaq data centers. Anova said it has dozens of trading firms waiting to try the lasers when they go live. One firm that plans to use the system is XR Trading LLC of Chicago. It is a “very compelling technology,” said XR’s president, Matthew Haraburda. He said if it behaves as intended, it could be “a huge development” in trading technology.

  * * *

  Some question whether Anova’s lasers will provide a meaningful speed improvement over networks that are already in place, since microwave and millimeter-wave order transmissions also travel at near light speed. 

  The answer, we now know, is a resounding yes.

  Because while a few months after our article showcasing the NYSE’s latest technical achievement we noticed that the Anova laser had been taken down from its primary location, perched among all the microwave dishes, in the past few days there was a drastic change.

  First, here is a quick look at the main microwave tower at the NYSE, highlighted below in yellow.

  

   

  The AOptix laser device, previously located on the main microwave tower, is still nowhere to be found.

  

   

  And yet, in the same photo, something unexpected has shown up in the backgroun: a new tower, erected just in the past few days, and highlighted in the image above in red.

  

   

  Here is the tower shown closer. In fact, unlike the microwave tower, this new, just erected one is located literally right on the main NYSE entrance.

  

   

  Wait, what’s that at the top, are those…? Yes, they are: not one, not two, not three, but four brand spanking new lasers.

  Here is the the best our zoom lens could do.

  

   

  And with that we can now close the case on the WSJ’s question “whether Anova’s lasers will provide a meaningful speed improvement over networks that are already in place” – because whereas 9 months ago there was only one laser unit, now there are four, all on a dedicated tower, and we are confident many more are coming in the next few weeks, as all users of the suddenly obsolete microwave technology, who until recently were used to having the latest and greatest in frontrunning technology, realize they are being frontrun by their even faster, laser-based peers.

  Which takes us back to the microwave tower, where we find not only what may be the world’s most important (if only for a few more months) fully-exposed power supply cables…

  

   

  …but the following sad remnant of a bygone era, and by bygone era we mean the peak in technological sophistication just 3 years ago, when microwaves ruled the financial world and were the absolute pinnacle of rigged market frontrunning: a sad microwave dish lying face down in the gravel.

  

  

   

  A zoom in of the now defunct technology for all to see:

  

  * * *

  Nine months ago we concluded by saying that everyone who splurged millions on the “brand-new” – as recently as 2013 – microwave technologies to give their HFT system a leg up… is now obsolete.

  Welcome to lasers: where you are either part of the very expensive club, or are being frontrun. Which also means that if Michael Lewis is indeed writing a sequel to Flash Boys focusing on microwave signals and towers as the “next big thing”, he may just want to burn the manuscript.

  As for what comes next, the WSJ suggested the following: “Some dream of a replacement for the fiber-optic cables across the Atlantic and Pacific. The idea: Turbocharge intercontinental trading by floating balloons carrying microwave dishes over the ocean.”

  Scratch that: the only option left now to trade ahead of everyone else with impunity – and entirely within the confines of post Reg NMS law – is to use lasers: laser beams encircling the globe, allowing speed-of-light quote stuffing, churning, momentum ingition, subpennying, spoofing, layering, intermarket sweeping and everything else that allows some to profit from everyone else in these rigged markets.

  Because this, ladies and gentlemen, is what “trading” has become.

  (That said, one wonders just what would happen if one flies, say, a drone in front of one or all of those lasers during, say, peak market hours or, heaven forbid, just a few milliseconds before the Fed announces its next “most important ever” policy decision.)

  

  

  

  

  

• This Is What Gold Does In A Currency Crisis, Canadian Edition

  Submitted by John Rubino via DollarCollapse.com,

  Along with the currencies of most other commodity-exporting countries, the Canadian dollar has been in near-freefall lately.

  

  Gold, meanwhile, has been sucked down with the rest of the commodities complex, falling hard since 2013. But only in US dollars. For Canadians, with their weak domestic currency, gold has been behaving just fine. It’s up 17% in C$ terms over the past two years and looks ready to rally from here:

  

  Protection from currency trouble is why people own it, and why in the vast majority of places it’s owners are very happy.

  Now combine a falling currency with a crashing oil price and the result is a surprisingly favorable environment for Canadian and other weak-currency-country gold miners. Big mostly-Canadian miner Goldcorp, for instance, has seen its production costs fall by almost 20% in USD terms in the past two years, with more to come based on the subsequent cheapening of the diesel fuel required to run its equipment.

  

  If 2016 plays out according to the script that has rising US interest rates producing an even stronger dollar (and correspondingly weaker currencies elsewhere) the terms of trade for non-US gold miners should become even more favorable. Many of them will report positive earnings comparisons while most other industries are doing the opposite, putting them on the radar screens of momentum traders and value investors who haven’t been paying attention since the last gold/USD bull market ended.

  

  

  

  

  

• Obama Scrambles To Create "New ISIS Narrative" After Putin Embarrasses Washington

  One of the most amusing things about Russia’s headlong plunge into Syria’s five-year conflict is the extent to which it effectively represented Moscow calling time on Washington’s strategy of seeking to bring about regime change in the Mid-East by intentionally destabilizing otherwise strong (if not always benign) governments.

  Until September 30 – which is the day a three star Russian general strolled into the US embassy in Baghdad and informed the staff that airstrikes in Syria begin “in one hour” – Washington, Riyadh, Ankara, and Doha seemed perfectly content to simply wait around for one group of rebels or another to finally succeed in taking Damascus. In the meantime, the US embarked on what one might call a “containment” strategy as it related to ISIS – the idea, basically, was to keep Frankenstein confined to the lab, but not to hit the monster hard enough to render it ineffectual in the fight to destabilize the Assad government. 

  Once Assad fell, the US would march in and “liberate” the country before promptly installing a puppet government – with the help of the Saudis of course. 

  All of that changed when the Russians arrived in Latakia.

  Once Moscow’s warplanes began to turn the tide in favor of the SAA with the help of Hezbollah ground forces and the IRGC, Putin promptly moved to blow the whole charade wide open by asking (loudly) why the US wouldn’t partner with Russia in the war on terror. He of course knew the answer, but the point was to make the general public question why, if ISIS really is the greatest threat to humanity since the Reich, Washington was unwilling to partner with Moscow and also with Tehran. Between that and the seemingly endless stream of Russian MoD clips depicting hundreds upon hundreds of airstrikes against terrorist targets, The Kremlin made the White House look as though the US was not serious about eradicating the very groups the Western media were holding up as public enemy number one.

  Since around mid-October, the US has embarked on a desperate attempt to counter the notion that maybe – just maybe – there’s a nefarious explanation for America’s perceived disinterest in eradicating terror. First, Washington released helmet cam footage of a raid on an ISIS prison which resulted in the first US combat death in Iraq since 2011. Next, the White House announced SpecOps would be sent to Syria. The Pentagon followed up by offering to send Apache helicopters and their crews to assist Baghdad in retaking Ramadi (assistance which PM Haider Abadi, under pressure from Shiite lawmakers and Iran to rollback American influence in the country, refused). Finally, the US began hitting ISIS oil tankers.

  Previously, the US claimed it didn’t destroy the oil convoys because The Pentagon was concerned about collateral damage. Once Putin blew the whistle on the Turkey-ISIS oil connection and began posting video clips of oil tanker trucks streaming across the border with apparent impunity, Washington was forced to drop the “collateral damage” excuse and start bombing the trucks (although Russia will tell you that there’s not much bombing going on from the US side of things). All in all, this reinforces the notion that Washington has no strategy. Actually, that’s not true. There’s probably a strategy, but it doesn’t involve an all out effort to degrade and defeat ISIS and so, the narrative needs to be spun in way that makes sense to an increasingly incredulous public. 

  As The Hill reports, the US is now scrambling to craft a “new narrative” to feed to the impatient electorate. “Military officials on the Operation Inherent Resolve task force have recently formed a working group to formulate a ‘new narrative,’ The Hill writes, citing defense officials. 

  “The steps are preliminary, and are part of a larger effort to better communicate the U.S.’s military strategy amid heavy criticism from Republican presidential candidates who say Obama is losing the battle against the terrorist group,” the article continues.

  “To say there’s no strategy is just flat out wrong,” Army Col. Christopher Garver, public affairs officer for the Combined Joint Task Force — Operation Inherent Resolve insists. 

  “The new working group will look at how best to articulate what it is we’re trying to do … and do it in a concise easy to understand way,” he adds. 

  Yes, the US wants to “articulate what it is they’re trying to do,” because as it stands, it’s Vladimir Putin, Sergei Lavrov, and Maria Zakharova that are doing the articulating when it comes to explaining what Washington is up to in Syria. The US desperately needs to recapture the narrative or else end up like Turkey, which is now widely understood to be what amounts to Islamic State’s number one state sponsor, all thanks to Moscow’s PR blitz in the wake of Erdogan’s move to shoot down a Russian Su-24 last month. 

  Here’s Obama: “There is a legitimate criticism of what I’ve been doing and our administration has been doing in the sense that we haven’t, you know, on a regular basis I think described all the work that we’ve been doing for more than a year now to defeat ISIL,” he said. 

  

  Here’s a list of steps the US has taken in the mad scramble to counter the notion that the US military has either failed, or is under orders to avoid eradicating the group:

  • On Nov. 30, the White House announced the president had tapped a new ISIS czar, Robert Malley. He held a Twitter chat two weeks later, answering questions from the general public and journalists. 
  • On Dec. 6, the president addressed the nation on ISIS from the Oval Office, reiterating and defending his strategy.
  • On Dec. 8, the National Security Council press team began emailing to journalists daily summaries of “key developments” “in our unyielding campaign to degrade and destroy ISIL.” 
  • On Dec. 14, the president himself visited the Pentagon, to convene a National Security Council meeting on ISIS. While he issued remarks afterwards, he did not take any questions from journalists.
  • On Dec. 15, a senior State Department official briefed Pentagon reporters on efforts to target ISIS’s oil assets. 
  • And on Dec. 16, Adam Szubin, Treasury undersecretary for terrorism and financial crimes, briefed White House reporters on efforts to shut down ISIS’s financing. 

  For his part, Paul Ryan says the problem isn’t the messaging, it’s the strategy itself. 

  “This isn’t the first time the president has stressed that the American people just don’t get it, blaming poor communication for America’s discontent rather than the failed policies themselves,” said a statement from Ryan’s office. 

  The issue was not with “a communications plan” to defeat ISIS but rather over the need for a “comprehensive plan to destroy this enemy and protect our homeland,” it said.

  Right. But what Ryan apparently either doesn’t get or simply can’t say, is that this isn’t about destroying ISIS, it’s about achieving larger geopolitical goals like rolling back Iranian influence in the Arabian Peninsula and helping ensure that the Mid-East balance of power doesn’t shift too dramatically towards Iran once sanctions are lifted next year. As Amb. James Jeffrey, a former Army infantry officer put it, “if you’re not willing to change policy … or you’re not willing to change your goals, then what you do is you reorganize the deck chairs on the Titanic.”

  In other words, the only way the US is going to reclaim some shred of its lost credibility is to simply stop trying to overthrow the Assad government and focus on “the terrorists.” Of course that isn’t going to happen despite the best efforts of Tulsi Gabbard and the handful of other lawmakers inside the Beltway who actually “get it.”

  

  

  

  

  

• Abenomics Is Dead – Japanese Data Collapses Across The Board

  With recent JPY strength not helping, last week ended on a down-note for Japan as its jobless rate ticked up from 3.1% to 3.3% (the biggest rise since January) and Household spending collapsed. However, as the last week of the year begins, things have not improved as a double whammy of awfulness just hit the shores of Abe's nation with retail sales (worst since the tsunami) and industrial production ugly and missing across the board. We are sure, of course, that just one more dose of faith-based QE will fix this.

  Household Spending has been a disaster…

  

   

  And Retail Sales is therefore terrible… (away from the effects of the pre- and post-tax hike moves, this is the worst monthtly drop in Retail Sales since The 2011 Tsunami!!!)

  

   

  And so Industrial Production is lagging…

  

   

  So to summarize – with JPY strength amid carry unwinds, Kuroda worriedly stuck on the sidelines, and global economic collapse, Japan's Abenomics 'program' just created the following disaster trhee years later:

  • Household Spending plunges 2.9% YoY – worst since March (post-tax-hike)
  • Jobless Rate jumps to 3.3% (from 3.1%)
  • Industrial Production drops 1.0% MoM – worst in 3 months
  • Retail Trade tumbles 1.0% YoY – biggest drop since March (post-tax-hike)
  • Retail Sales plunges 2.5% MoM – Worst drop since Fukushima Tsunami (absent tax-hike)

  But apart from that – everything is awesome.

  *  *  *

  Finally, in the interests of keeping things light over the holiday period, we note that when asked if this means trouble ahead for President Shinzo Abe, he allegedly replied "Depends."

  

  

  

  

  

• How The Public Get Suckered By "News" Media Ignoring Reality

  Submitted by Eric Zuesse, originally posted at strategic-culture.org,

  According to Russian Television on December 25th, Russian intelligence has counted “up to 12,000” tanker trucks filled with oil “on the Turkish-Iraqi border,” and “the final destination remains to be Turkey.” In addition, some of those trucks are still heading into Turkey from Syria, but their number is “decreased” because Russia’s Syrian bombing campaign, which started on September 30th, has, ever since they began bombing the oil trucks on November 18th, destroyed “up to 2,000” of those trucks, that were in Syria heading into Turkey.

  According to the news report, Russia is requesting help from the U.S. coalition to bomb the “up to 12,000” trucks that are in Iraq carrying ISIS oil into Turkey. ISIS drives them there so that ISIS can become self-sustaining by the oil-sales. ISIS, which had long been supported by America’s allies the Arab oil potentates — all of whom are fundamentalist Sunnis — aims to be self-sustaining now on the sales of this stolen oil through Turkey, which is operating the black market in ISIS’s stolen oil. That’s why Russia wants to stamp out this market. “However, so far, Washington says that it is not ready for such a move,” the report says.

  Whereas Russia had begun on November 18th to bomb those trucks en-route into Turkey, and eliminated around 500 of them at that time, the U.S. coalition hadn’t bombed any such trucks until later that day, November 18th, in order to pretend to be competitive with what Russia had been doing since it started on 30 September 2015, to bomb in Syria. Before the U.S. bombed the 116 trucks it destroyed, it warned the drivers 45 minutes in advance.

  Here was the shocking admission that was made by the U.S. Defense Department’s press-spokesman at his 18 November 2015 presentation, in which he voluntarily acknowledged that, throughout all of the 14 months during which the U.S. had been bombing in Syria and in Iraq, the U.S. hadn’t previously destroyed any  of the tens of thousands of oil tank-trucks that had been transporting ISIS's stolen oil out from Iraq and from Syria — the stolen-oil sales that bring $2B per year into ISIS coffers — and that the U.S. had warned 45-minutes in advance:

  This is our first strike against tanker trucks, and to minimize risks to civilians, we conducted a leaflet drop prior to the strike. We did a show of force, by — we had aircraft essentially buzz the trucks at low altitude.

   

  So, I do have copy of the leaflet, and I have got some videos, so why don't you pull the leaflet up. Let me take a look at it so I can talk about it.

   

  As you can see, it's a fairly simple leaflet, it says, "Get out of your trucks now, and run away from them." A very simple message.

   

  And then, also, "Warning: airstrikes are coming. Oil trucks will be destroyed. Get away from your oil trucks immediately. Do not risk your life."

   

  And so, these are the leaflets that we dropped — about 45 minutes before the airstrikes actually began. Again, we combine these leaflet drops with very low altitude passes of some of our attack aviation, which sends a very powerful message.

  So: not only had the U.S. previously avoided destroying ISIS’s main current source of income (besides the multimillion-dollar donations made by members of the royal families of Saudi Arabia, Qatar, UAE, and Kuwait — all of whom are protected by the U.S.) (and Secretary of State Hillary Clinton had urged all of them on 30 December 2009 please to stop funding their terrorists), but, when the U.S. now started to bomb those tank-trucks filled with stolen oil, the U.S. warned in advance the drivers, who were also assets to the jihadist cause the U.S. pretended to oppose, and thus were enemies of the public (and were participants in the evils of ISIS). The U.S. Department of Defense (DOD) wanted to protect them — not  to kill them. That was done “to minimize risks to civilians.” Wow!! After the U.S. history of slaughtering millions of civilians in wars, and torturing many, including complete innocents in Iraq and elsewhere, we’re now protecting ISIS’s drivers? Can any hypocrisy exceed this? If the United States were a democracy, its press would have been focusing on this issue for a week. The U.S. protecting ISIS’s financial base, and assets, has mind-boggling implications. On what side are ‘we’ — and who are “we,” and who are “them”? We are not the aristocracy. The aristocracy are them. It includes the top stockholders in firms such as Lockheed Martin. Warren Buffett said in 2006 “There’s class warfare, all right, but it’s my class, the rich class, that’s making war, and we’re winning.” That’s shocking honesty.

  Did any of the major U.S. news media, all of which have reporters attending those press conferences, report the U.S. Government’s open admission  there, that the U.S. Government had protected ISIS all along, not bombed any  of ISIS’s oil tank-trucks (until Russia did)? Those trucks providing $2B per year to ISIS terrorists? None  of them reported it. None of them conveyed to their audience this astounding information — essentially, that the U.S. was protecting the money-flow to the jihadists in Syria, and was even protecting their truckers, and its ‘press’ were protecting them.

  Another major revelation at this same press conference was that "we right now have no plans to conduct coordinated operations with the Russians” in Syria. And this was reconfirmed on December 25th from the Russian side, as being still the U.S. policy. In other words: the U.S. President is so hostile toward Russia, that, even months after Russia’s request to Washington on September 30th to cooperate in killing all jihadists in Syria,Obama still refuses to work together with Russia, or even just to “coordinate operations with the Russians,” to kill the jihadists. (And, in the Democratic debate on 19 December 2015, Hillary Clinton insisted that eliminating the jihadists in Syria mustn’t have higher priority than, nor occur before, Bashar al-Assad is permanently removed from Syria’s leadership. Her position is at least as anti-Russian as Obama’s.)

  The jihadists had flocked into Syria to oust the non-sectarian leader of that country, Assad, and to replace him with an Islamist leader, a Sharia-law Sunni, whom the U.S. Government, and the royal families of Saudi Arabia, Qatar, UAE, and Kuwait, approve of as being better than the non-sectarian Assad (who is personally a Shiite, but runs a decidedly unsectarian, secular, government). The jihadists work for the American alliance.

  Russia’s position on the matter is that no foreign power possesses the right to determine whom the President of Syria will or won’t be; only the Syrian people do, in an election. Russia insists that it be determined in internationally monitored and overseen elections. However, polls taken by Western polling firms indicate that Assad would overwhelmingly win any such election; so, U.S. President Barack Obama has rejected democracy for Syria. And yet, the U.S. accuses Putin of being dictatorial, and claims itself to be ‘democratic.’ And the U.S. President demands that Syria’s legal President be removed from power and excluded from any possibility of ever again becoming that nation’s President. This is America’s version of ‘democracy’ in Syria.

  The DOD spokesperson, Steve Warren, spoke contemptuously of Russia. He said that in Russia’s war against jihadists in Syria, "the Russians are using dumb bombs. Their history has been both reckless and irresponsible.” This statement was being made by a military spokesman for the same Government that in the most “reckless and irresponsible” manner had invaded and destroyed Iraq in 2003. However, his statement here was also, itself, simply false. Russia’s bombings have been with both precision-guided weapons and unguided munitions that are under no control after being fired.

  Warren there was reaffirming a reporter’s question which had asserted: “Getting back to Raqqa, as we all know, the Russians are not using precision munitions. Any sense of any increased civilian casualties in Raqqa as a result of that?” So, Warren was here reaffirming a reporter’s (or actually, a press-appointed government stenographer’s) falsehood — reaffirming an assertion that was either unprofessionally ignorant, or else a knowing lie. On September 30th, when Russia had started its air strikes, the U.S. had said that they were “doomed to failure.” That, too, seems increasingly likely to have been false (that it was “doomed to failure”). (And any such pretended foresight is also a lie when it comes from an official source such as a government. It was mere propaganda.)

  Instead of the mainstream U.S. press reporting that the U.S. Government lied there (and this Government does it routinely, because the ‘press’ never report that a lie by the President is  a lie), only a small number of only non-mainstream sites, all online-only, picked up anything from this stunning press conference, regarding any of the important and much-discussed issues that it addressed; and the first such site to do so was a fundamentalist Christian one, which is obsessively pro-Israel, and generally hard-rightwing Republican. Bridget Johnson at PJ Media headlined, on the same day as the press conference (the only site to report at all upon it that day, November 18th), “ISIS Oil Tankers Hit for First Time – With 45-Minute Warning.” This was an admirable reporting coup (though it wasn’t really “for First Time,” since Russian bombers  had already done it), because it covered all of the main points, including the shocking admissions by Mr. Warren. Her news coup had over 1,400 reader-comments.

  Paul Joseph Watson, at the generally conservative Republican site InfoWars, bannered on November 23rd, "WHITE HOUSE GAVE ISIS 45 MINUTE WARNING BEFORE BOMBING OIL TANKERS,” and he placed these matters honestly into their geostrategic context, of the Obama Administration’s placing a higher priority upon defeating Russia than defeating jihadism. As is so often the case with the terrific journalist Watson, he penetrated deeply into these matters, and was not at all shy to acknowledge, for example, the following stark contrast, which U.S. ‘news’ media hide:

  Compare the Obama White House’s approach to fighting ISIS to that of Russia.

   

  While it took the U.S. fifteen months to even begin targeting ISIS’ oil refineries and tankers, air strikes by Moscow destroyed more than 1,000 tankers in a period of just five days.

   

  In comparison, Col. Steve Warren said that the U.S. had taken out only 116 tanker trucks, the “first strike” to target ISIS’ lucrative black market oil business, which funds over 50 per cent of the terror group’s activities.

   

  So: this, too, like Bridget Johnson’s report, was honest and first-rate news-reporting, from another non-mainstream Republican site. (Note, however, that the mainstream  Republican news-sites, such as Fox News, Wall Street Journal, and Rush Limbaugh, were no more forthcoming on this matter than all of the Democratic Party sites were.)

  The aristocracy’s control over all the mainstream ‘news’ is ironclad – and this includes the political magazines, such as National Review, and The Nation;  as well as ‘intellectual’ magazines, such as Harpers  and The Atlantic.  American ‘news’ media stifle democracy in America; they’re not part of  democracy, in America. They’re like poison that’s presented as being ‘medicine’ instead. Suckers don’t just swallow it; they come back for more of that propaganda.

  The next day, November 23rd, “Tyler Durden,” the pseudonymous genius behind his own Zero Hedge blog, headlined "'Get Out Of Your Trucks And Run Away': US Gives ISIS 45 Minute Warning On Oil Tanker Strikes,” and he reported using some of the same sources as the others, but supplementing it with additional good sources. He had around 400 reader-comments.

  In addition, there were some trashy news-reports at far-right Republican sites, such as one, on November 19th, crediting Bridget Johnson’s news report the day before as its source, "The Obamization of the military, pt. 243.” This was by J.R. Dunn, at the fundamentalist Republican, American Thinker, blog. He pretended that Obama was being bad here because Obama was too concerned to avoid bloodshed: “You see, the important thing isn’t hurting ISIS. No – the important thing is not hurting civilians.” Picking up from the standard Republican meme that torture should be used against ‘bad people’ in order for ‘good people’ to be kept safe, and that civilians in ‘enemy’ nations are okay to be victims of American military attacks, Dunn took Bridget Johnson’s news-report merely as confirmation of his own bigotries and hatreds. He had about 150 reader-comments. Typical was this one: "The Left in America has known that in order to succeed with their agenda the US military had to be infiltrated, compromised, and weakened.” For such suckers, the ‘source’ of America’s problems wasn’t America’s aristocracy; it was America’s Democrats.

  On November 24th, Michael Morell, Obama’s CIA Director during 2011-2013, said on the trashy PBS Charlie Rose show (hosted by Mr. Rose, who is such an incompetent interviewer that he’s beloved by aristocrats for his reliably softball interviews), “We didn’t go after oil wells, actually hitting oil wells that ISIS controls, because we didn’t want to do environmental damage, and we didn’t want to destroy that infrastructure.” Of course, Mr. Rose avoided drilling down there to find out why the U.S. Government treats jihadists as being such a minor matter — especially after all of the environmental damage the U.S. routinely does in its invasions, such as the depleted uranium that contaminates today’s Iraq, from the U.S. attacks. And, of course, almost all of the news-media that picked up on that stunning admission from Obama’s former CIA Director, were Republican sites, such as Daily Caller, Washington Times, Breitbart, Real Clear Politics, and American Thinker. In addition, there were a few high quality journalistic sites reporting it, such as Zero Hedge, The Hill, The Economic Collapse, and Moon of Alabama. In other words: only very few Americans came to know about this jaw-dropping stunning admission from an Obama official — and most who did were people who hate Obama for his being such things as ‘against torture’ (in other words: Republican stooges of the aristocracy).

  Basically, in America, only marginal, and mainly right-wing, audiences were being informed even badly, regarding the sensational things that were revealed — and in some instances proudly  revealed — at the November 18th DOD press conference, and also in the November 24th TV interview of Morell. What is traditionally viewed as being America’s “news media” were entirely absent from their job of reporting even one of these two important statements by U.S. Government officials. And none of the news-reports on that astounding DOD press conference, and of that Morell interview, reached Democratic Party voters at all. Republicans hate Obama because he’s a communist Islamic Kenyan, while Democrats love Obama because the wacko Republican Party lies about him constantly and because Obama is to the left of those blithering wackos.

  A press like this makes it impossible for there to be intelligent, informed, rather than misinformed and/or stupid, voting in national political elections in the United States.

  Perhaps the biggest scandal in America is its rigid aristocratically controlled ‘press,’ which is really nothing more than a whored propaganda-operation that’s run by and for the nation’s aristocracy. The owners of America’s ‘news’ media know that the way for the press to make money in this type of dictatorship is to sell to the aristocrats’ corporations access to the public, and to ‘report’ only ‘news’ that the corporate sponsors don’t mind the public’s knowing about.

  So: this is how the public get suckered, in America.

  It wouldn’t be so bad if the American Government didn’t hypocritically claim to be a ‘democracy.’ That’s just piling it on, with a shovel.

  *  *  *

  Investigative historian Eric Zuesse is the author, most recently, of  They’re Not Even Close: The Democratic vs. Republican Economic Records, 1910-2010, and of  CHRIST’S VENTRILOQUISTS: The Event that Created Christianity.

  

  

  

  

  

• Ontarians Urged To "Voluntarily" Pay More Taxes To Cut Province's Debt

  Christmas is a time for giving and that is what Ontario Premier Kathleen Wynne is asking of her citizenry. With almost $300 billion in debt, and almost 1 in 10 dollars of revenue going to pay interest, and already facing the highest tax rates in North America, The Star reports that Ontario officials are asking that 'patriots' voluntarily donate their tax refund or write a cheque to defray the province's massive debtload.

  

   

  As The Toronto Sun reports, Canada’s largest province has asked its taxpayers to donate their hard-earned money to the cause of bailing out the much indebted provincial government.

  For a mere $21,000 for every man, woman and child in the province, Ontario could be debt free.

   

  No, this is not some kind of holiday joke about the Grinch who stole Christmas.

   

  On top of paying among the highest taxes in North America, and coping with skyrocketing hydro prices — hikes directly caused by the decisions made by this Liberal administration and the previous one — the Wynne government wants more.

   

  Treasury Board Chair Deb Matthews made the bold request last week, and specifically asked folks to donate their tax return rebate to help pay off the provincial debt.

   

  “It’s an unusual thing for someone to do, but I would encourage any Ontarian who wants to make a contribution to feel free to do so,” said Matthews.

  A government asking for donations isn’t just unusual. It’s like a stranger taking your car and then coming back the next day to ask if you’ll chip in some money for the gas. Maybe you can pay for an oil change, too?

  But the Wynne government is desperate for cash.

  For the past decade, they’ve spent and borrowed like there’s no tomorrow and wasted public funds with little concern for taxpayers.

   

  Thanks to all the government’s reckless spending, including a pile of billion-dollar scandals that have led to criminal charges, Ontario’s government is dealing with spiralling debt.

   

  Nearly one in every ten dollars spent by the Ontario government goes towards paying interest on the provincial debt.

   

  

  Ontario’s provincial government owes approximately $300 billion. That is $300,000,000,000 — with 11 zeros.

   

  And so the government constantly looks for ways to get its hands on more cash.

  Perhaps most surprisingly, the government’s plea for donations has not gone unanswered.

  Ontario collected $135,289 in voluntary tax return donations last year. Around 36,000 people chose to donate an average of $3.75 to this bizarre cause.

   

  At that rate, the government only needs another 80 billion donors and Ontario’s debt will be paid off.

   

  Of course, there are only about 14 million people in Ontario, and we imagine most taxpayers would rather lose their wallets than enable this government with more resources.

  As The Toronto Sun concludes, rather "cynically" and "unpatriotically":

  Tell the government to cut wasteful spending, and save your donations for those truly in need. 

  One wodners how long before non-volunteer-donators will be labelled enemies of the state?

  

  

  

  

  

• 2015: The Year That Exposed The "Experts" And Left The "Smart-Crowd" Dumbfounded

  Authored by Mark St.Cyr,

  It wasn’t supposed to be this way. We were all told by the “experts” and the so-called “smart crowd” ad nauseam the economy and markets of 2015 were “ready for lift off.” Proclamations that GDP and other economic metrics were indeed going to be the unquestionable catalyst to help propel not only the markets themselves ever higher, but also, prove all the nay-sayers as well as data-deniers wrong. The problem? It was the exact opposite.

  2015 exposed the sole overarching fundamental principle the “experts” refused to calculate into their qualitative analysis. That fundamental? Without the continuing interventionism of the Federal Reserve – there is no market. Period. i.e., The capital markets today are to a world-class marketplace for capital formation – as a Potemkin village is to any world-class capitol city. Welcome to today’s financial markets brought courtesy of the Fed.

  As the year began the markets continued their ascent to increasingly higher and higher historic levels (yes, historic.) It seemed near weekly another headline of “Historic Highs!” were proclaimed across the financial media as the markets zigzagged up and down yet, in effect, actually going nowhere. Here every selloff was met with an ever more forceful BTFD (buy the dip) recovering a prior days triple digit selloff with some stop running, HFT fueled, triple digit rally rewarding the Bulls (as well as the delivering the subsequent headlines) that the markets were indeed “on fire!” For surely it was insinuated; one would be a fool to be on the sidelines and miss out on all these “fundamental” based gains. Another problem? “Fundamental” was no longer anything real. It was only in the eyes of the beholder. And those beholders were and are “the experts.”

  Nowhere was this meme more prevalent, or on display, as the example I used earlier in the year in an article titled, “The Coming Credibility Hammer.” In that piece I quoted an exchange I watched on Bloomberg™ in response to an assertion that it was easy to beat tepid earnings estimates. The guest Tony Dwyer responded with the following push-back:

  “They haven’t been the entire cycle and we’ve had a 300% gain. Look, I’m trying to understand how we keep coming on every quarter, that the earnings are terrible, revenue growth is terrible, this is going to be bad – and we’re up 300%” He added as to reaffirm he still believes double-digit gains just 6 months out from here.

  Just to make it clear; I have no issue with Mr. Dwyer or anyone else. All I’m doing is pointing out glaring examples on the mindset that appeared not only prevalent, but also unquestioned within the rarefied air many still believed they were breathing on Wall Street. What many failed to consider was maybe, just maybe; the opinions of where and how these markets were not only going, or for that matter stayed at these levels, while additionally arguing against any premise as to question the how and why of these ever higher prints; was not actually breathing rarefied air, but had more in common with – inhaling one’s own exhaust. Let me demonstrate this using a more recent example.

  Over the past 5 years since the inception and implementation of the Fed’s QE (quantitative easing) programs the markets have done two things that have been extraordinary. One: They have gone up in a near linear fashion. And Two: That progression appeared unshakable if not unbreakable. It seemed no matter what took place in the world, or any economic uncertainties, the markets met it with a rally! So stable was this progression skyward a selloff of 5% (something quite ordinary as well as expected in normal markets) was all but nonexistent. And when there was a selloff for any reason – it was met with a buying frenzy that erased not only the loss but usually propelled the indexes even higher the following day. Selloffs now took on the tagline of Servpro™ “Like it never even happened”®

  So ridiculous had the markets acted to what would cause normal concerns one meme encapsulated the lunacy: “Bad news is now good news, and horrible is terrific!”

  This was now the only term that could explain just what the heck was going on within the capital markets. For nothing made sense any longer. Now, the only way one could make sense of the markets was to look at just how bad the economy was, and calculate the probabilities that it would force the Fed. to relinquish any thoughts of backing off the stimulus. All other economic principles or calculations were now laid bare. They didn’t matter. The only calculation that mattered was: QE = Investing genius. Buy, Buy, Buy!

  Nowhere was this more prominent than what became manifest with another one of Barrons™ now infamous “experts” market calls “Stick With The Bull.”

  The issue? Well, as of today if the S&P 500™ were to falter or just tread water for the remaining week of 2015 (a shortened holiday session in fact) all, let me repeat, all as in 10 out of the 10 “experts” polled would be de facto wrong. The average close of the polled is 2209. And if not for the vapid market action that has been taking place since the Fed. actually went ahead and “just did it” (e.g., raised rates) Even the most conservative remain in jeopardy.

  It is still quite possible that another out-of-the-blue, HFT fueled, algo-based, headline initiated, stop running mania could indeed be released into this worse than paper-thin market and make all these “experts” correct. (And one should never, ever, underestimate the lengths Wall Street will go to save a year-end bonus) But is that a call of expertise? Or; is it a saved by the cowbell call?  That’s an important call you need to make. Remember, none of these experts seemed to had ever contemplated just how ailing these fragile “markets” were in the first place. And after all, if your price target is off – just state it again for 2016. Now that’s analysis you can use, and will pay handsomely (as well as dearly) for, no?

  Does anyone remember this past August? (I know I do) If you were to poll many of the so-called “smart crowd” I would wager dollars to doughnuts the response would be to dismiss or, echo that of what many now imply for the Fed’s latest move: “One and done.” You would think a market rout of historic proportions so vehement, and so cascading, that it caused a historic first time ever halting of the three major indexes would be front-of-mind. Nope, just a blip. After all “Just look at the resiliency of these markets” is the usual response. However, there seems to be just a tiny bit more of a quiver in the voice when it’s expressed today, as compared to the all-out snorting one would hear at the beginning of the year. Funny how no QE suddenly brings about a diminished Bull forecast. Or should I say: just plain bull?

  Again, who knows where we go from here. After all it seems pretty clear the “experts” don’t have a clue either. Yet, if you want a glimpse of just how ardent this bull—- narrative is going to be spun, it was on full parade this past week.

  As I was watching a segment on Bloomberg’s <GO>™ the 22nd of this month. There was an intense discussion forming around the bull narrative and how or why it may not be as fundamentally sound as many imply that it is. During this discussion Barry Ritholtz interjected why he takes umbrage when it comes to “bubble calling.” He goes on to state and imply (I’m paraphrasing): “Those who have called bubble of late have been wrong.” Fair enough. However, the reasoning? I’ll let you be the judge.

  He then goes on to explain why those who lived through the last few bubbles yet missed recognizing them while they were happening – are the ones who should be discounted for their possible recognition that we may be in one once again. (No really. I’m not making that up.)

  The logic was absolutely breathtaking as I sat and listened. Let me illustrate this absurdity with this analogy for it really does sum it up:

  In order to not get burned by the hot stove, what you need to do is not take any advice from people with scars on their hands because, to them, now every stove is hot. And whatever you do, don’t ever bring up the fact that our houses have burned down more than once – for we don’t agree with the fire department’s findings that it was caused by an unattended, speculation fueled stove with visible cracks, leaking supply lines, and no preventive maintenance reviews in years. Remember: we’re the experts in stoves – not the fire dept.

  Think I’m kidding? Here’s another as he went on to explain what a “bubble” is as opposed to what it is not. Ready? (I’m paraphrasing – but not by much)

  “There is a huge difference between a bubble which is a collective crowd delusion. And parts of the art market that might have got overheated because of a few billionaires competing – that’s not the same as all of the stocks in the U.S. running amok.”

  Does not the first line of that statement tell you all you need to know? Do you think that maybe, just maybe, the “collective crowd delusion” might be held by the very one’s stating we’re delusional? And what by-golly fueled the “art market?” You just can’t make this stuff up. Yet, it doesn’t end there, there’s more.

  As I iterated if one wanted to see precisely how this “bull” market narrative was going to be conditionally spun the narrative was on full display coming once again from Mr. Ritholtz.

  In response to James Bianco (President of Bianco Research™) where Mr. Bianco went on to illustrate why this time it’s different (for the bull narrative that is) he stressed that for the first time in 80 years: Cash beat Asset allocation. Again, for the 1st time in 80 years. The “push back” to this argument was again stunning, as it was revealing. Mr. Ritholtz tried to make the case of… (again I’m paraphrasing)

  “Aren’t we due for just a digestion of gains and catching up to valuations? You’re not going to go up every year and blah, blah, blah.(I found it quite illustrative that his “longer view” analysis was 5 years. Funny how that view just so happens to coincide with QE, no? But I digress.)

  To which Mr. Bianco responded, “Yes, stocks can correct, but everything is correcting right now, and it’s the reduction of stimulus.”

  Remember, Mr. Bianco’s point about “Cash” vs “asset allocation” is a data point derived from over 80 years of backward looking research and this is – a first. Funny how suddenly all these historically bad data points seem to be propagating with more frequency, as well as intensity since the ending of QE. But we’re the one’s called “data-deniers” or “idiots” by people like Mr. Ritholtz. So there’s another really important question that needs to be asked of oneself as we approach 2016 and beyond.

  Exactly who is the idiot? Those who question these so-called “experts” or “smart crowd?” Or, the so-called “experts” and “smart-crowd” themselves? You know, the ones that like to tell us “It’s different this time” along with “Everything is awesome!”

  For 2016 that answer has never been more important to answer for yourself, honestly. Because, what is glaringly obvious: The “experts” won’t. After all, they think we’re all idiots. Just ask them.

  

  

  

  

  

• WalMart Works With FBI, MIC To Spy On "Problem" Employees

  Earlier this year, Wal-Mart had some “plumbing” problems.

  As regular readers might recall, the retailer shuttered five geographically distinct locations across the country citing intractable and persistent “clogs and leaks.” 

  

  The story gave birth to a variety of conspiracy theories including the contention that the closures were part and parcel of a plan to use the locations as internment camps in connection with the US SpecOps command’s Jade Helm 15 drills. 

  Another plausible explanation was that the closures were connected to the company’s desperate attempt to preserve margins in the wake of what now looks like an ill-advised decision to implement an across-the-board wage hike. Raising wages for the retailer’s lowest-paid associates led directly to a mad scramble aimed at extracting more savings from suppliers and ultimately resulted in a stunning guidance cut in October that sent the company’s shares plunging. Predictably, the pay raises also led to layoffs in Bentonville and fewer hours for employees. The store closures, we suggested back in April, could simply be another attempt to offset the cost of the wage hikes.

  Finally, some contended that at least one location may have been closed for its connection to organized labor. As we documented extensively in “Did WalMart Close A California Store To Punish Employees Who Protested Wages And Working Conditions?,” the Pico Rivera, California store had been a hotbed for wage and labor protests over the years. It was among the locations that were closed on short notice.

  First, a little background.

  When we began to look into each of the locations marked on the map shown above, we came across something rather interesting involving the Pico Rivera, CA store. As it turns out, it’s been the site of wage and working condition protests on a number of occasions, the most recent of which was late last year.

  Almost exactly one year prior to the latest picket, the Pico Rivera store was (along with multiple other locations across the US) the site of protests alleging that the company did not pay enough to keep many of its workers from seeking government assistance to supplement their meager wages (recall that 73% of those receiving public assistance in the US come from working families).

  And just a little over a year before the 2013 Black Friday protests, more than 200 workers at Pico Rivera went on strike and protested in front of the store waving signs that read “On Strike for the Freedom to Speak Out,” suggesting the company was retaliating against those who fought for better wages and working conditions. 

  What’s especially interesting here is that one of the groups which has consistently backed protests at the Pico Rivera store is the The United Food and Commercial Workers International Union or, UFCW.

  The UFCW has a history with the company. Back in 2004, when workers at the Jonquiere, Quebec location voted to join the organization, WalMart closed the store six months later noting that “you can’t take a store that is a struggling store anyway and add a bunch of people and a bunch of work rules.” This case ended up before the Supreme Court in Canada and just last year, the high court ruled against the company.

  So here is a WalMart location which has staged protests each and every year dating back to at least 2012, the latest of which led to two dozen arrests and these protests are backed by the same organization which was involved in a Canadian Supreme Court case against the company for closing a store where workers had agreed to adopt the UFCW as their representative.

  For those who might have missed it, here’s a hilarious anti-union training video that leaked online:

  Now, thanks to documents produced in discovery ahead of a National Labor Relations Board hearing into OUR Walmart’s (and offshoot of UFCW) allegations of retaliation against employees who joined protests in June 2013, we have an idea of just what lengths WalMart is willing to go to when it comes to keeping an eye on potential “problem” stores and associates. The documents, provided to Bloomberg, contain some “1,000 pages of e-mails, reports, playbooks, charts, and graphs, as well as testimony from its head of labor relations at the time.” 

  “Walmart considered OUR enough of a threat that it hired an intelligence-gathering service from Lockheed Martin, contacted the FBI, staffed up its labor hotline, ranked stores by labor activity, and kept eyes on employees (and activists) prominent in the group,” Bloomberg reports. Here’s more:

  During October 2012, OUR Walmart members and supporters began a series of walkouts and protests across the country to increase pressure on the retailer before the holiday shopping season. The group called a National Day of Action for Oct. 10 and sent a few people to Bentonville, where Walmart executives were meeting with Wall Street analysts. Two hundred calls to the labor hotline from almost as many stores were logged around that time.

   

  Some calls betrayed the paranoia of beleaguered managers.

   

  2:30 p.m., Store 5880 in Fairfax, Va.: “A customer began talking to a cashier about the strikes at Walmart this week, and the cashier responded that maybe she should go on strike. AM [assistant manager] feels the cashier was joking when she made the comment.”

   

  4:19 p.m., Store 3893 in Zion, Ill.: “Three associates made comments surrounding the ‘strikes’ in other stores to Grocery ZMS [zone merchandising supervisor]. Grocery ZMS shared his opinion but didn’t state our philosophy. He will do so the next time the associates are at work.”

   

  The last call in the log, on Oct. 15, came from Yuma, Ariz.: “An associate asked what would happen to associates if they walked out on Black Friday.”

   

  Walmart was watching Colby Harris. He was a full-time employee in the produce department in Store 471 in Lancaster, Texas. He joined protests in California, picketed stores in Dallas, and showed up in Bentonville for the analysts’ meeting. In November 2012, he said he had given more than 45 interviews to journalists. “People want to hear from us,” he said.

   

  On Oct. 17, Casey, the labor relations executive, sent an e-mail to one of her senior staff: “Colby Harris, what’s his story?” Casey said in her testimony that she asked about Harris because he had appeared in press accounts of the walkouts, and Walmart’s media relations group asked her for information about him. She also said that Walmart tracked associates “who may be engaged in the demonstrations and strikes to figure out who was working and who wasn’t.”

  And here’s where the story gets particularly unnerving:

  As momentum for the Black Friday protests was building, the Delta team raced to respond. The Black Friday Labor Relations Team Daily Meeting had its own acronym: the BFLRTDM. An e-mail on Oct. 24 from a member of the labor relations team to four executives had the subject line: “Blitz Planning (Re-visited due to new information).” The document they updated—the Labor Relations Blitz/Black Friday 2012 Plan—noted some of the latest tactics they expected from OUR Walmart: “work stoppages, mic checks, 1 post of a human chain, social media calls for boycotts and Sponsor a Striker for Black Friday food card program.” It also included this request to Walmart’s Analytical Research Center: “When does Lockheed provide more analysts?”

   

  The Analytical Research Center, or ARC, is part of Walmart’s global security division. Ken Senser, a former FBI officer, oversees the entire group. The executive responsible for ARC was Steve Dozier, according to Casey’s testimony. He was director of the Arkansas State Police before he joined Walmart in 2007. “When we received word of potential strikes and disruptive activity on Black Friday 2012, that’s when we started to ask the ARC to work with us,” Casey said during her testimony. “ARC had contracted with Lockheed leading up to Black Friday to help source open social media sites.”

   

  Lockheed Martin is one of the biggest defense contractors in the world. Although it’s best known for making fighter jets and missile systems, it also has an information technology division that offers cybersecurity and data analytics services. Tucked into that is a little-known operation called LM Wisdom, which has been around since 2011. LM Wisdom is described on Lockheed’s website as a tool “that monitors and analyzes rapidly changing open source intelligence data … [that] has the power to incite organized movements, riots and sway political outcomes.” A brochure depicts yellow tape with “crime scene” on it, an armored SWAT truck, and a word cloud with “MAFIA” in huge type.

   

  In mid-April 2013, Walmart executives began hearing about plans for “Ride for Respect,” a bus caravan that would arrive in Bentonville during the weeklong annual shareholder meeting in June. About 14,000 people—hand-picked associates, managers, shareholders, investors, the Walton family—would be in town. Elton John was performing. It was a time of particularly uncomfortable scrutiny for Walmart.

   

  A Delta team began operations. When global security heard that members of the Occupy movement might join the protests at corporate headquarters, they began working with the FBI Joint Terrorism Task Forces.

  
  

  “With some assistance from LM [Lockheed Martin] we have created the attached map to track the caravan movements and approximate participants,” Kris Russell, a risk program senior manager, wrote to colleagues on May 30. The map showed the predicted routes for five buses. By then, 96 associates had announced their intent to strike. Another 115 “uninvited guests” were expected in Bentonville.

   

  

   

  There’s much, much more in the full Bloomberg piece, but the takeaway here is that WalMart doesn’t just despise union sympathizers, the retailer equates them with terrorism and indeed, the company monitors their activities at certain locations just as the government would track jihadi sleeper cells. 

  The FBI is involved as is one of the world’s foremost defense contractors and at one point, the Bureau’s Joint Terrorism Task Forces were called to the scene in a kind of nightmarish “evil corporate America meets oppressive police state” scenario.

  As for OUR WalMart, they’re not giving up the fight. In fact, they’re adopting new and innovative strategies. This year, for instance, they decided to highlight the problems associates face feeding their families on meager wages by – starving themselves:  

  “This year, instead of striking, OUR Walmart staged a 15-day fast leading up to Black Friday. The hunger strike is in support of a $15-an-hour minimum wage and to highlight the problems some Walmart workers have feeding their families, Cynthia Murray, one of the founders of OUR Walmart said. 

  We wonder if waterboarding is coming soon to WalMart breakrooms or if perhaps a drone strike or two on a picket line will be necessary to disperse the living wage “jihad.”

  

  

  

  

  

• David Collum: The Next Recession Will Be A Barn-Burner

  Submitted by David Collum via PeakProsperity.com,

  For those who enjoyed his encyclopedic 2015: Year In Review, this week we spend an hour with David Collum to ask: After processing through all of that information, what do you think the future is most likely to bring?

  Perhaps it comes as little surprise that he sees the global economy headed back down into recession, one that will be deeper and more damaging than the 2008 crisis:

  In 2008/9, while the equity markets when down, the bond markets went up. And that buffered an awful lot of pensions and 401Ks and endowments and things like that. And so people felt pain, but they didn’t realize that there was an offsetting gain. They did not notice that part as much, but I think the next downturn is going to be concurrent bond market collapse and equity collapse and there will be no slack in that downturn.

   

  I think stocks and bonds are both at ridiculously high levels now. The bond market can only go down from here, right? I mean, it can keep going up for a while, but there is just nothing left to be squeezed out of it. Interest rates are at seven hundred-year lows, supposedly – they’re certainly at stupid lows, right. You have a third of Europe at negative rates… And so I think at some point the bond market’s got to collapse. It will start in the high yield market, and that is happening right now. Then it’ll spread, maybe treasuries will get bid to the stratosphere, but at some point you’ve got to get a real return. And so bonds have to sell off to get back to that real return — after all, all crises are credit crises, right,? And then equities are going to go once there’s not leverage out there for share buy backs and stuff like that.

   

  That's why I think the next recession is going to be a barn-burner. 

  Click the play button below to listen to Chris' interview with David Collum (74m:53s)

  

  

  

  

  

• Warmongering Pays – US Foreign Arms Sales Soar 35%

  If ever there was a clearer indication of America's "need for war" it was the latest Durable Goods orders data, which confirmed, absent defense spending, the US economy is in a tail-spin. However, as NYTimes reports, foreign arms sales by the United States jumped by almost $10 billion in 2014, about 35 percent, even as the global weapons market remained flat and competition among suppliers increased, thanks to multibillion-dollar agreements with Qatar, Saudi Arabia and South Korea.

   

  Defense Spending New Orders has soared 148% in the last 3 months… the biggest rise since 2007

  

   

  But it is the US arms sales to foreigners that is really flourising. Despite a stagnant international weapons market and increased competition among suppliers, American foreign weapons receipts rose from $26.7 billion to $36.2 billion last year. According to a new congressional report, as The NY Times reports…

  The United States remained the single largest provider of arms around the world last year, controlling just over 50 percent of the market.

   

  Russia followed the United States as the top weapons supplier, completing $10.2 billion in sales, compared with $10.3 billion in 2013. Sweden was third, with roughly $5.5 billion in sales, followed by France with $4.4 billion and China with $2.2 billion.

   

  South Korea, a key American ally, was the world’s top weapons buyer in 2014, completing $7.8 billion in contracts. It has faced continued tensions with neighboring North Korea in recent years over the North’s nuclear weapons program and other provocations. The bulk of South Korea’s purchases, worth more than $7 billion, were made with the United States and included transport helicopters and related support, as well as advanced unmanned aerial surveillance vehicles.

   

  Iraq followed South Korea, with $7.3 billion in purchases intended to build up its military in the wake of the American troop withdrawal there.

   

  Brazil, another developing nation building its military force, was third with $6.5 billion worth of purchase agreements, primarily for Swedish aircraft.

   

  The report to Congress found that total global arms sales rose slightly in 2014 to $71.8 billion, from $70.1 billion in 2013. Despite that increase, the report concluded that “the international arms market is not likely growing over all,” because of “the weakened state of the global economy.”

  So, as has been explained so many times ad nauseum that even the most hawkish warmongerer cannot avoid it, the truth is, America (well it's corporatocracy) has a 3-step plan to make money…

  Step 1: Put on Pants

   

  Step 2: Start Warmongery in Middle-East

   

  Step 3: Reap Rewards

  Of course, this is hardly news, as Ron Paul told RT:

   

   

  Seen from the proper angle, the dollar is revealed to be a paper thin instrument of warfare, a ripple effect on the people, a twisted illusion, a weaponized money now engaged in a covert economic warfare that threatens their very livelihood.

  The former Congressman and presidential candidate explained:

  Almost all wars have been paid for through inflation… the practice always ends badly as currency becomes debased leading to upward pressure on prices.

   

  “Almost all wars, in a hundred years or so, have been paid for through inflation, that is debasing the currency,” he said, adding that this has been going on “for hundreds, if not thousands of years.”

   

  “I don’t know if we ever had a war paid though tax payers. The only thing where they must have been literally paid for, was when they depended on the looting. They would go in and take over a country, and they would loot and take their gold, and they would pay for the war.”

   

  As inflation has debased the currency, other shady Wall Street tactics have driven Americans into a corner, overwhelmed with debt, and gamed by rigged markets in which Americans must make a living. The economic prosperity, adjusted for the kind of reality that doesn’t factor into government reports, can’t match the costs of a military industrial complex that has transformed society into a domestic police state, and slapped Americans with the bill for their own enslavement.

   

  Dr. Paul notes the mutual interest in keeping the lie going for as long as the public can stand it… and as long as the gravy keeps rolling in:

   

  They’re going to continue to finance all these warmongering, and letting the military industrial complex to make a lot of money, before it’s admitted that it doesn’t work, and the whole system comes down because of the debt burden, which would be unsustainable.”

  Unsustainable might be putting it lightly. The entire thing is in shambles from the second the coyote looks down and sees that he’s run out over a cliff.

  

  

  

  

  

• "Trump Voters Are Not Just Angry – They Want Revenge"

  Authored by Frank Lutz, originally posted at The FT,

  Outraged by what Donald Trump says? You are not alone. No high-polling presidential candidate in the modern era has so intrepidly drawn the ire of so many within the American electorate. And there remains no end in sight.

  Yet in rendering one voting bloc utterly apoplectic, he has appealed viscerally to another. The balance of middle ground politics is not, shall we say, Mr Trump’s bailiwick. But America is no longer a middle ground country. We are already scared by our division — and it is getting worse.

  The simple truth is, the more provocative his language, the deeper and more passionate his support. He is no dummy; there is a method to his proverbial madness. Mr Trump says — to the growing legions who will listen — what tens of millions of Americans are already thinking. Respect or revile him, the man has hit a vein.

  I spent three hours in a deep dialogue focus group with 29 Trump supporters. The phenomenon of “The Donald” is rooted in a psyche far deeper and more consequential than next November’s presidential election. His support denotes an abiding distrust in — and disrespect for — the governing elite. These individuals do not like being told by Washington or Wall Street what is best for them, do not like the direction America is headed in, and disdain President Barack Obama and his (perceived) circle of self-righteous, tone-deaf governing partisans.

  Trump voters are not just angry — they want revenge.

  Mr Trump has adroitly filled the vacuum of vitriol, establishing himself as the bold, brash, take-no-prisoners megaphone for the frustrated masses. They see him as the antidote to all that Mr Obama has made wrong with America. So to understand why millions love Mr Trump so much, you have to take a step back and listen to why they hate Mr Obama so much.

  Here, my Trump voter focus group was particularly illuminating. Some still believe the president is not Christian. Many believe he does not love America. And just about all of them think he does not reflect the values the country was built upon. Indeed, within this growing faction, Mr Trump has licence to say just about anything. As we have seen repeatedly, the more outrageous the accusation, the more receptive the ear.

  Mr Trump delights in unleashing harsh attacks on Jeb Bush, the Republican establishment and the “mainstream media”. His childlike joy in ridiculing his critics is tantamount to healing balm for the millions who have felt silenced, ignored and even scorned by the governing and media elite for so long. Is it any wonder that his declaration of war against “political correctness” is his most potent and predictable applause line?

  Straight-talking candidates are nothing new in American politics. From Ross Perot in 1992 to John McCain in 2000, from Howard Dean in 2004 to Sarah Palin in 2008, they rise like a rocket on the fuel of their seemingly fresh and unencumbered aversion to traditional politics. They purport to say what they mean and mean what they say — bucking established electoral trends and ruffling established political feathers. Then they crash. The media turn sour. The message grows stale. The electorate gets bored.

  Mr Trump is different. The media attacks on him have been fast and furious. Yet he has defied electoral gravity because the blows are delivered by an institution that is distrusted and an elite political and business establishment that is detested.

  

  Meanwhile, voters consistently tell pollsters like me that negative attacks do not work; they hate the ad hominem assaults. Mr Trump? He dines out on them. As his devotees see it, it is not Mr Trump going negative. It is him telling the truth. And when he fights back, he’s throwing punches on their behalf. He said something outrageous? “He’s simply raising an important issue nobody else has the courage to talk about.” He insulted someone? “That’s just him campaigning. He won’t do that as president.” He changed his position? “That was a long time ago. Everyone’s entitled to change their mind.” He doesn’t have many policy specifics? “He doesn’t need them. He’ll surround himself with smart people.” They will justify any action, explain away any contradiction, and dismiss any criticism because they are so personally and passionately invested in him.

  And here is the prediction that will furrow brows on both sides of the Atlantic. Mr Trump’s supporters today will be Mr Trump’s supporters next November if he is still a candidate — no matter what party banner he runs under. Half will follow him out of the Republican Party if he breaks his promise and declares as an independent. For better or worse, his supporters will follow him to the ends of the Earth — or to the White House. Whichever comes first.

  

  

  

  

  

• Another Bubble Pops: Used Boeing 777 Sells For 97% Off List Price

  While the US economy may have unofficially entered an industrial recession in recent months with the dip in the manufacturing ISM below the critical 50 level, one sector has continued to do surprisingly well: automotive manufacturing, as a result of vibrant car sales. The reason for this, as we have repeatedly demonstrated, has been the record surge in auto loans, which have long surpassed both total credit card debt (and the $1 trillion mark), and continue to fund an unprecedented auto buying spree as they rush to catch up to the $1.2 trillion in total student loans.

  

   

  Furthermore, recent Experian data confirms what most have known: the only reason auto sales are as strong as they are is because for the second time in under a decade, there is a substantial car loan bubble. As noted pbefore, here are some of its key characteristics:

  • Average loan term for new cars is now 67 months — a record.
  • Average loan term for used cars is now 62 months — a record.
  • Loans with terms from 74 to 84 months made up 30%  of all new vehicle financing — a record.
  • Loans with terms from 74 to 84 months made up 16% of all used vehicle financing — a record.
  • The average amount financed for a new vehicle was $28,711 — a record.
  • The average payment for new vehicles was $488 — a record.
  • The percentage of all new vehicles financed accounted for by leases was 31.46% — a record.

  

   

  Still, despite persistently record easy credit terms, the final days of the car loan bubble appear to be at hand: with US auto inventories already at their highest levels relative to sales since 2009 – suggesting US consumers can hardly absorb any incremental auto production – all it would take to pop the bubble, is a small exogenous event: like a rate hike by the Fed.

  

   

  But while the car loan bubble has been extensively documented there is another mode of transportation where the bubble in prices may have easily eclipsed anything seen in the auto space, and which, pardon the pun, has flown right below the radar.

  Airplanes.

  According to Air Transport World, Delta recently signed a letter of intent to buy a used Boeing 777 for $7.7 million, according to CEO Richard Anderson.

  The Delta CEO raised some eyebrows in October when he said there was a “huge bubble” in used widebody aircraft, pricing a 10-year-old 777-200 at $10 million. Anderson said that the market would be “ripe” for Delta to buy used 777s.

  To be sure, Boeing president and CEO Dennis Muilenburg was among those who pushed back against Anderson, saying the Delta CEO was valuing used 777’s much too low.

  It wasn’t. Although, as it turns out, Anderson was indeed wrong when he said used 777s were on the market for $10 million. “It was actually $7.7 million. We just signed a letter of intent to buy one.”

  Anderson’s comments came during Delta’s investor day and, for added emphasis, were posted on Twitter by Delta. Just as happened when Anderson made the original remark about used 777 values, Boeing’s stock price immediately dropped.

  CEO: I was wrong when I said used 777s were on market for $10M. It was actually $7.7M. We just signed a letter of intent to buy one.

  — Delta News Hub (@DeltaNewsHub) December 17, 2015

  Here is the punchline: Boeing’s list price for a new 777-200ER is $277.3 million, meaning Delta is buying a used 777 at a price 97.2% lower than the value of a new 777.

  

  Delta did not give details on the 777 for which it signed the LOI, such as who the seller is and which airline previously operated the aircraft.

  This stunning “price discovery” leaves a few key questions wide open:

  • Was this just a one off transaction in which Delta found a very “motivated” seller and took advantage of what was beyond a firesale price? If so, who was the seller and why liquidate in such a hurry?
  • Alternatively, if this deal is indicative of prevailing “used plane” market prices, and judging by Anderson’s comment one can find more 777-200ERs for the low price of $10 million, this means that either the market for new plane widebody airplanes is indeed an unprecedented bubble funded by such government vehicles as the Ex-Im bank, or the used plane market is a ticking time bomb for all those billions in EETFs and various aircraft-backed pass through securities which are collateralized by planes such as the the Boeing 777. It explains the stink Boeing made when Ex-Im bank’s charter was temporarily revoked by Congress.
  • At the micro level, if new plane prices are just a “huge bubble” as the Delta CEO alleges, that means that the valuation of Boeing is about as “credible” and sustainable as that of New Century just a few days before the subprime bubble burst.
  • Finally, if there is such a dramatic cliff between new and used airplanes, what does that mean for bank amortization assumptions on billions in airplane inventory which is still carried by banks on their books, and just how massive would be the valuation deficit once loans collateralized by airplane “assets” are marked to market.

  Granted, while it is becoming increasingly difficult to track all of the bubbles and capital misallocations that have resulted from 7 years of ZIRP, NIRP and QE, we hope to present readers with some answers to these questions ideally before the serial, or parallel, and long overdue bursting of said bubbles takes place.

  

  

  

  

  

• Atlas Shrugged-er: Government Now Preying On High School Graduates

  Via Investment Research Dynamics,

  A friend sent me a news item from U.S. News and World Report which reported that Louisiana’s board of education is going to implement a new policy which requires all students to fill out a Free Application for Federal Student Aid in order to receive a high school diploma.

  Think about that for a moment.  In order to receive a high diploma, the State of Louisiana is requiring that high school seniors fill out an application which would enable them to go into debt the moment they receive their diploma.

  This is a mind-blowing event.  Most jobs available to high school grads do not require a college degree.  But some might require a high school diploma.  I have to wonder what the motive is behind this.  A significant portion of student debt is now being used for corporate-owned “universities” which are largely worthless to everyone except the entities who own the schools.  Goldman Sachs is a big player in this space.   Student debt, backed by the Taxpayer, is just another form of wealth transfer from the public to the banks and big corporations.

  

  The amount of student debt issued and outstanding is now over $1.3 trillion. Obama pats himself on the back because student loan delinquency rates are falling a bit.  But this is because he has made it easier to defer payment. While 11.5% – roughly $150 billion – is in delinquency, about 50% of this debt is in some form of grace period, deferment or forebearance.  Loans in deferment are not part of the delinquency rate calculation.  The true level of delinquency and technical default is probably somewhere in the 35-45% range.

  I have to believe that the requirement being implemented in Louisiana is violating some part of the Constitution.  Of course, with the simple stroke of a pen, Obama can override the Constitution with yet another Executive Order upholding this requirement.

  This requirement in Louisiana is exactly the type insane laws which were imposed by the Government as described in the narrative laid out in “Atlas Shrugged.”  Acts of mandate which enabled the Government and the corporate friends of the Government to suck wealth from the populace and from productive workers and redistribute the largesse amongst themselves.

  We know how the story unfolds in “Atlas Shrugged.”  Unfortunately, I see the same type of story unfolding in the United States.

  If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around them will deprive the people of all property until their children wake up homeless on the continent their Fathers conquered…I believe that banking institutions are more dangerous to our liberties than standing armies… The issuing power should be taken from the banks and restored to the people, to whom it properly belongs.  – Thomas Jefferson

  

  

  

  

  

• ISIS Head Calls For Global Jihad; Here Are Some Muslim Responses

  On Saturday, Bakr al-Baghdadi released a rare audio recording in which the ISIS leader threatened Israel (“we are getting closer to you everyday”), insisted that the Russian air campaign had not weakened the group (“hear the good news that our state is doing well”), and called upon Muslims to join the caliphate and take up arms against its enemies. 

  “Joining (its fight) is a duty on every Muslim. We are calling on you either join or carry weapons (to fight) wherever you are,” Baghdadi said, adding that “there is no excuse for any Muslim not to migrate to the Islamic State.” 

  Muslims, apparently, do not agree and took to Twitter to list a number of “excuses” for their unwillingness to drop what they’re doing to wage jihad in Syria and Iraq. Here are some amusing examples.

  I’ve got Star Wars on Sunday. Maybe later. https://t.co/UQ71PkUi4j

  — Saadat Ali Zia (@my69cents) December 26, 2015

  Sorry #ISIS. This Muslim is just waking up. Needs coffee. Also, it’s Christmas weekend family time. Run along now. https://t.co/gUODLPdDy6

  — Salman Anees Soz (@SalmanSoz) December 26, 2015

  Sorry, I am busy watching Netflix. https://t.co/YyLJ9cQ2nS

  — Mohamed Djingo (@TheDjingo) December 26, 2015

  Would do, but there’s engineering work on the trains around London Bridge. Soz https://t.co/Rx2ucColWo

  — radio_shak (@radio_shak) December 26, 2015

  Are you telling me I should join you rather than witness Leicester City win the league?? Noooo wayyyy! https://t.co/CqtIZBesM9

  — Anjum Rauf Meer (@anjum_meer) December 26, 2015

  As The Independent notes, the Twitter reaction is “a reminder that the overwhelming majority of people follow Islam peacefully and detest the message that Isis spreads.” 

  One country that does not detest the message ISIS spreads is of course Saudi Arabi, where wahhabism is openly promoted and championed. It’s interesting to note that Baghdadi also threatened Riyadh in the audio recording, asking Saudi citizens to overthrow the government. And then on Sunday, we get this from al-Jazeera: 

  While recent spectacular terror attacks either directed or inspired by the Islamic State of Iraq and the Levant (ISIL) have mostly taken place against the West and Russia, a new priority for ISIL could be the Gulf.

   

  The two countries that appear to be more at risk now are Saudi Arabia and the United Arab Emirates (UAE).

   

  The likelihood of a full-blown ground operation by troops from that newly formed coalition is at the moment quite low, as it would mean Saudi soldiers fighting alongside its arch-enemies – the Shia militias – against ISIL. 

  This assessment might change instantaneously if there were to be a spectacular ISIL-directed terror attack in either Saudi Arabia or the UAE.

  Did Baghdadi just set the stage for a Saudi-led ground intervention in Syria? And if so, how convenient is that for Riyadh and its newly formed anti-terror “coalition” who would like nothing more than to rollback the Iranians (who were left out of the alliance) and tip the scales back in favor of the rebels fighting Assad?

  

  

  

  

  

• Bank of Montreal Asks If "Oil Prices Could Collapse To $20"; Answers: "Yes"

  When looking at the price of oil in 2015, Canada’s Bank of Montreal admits it was wrong. Very, very wrong.

  In our “2015 Year Ahead” report we laid out three plausible scenarios: (1) our base case, which forecast Brent crude oil prices of $50-60/bbl over the first half of 2015 and $60-80/bbl over the second half of the year; (2) a bull case, which forecast a Brent trading range of $85-95; and a bear case, which suggested a Brent trading range of $50-60/bbl. The actual trading range in 2015 proved to be even more ‘bearish’ than our bear case, with Brent generally trading between $36 and $60/bbl. So what did we get wrong?

  The answer: pretty much everything but mostly the fact that in the race to the production bottom (“we’ll make up for plunging prices with soaring volumes”) only dramatic outcomes, which shock the status quo, have any impact, to wit:

  “we assumed that Iraq production would average 2.9 million bpd; actual production was roughly 1 million bpd higher. We also assumed that Saudi Arabia would be content to hold production at 9.2 million bpd whereas actual production was roughly 800,000 bpd higher. In our view, this incremental 1.8 million bpd of production was the principal reason that global oil inventories swelled by more than 340 million barrels to a record high of approximately 3.1 billion barrels and why crude oil prices have collapsed.”

  Well, that, and the fact that the financial BTFD community finally threw in the towel on the most financialized commodity, and following two failed attempts at dead cat bounces, may have thrown in the towel. That said, just looking at speculative positions, oil may have a long way to drop still.

  

   

  Which may also explain why, as noted last week, someone has made material directional (and/or hedge) bets via puts that oil will slide to $25, $20, even as low as $15.

  

   

  However, now that the financial overhang from the price of oil has been stripped away, the supply/demand fundamentals once again matter. Which brings us back to BMO, and its latest oil price forecast for the coming year. According to the far more downbeat (compared to last year) Canadian bank, “the current supply-demand balance is not sustainable; something has to give.” More:

  If OPEC production increases with the return of Iran and non-OPEC production declines only modestly, global inventories could test capacity in 2016. Since this can’t happen either OPEC and/or non-OPEC has to voluntarily (or involuntarily in the case of a disruption) reduce supply. We believe that crude oil prices will need to remain low enough for long enough to force non-OPEC producers to reduce production. We believe that Brent oil prices in the range of $35-45/bbl are required to force a further reduction in the U.S. rig count and/or shut-in oil production from higher cost sources such as stripper wells, conventional heavy oil and mature offshore platforms. Our base case assumes that Brent crude trades in the $35-40/bbl range over the first half of 2016. We believe that this could lead to a reduction in non-OPEC supply in the second half of 2016 that balances supply and demand and supports modestly higher prices in $45-55/bbl range over the second half of the year. The reduced activity should also allow inventories to begin being drawn down in 2017, which should support prices in the $50-60/bbl range in 2017.

  More on the near record supply/demand imbalance:

  We believe that the weakness in crude oil prices reflects a combination of fundamental factors and financial flows. Fundamentally there is simply too much oil. The main culprit is Iraq, which increased production by roughly 1 million bpd over the last 12 months, along with Saudi Arabia which added an additional 800,000 bpd over the same period. In our view, this incremental 1.8 million bpd of production was the principal reason that global oil inventories swelled by more than 340 million barrels to a record high of approximately 3.1 billion barrels and why crude oil prices have collapsed.

   

  

  * * *

  In other words, in order to avoid embarrassment for the second year in a row, BMO is merely parroting the Goldman base-case of a reduction in the net supply imbalance in the second half of 2016, which should push prices of oil higher. On paper, sure. In reality, who knows.

  Which is also why BMO, prudently, hedges by laying out the biggest downside risk to any forecast: a full-on price implosion.

  Could oil prices collapse to $20?

   

  The short answer is ‘yes.’ We believe that crude oil prices could fall further unless global oil production is reduced. As shown in Table 2, we estimate that the global oil market could be oversupplied by roughly 920,000 bpd in 2016. The key assumptions are year-over-year growth in global demand of 1.2 million bpd, Saudi Arabia, Iraq and Libya hold production at current levels, Iran ramps up production at moderate pace over the course of the year and the U.S. rig count remains at current levels.

   

  

   

  This would translate to a build in global crude oil inventories of roughly 231 million barrels over the course of the year and potentially result in OECD crude oil inventories reaching capacity by the end of the year, as shown in Chart 14. Another risk is that Libya increases production. The countries two warring factions recently signed a UN-brokered agreement to form a national government. This could lead to higher levels of production, potentially adding another 1 million bpd to the already over-supplied market. Under this scenario, we believe that crude oil prices could plunge to $20/bbl to ensure that enough crude oil is taken off the market to prevent inventories from breaching capacity.

  Good luck with that “voluntary” reduction thesis. If anything, the worse the fiscal outlook of any given oil-exporter gets, the more it will export to offset declining prices, as Chinese steel producers have been kind enough to demonstrate.

  

  Which is why, for anyone focusing on the fundamentals instead of the financials (and the biggest upside price risk has nothing to do with geopolitical events but more with a central bank -coughnorwaycough – announcing it would launch a commodity-focused QE) a $20 case should be the base-case around which to hedge, especially since last week Dennis Gartman turned “Very, Very Quietly Bullish Of Crude.“

  In a follow-up article we will show what $20/oil means for the key industry participants in the context of everyone’s specific oil price floor, and what happens if and when it is breached.

  

  

  

  

  

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