Today’s News October 15, 2015

• Government Corruption Tops List of Americans’ Fears

  Time reports:

  Corruption of government officials is currently Americans’ number one fear, according to a recent survey by researchers at Chapman University.

   

  The researchers asked a random sample of 1,541 adults to rate the level of fear for 88 different fear options across a variety of domains (like crime and natural disasters). Based on their findings, here were the top 10 fears for 2015:

  • Corruption of government officials (58.0%)
  • Cyber-terrorism (44.8%)
  • Corporate tracking of personal information (44.6%)
  • Terrorist attacks (44.4%)
  • Government tracking of personal information (41.4%)
  • Bio-warfare (40.9%)
  • Identity theft (39.6%)
  • Economic collapse (39.2%)
  • Running out of money in the future (37.4%)
  • Credit card fraud (36.9%)

  Last month, Gallup found that 75% of Americans said they believe corruption is widespread in the government (up from 66% percent in 2009).

  Also last month, Gallup found that a record low 38% of Americans trust the government to handle domestic problems. And half of Americans think that the government is an immediate threat to us.

  We at Washington’s Blog are non-partisan and non-dogmatic. We don’t believe that government is inherently good or inherently bad.  We instead believe that each government has to be analyzed to determine its degree of honesty or corruption.

  Unfortunately, it is T-H-O-R-O-U-G-H-L-Y documented  that systemic corruption has destroyed America … as admitted by politicians on both sides of the political aisle.

  (Sadly, America is not alone … governments worldwide are sliding down into mud pits of corruption.)

  Postscript:  Mainstream politicians and media are trying to browbeat Americans into trusting our government more. For example, Time Magazine tries to make fun of Americans who don’t trust the government … by comparing them to people who believe in  aliens and the paranormal.

  Likewise, Obama frequently chides Americans for distrusting their government.

  But we Americans don’t trust our government because our government has repeatedly demonstrated through its actions that it is corrupt and untrustworthy.

  

  

  

  

• Hilsenrath 'No Rate Hikes In 2015' Hint Sparks Buying Panic In EM FX And Japanese Stocks

  Between the plunging market-implied rate-hike probabilities and Fed-Whsiperer Jon Hilsenrath's WSJ piece this evening strongly hinting at no hikes in 2015, the 'relief' rally in Asian FX (and Japanese stocks) is – in a word – insane. If the world's central banks mandates are "price stability" in whatever format they believe that to manifest, they have well and truly failed. The Won has jumped most since 2011, Ringgit and Rupiah are soaring over 2%, and Nikkei 225 is up over 400 points from the US session close…

  The rate-hike odds are collapsing…

  

   

  And as WSJ's Hilsenrath notes, confirming the market's bias…

  The chances of a Federal Reserve interest-rate increase in 2015 are diminishing amid new signs of anemic economic activity, a disappointing development for central bank officials who have been hoping to move this year after a prolonged period of easy-money policies.

   

  Lackluster readings on consumer spending, inflation and jobs have virtually eliminated the chances of a move this month. Already, two Fed governors expressed doubts this week about whether the timing will be right this year, and the recent trove of data hasn’t reassured top officials about the economic outlook.

  Sparking panic buying in Nikkei 225…

  

   

  But EM FX is soaring against the USD…

  

   

  As the following chaos shows…

  • *KOREAN WON SET FOR BIGGEST GAIN VS DOLLAR SINCE NOV. 2011

  

   

  We would note though that the USD weakness is starting to stall out any BoJ-hope-strewn JPY weakness which supports the world's equity markets…

  

   

  Between the pace of hot money flows and illiquidity, the yo-yo-ing "markets" are as fragile as anything we have seen since Lehman.

   

  Charts: Bloomberg

  

  

  

  

  

• Meet Allen Dulles: The "Psychopath" Who Created America's Modern Shadow Government

  Submitted by Mike Krieger via Liberty Blitzkrieg blog,

  Allen Dulles, the CIA director under presidents Eisenhower and Kennedy, the younger brother of Secretary of State John Foster Dulles, and the architect of a secretive national security apparatus that functioned as essentially an autonomous branch of government. Talbot offers a portrait of a black-and-white Cold War-era world full of spy games and nuclear brinkmanship, in which everyone is either a good guy or a bad guy. Dulles—who deceived American elected leaders and overthrew foreign ones, who backed ex-Nazis and thwarted left-leaning democrats—falls firmly in the latter camp.

   

  But what I was really trying to do was a biography on the American power elite from World War II up to the 60s. That was the key period when the national security state was constructed in this country, and where it begins to overshadow American democracy. It’s almost like Game of Thrones to me, where you have the dynastic struggles between these power groups within the American system for control of the country and the world…

   

  Absolutely. The surveillance state that Snowden and others have exposed is very much a legacy of the Dulles past. I think Dulles would have been delighted by how technology and other developments have allowed the American security state to go much further than he went. He had to build a team of cutthroats and assassins on the ground to go around eliminating the people he wanted to eliminate, who he felt were in the way of American interests. He called them communists. We call them terrorists today. And of course the most controversial part of my book, I’m sure, will be the end, where I say there was blowback from that. Because that killing machine in some way was brought back home.

   

  – From the Mother Jones article: You Think the NSA Is Bad? Meet Former CIA Director Allen Dulles

  Many of you will be intimately familiar with the name Allen Dulles. Younger readers, of my generation or below, will be far less so. It is precisely because the youth of this nation remain so ignorant of the nefarious characters in America’s past, that David Talbot’s recently published book, The Devil’s Chessboard: Allen Dulles, the CIA, and the Rise of America’s Secret Government, is so incredibly important.

  Mr. Talbot has been recently conducting invaluable interviews about the book with various media organizations. One of the best I’ve seen is with Mother Jones. Here’s some of what he had to say about America’s longest serving CIA director:

  But what I was really trying to do was a biography on the American power elite from World War II up to the 60s. That was the key period when the national security state was constructed in this country, and where it begins to overshadow American democracy. It’s almost like Game of Thrones to me, where you have the dynastic struggles between these power groups within the American system for control of the country and the world.

   

  I focused on those elements that I thought were important to understanding him. I thought other books covered that ground fairly well before me. But what they left out was the interesting nuances and shadow aspects of Dulles’s biography. I think that you can make a case, although I didn’t explicitly say this in the book, for Allen Dulles being a psychopath.

   

  They’ve done studies of people in power, and they all have to be, to some extent, on the spectrum. You have to be unfeeling to a certain extent to send people to their death in war and take the kind of actions that men and women in power routinely have to take. But with Dulles, I think he went to the next step. His own wife and mistress called him “the Shark.” His favorite word was whether you were “useful” to him or not. And this went for people he was sleeping with or people he was manipulating in espionage or so on. He was the kind of man that could cold-bloodedly, again and again, send people to their death, including people he was familiar with and supposedly fond of.

   

  There’s a thread there between people like Dulles up through Dick Cheney and [Donald] Rumsfeld—who was sitting at Dulles’s knee at one point. I was fascinated to find that correspondence between a young Congressman Rumsfeld and Allen Dulles, who he was looking to for wisdom and guidance as a young politician.

   

  Absolutely. The surveillance state that Snowden and others have exposed is very much a legacy of the Dulles past. I think Dulles would have been delighted by how technology and other developments have allowed the American security state to go much further than he went. He had to build a team of cutthroats and assassins on the ground to go around eliminating the people he wanted to eliminate, who he felt were in the way of American interests. He called them communists. We call them terrorists today. And of course the most controversial part of my book, I’m sure, will be the end, where I say there was blowback from that. Because that killing machine in some way was brought back home.

  How about Dulles’ role in the assassination of JFK? Talbot pulls no punches here either…

  To me it’s one of the greatest examples of media incompetence and negligence in American history. I even confronted Ben Bradlee about this, who was probably JFK’s closest friend in the Washington press corps and wrote a book all about JFK and their close friendship. “Why didn’t you, with your investigative resources, try to get [to] the bottom of it?” You should read what he says in Brothers, but basically it came down to, “Well, I thought it would ruin my career.”

   

  I think I have studied this about as much as anyone in my generation at this point, and my final conclusion after 50 years was we have to go there, we have to look at the fact that there’s a wealth of circumstantial evidence that says not only was there, at the highest level, CIA involvement. Probably in the assassination cover-up. But beyond the CIA, because the CIA wouldn’t have acted on its own.

  But the CIA are good guys now. Or so the propagandized American public believes…

  Now check out David’s interview with Amy Goodman of Democracy Now:

  

  

  

  

  

• America #1? 36 Facts That Prove That The United States Is An 'Exceptional' Nation

  Submitted by Michael Snyder via The End of The American Dream blog,

  Is the United States an “exceptional” nation?  Well, the facts show that we are, but not for the reasons that you may think.  Now that it is election season, we have all sorts of politicians running around proclaiming that America is the greatest nation on the entire planet.  And just this week, Warren Buffett stated that “America’s great now — it’s never been greater“.  But is it actually true?  Is the United States still a great nation? 

  I would submit that the numbers suggest otherwise.  I love America, and in my opinion there is not much hope for us until we are willing to admit to ourselves just how far we have fallen.  The following are 36 facts that prove that the United States is an “exceptional” nation…

  #1 According to a brand new report that was just released by the Organization for Economic Cooperation and Development, the United States has the fattest population in the entire industrialized world by a wide margin.

  #2 That same report from the OECD also found that we are number one in child obesity.  In fact, at 38 percent our rate of childhood obesity is even higher than our overall rate of obesity.

  #3 According to USA Today, the obesity rate in the United States has more than doubled over the past 25 years.

  #4 The Washington Post has reported that Americans spend an average of 293 minutes a day watching television, which is the most in the world by a wide margin.   And as I have discussed previously, more than 90 percent of the “programming” that we absorb is created by just 6 enormously powerful media corporations.

  #5 One study found that the average American spends more than 10 hours a day using some sort of electronic device.

  #6 By the time an American child reaches the age of 18, that child will have seen approximately 40,000 murders on television.

  #7 The average young American will spend 10,000 hours playing video games before the age of 21.

  #8 Out of 22 countries studied by the Educational Testing Service, Americans were dead last in tech proficiency, dead last in numeracy and only two countries performed worse than us when it came to literacy proficiency.

  #9 In more than half of all U.S. states, the highest paid public employee in the state is a football coach.

  #10 The percentage of wealth owned by middle class adults is lower in North America than it is anywhere else in the world.

  #11 Almost half of all Americans (47 percent) do not put a single penny out of their paychecks into savings.

  #12 It turns out that Americans are very good at locking people away in prison.  At 716 per 100,000 members of the population, the United States has the highest incarceration rate on the entire planet by a very wide margin.

  #13 Approximately one-fourth of the entire global prison population is in the United States.

  #14 In 2014, police in the United States killed 1,100 people.  During that same year, police in Canada killed 14 people, police in China killed 12 people and police in Germany didn’t kill anyone at all.

  #15 One recently published study found that one out of every six young Americans has stolen something during the past year.

  #16 There are more car thefts in the United States than anywhere else in the world by far.

  #17 According to Fox News, approximately 70 percent of married men in the United States admit to having cheated on their wives.

  #18 Americans spend far more on health care than anyone else in the world, and yet we only rank 26th in life expectancy and our entire health care system has been transformed into a giant money making scam.

  #19 According to a study conducted by the Mayo Clinic, nearly 70 percent of all Americans are on at least one prescription drug, and an astounding 20 percent of all Americans are on at least five prescription drugs.

  #20 According to the U.S. Department of Agriculture, 31 percent of all food in the United States gets wasted.  In case you were wondering, that amounts to approximately 133 billion pounds of food a year.

  #21 In 2013, women earned 60 percent of all bachelor’s degrees that were awarded that year in the United States.

  #22 A survey conducted by the Barna Group discovered that 77 percent of Christian men in America in the 18 to 30-year-old age bracket view pornography at least monthly.

  #23 There are more than 4 million adult websites on the Internet, and they get more traffic than Netflix, Amazon and Twitter combined.

  #24 70 percent of Americans do not “feel engaged or inspired at their jobs”.

  #25 When LBJ’s “War on Poverty” began, less than 10 percent of all U.S. children were growing up in single parent households.  Today, that number has skyrocketed to 33 percent.

  #26 In 1950, less than 5 percent of all babies in America were born to unmarried parents.  Today, that number is over 40 percent.

  #27 According to the Centers for Disease Control and Prevention, there are 20 million new cases of sexually-transmitted disease in the United States each year.

  #28 Today, the United States has the highest STD infection rate in the entire industrialized world.

  #29 According to a survey that was just released within the last 30 days, only 29 percent of Americans want to cut off federal funding for Planned Parenthood even after all of the shocking undercover videos that were released this year.

  #30 America has the highest rate of illegal drug use on the entire planet.

  #31 Doctors in the United States write more than 250 million prescriptions for antidepressants each year.

  #32 One survey of 50-year-old men in the U.S. found that only 12 percent of them said that they were “very happy”.

  #33 Every single year, the United States has the largest trade deficit in the entire world by a very wide margin.  But most Americans still don’t seem concerned that thousands of businesses and millions of good jobs have been leaving our country.

  #34 As you read this article, there are 102.6 million working age Americans that do not have a job.

  #35 We are supposed to have a government “of the people, by the people, for the people”, but only 25 percent of all Americans know how long U.S. Senators are elected for (6 years), and only 20 percent of all Americans know how many U.S. senators there are in total.

  #36 On average, we have been stealing more than 100 million dollars from future generations of Americans every single hour of every single day since Barack Obama entered the White House.

  

  

  

  

  

• China's Other Big Problem: 35 Applicants For One White Collar Job

  Over a year ago, the world’s most influential and central-banker spawning FDIC-backed hedge fund, Goldman Sachs, proudly revealed that despite 6 consecutive years of revelations of bank rigging, manipulation, fraud, bailout, crime and so on, there was no other job that the world’s most ambitious young people wanted to do more:

  As an investment bank, our main asset is our people and the advice and solutions that they provide to our clients. Great people build great relationships. And, we are fortunate to have a diverse group of young people from around the world who continue to view Goldman Sachs as a great place to begin and sustain their careers. For our latest analyst class, more than 43,000 candidates applied for 1,900 positions. We accepted about four percent of those applicants and of those receiving offers, more than 80 percent accepted.

  Or, as Lloyd Blankfein would proudly calculate, 23 applicants for every job opening.

  According to that logic, if working at Goldman is about as prestigious as it gets, then we know a job – based on unprecedented demand – that is even more prestigious: your average white-collar job in China, for which there were a record 35 application in the third quarter.

  Indeed, in the world’s most populous communist country where jobs used to be guaranteed – by definition – to anyone, in any walk of life, it has suddenly become next to impossible to progress up the career ladder, something which will result in great social angst and instability in the coming years.

  According to China Daily, competition for white-collar jobs became fiercer in the third quarter, with more than 35 job seekers contending for the same position on average. This is a jump from 26 and 29 in the first and second quarters this year, a Chinese human resources website said on Tuesday.

  The Daily cites Zhaopin.com’s third-quarter jobs report for white-collar workers, which  showed that demand for talent was shrinking with the slowdown of China’s economic growth. At the same time, more such workers were considering changing jobs, leading to more competition among job hunters, especially those in Northeast China and in second-tier cites.

  In Zhaopin’s competition index for major cities, Shenyang and Dalian, both in Liaoning province, and Changchun, Jilin province – all in Northeast China – ranked first, fourth and eighth.

  Zhu Hongyan, chief career consultant for the website, said that “the changing economic structure affects certain traditional careers. The need for professionals in certain fields declined, and some even disappeared.” Hongyan added that “Workers in these industries are forced to seek career opportunities in other ones, increasing competition in the market for job seekers.”

   

  Moreover, second-tier cities such as Chengdu, Sichuan province, Suzhou, Jiangsu province, Xi’an, Shaanxi province, and Tianjin are all among the top 10 cities with the most competitive job market.

   

  Beijing ranked ninth, while Shanghai ranked 18th.

   

  Zhu, the career consultant, said the trend of white collar workers shifting their jobs to fast-developing second-or third-tier cities has become more prominent because of the high pressures of working and living in larger cities, deteriorating environments and restrictions on cars and housing.

   

  “Regional preferential policies have helped second-and third-tier cities attract overflow industries and companies from the overcrowded metropolises, which have their own restrictions such as limited land and other resources,” Zhu said.

  “However, second-and third-tier cities do not have the same mature economic structure and industries as the metropolises,” added Zhu. “So not all job seekers can find satisfactory jobs.”

  And with 35 applicants for any one job, that is precisely what is happening.

  Worse, due to surging labor market competition and the drop of vacant positions for which there is demands – usually at the best paid positions in the labor chain – wages are about to tumble as employers realize they can pay anything they want: after all if someone quits, there are 34 other workers happy to replace him.

  This has two major impllcations:

  • first, with wages set to drop, yet another source of deflation is about to be unveiled;
  • second, as China’s economic collapse leads to increasingly less job opening , it inevitably means that social tensions and violence are set to rise in a country which see the migration of tens of millions of people from the heartland to the coastal cities.

  Finally, all those conflicting forecasts in 2011 that China may or may not hit wage parity with the US some time in 2016, well – we now know the answer: China may have reached its Lewis point, but now that the economy is on its way to a crash landing, it has solidly gone into reverse.

  (for those asking what China’s first problem is, well there are many to choose from, but if given just one option, we would repeat what we said last night when we reported that “CLSA Just Stumbled On The Neutron Bomb In China’s Banking System” – the country’s trillion in non-performing loans which nobody is talking about just yet).

  

  

  

  

  

• Market Cycles And Collisions In A Non-Linear World

  Submitted by Keith Dicker of IceCap Asset Management, October 2015 letter to Clients

  Newsflash

  Newsflash # 1: A few short weeks ago, Canada’s self-proclaimed biggest and best bank told clients: “much of the negative news from Europe is firmly rooted in the past” and that there is “more potential for upside for markets.”

  Result: European Stocks subsequently declined -13.5%

  Newsflash # 2: America’s biggest and best bank bragged: “global developed market equities should remain attractive”.

  Result: Global Stocks subsequently declined -11.3%

  Newsflash # 3: Britain’s biggest and best bank was all squiffy over markets, proclaiming: “Economic growth is gaining momentum” and “overall, we continue to prefer risk assets such as equities, high yield credit and EM debt.”

  Result: Global stocks subsequently declined -11.3%, High Yield Bonds subsequently declined -4.7%, and Emerging Market Debt subsequently declined -3.2%

  By now, most people are once again painfully aware that stocks, high yield bonds and emerging market bonds can actually go down as well as up. For stock investors, it has been a brutal 5 weeks with most markets dropping -10% or more.

  As a reminder, a -10% decline needs a +11.1% rebound to get back to where you started. Or from a more serious perspective, a -50% decline needs a +100% rebound to get back to where you started.

  The reason we share these very simple and obvious mathematical facts is due to the following intelligent investment insight: avoiding and limiting downside losses is a crucial aspect of investment management.

  Yet, as you can see from the market wisdom from the biggest Canadian, American and British banks – they completely ignore this very simple rule of investing.

  Instead, millions of investors are constantly bombarded with the seemingly innocuous market wisdoms:

  1. Buy the dip
  2. Invest for the long term
  3. Know your time horizon
  4. Invest regularly 

  And in our opinion, this is a real shame – a very, real shame. There certainly are times when these are words of wisdom. But, there are also times when they are not.

  By now, clients, non-clients, and peers are all familiar with our big view of the World. Our experience, perspective and research continues to conclude that global financial markets, the global economy and government fiscal balances are all converging to make everyone’s investment experience very different than that painted by the very big banks.

  Yet, the big banks continue to shamefully respond as if all is well. Considering the fact that central banks have kept interest rates at 0% for 7 years and the global economy continues to decline is the clearest of clear messages that the financial World isn’t quite right.

  And if that isn’t clear enough, just know that now many countries have begun to implement NEGATIVE interest rates to help stimulate their economies.

  Yet, we rarely read or hear any of these facts from the big banks. This of course can mean several things – none of which are complimentary:

  1 – the big banks feel the average investor isn’t intelligent enough to understand what is happening

  2 – the big banks cannot articulate the true state of the money World to their millions of clients

  3 – the big banks truly believe all is well, and that the World will always see a few bumps every now and then.

  As we all know, investment managers will ALWAYS make a few wrong decisions – it’s inevitable. Managing other people’s wealth can be a stressful responsibility. The good times are awesome. The bad times, not so much.

  However, if anyone has any aspirations to be an investment manager – this is THE most perfect time to realise your dream.

  Let us explain why.

  As of today, 100,000s of investment professionals around the World are following the age-old adage of buy and hold, buy the dip, stocks always outperform bonds, and never invest in currencies.

  Just steer the course and you’ll be fine, just fine.

  Unless of course, the ship you are in doesn’t have a rudder, a mast, a jib, a boom, a tiller or a keel. In truth, these ships are not really investment managers at all, instead they are asset gatherers.

  The difference being is that real investment managers are very focused on making investment decisions to preserve your capital during volatile times, while growing your capital during the good times.

  Asset gatherers on the other hand, are very focused on winning new clients and receiving new money to manage – after all, investment management IS a business.

  At these firms, the focus is on marketing and sales. They razzle and dazzle you with very nice commercials, brochures and presentations, as well as a splendid array of investment options.

  Yet, if you open your eyes and ears just enough, you’ll notice the difference and it mainly starts with investing for the long-term, buy and hold, and invest regularly – sadly, it ends the same way as well.

  In other words – investors hear the same old story, time and time again. This would be perfectly acceptable IF we lived in a linear World.

  The problem of course is that we DO NOT live in a linear World.

  While it is human nature to think and expect along linear lines, our World just doesn’t work that way. Instead, everything moves in cycles, some short and shallow, while other cycles are long and deep.

  What we are experiencing today is the likely turning point in a very long cycle of borrowing, borrowing and then borrowing some more.

  The capacity to borrow has reached the limit for many, yet our governments and central banks are desperate to keep the party going. Yes, despite foggy heads, tired legs and full bellies; governments and central banks continue to pour more drinks, dish out more food, all while playing even louder music.

  In some ways, the real question to ask your mutual fund sales person is whether the party has ended or is it just getting started?

  The real difference between the investment managers and asset gatherers is in their ability to truly understand market conditions, identify the key driving points, reposition your strategies and then to easily communicate the entire process.

  Let’s be honest here – the calm sailing and the good times ended in March 2000. That was the end of the most beautiful simultaneous bull market in both stocks and bonds ever known to mankind.

  For 18 stunning years prior to March 2000, financial markets everywhere, charmed everyone into believing that life as an investment manager was as difficult as a sail into a gentle, onshore breeze.

  And considering markets produced an average annual return of +15%, how could anyone not be happy?

  This was the way life should be.

  However, since March 2000, stocks plummeted -50%, then soared +100%, then crashed -56%, only to zoom +215%.

  So since March 2000, 16 years of buying the dip, investing for the long-term, knowing your time horizon, diversifying your portfolio, and investing regularly netted you a handsome annual return of +2%.

  This wasn’t the way life should be.

  So which is it? Do you expect stocks to always perform like they did from 1982 to 2000? Or, do you expect stocks to perform like they did from 2000 to 2015?

  Judging by their investment commentary, the big banks obviously believe in the 80-90s era. In reality however, the big banks believe in gathering your assets, and investing for the long-term, buying the dip…

  Collision Time

  Make no doubt about it – our economy and our debt loads have created a very uncomfortable environment for those in governments and central banks.

  Over the years, individuals, companies and governments of all kinds have borrowed to their hearts content. Subsequently, all of this borrowing gushed new money into our economies and swirled around, around and around.

  The good times became so great, they turned awesome.

  Politicians promised a chicken in every pot – yet, by borrowing and borrowing they delivered entire farms to their voters.

  Companies promised steady hours with steady pay – yet they delivered more jobs, more pay and more pensions.

  Not to be outdone, individuals goosed the system too, and enjoyed golden eggs year after year after year.

  It happened during the hippy-days of the 60s, and during the disco-days of the 70s. Of course, bumps also happened during the metal-days of the 80s and then again during the grunge-days of the 90s. Then American Idol took over and all was lost – well, all except the ineffective vision of our leading central bankers and government treasuries.

  While some people began their careers in the 1970s, even more started their investment careers in the 1980s; with more still in the 1990s and 2000s.

  Worse still, many of today’s investment young guns started their careers after the 2008 crisis.

  We share this perspective because every market expert today draws upon their years of wisdom to make very important investment decisions for you, your family and your pension plans.

  This would be great if everyone lived to be 300 years old and shared this much longer, and much richer experience with the World.

  Instead, our minds are trapped within a very narrow place in time which limits our ability to think and see things from a much broader and clearer perspective.

  Today, we have 3 enormously important market drivers steam rolling towards each other and when they collide, the distortions will be leave everyone dazed, confused, asking questions – and demanding answers.

  Sadly, the answers will be completely unsatisfying entirely due to an industry focused on linear thinking and obsessed with gathering assets. Fortunately, the key to understanding why the World has reached a precarious point in time is actually quite easy to achieve – just shed your mind of your tunnel visions and linear thinking, and open it to a World that is crystal clear.

  For starters, knowing and accepting that every market, every economy, and every society is interconnected will allow you to understand the events that are unfolding around us.

  Next, ignore the drivel from the talking heads and asset gathering machines. Then, know that every single time our World has experienced an economic bump, our governments and centrals always responded by:

  1) Borrowing more money to spend on special projects

  2) Cutting interest rates to make it cheaper for individuals and companies to borrow

  The result of 1) and 2) would be more money pumped into our economies which would inevitably help us recover from the little bumps.

  This happened like clock work in the 60s, 70s, 80s, 90s, and 2000s. Unfortunately, this clock has suddenly become broken. Yes, broken clocks are correct twice a day, but right now our global financial World is over 11 figurative hours away from that effusive goal.

  Over 60 years of borrowing and 35 years of cutting interest rates has left us with the mess we have today:

  1) Excessive debt loads for practically EVERY country

  2) ZERO and NEGATIVE interest rates

  Collision Time

  Linear thinkers not only see these as two separate market dynamics, but they also view it as two markets factors within every single, separate country and market.

  To proclaim that Greece doesn’t matter is tunnel vision.

  To believe China is an economic miracle is gullible.

  To conclude that lower interest rates and money printing will create a better World is pretty weak.

  Instead, we’ll show you how to liberate your mind and see the World as one continuous flowing market, where capital, ideas and innovation always seeks safety and avoids excessive risks and losses.

  We cannot stop what is coming, however if you escape the traps caused by linear thinking, the opportunity for your own personal schadenfreude is right around the corner.

  And it all starts with a collision:

  

   

  Here comes the recession

  Recently someone told us that if everyone simply acted with more optimism, then all of this gloom and doom would disappear.

  In one way, this is 100% correct. Positive thinking is great for a positive economy which leads to positive everything – more jobs, more bonuses, more raises, and more spending, and then rinse and repeat.

  Yet, all of this optimism can only carry an economy so far. Eventually mathematics take over, and soon thereafter one realises positive thinking doesn’t automatically give you a new job with more bonus, more raises which creates more spending.

  It’s funny how the loss of a bonus, or worse still, the loss of a job really affects the ole’ optimism gene by affecting it with something very different – pessimism.

  Suddenly, that vacation in Europe becomes a stay-cation. That new dream kitchen remains a distant dream. And the weekly eat-outs, turn into home pizza night (not that there’s anything wrong with home pizza night).

  As you can see, eventually mathematics always trumps optimism and pessimism too for that matter. Unfortunately, today’s market cycle – has the World sliding downwards and not upwards. Eventually the day will come when the opposite is happening, but we have to slump into the financial valley first – that’s just the way it works.

  * * *

  Continue reading in the full letter below:

   

  
  

  

  

  

  

  

• What Has Generated Alpha This Year?

  It only makes sense in this "good news is bad news" market that the best outperformance this year has been achieved by being ultimately contrarian and fading the crowd. As BofAML warns, 2015 is another year of position-driven alpha as selling the 10 most-overweight stocks held by active managers and buying the 10 most-underweight stocks crated a stunning 17 percentage point spread this year…

   

  

   

  BofAML sees risk this positioning trade continues.

  Consultants may be helping to perpetuate it, given they have honed in active share as a key metric for fund managers, which has forced managers into a crowded subset of similar holdings (typically smaller, more idiosyncratic stocks).
   

  

  

  

  

  

• World's Largest Leveraged ETF Halts Orders, Citing "Liquidity Constraints"

  First The Bank of Japan destroyed the Japanese bond market, and then, back in May we warned that The Bank of Japan had 'broken' the stock market. Now, it appears the all too obvious consequences of being the sole provider of buying power in an antirely false market are coming home to roost as Nomura reports the "temporary suspension" of new orders for 3 leveraged ETFs – the largest in the world – citing "liquidity of the underlying Nikkei 225 futures market."

  

  Source: Nomura

  As Bloomberg reported previously on Nomura's funds,

  Money is being shredded at an unprecedented rate in a souped-up exchange-traded fund tied to Japan’s most famous stock index.

   

  Since mid-August, investors have poured a record $4.5 billion into the Next Funds Nikkei 225 Leveraged Index ETF, a security designed to rise or fall twice as fast as its namesake equity gauge. That’s too bad, considering that twice the Nikkei 225 Stock Average’s loss over that period comes out to about 21 percent.

   

  So fast have the country’s individual investors been plowing money into the fund that even as a fifth was lopped off its price, its market value more than doubled. It’s the largest security of its kind in the world, and is now big enough to affect the whole stock market as overseers rush to buy and sell securities to meet its price target, according to BNP Paribas Investment Partners Ltd.

   

  “They are taking up a larger proportion of the market,” said Tony Glover, head of the investment management department at BNP Paribas Investment Partners Japan in Tokyo. “Volatile markets are not great news with increasingly wider intraday swings. The funds are a big factor causing this.”

   

  The ETF has become more popular with traders than even Toyota Motor Corp., Japan’s biggest company. Average turnover for the ETF was about 250 billion yen ($2.1 billion) a day over the past two months, triple that of Toyota.

  *  *  *

  Who could have seen this coming? Well we did… numerous times…and here is the explanation…

  Two months ago, in “ETF Issuers Quietly Prepare For Meltdown With Billions In Emergency Liquidity,” we outlined the rather disconcerting circumstances that have led some large fund managers to quietly line up emergency liquidity facilities that can be tapped in the event of a sudden retail exodus from bond funds.

   

  "The biggest providers of exchange-traded funds, which have been funneling billions of investor dollars into some little-traded corners of the bond market, are bolstering bank credit lines for cash to tap in the event of a market meltdown. Vanguard Group, Guggenheim Investments and First Trust are among U.S. fund companies that have lined up new bank guarantees or expanded ones they already had, recent company filings show," Reuters reported at the time, in a story we suspect did not get the attention it deserved.

   

  At a base level, these precautionary measures are the result of the interplay between central bank policy and the unintended consequences of the post-crisis regulatory regime. ZIRP creates a hunt a for yield and simultaneously incentivizes companies (especially cash strapped companies) to tap the bond market while borrowing costs remain artificially suppressed. Clearly, this is a self-fulfilling prophecy. The longer rates on risk free assets remain near, at, or even below zero, the more demand there is for new corporate issuance (the rationale being that at least corporate credit offers some semblance of yield). More demand means rates on corporate credit are driven still lower, and once yields on high grade issues get close to the lower limit, yield-starved investors are then herded into HY.

   

  All of this supply in the primary market comes at a time when liquidity in the secondary market for corporate credit is non-existent thanks to the shrinking dealer books that resulted from the government’s (maybe) well-meaning attempt to crack down on prop trading. The result: a crowded theatre with a tiny exit.

   

  This situation has been exacerbated by the proliferation of bond ETFs which have allowed retail investors to pile into corners of the fixed income world where they might not belong.

  All of the above can be summarized as follows.

  "MF assets too large versus dealer inventories" (via Citi)…

  

  … clear evidence of "structural damage in corporate bond trading liquidity" (via JP Morgan)…

  

  … and the rapid growth of bond funds in the post-crisis world (via BIS)…

  

  So given the above, the question is this: if something were to spook the market – a rate hike cycle for instance, or an October revolver raid on HY energy names, or an exogenous geopolitical shock – causing an exodus from these funds, what would happen to prices if fund managers were suddenly forced to transact in size in an illiquid secondary market in order to meet redemptions?

  "Nothing good", is the answer. 

  The solution is to avoid selling the underlying bonds – even when investors are selling their shares in the funds.

  But how is this possible? 

  To a certain extent, outflows in one fund can be offset by inflows to another. These "diversifiable flows" are one happy byproduct of the great ETF proliferation. Here's a refresher on how this works courtesy of Barclays.

  *  *  *

  Portfolio Products Replace Dealer Inventory

  While diversifiable flows limit the risks to portfolio managers in principle, the reality of the high yield market is more complicated. Managers have specific views on tenor, callability, sectors, covenants, and, most importantly, individual credits, such that actually finding buyers for specific bonds can be quite difficult. In the pre-crisis period, dealers ran large inventories that effectively facilitated the netting of flows across funds (Figure 1). A fund with an outflow would sell bonds into the dealer community, and funds with outflows would buy bonds out of the dealer inventory. When inventory is large, the fact that the specific bonds bought and sold did not match was largely irrelevant. Funds with outflows could sell the bonds of their choice, and the funds with inflows could pick investments from the large variety of inventory held by dealers.

  

  The matching problem has become more acute as dealer inventories have declined. Even funds can net flows in principle, dealers are much less willing to warehouse bonds, and are much more likely to buy only when they believe they can quickly offload the risk. Under this scenario, the fact that flows can theoretically be netted is of little practical use to fund managers – actually netting individual bonds is extremely difficult, particularly in the short time frame required by funds offering daily liquidity to end investors.

  This is where portfolio products come in. Investors can use portfolio products to fund outflows/invest inflows immediately and execute the necessary single-name bond trades over time as liquidity in the underlying bond market allows (Figure 2). In this scenario, funds with inflows and outflows simply exchange portfolio products, sidestepping the immediate need to trade single-name corporate bonds.

  

  *  *  *

  Ok great, so ETFs provide a kind of "phantom" liquidity if you will. There are two problems with this:

  • It only works when flows are diversifiable. Once flows become unidirectional, it all goes out the window.
  • It makes the underlying markets even more illiquid.

  Here's how we put it last month in "How Fund Managers Use ETF Phantom Liquidity To Avert A Meltdown"

  In other words, if I'm a fund manager, the idea that ETFs provide liquidity rests on the assumption that when I experience outflows, someone else will be experiencing inflows and thus I can sell ETFs and avoid offloading my bonds into an illiquid corporate credit market. Put another way: I am depending on new money coming into the market to fund redemptions from previous investors who are exiting the market, all so that I can avoid liquidating assets that are declining in value and that I believe will be difficult to sell. There's a term for that kind of business. It's called a ponzi scheme and just like all other ponzi schemes, when the new money dries up (so, for example, when HY bond ETF flows are all headed in the wrong direction), the only way to meet redemptions is to get what I can for the assets I have and when the market for those assets is thin (as the secondary market for corporate credit most certainly is), I may incur substantial losses. 

   

  Note also that the more often ETFs are used as a way of avoiding the underlying bond market, the more illiquid that market becomes, making the situation still more precarious in the event of a panic.

  So what is a fund manager to do?

  This is where we come full circle to the emergency liquidity lines mentioned at the outset. In order to avoid tapping the underlying illiquid bond market in a situation where flows are unidirectional, fund managers may instead pay out redemptions in borrowed cash.

   

  This is, to quote Citi's Matt King, "creative destruction destroyed."

   

  Only worse.

   

   

  That is, this represents the willful delay of a long overdue episode of creative destruction layered atop another delay of the much needed Schumpeterian endgame. Stripping out the metaphysics and philosophy references, that can be translated as follows: this strategy is yet another example of delaying the inevitable. If fund managers are forced to tap these liquidity lines it likely means investors have found a reason to sell en masse and if that reason turns out to be something that permanently impairs the value of the underlying bonds (as opposed to a transitory, irrational panic) then all the funds are doing by borrowing to meet redemptions is employing leverage to stave off the recognition of losses, which is ironically the same thing (in principle anyway) that the companies whose bonds they’re holding have done to stay in business. It’s a delay-and-pray scheme designed to avoid selling the debt of companies whose similar delay-and-pray schemes have run their course.

  In closing, it's important to note that no fund manager in the world will be able to line up enough emergency liquidity protection to avoid tapping the corporate credit market in the event of panic selling in the increasingly crowded market for bond funds. 

  In other words, when the exodus comes, the illiquidity that's been chasing markets for the better part of seven years will finally catch up, and at that point, all bets are officially off.

  *  *  *

  At the end of the day, one is reminded of what Howard Marks' recently said about ETFs: 

  "[They] can't be more liquid than the underlying and we know the underlying can be quite illiquid."

  We are about to get the real-life answer to Howard Marks' more critical question: "What happens when ETF Holders all sell at once?"

  

  

  

  

  

• Paul Craig Roberts On The MH-17 Report: "Only An Idiot Would Believe It"

  Submitted by Paul Craig Roberts,

  When I read that the report on the downing of the Malaysian airliner over Ukraine was being
  put in the hands of the Dutch, I knew that there would be no investigation and no attention to the facts.

  And there wasn’t.

  I did not intend to write about the report, because Washington’s propaganda has already succeeded, at least in the Western world, in its purpose of laying the blame on Russia. However, the misrepresentation of the Dutch report by Western media, such as NPR, is so outrageous as to make the media the story and not the report.

  For example, I just heard NPR’s Moscow correspondent, Corey Flintoff, say that the missile that hit the airliner was fired by Ukrainian separatists who lack the technical ability to operate the system. Therefore, the missile had to have been fired by a Russian.

  There is nothing in the Dutch report whatsoever that leads to this conclusion. Flintoff either is incompetent or lying or he is expressing his view and not the report’s conclusion.

  The only conclusion that the report reaches is one that we already knew: if a Buk missile brought down the airliner, it was a Russian-made missile. The Dutch report does not say who fired it.

  Indeed, the report places no blame on Russia, but it does place blame on Ukraine for not closing the airspace over the war area. Attorneys have stated in response to the report that families of those killed and the Malaysian airline itself are likely to file lawsuits against Ukraine for negligence.

  Of course, there was nothing of this in Flintoff’s report.

  As I wrote at the time of the airliner’s destruction, the Western media already had “the-Russians-did-it” story ready the moment the airliner was reported to be shot down. This story was very useful to Washington in hardening its European vassal states into sanctions against Russia, as there was some dissent. What Washington has never explained and the Western media has never asked is: What motive did separatists and Russia have to shoot down a Malaysian airliner?

  None whatsoever. The Russian government would never allow such a thing. Putin would have immediately strung up those responsible.

  Washington’s story makes no sense whatsoever. Only an idiot could believe it.

  What motive did Washington have? Many. The demonization of Russia made it impossible for European governments to resist or abandon the economic sanctions that Washington is using to break economic and political relationships between Europe and Russia.

  The Russian manufacturer of the Buk missile has proven that if a Buk missile was used, it was an old version that exists only in the Ukraine military. For some years the Russian military has been equipped with a replacement version that has a different signature in its destructive impact. The damage to the Malaysian airliner is inconsistent with the destructive force of the Buk missile in Russian service. The reports were given to the Dutch, but no effort was made to replicate and verify the validity of the tests conducted by the manufacturer of the missile. Indeed, the Dutch report does not even consider whether the airliner was downed by Ukrainian fighter jets. The report is as useless as the 9/11 Commission’s report.

  Don’t expect any acknowledgement of this by the Western media, a collection of people who lie for a living.

  The reason that the West has no future is that the West has no media, only propagandists for government and corporate agendas and apologists for their crimes. Every day the bought-and-paid-for-media sustains The Matrix that makes Western peoples politically impotent.

  The Western media has no independence. An editor of a major German newspaper has written a book, a best-seller published in Germany, in which he states that not only he himself served the CIA as a reliable purveyor of Washington’s lies, but that every significant journalist in Europe does so also.

  Obviously, his book has not been translated and published in America.

  NPR, like all of Western media, has lost its integrity. NPR claims to be reader-supported. In fact, it is supported by corporations. Pay attention to the ads: “NPR is supported by xyz corporation working to sell you this or that product or service.”

  The George W. Bush regime destroyed NPR by appointing two Republican female ideologues to oversee NPR’s public function. The two Republicans succeeded in making job security, not reporting integrity, the motive of NPR journalists.

  As a person who worked with President Reagan to end the Cold War and associated nuclear threat, I am dismayed that the Western media has failed life on earth by resurrecting the prospect of nuclear armageddon.

  

  

  

  

  

• OPeRaTioN OaTMeaL…

  

  

  

  

  

• Whose FX Reserves Suffered The Most During The "China Tantrum"? Goldman Has The Answer

  In the four or so weeks after the August 11 China deval, all anyone wanted to talk about was FX reserves. 

  What most didn’t immediately realize was that China’s new FX regime would, in the short-term anyway, end up leaving less of a role for the market in determining the yuan’s exchange rate not more. This is because – and we’re fond of quoting BNP’s Mole Hau on this – “whereas the daily fix was previously used to fix the spot rate, the PBoC now seemingly fixes the spot rate to determine the daily fix.” Because the market ultimately expects a much larger devaluation, the persistent pressure on the yuan caused the PBoC to have to intervene in the onshore and eventually, the offshore spot markets. That meant liquidating reserves. The sheer pace of the drawdown caught the world’s attention as suddenly, everyone woke up to what we began discussing last November when it became clear that the Saudi’s move to kill the petrodollar would lead directly to reserve liquidation across EM as commodity currencies and exporters were set to suffer from crude’s collapse. 

  Of course the yuan deval was especially bad news for emerging Asia where economies that were already suffering from slowing Chinese demand and slumping commodities were suddenly forced to grapple with a loss of export competitiveness as well. 

  Before you knew it, it was an all-out Eastern USD reserve liquidation party, leading some to ask what effect the drawdowns would ultimately have on UST yields because all else equal, FX reserve selling is just QE in reverse. As we noted on any number of occasions, this could have the effect of amplifying what would otherwise be a merely “symbolic” 25 bps Fed hike. That is, if the Fed hikes and triggers more EM outflows, well then they’ll be more USD paper selling (i.e. a loss of global liquidity) as FX managers move to support their currencies. 

  Against this backdrop, we bring you the following from Goldman who has endeavored to tally up currency intervention as a percentage of reserve money in Asia during what they’re calling the “China tantrum”. Note the rather scary looking figure for Malaysia, where it’s not just financial and economic conditions that threaten to tip the country into crisis, but a political scandal as well that has quickly mushroomed into a series of investigations across the globe that could ultimately cost PM Najib his career and legacy.

  *  *  *

  From Goldman

  When the mini-devaluation of the RMB surprised us and markets in early August, we argued strongly that this was a one-off adjustment that did not signal the beginning of a devaluation cycle. Markets disagreed and risk assets sold off hard in the weeks that followed. Asian FX was not spared amid the sell-off, with RMB proxies such as the MYR hit especially hard. There is always a challenge in reading price action in the moment, given that many Asian central banks use their official foreign exchange reserves to stabilize exchange rates. These actions are usually not known until months afterwards, when data on spot reserves and forward books become available. In this Global Markets Daily, we compile the full picture for Asian central bank intervention during what we are calling the ‘China tantrum’, the period from June to August when SHCOMP was already selling off. We compare the magnitude of reserve drawdowns to the ‘taper tantrum’, the period from June to August 2013.

  Many Asian central banks intervene not just in spot foreign exchange markets, but also in forward markets. Typically, these transactions consist of a spot/forward foreign exchange swap that results in the central bank having a forward USD asset. This kind of intervention leaves the central bank balance sheet unaffected and thus amounts to sterilized intervention. Many Asian central banks rely heavily on this kind of intervention, so it is important to factor this into the overall intervention picture. We look at the FX-valuation-adjusted decline in spot reserves between end-May and end-August (using the COFER data to adjust for valuation effects) plus the change in forward books over this period. We scale this proxy for official intervention by reserve money at the end of May, which helps control for differences in size across countries. After all, a $1bn drop in reserves is a different story for China compared with Malaysia.

  Relative to reserve money, foreign exchange intervention was most pronounced for Malaysia (43%), followed by Thailand (17%), Singapore (16%), South Korea (15%) and Indonesia (10%). Despite the seemingly large drop in China’s official reserves, this works out to be only 4% of reserve money, underscoring our view that developments there are more benign than meets the eye. Coupled with FX moves, these numbers paint a picture where depreciation pressure was most pronounced for Malaysia. With the exception of Malaysia, these reserve losses are comparable to 2013 when the ‘taper tantrum’ put depreciation pressure on currencies in the region.

  

  

  

  

  

• Moral Hazard, "Supernormal" VIX Swings, And Why August 2015 Was Just An Appetizer

  Excerpted from Artemis Capital Management letter to investors,

  True knowledge is not what you know but certainty in what you do not. Volatility is simply about putting a price on that. Drawing from the famous quote by Donald Rumsfeld, former US Secretary of Defense(20), the trader of volatility must be able to identify “known unknowns” and “unknown unknowns” while simultaneously making a market in both. Modern volatility markets know that the global economy is facing deflation… but they also know that global central banks will be right there to respond to any crisis. The single most important “unknown unknown” today is any random event that may unexpectedly cause global central banks to withdraw their stated support of markets.

  Moral hazard has contributed to a significant build up in short and leveraged volatility creating a shadow ‘volatility gamma’ that reinforces the current trend in volatility direction. Rising volatility is followed by more rising volatility and vice versa. Volatility is crushed whenever a central bank responds to crisis and thereafter leverage is re-applied in even greater amounts in a cycle of moral hazard. The pattern is creating a pro-cyclical monster of short volatility that, if left unchecked will contribute to a repeat of the May 2010 Flash Crash or 1987 Black Monday Crash.  August 2015 was just an appetizer.

  In 2012 Artemis coined the term “Bull Market in Fear” to explain a regime of volatility defined by investor's willingness to pay almost anything to shield their portfolios from the next deflationary crash. Between 2013 and October 2014 we experienced a “Bear Market in Fear” defined by a rising short volatility complex and low risk premiums for selling variance. Ever since last fall, we have entered into one last dangerous phase in the volatility cycle. Forward volatility markets no longer fade volatility out of denial; they fade volatility out of the prospect of central bank support.

  This is a new era of hyper-moral hazard whereby a central bank reaction function is fully priced into option markets. Volatility markets do not believe central banks will let us fail. 

  For evidence, consider that the VIX futures markets faded the August VIX spike by the greatest margin in history.  The graph below shows the ratio of the VIX to the market’s one-month forward expectation of the VIX. The higher the ratio the greater the market’s confidence in volatility mean reversion. August 2015 dwarfed all other crises in mean reversion expectation including October 2008, May 2010, and August 2011. The entire VIX market was essentially one large leveraged bet that central banks would respond to the crisis… and it paid off! What if it didn’t?

  

  The VIX is experiencing epileptic seizures including erratic and violent outbursts up and down at the most frequent pace in history as new sources of structural short convexity interact with interventionist policy responses to crisis. The VIX has registered a quantifiable ‘supernormal’ (five standard deviation +) move up or down every three months over the last two years. 

  In July-August 2015 alone, we experienced the single largest multi-day drawup and drawdown in the history of the VIX index. Artemis ranks consecutive drawups and drawdowns (trough-to-peak or peak-to-trough) in volatility and models them as a power law distribution.  The distributions of a wide variety of physical, biological, and human phenomena closely follow this form. Examples include earthquakes, deaths in war and terrorism, populations of cities, solar flares, word frequencies in language, movie box office receipts, and asset price movements.  When you logarithmically rank the event magnitude of these natural and human phenomena the majority of observations will align linearly along the x-axis as a power-law function (see white line below). Violations of the power-law function are supernormal events because their results contain a degree of reflexivity that exceeds the exponential growth function. Examples of supernormal violations in power laws across other phenomena include death counts in WWII ranked among all wars, box office receipts of the movie Titanic, the Titanic disaster itself, the 9.2 Magnitude 1960 Chilean Earthquake, the population of Tokyo, the 1987 Black Monday Crash, and the 9/11 terror attack in NYC. Three of the top ten supernormal VIX increases and four of the top eight supernormal VIX decreases have occurred in the last year alone! The top eight ranked drawdown collapses in VIX have all occurred during the post-2012 monetary regime. Power-law violations in VIX to the downside and upside are now happening with regularity!

  

  Volatility markets are demonstrating deep uncertainty in the very nature of uncertainty itself. The schizophrenic behavior of volatility is a deep warning sign for policy makers that something is not right. Implied Volatility-of-the VIX (“CBOE VVIX”) reached the highest levels in history on August 24th, 2015. The volatility-of-VIX rose higher than levels achieved even during the 2008 financial crisis, 2010 Flash Crash, and 2011-debt downgrade crisis.

  Many will point to structural considerations as a driver including the proliferation of VIX exchange traded products and the new spot-VIX calculation methodology. While these are important factors, they are only part of the story.

  To understand why the volatility of volatility reached new highs we have to engage in deep meta-thinking about our reaction to change. Volatility provides exposure to our collective insecurity towards an unknowable future. Likewise, to short volatility is to express personal confidence in the status quo of market affairs despite a broader fear of change. To go long volatility is to express fear that change is coming.

  Volatility-of-volatility is simply the war between these two different modes of perception… shifting perceptions in the nature of uncertainty itself. If uncertainty is rising so should the VIX… but there is a very different type of uncertainty to evaluate … the uncertainty that central banks will intervene.  When global central banks seek to defend the status quo and mean reversion it becomes increasingly difficult to accurately gauge the probability of change in markets.  Volatility markets are now gaming central banks in addition to fundamental economic and technical conditions. If we are unclear from one moment to the next whether radical change or the status quo will prevail than volatility-of-volatility should logically rise. 

  

  Volatility mean reversion has been an abnormally profitable bet during the regime of pre-emptive strikes on financial risk. Following each tail event in volatility, we are experiencing another tail event in the magnitude of volatility declines. Central banks refuse to let volatility remain elevated and are quick to react to any crisis.

  Between August and September 2015 the VIX collapsed faster than ever before following a spike to 40 (see red line below) due to another massive stimulus response by central banks.  China cuts rates, devalued the Yuan, and purchased an estimated $263bn of equity (9.2% of freely traded shares) to artificially prop-up their stock market before a nationalistic military parade. Following China, the ECB expanded their QE program.  The graph below demonstrates the historic decline in volatility by showing the average, high, and low trajectory paths of the VIX the ensuing fifteen days following every implied volatility spike to 40.

  

  Likewise, the area chart below graphs the forward probability distribution of S&P 100 implied volatility (VXO) following a breach of the 35 barrier in spot-vol.

  

  As expected, implied volatility exhibits an exceptionally positively skewed distribution following a ‘risk-off’ event, but notice how the current trajectory of VXO lies on the far left of the distribution. Central banks refuse to let volatility remain elevated but this is creating a new set of shadow risks…Global central banking has artificially incentivized bets on mean reversion.

  

  

  

  

  

• Fastenal CEO: "The Industrial Environment Is In A Recession – I Don’t Care What Anybody Says!"

  You know things might not be going particularly well when you’ve had three CEOs in the space of nine months, and that’s exactly what’s happened at nuts and bolts maker Fastenal which named current CFO Daniel Florness to the top spot on Tuesday.

  The move came after the company reported meager top and bottom line results for Q3 this week. 

  It’s not very difficult to understand why the company’s business has come under pressure. The slump in crude prices has put an enormous strain on its energy-related operations. Here’s some color from Credit Suisse who notes that in September, Fastenal saw its first Y/Y sales decline since 2009:

  Not surprising, FAST indicated the industrial outlook has deteriorated in particular during the month of September. In fact, September, was the first month since 2009 in which FAST experienced y/y declines. Along with the stronger dollar, FAST noted continued oil and gas headwinds, and heavy manufacturing. By geography, Texas took a step down and FAST noted slowing growth in Canada. Of FAST’s top 100 customers, 44 saw top line declines. Of the 44, 32 were negative by more than 10% and 17 were negative by more than 25%. FAST does not expect to see any improvement for the next several quarters and believes the industrial environment is in a recession.

  Now hilariously, Credit Suisse somehow managed to take that strikingly bad assessment and turn it into this title: “SteadFAST In the Face of Adversity.” But hey, it’s the sellside so it’s not like they were going to tell you to sell it. 

  Anyway, what struck us was the rhetoric on the call, especially the retort from new CEO Daniel Florness when William Blair analyst Ryan Merkel (no relation to any “pure hearted” German “lion mothers”) made the mistake of calling the current environment “non-recessionary”:

  Merkel: Then just lastly, Fastenal growing zero percent here in September and in a non-recessionary environment, it’s pretty surprising, I think, for a lot of us. But if we just step back and we think about quantifying some of the headwinds, and I don’t want to put words in your mouth but it seems to me, oil and gas customers are probably down, what, 30% this year. It might be a 3% headwind to sales. And then what about exports? I’ve got to think that’s an even bigger impact, but you tell me – and we’ve also got FX as a one-point headwind.

   

  Florness: Yeah, a couple things. First off, the premise of the question, I would argue that anybody selling into the industrial market is not selling into a non-recessionary environment. We are–

   

  Merkel: I agree. I agree with you there.

   

  Florness: The industrial environment is in a recession – I don’t care what anybody says, because nobody knows that market better than we do. You know, we touch 250,000 active customers a month. 

   

  Right now in the third quarter, 44 of our top 100 customers are negative. We have not lost any business with that group. They are negative in their spend. In some cases, they are negative because their business is very negative and they are somewhat negative with us. 

   

  Of that 44 that were negative, 32 of them were negative more than 10%. Of that 44 that’s negative, 17 of them were negative more than 25%. That’s a sign of a recessionary environment.

  So, two very simple, yet very critical takeaways:

  • the industrial sector is in a recession,
  • whatever you do, do not suggest to Dan Florness that Fastenal’s lackluster performance is related to anything other than the pitiable condition of the US economy

  

  

  

  

  

• Russia Sends Its Only Aircraft Carrier To Syria, Signals It Is Just Getting Started

  As should be abundantly clear by now, The Kremlinis adopting a “slightly” different strategy when it comes to combatting terror in the Mid-East than that adopted by the US and its Western and regional allies. 

  The strategy of the US and its allies seems to go something like this: 1) covertly arm and train groups who you know might ultimately become terrorists because arming and training these groups may be a way to destabilize unfriendly regimes, 2) wait for blowback, 3) launch serious effort to combat terror if unfriendly regime has been “successfully” replaced by puppet government, or launch half-hearted effort to combat terror if situation still fluid and regime still clings to power. 

  Obviously, that strategy is prone to all types of problems, and sensing that the US and its allies might have finally met their foreign policy blunder Waterloo in Syria, Russia decided to call everyone’s bluff by launching a real war on terror. Of course, this war conveniently restores the regime of one of Moscow’s allies, but in the end the result is the same: anyone who is a terrorist and who is also fighting Assad in Syria is in for big trouble because Russia is using this is as an opportunity to reassert itself on the world stage and also to fire up a long-dormant military juggernaut. 

  Now, on the heels of hundreds of airstrikes accompanied by dramatic video footage as well as cruise missile attacks launched from Russian warships in the Caspian, The Kremlin is sending its lone heavy aircraft carrier into the fight. This is only the ship’s sixth deployment in history. 

   Here’s more from Flashnord (Google translated):

  Heavy aircraft carrier (heavy aircraft), “Admiral Kuznetsov” is Russia’s only aircraft carrier, the weekend will go from Murmansk to the shores of Syria, said FlashNord source in the Northern Fleet command.

   

  “The cruiser dock repair completed until the end of the week go to the coast of Syria, where he joined the operation to destroy the group” Islamic State “,” – a spokesman said.

   

  According to him, from May to August this year was held aircraft carrier dock repair 82 Shipyard in Roslyakovo (Murmansk region). Then, on a regular docked in Murmansk, he walked up to the restoration of full combat readiness.

   

  Since September 30, Russia carries out air operations in Syria with the aim of destroying the objects of the “Islamic state.”

  Here are some images:

  

  

  

  Here’s a bit of color via Reuters from earlier this year. Notably, the Kuznetsov isn’t known for being in particularly great working order which probably makes the chances of some kind of accident that much greater:

  When the Soviet Union launched Kuznetsov in 1985, it was a major technical accomplishment for the then-superpower. Moscow began assembling Varyag, a sister ship of Kuznetsov, around the same time. It also started work on a true full-size carrier, as big as anything the United States builds.

   

  But the Soviet Union’s collapse in 1991 abruptly halted the carrier program.

   

  Russia was left with Kuznetsov as its sole flattop and, deprived of funds and Ukraine’s assistance, has struggled to keep the vessel in working condition. Since the ship was commissioned into frontline service in the early 1990s, Kuznetsov has deployed just five times. Each deployment, lasting between three and six months, saw the flattop sail from its home port in northern Russia around Europe and into the Mediterranean as a show of force and to demonstrate support for Russia’s allies in the region, including Syria.

  

  

  

  

• "A Generation In Crisis" – The World Needs 5 Million Jobs/Month To Stymie Youth Extremism

  For over 3 years we have pointed out that the surging youth unemployment was Europe's (if not the world's) scariest chart, because the last thing Europe needs is a discontented, disenfranchised, and devoid of hope youth roving the streets with nothing to do, easily susceptible to extremist and xenophobic tendencies: after all, it must be "someone's" fault that there are no job opportunities for anyone. Well, as Bloomberg reports, The World Bank has an unsettling message for young people around the globe: unless we create 5 million jobs a month, the situation is going to get worse.

  As The World Bank notes, Unemployment in any form is a drag on an economy and society.

  It undercuts productivity, spending, and investment, stunting national growth. It contributes to inequality and spurs social tension. Joblessness and inactivity and the failure to tap into the economic aspirations and resources of young people carry an even higher price.

   

  As prospects dwindle, many face social exclusion, or see their emotional, mental, or physical health deteriorate.

   

  …

   

  Young people account for roughly 40 percent of the world’s unemployed and are up to four times more likely to be unemployed than adults.

   

  …

   

  When young people are not fully participating in the labor force or are NEETs, governments forgo tax revenue and incur the cost of social safety nets, unemployment benefits and insurances, and lost  roductivity. Businesses risk losing a generation of consumers. Social costs are ever mounting as well. The Arab Spring and subsequent youth-led uprisings in many countries, along with the rise of economic insurgency and youth extremism, demand that we explore the links between economic participation, inequality, and community security, crime, and national fragility through a lens focused on youth. What we see is a generation in economic crisis.

   

  Over the next decade, a billion more young people will enter the job market—and only 40 percent are expected to be able to enter jobs that currently exist. The global economy will need to create 600 million jobs over the next 10 years: that’s 5 million jobs each month simply to keep employment rates constant.

  In other words, even with that 'growth' we are going nowhere!!

  

   

  As Bloomberg reports,

  The youngest workers have been hit hardest by the financial crisis and the global recession of the last decade because they often held the temporary jobs, which offer less protection. The youth unemployment rate is projected to be 13.1 percent in 2015, compared with 4.5 percent for adults, according to the ILO.

   

  Global employers are looking not only for technical and academic skills, but also such qualities as being open, responsible or organized, …Young workers are often either overqualified or underqualified for their jobs, it said.

   

  "In emerging economies that are progressively more service-based, employers find a workforce population that lacks necessary skills," the report said. "Elsewhere, the problem is that many of the unemployed are highly educated but the market demands different competencies or more technical or vocational skills."

   

  At stake is the well-being of the entire global economy. Without an income, millions of young people slump into poverty. By delaying their entry into the workforce or accepting low-paying jobs, many limit their lifetime earning potential. When young people don't work, governments don't get the tax revenue and businesses fail to gain customers.

   

  "Social costs are ever mounting as well," the report said, citing youth-led uprisings in many Arab countries and the rise of economic insurgency and youth extremism. "What we see is a generation in economic crisis."

  *  *  *

  Full World Bank Report below…

  Toward Solutions for Youth Employment Full

  

  

  

  

  

• A Third Of All Containers Shipped From Long Beach Port Are Empty

  In the past several months, it has been virtually impossible to make any sense of the conflicting trends involving US and global trade. On one hand, there is global trade, which as we have covered since the spring, has been in a state of consistent decline. Some example of this:

  • World Trade Slumps By Most Since Financial Crisis
  • Something Just Snapped: Container Freight Rates From Asia To Europe Crash 23% In One Week
  • Global Trade In Freefall: Container Freight Rates From Asia To Europe Crash 60% In Three Weeks
  • South Korea Exports Crash Most Since 2009

  And of course China’s terrible trade data for the past 5 months, which has seen the longest stretch of import declines since the financial crisis.

  In short: only an economist, either a tenured one or one employed by CNBC, is unable to see that the world is sinking into a global trade recession, with a economic one soon to follow.

  Where things get more complicated, however, is when looking at the US. Here, macro data throughout the summer had suggested more or less smooth sailing in the trade space, and it was only a week ago that the facade started to crack, following the ugly advance trade report, when as we reported there was a “16% Surge In August Trade Deficit; Imports Jump As Exports Drop.”

  But what really confused us, and others, was the “micro” reports from the ground. Take the following article from Bloomberg in September, in which we read that “Record Long Beach Port Traffic Shows Strength in U.S. Demand.” Some more details:

  The Port of Long Beach — which is poised to overtake neighboring Los Angeles next year to become the No. 1 shipping gateway in the country — had a record month in July, with cargo volume up 18 percent from July 2014. Figures being released later this month will show unprecedented traffic again in August, and early signs in September are “very very encouraging,” Jon Slangerup, the Long Beach port’s chief executive officer, said in an interview at Bloomberg’s offices in New York last week.

   

  Overall, the two ports are handling 4 percent more cargo this year than last, Slangerup said. With consumers showing no letup, he predicted a record year for Long Beach in 2015, taking out pre-recession highs set in 2007. West Coast ports are poised to regain share lost earlier in the year, when backlogs led clients to divert cargo to East Coast destinations like Savannah, Georgia, he said.

  The article’s punchline:

  “When you look at the macros, you look at unemployment, consumer confidence, savings, available discretionary spending, all of those numbers suggest that we have more to spend,” Slangerup said. “The economy here is super strong relative to the rest of the world, and the strongest I’ve seen it in a very long time.”

  As it turns out, the economy was neither “super strong”, nor was “unemployment, consumer confidence, savings, or available discretionary spending” suggesting that we have more to spend. In fact just the opposite, because thanks to the WSJ we can now reconcile the seeming discrepancy between slowing macro and booming micro, at least as manifested by “record” west coast port traffic.

  According to the WSJ, “shipments of empty containers out of the U.S. are surging this year, highlighting the impact the economic slowdown in China is having on U.S. exporters. The U.S. imports more from China than it sends back, but certain American industries—including those that supply scrap metal and wastepaper—feed China’s industrial production.”

  The magnitude of the shipping container “contagion” is stunning: in September, the Port of Long Beach handled a near record 197,076 outbound empty boxes. “They accounted for nearly a third of all containers that moved through the port last month. September was the eighth straight month in which empty containers leaving Long Beach outnumbered those loaded with exports.“

  As the chart below shows, the situation at LA and Long Beach is so dire, the amount of empty container has surpassed the 2008 crisis period, and is about to take out the all time highs from the peak of the 2006 credit bubble:

  

   

  And here is the “record” West Coast port traffic in all its unglory: as noted above, empty containers now amount to a third of all West Coast port traffic in the US.

  

   

  What is an empty container? The WSJ explains that after under normal conditions, containers filled with consumer goods are delivered to the U.S. and unloaded, they return to export hubs. There, they typically are stuffed with American agricultural products, certain high-end consumer goods and large volumes of the heavy, bulk refuse that is recycled through China’s factories into products or packaging.

  Not any more:

  Last month, however, Long Beach and the Port of Oakland both reported double-digit gains in exports of empty containers. So far this year, empties at the two ports are up more than 20% from a year earlier.

  A big reason for the collapse in trade is the strong dollar: the empties are shipping out at a faster rate at many U.S. ports, particularly those closely tied to trade with China, while shipments of containers loaded with goods are declining as exporters find it tougher to make foreign sales. That’s at least partly because the strong dollar makes American goods more expensive.

  The problem is spreading:

  Outbound empties have mounted this year at other big gateways, too. In August, the Port of Los Angeles, the country’s largest single container port, handled more than 225,000 empty outbound containers, counted in twenty-foot equivalent units, a standard maritime industry measure. That was 21% more than a year earlier. The Port Authority of New York and New Jersey expanded its empty-container exports nearly 31.5% in the first eight months of this year, and empties outnumbered loaded container exports over that time.

  Suddenly the discrepancy between the ugly macro data and the

  Dollar-based or not, the end result is the same – global trade channels are rapidly slowing down.

  And it is not just empty containers that are being shipped out: overall containerized exports are also tumbling: “Long Beach’s containerized exports were down 8.2% this year through September, while Oakland’s volume of outbound loaded containers fell 12.7% from a year earlier in the January-September period.”

  This data certainly puts that “record” Long Beach port traffic in a different perspective. Others admit the same:

  “This is a thermometer,” said Jock O’Connell, an international-trade economist at Beacon Economics. “The thing to worry about is if the trade imbalance starts to widen.”

  It is starting to widen: the U.S. trade gap has expanded sharply in recent months as exports have slipped, growing 15.6% in August to a seasonally adjusted $48.3 billion, according to the Commerce Department. U.S. exports fell 2% in the month to their lowest level since October 2012.

  And as a reminder, net trade feeds directly into GDP, so the next time an idiot tells you that there are no direct linkages or contagion choke points between China and the US, feel free to take them to the Long Beach and show them the thousands of empty boxes whose contents one can label  simply as “recession”.

  There is, however, a silver lining: if the containers remain empty, and once the US slides back into depression, they can always be used for housing, just like now in San Francisco’s unicorn bubble mania.

  

  

  

  

  

• "China Has No Reason To Rush To The Frontlines": Beijing Denies Syria "Rumors"

  In the weeks since Moscow joined the fight in Syria, in the process lending Iran’s ground troops a rather powerful hand in the form of airstrikes by the Russian air force juggernaut, there have been two questions on everyone’s mind, i) how would Washington respond?, and ii) will China get involved? 

  As for the first question, the US has responded in the only way they could given the situation the West and its allies got themselves into: with a confused message about how the US can’t accept Russia’s invite to coordinate efforts because somehow Moscow’s involvement is going to create more terrorism. 

  With regard to the China, early reports indicated that Beijing was indeed considering some manner of military “support.” For instance, late last month the pro-Assad Al-Masdar news said the following:

  On Tuesday morning, a Chinese naval vessel reportedly traveled through Egypt’s Suez Canal to enter the Mediterranean Sea; its destination was not confirmed.

   

  However, according to a senior officer in the Syrian Arab Army (SAA) that is stationed inside the Syrian coastal city of Latakia, Chinese military personnel and aerial assets are scheduled to arrive in the coming weeks (6 weeks) to the port-city of Tartous – he could not provide any more detail.

  Three days later, Pravda reported that “according to Russian Senator Igor Morozov, Beijing has taken decision to take part in combating IS and sent its vessels to the Syrian coast.”

  “It is known, that China has joined our military operation in Syria, the Chinese cruiser has already entered the Mediterranean, aircraft carrier follows it,” Morozov allegedly said.

  Needless to say, if China were to join Russia and Iran in support of Assad in military operations against anti-regime elements, it would be a further embarrassment for Washington which is keen to pretend that it can counter what’s been pitched as military aggression on Beijing’s part in the South China. That is, were China to go into Syria while the US stood by and watched, it would send a message to Washington’s regional allies in the South Pacific that other than promising to send some ships to sail around the Spratlys, there’s really not much the Pentagon can or at least is willing, to do.

  But China is well aware that a dying hegemon is still a hegemon and while Beijing has made great strides over the past several years in terms of raising its presence on the world stage, simply invading Syria at the drop of a hat is a move that seems a bit too crass for Xi Jinping given his recent trip to the US and desire to promote social stability at home.

  Predictably, the Chinese are now out denying the Syria “rumors”. Here’s Reuters:

  China said on Wednesday it had no plans to send military ships to Syria to fight with Russian forces after reports in overseas media that it was planning to do so.

   

  Chinese media has picked up Russian and Middle Eastern news reports that China would fight alongside Russia in

   

  Syria, and that China’s sole aircraft carrier, the Liaoning, could participate too.

   

  Chinese media has also described these reports as speculative nonsense.

   

  Foreign Ministry spokeswoman Hua Chunying, when asked if China had or would send forces to Syria, told a daily news briefing that she had also noticed the reports.

   

  “I can tell you that as for China’s warships, for example the Liaoning, whether it has gone to join, for this issue, as far as I know, there is no such plan. At this time the Liaoning is in a phase of carrying out technical training and military exercises.”

   

  The Global Times, an influential tabloid run by the ruling Communist Party’s official People’s Daily, said in an editorial on Wednesday it was “unfounded rumour” that China would interfere militarily in Syria.

   

  “It’s not China that brought chaos to Syria, and China has no reason to rush to the frontlines and play a confrontational role,” it said.

  Remember, China has voted with Russia on the Security Council when it comes to Syria and there is no question which side Beijing supports. 

  Also, note that while the Politburo’s mouthpiece may have dismissed the reports as “speculative nonsense”, the other language there isn’t quite as committal and as we saw in Yemen, the PLA occasionally shows up out of the blue in surprising places. Besides Yemen, we’ve seen a plethora of examples this year of the PLA navy actively seeking to showcase China’s maritime prowess including a pass by the Alaska coast, the planned deployment of a nuclear sub, and of course the creation of 3,000 acres of new sovereign territory in the Spratlys. As brazen as it most certainly would be, another great way to make a splash (no pun intended), would be to send an aircraft carrier to Syria. 

  We’ll leave you with the following headline from Interfax:

  • CSTO, Iran, China agree on joint counteraction to ISIL

  *  *  *

  Maybe they’ll just send the girls from Fiery Cross…

  

  

  

  

  

  

• Oct 15 – US 10-year yields fall below 2% amid weak economic data

  EMOTION MOVING MARKETS NOW: 35/100 FEAR

  PREVIOUS CLOSE: 38/100 FEAR

  ONE WEEK AGO: 37/100 FEAR 
  ONE MONTH AGO: 13/100 EXTREME FEAR

  ONE YEAR AGO: 2/100 EXTREME FEAR

  Put and Call Options: FEAR During the last five trading days, volume in put options has lagged volume in call options by 27.55% as investors make bullish bets in their portfolios. However, this is still among the highest levels of put buying seen during the last two years, indicating fear on the part of investors.

  Market Volatility:  NEUTRAL The CBOE Volatility Index (VIX) is at 18.03. This is a neutral reading and indicates that market risks appear low.

  Stock Price Strength: FEAR The CBOE Volatility Index (VIX) is at 18.03. This is a neutral reading and indicates that market risks appear low.

   

  PIVOT POINTS

  EURUSD | GBPUSD | USDJPY | USDCAD | AUDUSD | EURJPY | EURCHF | EURGBP| GBPJPY | NZDUSD | USDCHF | EURAUD | AUDJPY 
  

  S&P 500 (ES) | NASDAQ 100 (NQ) | DOW 30 (YM) | RUSSELL 2000 (TF) | Euro (6E) |Pound (6B)

  EUROSTOXX 50 (FESX) | DAX 30 (FDAX) | BOBL (FGBM) | SCHATZ (FGBS) | BUND (FGBL)

  CRUDE OIL (CL) | GOLD (GC) | 10 YR T NOTE | 2 YR T  NOTE | 5 YR T NOTE | 30 YR TREASURY BOND| SOYBEANS | CORN

   

  MEME OF THE DAY – WHEN DR. T SPEAKS…

   

  UNUSUAL ACTIVITY

  VXX OCT WEEKLY4 21.5 CALLS7K+ @$.58

  LOCK NOV 8 PUT Activity on the BID side

  LULU NOV 55 CALL Activity 2500 block @$1.20 on offer

  EDGE SC 13D Filed by NEW LEAF Ventures .. 8.2%

  TROX .. SC 13G Filed by Putnam Investments .. 13.2%

  More Unusual Activity…

  HEADLINES

   

  PBOC dismisses talk its engaging in QE –Sec Journal

  Fed’s Beige Book: Economic activity continued to expand modestly

  Atlanta Fed GDPNow Tracker: 0.9% (prev. 1.0%)

  US CBO: Extraordinary measures seen lasting until H1 of Nov

  US House Bill raising debt ceiling possible before Boehner retirement –Rtrs

  US 10-year yields fall below 2% amid weak economic data

  Walmart: Our profits are going to fall next year

  Bank of America Swings to 3rd-Quarter Profit

  Wells Fargo Profit Edges Up for Quarter

   

  GOVERNMENTS/CENTRAL BANKS

  Fed’s Beige Book: Economic activity continued to expand modestly

  Atlanta Fed GDPNow Tracker: 0.9% (prev. 1.0%)

  Fed rake hike bets disappear further into 2016 –FT

  US House Bill raising debt ceiling possible before Boehner retirement –aide cited by Rtrs

  US CBO: Extraordinary measures seen lasting until H1 of Nov, debt limit may need to be increased earlier or later –BBG

  COMMENT: What a vanishing Fed hike means for the ECB, BoJ –FT

  PBOC dismisses talk its engaging in QE

  Germany cuts 2015 GDP forecast to 1.7% vs 1.8% prev –ForexLive

  UK FCA issues warning against unauthorized FX firm SMP Forex –ForexLive

  Japan’s Amari says it’s too soon to be speaking about new stimulus –ForexLive

  FIXED INCOME

  US 10-year yields fall below 2% amid weak economic data –CNBC

  Bonds rally as US consumers have sluggish September –FT

  UBS Sees Sovereign Assets Shrinking by $1.2 Trillion –BBG

  NY Fed Blog: Dealers play important role in the intertemporal intermediation of Treasury supply

  FX

  USD: Pain for dollar bulls as US retail sales underwhelm –FT

  EUR, JPY: EUR, JPY strengthen vs USD after Fed’s beige book –ForexLive

  GBP: Pound boosted by strong jobs data –BBC

  SGD: Singapore Central Bank Eases Policy by Adjusting Currency Band –BBG

  ENERGY/COMMODITIES

  CRUDE: Oil down again; global glut worry offsets US output drop –Rtrs

  METALS: Gold rises to 3 month high –cnbc

  EQUITIES

  EARNINGS: Walmart: Our profits are going to fall next year –BI

  EARNINGS: Bank of America Swings to 3rd-Quarter Profit –NYT

  EARNINGS: Wells Fargo Profit Edges Up for Quarter –NYT

  EARNINGS: BlackRock Reports Lower Profit as Assets, Fees Drop –WSJ

  EARNINGS: Delta Beats Profit Estimates With Boost From Falling Fuel –BBG

  BANKS: US authorities examine Goldman Sachs role in 1MDB transactions –WSJ

  BANKS: Moody’s: 5 US regional banks’ credit pressured by low oil and gas prices; outlook negative

  BANKS: M&A boom still a bright spot for US banks –FT

  BANKS: UK banks may need billions of pounds in added capital –Sky

  TECH: Twitter names ex-Google executive Kordestani chairman –Rtrs

  Acquisitions bring Canon’s 5 trln-yen sales target back into view –Rtrs

  CONS DISC: PriceLine agrees to room-booking deal with TripAdvisor –Rtrs

  M&A: US yearbook maker Jostens sold for $1.5bn –FT

   

  JOBS: France asks Air France to drop job cut plans –BBG

  

  

  

  

  

• The "Other" Shoe About To Drop

  A long way down…

   

  

   

  Source: Investors.com

  

  

  

  

  

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