Today’s News October 26, 2015

• The Death Of Europe

  Submitted by Daniel Greenfield via FrontPageMag.com,

  How The Mohammed Reitrement Plan Will Kill Europe

  European leaders talk about two things these days; preserving European values by taking in Muslim migrants and integrating Muslim migrants into Europe by getting them to adopt European values.

  It does not occur to them that their plan to save European values depends on killing European values.

  The same European values that require Sweden, a country of less than 10 million, to take in 180,000 Muslim migrants in one year also expects the new “Swedes” to celebrate tolerance, feminism and gay marriage. Instead European values have filled the cities of Europe with Shariah patrols, unemployed angry men waving ISIS flags and the occasional public act of terror.

  European countries that refuse to invest money in border security instead find themselves forced to invest money into counterterrorism forces. And those are bad for European values too.

  But, as Central European countries are discovering, European values don’t have much to do with the preservation of viable functioning European states. Instead they are about the sort of static Socialism that Bernie Sanders admires from abroad. But even a Socialist welfare state requires people to work for a living. Maine’s generous welfare policies began collapsing once Somali Muslims swarmed in to take advantage of them. Denmark and the Dutch, among other of Bernie Sanders’ role models, have been sounding more like Reagan and less like Bernie Sanders or Elizabeth Warren.

  Two years ago, the Dutch King declared that, “The classic welfare state of the second half of the 20th century in these areas in particular brought forth arrangements that are unsustainable in their current form.” That same year, the Danish Finance Minister called for the “modernization of the welfare state.”

  But the problem isn’t one of modernization, it’s medievalization.

  27% of Moroccans and 21% of Turks in the Netherlands are unemployed. It’s 27% in Denmark for Iraqis. And even when employed, their average income is well below the European average.

  Critics pointed out in the past that a multicultural America can’t afford the welfare states that European countries have. Now that those same countries are turning multicultural, they can’t afford them either.

  Europe invested in the values of its welfare state. The Muslim world invested in large families. Europe expects the Muslim world to bail out its shrinking birth rate by working and paying into the system so that its aging population can retire. The Muslim migrants however expect Europe to subsidize their large families with its welfare state while they deal some drugs and chop off some heads on the side.

  Once again, European values are in conflict with European survival.

  The European values that require Europe to commit suicide are about ideology, not language, culture or nationhood. But the incoming migrants don’t share that ideology. They have their own Islamic values.

  Why should 23-year-old Mohammed work for four decades so that Hans or Fritz across the way can retire at 61 and lie on a beach in Mallorca? The idea that Mohammed would ever want to do such a thing out of love for Europe was a silly fantasy that European governments fed their worried citizens.

  Mohammed doesn’t share European values. Nor are they likely to take hold of him no matter how often the aging teachers, who hope he gets a job and subsidizes their retirement, try to drill them into his head. Europeans expect Mohammed to become a Swede or a German as if he were some child they had adopted from an exotic country and raised as their own, and work to subsidize their European values.

  The Muslim migrants are meant to be the retirement plan for an aging Europe. They’re supposed to keep its ramshackle collection of economic policies, its welfare states and social programs rolling along.

  But they’re more like a final solution.

  Mohammed is Fritz’s retirement plan. But Mohammed has a very different type of plan. Fritz is counting on Mohammed to work while he relaxes. Mohammed relaxes and expects Fritz to work.  Fritz is not related to him and therefore Mohammed sees no reason why he should work to support him.

  European social democracy reduces society to a giant insurance plan in which money is pooled together.  But insurance is forbidden in Islam which considers it to be gambling. European social democracy expects him to bail it out, but to Mohammed, European values are a crime against Islam.

  Mohammed’s Imam will tell him to work off the books because paying into the system is gambling. However taking money out of the system is just Jizya; the money non-Muslims are obligated to pay to Muslims. Under Islamic law, it’s better for Mohammed to sell drugs than to pay taxes.

  That’s why drug dealing and petty crime are such popular occupations for Salafis in Europe. It’s preferable to steal from infidels than to participate in the great gamble of the European welfare state.

  Mohammed isn’t staking his future on the shaky pensions of European socialism. He invests in what social scientists call social capital. He plans his retirement by having a dozen kids. If this lifestyle is subsidized by infidel social services, so much the better. And when social services collapse, those of his kids who aren’t in prison or in ISIS will be there to look after him in his golden years.

   As retirement plans go, it’s older and better than the European model.

  Mohammed doesn’t worry much about the future. Even if he doesn’t make it past six kids, by the time he’s ready to retire the European country he’s living in will probably be an Islamic State. And he is confident that whatever its arrangements are, they will be better and more just than the infidel system.

  Sweden will take in 180,000 migrants this year. Germany may take in 1.5 million. Most of them will be young men following the Mohammed retirement plan.

  Europeans are being assured that the Mohammeds will balance out the demographic disparity of an aging population with too many retirees and too few younger workers. But instead the Mohammeds will put even more pressure on the younger workers who not only have to subsidize their elders, but millions of Mohammeds, their multiple brides and their fourteen child Islamic retirement plans.

  Retirement ages will go further up and social services for the elderly will be cut. The welfare state will collapse, but it will have to be kept running because the alternative will be major social unrest.

  Among the triggers of the Arab Spring were rising wheat prices and cuts to food subsidies. Prices went up and governments fell as street riots turned into civil wars. Imagine a Sweden where 50 percent of the young male population is Muslim, mostly unemployed, turning into Syria when the economy collapses and the bill comes due. Imagine European Muslim street riots where the gangs have heavy artillery and each ghetto Caliph has his own Imams and Fatwas to back up his claims.

  Europe is slowly killing itself in the name of European values. It’s trying to protect its economic setup by bankrupting it. European values have become a suicide pact. Its politicians deliver speeches explaining why European values require mass Muslim migration that make as little sense as a lunatic’s suicide note.

  Islamic values are not compatible with European values. Not only free speech and religious freedom, but even the European welfare state is un-Islamic. Muslims have a high birth rate because their approach to the future is fundamentally different than the European one. Europeans have chosen to have few children and many government agencies to take care of them. Muslims choose to have many children and few government agencies. The European values so admired by American leftists have no future.

  Europe is drinking rat poison to cure a cold. Instead of changing its values, it’s trying to maintain them by killing itself. The Mohammed retirement plan won’t save European Socialism. It will bury it.

  

  

  

  

  

• The Mechanics Of The Fed As Seen Ny The Eurodollar Curve

  For a while, in that brief period between the August flash crash and the terrible September jobs report, it seemed that things may revert back to normal: bad news are bad news, good news are good news, and the economic cycle – as in the recession – is allowed to make a long-overdue repeat appearance from under the suffocating pressure of central banks.

  Alas, it was not meant to be.

  This is how DB’s Alekandar Kocic explained it:

  Last week’s developments in Europe (more QE, negative rates) and Asia (China cutting interest rates) are further reducing the probability of Fed liftoff. In all likelihood, we are one weak number away from a full relent and the market is already on the way to pricing it. But, to fully embrace this scenario, the market will likely wait for an explicit statement from the Fed. We continue to believe that repricing of the curve will follow a two step procedure with initial bull steepening followed by a bull flattening. This rates and macro view is roughly consistent with the curve approaching its shape of the late 2011, post low-for-long and operation twist, environment.

  And while many – mostly those with no money on the table – debate daily what, how and when the Fed should move, for a specific subset of massively levered traders, even more so than the HFT algos who frontrun the equity market, every hiccup, stutter and vomit by Janet Yellen can mean the difference between early retirement and suicide (we hope this is a joke).

  We are talking of course about Eurodollars, and it is Eurodollar traders who have been carted out feet first, year after year, having positioned (year after year), for a Fed rate hike that just doesn’t come, and doesn’t come, and doesn’t come, etc in perpetuity.

  In this case, the Eurodollar curve is also a useful barometer of what the market’s consensus take is on what the Fed will do (at least until proven wrong by the Fed). And so, courtesy of DB, here is a quick primer on…

  The mechanics of the Fed as seen by the Eurodollar curve

  Eurodollar curve captures the mechanics of Fed expectations in a simple way. Away from the very front end, the curve dynamics is displays a rather rigid structure where a single risk premium parameter explains bulk of the spreads movement in different sectors of the curve. Typically, in anticipation of Fed hikes or cuts, the market makes up its mind about the terminal Fed funds (Greens) and begins to price in the rates path around that. The more aggressive the initial hikes are, the less they will have to do later. So, Red/Green spreads are highly coordinated with Green/Blue. The two spreads are roughly a mirror image of each other, Fig 1. This is in effect synonymous to summarizing dominant curve modes in terms of bull steepeners and bear flatteners.

  

  As market anticipates rate cuts, the spreads begin to widen and continue throughout the easing cycle. They begin to tighten before the hikes. Towards the end of tightening the two spreads begin to pinch the x-axis. This is pre mechanics of the ED curve.

  In that context, 2011-12 is a departure from the traditional pattern as low-for-long led to compression of risk premia in low rates environment. Taper tantrum is a snap out from that mode: Fed exit is announced and “normal” mechanics of the Eurodollar curve is set in place – the speads widen and they are beginning to tighten as expected rate hikes is approaching. This was in place roughly, with some additional wrinkles, until the last summer.

  The dynamics in the H2 is consistent with the market anticipating another episode of squeezing of the toothpaste. Reds have already rallied. Greens should follow, while in the near term blues are likely to hesitate before we have more clarity about the Fed in 2016 and beyond. Figs 2 & 3 illustrate departures of the current dynamics from historical pattern post-2008 as seen by both spreads and individual forward rates.

  

  Fig 3 illustrates the timeline of the last two years. It addresses the corresponding dislocation in spreads as seen on Fig 2. The compression of the spreads has been a result of two distinct dynamics. 2014 has been by and large a result of repricing the terminal rates lower. It was dominated by the Green/Blue flatteners, while Reds traded sideways for the most part – short term rate hikes remained on the table.H1:2015 was a finessed version of the same mode with Reds pushing higher as consensus was shaping around Sep- 2015 hikes, thus, a more aggressive Red/Green tightening.

  This appears to be a true structural break of the mechanics of Fed expectations, as captured by the curve, Red/Green vs. Green/Blue interaction (two mirror images) has changed. This is highlighted in Fig 4 across the two samples: (2011-2013 blue and 2014-15 red).

  

  The last leg of curve repricing corresponds to pricing Fed relent – taking the near (and possible intermediate) term hikes out. This is a Red/Green flattener with roughly a parallel shift in Green/ Blue sector. So the first installment of Fed repricing, red/green steepening has already been taking place. The next step is the red/green flattening or green/blue steepening. Given the vol pricing and carry consideration, we are buyers of conditional bull steepeners in terms of mid-curve receivers.

  

  

  

  

  

• Chinese Stocks Rise To 2 Month High Following PBOC's Rate, RRR Cut But Copper, Crude Struggle

  As largely expected, following Friday’s unexpected rate cut by the PBOC (which may have been mostly driven by 5th CCP Plenum considerations), and today’s drop in the onshore Yuan which traded down 0.13% vs the Dollar to 6.3554, China’s stocks opened solidly in the green, led by construction names, with recently troubled Vanke shares jumping 7.4% in early trading, the most since July 10, to their highest level since Aug. 11. Peers such as Longfor, CR Land and China Overseas Land, also jumped by 6.9%, 1.9% and 1.4%, respectively.

  China’s indices were solidly green in early trading, with the Shanghai Composite +0.9%, Shenzhen Comp +0.8%, and CSI 300 +1.3%.

  Hong Kong was likewise euphoric, with several key names standing out:

  • Tencent +1.3%; biggest contribution to HSI’s gains
  • Banks such as Agricultural Bank +0.6%, ICBC +0.8%, and Bank of China +0.8% were all stronger after China removed the deposit rate ceiling
  • Citic Securities +2.3%; seeks bond payment from Baoding Tianwei
  • China Reinsurance +2.2% on its debut

  Elsewhere in the Asian region, early sentiment was also a broad, if somewhat tame, bullishness.

  • MSCI AP Index +0.7% to 136.71; health care, consumer discretionary rise most
  • Nikkei 225 +1.2%; Topix +1.1%; yen +0.3% to 121.17/USD
  • Hang Seng Index +0.7%, HSCI +0.7%, HSCEI +1.1%
  • Shanghai Composite +0.9%,
  • ASX 200 +0.2%
  • Kospi +0.3%
  • Straits Times Index +1.0%
  • KLCI -0.2%
  • TWSE +0.7%
  • Philippines Composite +1.6%
  • Australian dollar +0.4% to $0.7242
  • NZ dollar +0.1% to $0.6760
  • Dollar Index -0.1% to 96.98
  • Asia dollar index +0.1% to 108.57

  As for China’s key index, the Shanghai Composite, it is up over 1%, or 40 points in early trading, to 3,450 – the highest level in 2 months, a gain which however is well below Friday’s pre-rate cut gain…

  

   

  … and if prior rate cut history is any indication, not to mention the weak reaction by commodities on Friday (continuing into today, where WTI turned green by the smallest of margins just seconds ago…

  

   

  … not to mention copper which is down for the second day in a row…

  

  …  we would not be surprised to see China’s stocks sliding back into the red very shortly as “sell the news” concerns return, and as the increasingly more addicted “markets” demand even more liquidity from central banks just to stay unchanged, let alone rise to new all time highs.

  

  

  

  

  

• Paul Craig Roberts Slams Western Press-titution

  Authored by Paul Craig Roberts,

  The Western media has only two tools.

  One is the outrageous lie. This overused tool no longer works, except on dumbshit Americans.

  The pinpoint accuracy of the Russian cruise missiles and air attacks has the Pentagon shaking in its boots. But according to the Western presstitutes the Russian missiles fell out of the sky over Iran and never made it to their ISIS targets.

  According to the presstitute reports, the Russia air attacks have only killed civilians and blew up a hospital.

  The presstitutes fool only themselves and dumbshit Americans.

  The other tool used by presstitutes is to discuss a problem with no reference to its causes. Yesterday I heard a long discussion on NPR, a corporate and Israeli owned propaganda organ, about the migrant problem in Europe. Yes, migrants, not refugees.

  These migrants have appeared out of nowhere. They have decided to seek a better life in Europe, where capitalism, which provides jobs, freedom, democracy, and women’s rights guarantee a fulfilling life. Only the West provides a fulfilling life, because it doesn’t yet bomb itself.

  The hordes overrunning Europe just suddenly decided to go there. It has nothing to do with Washington’s 14 years of destruction of seven countries, enabled by the dumbshit Europeans themselves, who provided cover for the war crimes under such monikers as the “coalition of the willing,” a “NATO operation,” “bringing freedom and democracy.”

  From the Western presstitute media you would never know that the millions fleeing into Europe are fleeing American and European bombs that have indiscriminately slaughtered and dislocated millions of Muslim peoples.

  Not even the tiny remnant of conservative magazines, the ones that the neocon nazis have not taken over or exterminated, can find the courage to connect the refugees with US policy in the Middle East.

  For example, Srdja Trifkovic writing in the October issue of Chronicles: A Magazine of American Culture, sees the refugees as “the third Muslim invasion of Europe.” For Trifkovic, the refugees are invaders who will bring about the collapse of the remnant of Western Christian Civilization.

  Trifkovic never mentions that the Europeans brought the millions of Muslim refugees upon themselves, because their corrupt political bosses are Washington’s well-paid vassals and enabled Washington’s wars for hegemony that displaced millions of Muslims. For Trifkovic and every other conservative, only Muslims can do wrong. As Trifkovic understands it, the wrong that the West does is not defending itself against Muslims.

  Trifkovic believes that Europe will soon live under Sharia law. He wonders if America will “have the wherewithal to carry the torch.”

  A majority of Americans live in a fake world created by propaganda. They are disconnected from reality. I have in front of me a local North Georgia newspaper dated October that reports that “a Patriot Day Memorial Service was held at the Dawson County Fire Headquarters on September 11 to remember the terrorist attacks that shook America 14 years ago.” Various local dignitaries called on the attendees to remember “all of those who have died not only on that day, but since that day in the fight to keep America free.”

  The dignitaries did not say how murdering and dislocating millions of Muslims in seven counries keeps us free. No doubt, the question has never occurred to them. America runs on rote platitudes.

  The presidents of Russia and China watch with amazement the immoral stupidity that has become America’s defining characteristic. At some point the Russians and Chinese will realize that no matter how patient they are, the West is lost and cannot be redeemed.

  When the West collapses from its own evil, peace will return to the world.

  

  

  

  

  

• "How Would One Position For One Final Melt-Up On Wall Street"? – Here Is BofA's Answer

  In the past month, now that stocks have stabilized on the hope, and at least one confirmation of easing by the ECB, BOJ, and PBOC and even the Fed, we have seen quite a few comparisons of the current market to that encountered during the post-LTCM bailout halcyon days of late 1998/early 1999. From Ice Farm Capital, to BofA, now that the early-2008 chart comparisons have taken an indefinite hiatus (at least temporarily), suddenly analogs to pre dot-com bubble mania are all the rage.

  And sure enough, for the technicians out there all else equal, the following chart overlay screams Nasdaq at 6000 in 4-6 months.

  

  This is how BofA summarizes it:

  It could simply be 1998/99 all over again. After all, a “speculative blow-off” in asset prices is one logical conclusion to a world dominated by central bank liquidity, technological disruption & wealth inequality.

   

  Back then, as could be the case today, a bull market & a US-led economic recovery was rudely interrupted by a crisis in Emerging Markets. The crisis threatened to hurt Main Street via Wall Street (the Nasdaq fell 33% between July-Oct 1998, when LTCM went under). Policy makers panicked and monetary policy was eased (with hindsight unnecessarily). Fresh liquidity combined with apocalyptic investor sentiment very quickly morphed into a violent but narrow equity bull market/bubble in 1998/99, one which ultimately took valuations & interest rates sharply higher to levels that eventually caused a “pop”.

   

  The 1998-2015 analogy, for what it’s worth, is working for the Nasdaq (see chart above), which is currently bouncing hard, and leading the rally, after an 18% plunge. (Although it is not yet working for biotech which is consolidating after a 35% crash).

  So if this is merely a rerun of the well-known pre-dot com bubble episode, what should one be positioned? This is how BofA would trade the “final melt-up on Wall Street.“

  What worked back then? What rose from the rubble of 1998? How would one position for one final melt-up on Wall Street? Table 1 illustrates it was an “überbarbell” of über-growth stocks (e.g. internet) and über-value (e.g. EM/Russia) that significantly outperformed in 1998-99. Why? Because 1999 started as a year of “max liquidity, scarce growth & distressed value” and ended with an internet bubble causing a significant rise in interest rates, growth & inflation.

   

  

  So far has certainly been so good, if not for the near record NYSE shorts: “The October “pain trade” has thus been a big rally in risk assets, as predicted (albeit too early) by all our contrarian trading rules flashing “buy” signals in early-Sept. The ECB, the PBoC, US tech EPS and the fact that too many were positioned for the “event”, the recession, the default, the plunge below the 50 boom-bust line in the world’s PMI, all have caused a big squeeze in risk assets in particular S&P 500 back through its key resistance level of 2060.”

  And yet, while suggesting the appropriate trade if this were indeed 1998/1999, BofA’ Michael Hartnett isn’t buying it, for two reasons.

  The 1998/99 redux risk aside, we believe the Big Macro Picture remains one of “Deflationary Expansion”, and the Big Market Picture is the “End of Excess Liquidity” & the “End of Excess Profits” over the past 12-months. That’s why we would recommend investors sell into new upside in risk assets in Q4.

   

  Ironically, while “liquidity” was the bull driver of risk appetite in recent years, in 2015 it is the perception of “illiquidity” in fixed income & equity markets that has become a driver of risk aversion. This perception has been abetted by a non-stop period of “pain trades.”

  Here is the three part answer to “what prevents us BofA from getting more bullish now that risk has rallied”:

  First, positioning is not bearish enough to generate new highs in risk assets and sustain new highs. Cash levels jumped in recent months but clients never went UW equities (although there were significant outflows from High Yield funds, in excess of 5% of AUM in recent weeks). And the consensus never made recession the base case. In addition, as noted in our latest Flow Show (link), a number of our Trading Rules are flipping from “buy” to “neutral”. The Global Breadth Rule, the EM Flow Trading Rule & the Global Flow Trading Rule have turned neutral in the past week, and while the FMS Cash Rule & the Bull & Bear Index reveal high cash and bearish cross-asset sentiment, both have turned in a less bearish direction (see page 8).

   

  Second, policy. The Quantitative Failure narrative failed this week. The ECB’s promise of QE2 in December was met by a lower Euro, lower bond yields and higher bank stocks. Quantitative Failure requires a lower currency, lower bond yields and lower bank stocks, thus signaling investor revolt against the ability of central banks to raise growth expectations. (Note true QE-apocalypse would be higher bond yields and lower bank stocks).

   

  However, the old script of “I’m so Bearish, I’m Bullish”, a script that worked like a charm between QE1 and the end of QE3, no longer cuts it. Investors will no longer be satisfied simply by Quantitative Easing. They require “Quantitative Success”, and a success that is visible in corporate profits. This risk rally cannot be sustained if Fed hikes and/or ECB/BoJ/PBoC easing causes the US dollar to rally strongly, thus setting off another “death spiral” in EM/commodities/energy/HY and fresh round of EPS downgrades.

   

  Third, profits. The growth of global EPS is currently negative. And the level of global EPS is down 4.2% from its February 2015 highs. The classic strong “year-end” rally in stocks & credit requires EPS expectations to rise. Without EPS upside, Q4 risk gains will prove transitory.

  BofA’s conclusion, and why new all time highs are problematic here:

  As explained above, new highs thus require:

  1. The Fed to hike, without…
  2. The dollar rallying significantly because…
  3. European/Japanese/Chinese domestic demand surprise on the upside.

  That’s a tough ask.

  Yes… but… all that would take to cover the “ask” is for some central bank to unexpectedly announce that it will proceed to buy an unlimited amount of stock. Because not even Bank of America seems to realize that a market crash, now that every.single.central.bank has gone all in on the asset reflation trade, failure is not an option, and money will fall out of helicopters before central banks admit defeat and allow a repeat of the 2008, with the S&P falling to its fair value, somehere just south of 500 (yes, that $60 trillion in newly created debt in the past 7 years rising to $200 trillion, means that without central bank support, the global equity tranche is now non-existent).

  

  

  

  

  

• KiM JoNG JuaN…

  

  

  

  

  

• Crisis Alpha & Why Volatility Is The 'Only' Asset Class

  Excerpted from Artemis Capital Management letter to investors,

  There is a tiresome debate as to whether or not volatility is an asset class. Let me end that debate… Volatility is the ONLY asset class. We are all volatility traders and the only question is whether we realize it or not.  If you disagree do me a favor and imagine you are an alien that just landed on earth and you know nothing about investing. Stocks, bonds, what are those? All you have to look at are numbers.

  Most investments will show upward growth in a steady and seductive line until they experience horrific drawdowns: classic value investing, credit, real estate, and carry trades all fit this profile and are akin to shorting volatility, correlation, and dispersion. Other investments exhibit negative to flat returns with huge profit jumps that occur infrequently. Examples include global macro funds, trend-following CTAs, and tail-risk funds.

  Most of what we think of as alpha is actually short volatility in sheep’s clothing. To prove this point we took a cross section of popular hedge fund strategies and compared their returns against selling naked put options on the S&P 500 index. The results speak for themselves and the average hedge fund strongly resembles a simple short volatility position.

  

  I find it puzzling why institutions focus on superficial asset buckets but fail to categorize investments by what really matters… return profile. This is akin to categorizing a blue and green parakeet as two entirely different species of animal, but putting an alligator and the green parakeet in the same bucket. Diversification is futile if you do not categorize by return style.

  Many investors assemble a varied portfolio of asset classes and hedge funds thinking there is safety in diversification… but all that is achieved is concentrated short convexity exposure. In a crisis the portfolio is revealed for what it really is – majority short volatility with no diversification at all.

  

  Very few investments maintain a dedicated long convexity return profile. It can be hard to hang out with the designated driver when everyone else is getting drunk from the global monetary punchbowl. Many great investors understand that having a convex asset in their portfolio allows them to buy when everyone else is selling, stick with their investment plan in times of duress, or even apply a bit of leverage onto their beta to pay for any negative carry in the low turbulence years.

  It takes a very special breed of investor to allocate to a long volatility fund and be able to tolerate years of neutral performance to small losses when everything else is going up in value… only to achieve remarkable gains when everything else crashes and burns. The key is to view a portfolio holistically, understanding that long volatility exposure provides tremendous flexibility and better risk adjusted returns over the entire business cycle. The two classifications of positive convexity hedge funds are long volatility funds and tail risk funds. While long volatility and tail risk both provide exposure to crisis, they represent very different vintages.

   

  

  CBOE/Eurekahedge publishes indices that track the respective performance of each style.

  CHART

  They say that being short volatility is like picking up pennies in front of a steamroller. If I had a penny every time somebody mischaracterized Artemis as a tail risk fund I could probably buy a steamroller.

  Long volatility hedge funds are in search of crisis alpha defined as an uncorrelated return stream whereby the balance of risk and reward is skewed toward systemic crisis in markets without the constant negative carry associated with traditional hedging. This vintage of convexity should have a positive risk-to-reward ratio overall but with the best gains reserved for market crashes. To achieve this end such funds may balance long volatility exposure with strategic shorts or use tactical exposure to gain convexity. These funds are better at capturing regime shifts in volatility associated with bear markets as opposed to one off volatility spikes that mean revert in a bull market. That nuance is lost on many investors. Long volatility funds are designed to capture market endogenous forms of crisis (e.g. 2008 financial crash, 2011 debt ceiling crash) but may or may not capture market exogenous crises (e.g. market sell-off from 9/11 terror attack).

  Tail risk hedge funds are effectively a form of financial asset insurance that provides constant exposure to long convexity, with strong reactivity to crisis, but constant negative bleed.  The tail risk fund has a negative expected return (absent a combination with equity beta) and is more of a pure hedge, as opposed to the long volatility fund, which is an alpha strategy that behaves like a hedge. Tail risk funds are positively exposed to both market endogenous and exogenous events, and do a better job capturing one-off volatility spikes. The CBOE tail risk index brings much needed transparency to tail risk funds, some of whom prefer to remain opaque to the disadvantage of investors. For example, one provider that is not a member of the index, reported recent returns to the financial media on a margin basis (effectively doubling or quadrupling returns) while reportedly excluding the fact that a portion of that performance was generated by buying equity futures the morning of a volatility spike. In actuality, this fund’s performance was in line or likely below the CBOE tail risk hedge fund index on an equal comparison basis (non-margined). All the funds in the tail risk and long volatility indices have agreed to a level of performance transparency and fairness to the benefit of investors.  

  

  Long volatility and tail risk funds can be combined with basic equity exposure to create fantastic returns. A 50/50 combination of the CBOE long volatility hedge fund index and the S&P 500 index has significantly outperformed the market and the HFRX global hedge fund index since 2008 (see above).

  In many cases, institutions can layer the convex derivatives exposure directly on the equity beta so there is no lost opportunity cost. The difference is that investors are only paying for ‘crisis alpha’ and not generic beta or short convexity exposure.

  The best long volatility funds are like guerilla freedom fighters as opposed to a standing army. Small is better than large for long volatility because convexity does not scale as easily as fragility. Long volatility is a tough business model which is why it is so rare to find funds that offer true exposure. It is simple human nature to lose interest in an asset that has flat returns for years at a time with huge payouts only occasionally. Plain vanilla short convexity funds that make steady returns are a much easier sell and accrue incentive fees faster until they blow up.

  Somebody once said that he thought there would be a $10+ billion volatility fund one day… that may be true… but at that point, it may cease to be a true volatility fund and risks becoming just an average hedge fund. Small is beautiful. Hedgehogs outlasted dinosaurs.

  *  *  *

  The complete Artemis Capital letter to investors is below:

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  start_page=1&view_mode=scroll&show_recommendations=true” width=”100%”>

  

  

  

  

  

• "If We Don't Find A Solution Today, It's The End Of The European Union" – Refugee Crisis Hits Tipping Point

  After escalating for months, Europe’s refugee crisis hit its most serious tipping point yet, when when earlier today European Union leaders held a mini-summit on Sunday debating whether to send hundreds of guards to its borders with the western Balkans, as well as deploying more ships off Greece, as the bloc seeks to balance Germany’s welcome for refugees with tougher security measures.

  So far, over 680,000 migrants and refugees have crossed to Europe by sea so far this year, fleeing war and poverty in the Middle East, Africa and Asia, according to the International Organization for Migration. Their goal has been Germany, which has promised sanctuary, however as a result of a populist backlash and concerns over the economy, Merkel’s popularity has taken a major hit, sliding to the lowest level in four years.

  

   

  Taking place just two weeks after a full EU summit, the meeting was sought by German Chancellor Angela Merkel. According to Reuters, “many see it as an attempt by Juncker and Merkel to raise pressure on central and southeast European states to coordinate among themselves in managing the migration flow in a more humane way and end a series of unilateral actions.“

  Central and eastern European leaders meeting in Brussels may agree to send 400 border guards and set up new checkpoints if the EU’s frontier states drop their policy of giving arrivals passage to other countries, according to a draft statement seen by Reuters that must still be agreed.

  According to Reuters, the draft said that “we commit to immediately increase our efforts to manage our borders,” which, if formalized, would be a 16-point plan and the latest step in drawing up a common approach to dealing with the thousands of migrants streaming into the EU every day from the Middle East, North Africa and Afghanistan.

  Jean-Claude Juncker, the EU’s chief executive, has called leaders of Austria, Bulgaria, Croatia, Macedonia, Germany, Greece, Hungary, Romania, Serbia and Slovenia, plus refugee organizations involved, to attend the meeting in Brussels.

  Europe has been forced to tread lightly as Bulgaria, Serbia and Romania said they would close their borders if Germany or other countries shut the door on refugees, warning they would not let the Balkan region become a “buffer zone” for stranded migrants.

  In recent week, the fate of the European “Schengen” Customs Union has been in doubt following Hungary’s decision to close its border with Serbia and Croatia which prompted others to follow, stranding tens of thousands in dire conditions as temperatures drop.

  The traditional European response to another systemic risk has been the usual fallback: chaos, as the European Union has been so far unable to implement a coherent, credible response.

  Rights group Amnesty International said the 28-country bloc could not afford to end another meeting without an agreed plan. “As winter looms, the sight of thousands of refugees sleeping rough as they make their way through Europe represents a damning indictment of the European Union’s failure to offer a coordinated response to the refugee crisis,” said John Dalhuisen, Amnesty’s director for Europe and Central Asia.

  And while Europe dithers, the lack of a common policy is straining ties between European leaders, raising questions about the EU’s future.

  It was just a few days ago that Hungary warned that Europe’s future is at stake, when it announced it would seal its border with Croatia.  “This is the second-best option,” Hungarian foreign minister Szijjarto told reporters. “The best option, setting up an EU force to defend Greece’s external borders, was rejected in Brussels yesterday.”

  Now others are joining in.

  Yesterday, it was the turn of Austrian Chancellor Werner Faymann who told the Austrian Kronen Zeitung that “now the speech is about either a common Europe or about a quiet collapse of the European Union. One path is burdensome, difficult and supposedly long and the other one would lead to the chaos.”

  Then moments ago, Slovenia Prime Minister was quoted by Reuters during his arrival at the latest mini-summit, as saying “if European leaders fail to agree a plan to counter the sudden inflows of refugees, it could mean the end of the European Union.”

  “If we don’t find a solution today, if we don’t do everything we can today, then it is the end of the European Union as such,” Prime Minister Miro Cerar said. “If we don’t deliver concrete action, I believe Europe will start falling apart,” he told reporters.

  Considering this is the same Europe, which five years after the first Greek default has been unable to find any solution to its economic troubles – or at least a solution that does not benefit only the top 1% –  aside from kicking the can time and again and covering up record amounts of debt with even more debt, we are skeptical Europe will “deliver concrete action” today, or at any one point in the near and not so near future.

  Which means more crises, more summits, more confusion, more human suffering and tragedy.

  Which may be just what Europe wants.

  Tecall the prophetic 2008 AIG report on “Empire Europe” which explained in 4 simple bullet points just what Europe wants:

  AIG’s explanation: “To use global issues as excuses to extend its power”

  • environmental issues: increase control over member countries; advance idea of global governance
  • terrorism: use excuse for greater control over police and judicial issues; increase extent of surveillance
  • global financial crisis: kill two birds (free market; Anglo-Saxon economies) with one stone (Europe-wide regulator; attempts at global financial governance)
  • EMU: create a crisis to force introduction of “European economic government”

  And there it is: in four simple bullet points laid out in a 7 year old presentation, a prediction which has come true time and again: from the endless Greek bailouts, to the austerity paradox, to European youth unemployment stubbornly flat at 50% for years in many “southern” European nations, to Europe’s QE creating the deflationary impulse it is said to be fighting against, and now – to the “refugee crisis”, it is all playing out as if according to some unseen script.

   

  

  

  

  

  

• "The Distress Is Showing Up" Credit Managers Index Plunges To Recessionary Levels

  While even the mainstream media is now aware of the 'turn' in the credit cycle and the decoupling of high-yield credit markets from equity (and equity protection) markets, there is a lot going on under the surface of the broad lending (and borrowing) markets that warrants serious concern.

   

  As The National Association of Credit Managers notes,

  So much for that hoped for pattern of one bad month followed by a good one. This month’s CMI is as low as it has been in more than a year and this time the problem is in the non-favorable categories—a bigger concern than if the favorable had been the issue. When the unfavorable factors are showing stress, it is an indication that companies are feeling the pinch and may be starting a long downward trend.

   

  There was considerable distress noted in the unfavorable factors as well. These are the factors that usually suggest that creditors are getting in trouble. For the last several months, the good news has been that current credit was in decent shape, that the economic issues of the day had yet to really impact, but this no longer seems to be the case. The distress is showing up.

   

  

   

  Now we have a month when almost all the categories have weakened.

   

  This is signaling an abundance of caution going into what is supposed to be strong selling season and this is worrying.

   

  It would seem that many of the triggers that usually promote growth are not working out – unemployment is relatively low, there is no inflation in the energy sector and there has been improvement in the housing data – nothing seems to be able to shake the lethargy and concern.

  More problematic still is the resurgence in the bankrutpcy index..

  

   

  In addition, the 'amount of credit extended' index has tumbled to its lowest since October 2010, the same level it had dropped to before the collapse began in 2008.

  Comparing September 2015 to September 2014, thus far, the trend is far from a happy one. Nearly all the readings are down from where they were a month ago and significantly down from a year ago. There will have to be a big rebound just to get back to where the readings were in October and November of 2014.

  *  *  *

  And finally, it is not just high-yield credit markets that are decoupled, the investment-grade bond market's cost of hedging is now seriously decoupled from the equity market's costs of hedging…

  

   

  With leverage at or near recod highs and downgrades-to-upgrade ratios at 2009 peaks, even with the help of additional QE around the world, the rise in default rates will force credit to contract and disable the only leg holding stocks up – the non-economic stock repurchaser.

  

   

  Charts: Bloomberg

  

  

  

  

  

• Caught On Helmet Cam: US Releases Video Footage From SpecOps ISIS Prison Raid

  It would have been bad enough for Washington if Moscow had simply intervened in Syria and left it to the media to speculate and report on the progress made by Iranian ground troops operating under the cover of Russian airstrikes. But subtlety isn’t really Putin’s style and besides, the conflict in Syria represents a once in a lifetime opportunity to lay bare the West’s deplorable strategy of funding and arming extremists on the way to destabilizing recalcitrant regimes. 

  And so, not wanting to miss a chance at thoroughly embarrassing the West, The Kremlin has unleashed a veritable avalanche of videos, foreign policy critiques, and pronouncements aimed at i) unmasking the role Washington and its regional allies have played in facilitating the rise of Sunni extremism and ii) highlighting the extent to which Russia is the only country that’s actually gotten results in the campaign to eradicate terrorism in Syria. The media blitz encompasses near daily videos from the Russian Defense Ministry, characteristically deadpan (not to mention hilarious) soundbites from Sergei Lavrov, stinging criticism from Moscow’s Western foreign policy critic extraordinaire Maria Zakharova, and of course, plenty of Putin admonishments. 

  Not to put too fine a point on it, but the West has been left dumbfounded. There’s just no way to explain this to the public. There’s no way to rationalize Washington’s insistence on not cooperating with the Russians because the US has spent a year holding up ISIS as the scourge of humanity. There’s also no way to go about apologizing for the fact that Russian airstrikes have achieved more in four weeks than US airstrikes have achieved in 13 months. 

  Of course the above isn’t entirely accurate. The situation is very easily explainable. Washington could just say this: “look, Russia and Iran are the real enemies here and ISIS is just a bunch of guys we and our Mid-East allies supported initially because we thought they would help oust Assad and break up the Shiite crescent.” But saying that would be to shatter the illusion and because the public must forever be left in the dark, the US has been left to scramble around for ways to salvage the narrative. 

  Well, in what might reasonably be described as a bizarre story, the Western media has now released what looks like GoPro helmet cam footage from what Washington is trying to call a dramatic rescue effort that freed dozens of hostages from an ISIS prison in the northern Iraqi town of Huwija. 

  Apparently, the Peshmerga were attempting to free what they thought were Kurdish prisoners whose graves ISIS had (literally) already dug when Delta Force (who were on the scene acting as “advisers”) decided to step in and assist.

  The ensuing firefight led to the first American casualty in Iraq since 2011.

  Here’s Reuters:

  One member of a U.S. special operations force was killed during an overnight mission to rescue hostages held by Islamic State militants in northern Iraq, the first American to die in ground combat with the militant group, U.S. officials said on Thursday.

   

  Sixty-nine hostages were rescued in the action, which targeted an Islamic State prison around 7 kilometers north of the town of Hawija, according to the security council of the Kurdistan region, whose counterterrorism forces took part.

   

  The U.S. rescue mission unfolded amid mounting concerns in Washington over increasing Russian intervention in the Middle East.

   

  The hostages rescued in the raid were all Arabs, including local residents and Islamic State fighters held as suspected spies, a U.S. official said on Thursday.

   

  The official told Reuters that around 20 of the hostages were members of Iraqi security forces.

   

  “Some of the remainder were Daesh (Islamic State) … fighters that Daesh thought were spies,” the official said. “The rest of them were citizens of the local town”.

   

  More than 20 Islamic State militants were killed and six detained, the security council said.

   

  Islamic State called the operation “unsuccessful” but acknowledged casualties among its fighters.

   

  In a statement distributed online on Thursday by supporters, it said U.S. gunships had shelled areas around the prison to prevent the arrival of reinforcements, then clashed with militants for two hours.

   

  The statement confirmed U.S. claims that some guards had been killed and others detained in the operation.

   

  “Dozens” of U.S. troops were involved in the mission, a U.S. defense official said, declining to be more specific about the number.

   

  “It was a deliberately planned operation, but it was also done with the knowledge that imminent action was needed to save the lives of these people,” the U.S. defense official said.

  Now obviously, there’s no telling what actually went on here, nor is there any telling what 30 members of Delta Force were doing running around with the Peshmerga in northern Iraq, but one thing is for sure: the US media seems to be trying to counter the Russian propaganda blitz by holding up the Huwija raid and the death of Master Sgt. Joshua L. Wheeler as proof that Washington is serious about battling ISIS.

  Here’s AP:

  The U.S. soldier fatally wounded in a hostage rescue mission in Iraq heroically inserted himself into a firefight to defend Kurdish soldiers, even though the plan called for the Kurds to do the fighting, Defense Secretary Ash Carter said Friday.

   

  “This is someone who saw the team that he was advising and assisting coming under attack, and he rushed to help them and made it possible for them to be effective, and in doing that lost his own life,” Carter told a Pentagon news conference.

  Carter applauded Army Master Sgt. Joshua L. Wheeler, 39, of Roland, Oklahoma, who died of his wounds Thursday.

   

  The defense chief gave the most extensive public description yet of what transpired during the pre-dawn raid on an Islamic State prison compound near the town of Hawija. About 70 people, including at least 20 members of the Iraqi security forces, were freed. It was the first time U.S. troops had become involved in direct ground combat in Iraq since the war against the Islamic State was launched in August 2014, and Wheeler was the first U.S. combat death.

   

  “As the compound was being stormed, the plan was not for the U.S. … forces to enter the compound or be involved in the firefight,” Carter said. “However, when a firefight ensued, this American did what I’m very proud that Americans do in that situation, and he ran to the sound of the guns and he stood up. All the indications are that it was his actions and that of one of his teammates that protected those who were involved in breaching the compound and made the mission a success.”

   

  “That is an inherent risk that we ask people to assume,” Carter added. “Again, it wasn’t part of the plan, but it was something that he did, and I’m immensely proud that he did that.”

  Carter went on to suggest that “missions” like these are set to become more commonplace going forward:

  Carter said he expects U.S. forces to be involved in more such raids against Islamic State targets, describing it as part and parcel of what the Pentagon calls a “train, advise and assist” mission in support of Iraqi forces. At one point he said, “It doesn’t represent assuming a combat role” — but later, in noting that it is difficult to see the full picture of what happened during the Hawija raid, he said: “This is combat. It’s complex.”

  We are of course not attempting to trivialize the death of Joshua Wheeler by writing this off as some kind of publicity stunt aimed at countering the Russian media blitz. In fact, the opposite is true. If the US is now set to ramp up the frequency with which the Pentagon puts American lives at stake by inserting spec ops in ground operations just so Washington can prove to the world that America is just as serious as Russia is about fighting ISIS, well then that’s a crying shame for US servicemen; especially considering the role the US and its regional allies had in creating the groups that Delta Force and other units are now tasked with countering.

  In any event, here’s the helmet cam footage which we’ll leave it to readers to analyze and critique.

  

  

  

  

• Caption Contest: "Damn It Feels Good To Be A North Korean Dictator"

  Presented without comment because, well… what else could we say? 

  

  

  

  

  

  

• Europe "Crosses Rubicon" As Portugal Usurps Democracy, Bans Leftist Government

  On Thursday evening, we took a close look at how the political landscape has changed in Portugal following inconclusive elections held earlier this month. 

  For those unaware, the worry in Brussels has always been that either Spain, Portugal or, in a less likely scenario, Italy, would go the way of Greece by electing politicians that would seek to roll back austerity, shun fiscal rectitude, and demand debt relief. 

  As we’ve noted on any number of occasions over the past nine months, that’s why Berlin adopted such a hardline approach to negotiations with Alexis Tsipras and Yanis Varoufakis. There was never any hope of setting Athens on a “sustainable path.” It was always about deterring more “meaningful” states from going the Syriza route. 

  Well as it turns out, the troika’s efforts to subvert the democratic process in Greece by using the purse string to overthrow the government apparently did not deter the Portuguese leftists. Put differently, the ATM lines, empty shelves, and gas station queues Greece witnessed over the summer have not had their intended psychological effect in Portugal as Socialist leader Antonio Costa announced earlier in the week that he’s prepared to align with the Communists and with Left Bloc to form a government in defiance of the Right-wing coalition. The Left alliance would have an absolute majority in parliament and would likely adopt an anti-austerity, and perhaps even an anti-euro, platform.

  In an effort to head off this eventuality, President Anibal Cavaco Silva appointed Pedro Passos Coelho to serve another term as PM on Thursday. That was a slap in the face for Costa, and as we noted just moments after the announcement, Silva’s decision is likely to leave Portugal mired in an intractable political stalemate which is just about the last thing Europe needs as Brussels attempts to put the Greek debacle in the rearview while confronting the worsening refugee crisis. 

  Sure enough, Costa is now threatening to topple the government on the heels of what is widely viewed as an usurpation of democracy. Here’s Reuters: 

  Portugal’s opposition Socialists pledged on Friday to topple the centre-right minority government with a no-confidence motion, saying the president had created “an unnecessary political crisis” by nominating Pedro Passos Coelho as prime minister.

   

  The move could wreck Passos Coelho’s efforts to get his centre-right government’s programme passed in parliament in 10 days’ time, extending the political uncertainty hanging over the country since an inconclusive Oct. 4 election.

   

  This set up a confrontation with the main opposition Socialists, who have been trying to form their own coalition government with the hard left Communists and Left Bloc, who all want to end the centre-right’s austerity policies.

   

  “The president has created an unnecessary political crisis” by naming Passos Coelho as prime minister,” Socialist leader Antonio Costa said.

   

  The Socialists and two leftist parties quickly showed that they control the most votes when parliament reopened on Friday, electing a Socialist speaker of the house and rejecting the centre-right candidate.

   

  “This is the first institutional expression of the election results,” Costa said. “In this election of speaker, parliament showed unequivocally the majority will of the Portuguese for a change in our democracy.”

   

  Antonio Barroso, senior vice president of the Teneo Intelligence consultancy in London, said Costa was likely to threaten any Socialist lawmaker with expulsion if they vote for the centre-right government’s programme.

   

  “Therefore, the government is likely to fall, which will put the ball back on the president’s court,” Barroso said in a note.

  And here’s more from The Telegraph on the effort to undercut the democratic process:

  Portugal has entered dangerous political waters. For the first time since the creation of Europe’s monetary union, a member state has taken the explicit step of forbidding eurosceptic parties from taking office on the grounds of national interest.

   

  Anibal Cavaco Silva, Portugal’s constitutional president, has refused to appoint a Left-wing coalition government even though it secured an absolute majority in the Portuguese parliament and won a mandate to smash the austerity regime bequeathed by the EU-IMF Troika.

   

  He deemed it too risky to let the Left Bloc or the Communists come close to power, insisting that conservatives should soldier on as a minority in order to satisfy Brussels and appease foreign financial markets.

  Democracy must take second place to the higher imperative of euro rules and membership.

   

  “In 40 years of democracy, no government in Portugal has ever depended on the support of anti-European forces, that is to say forces that campaigned to abrogate the Lisbon Treaty, the Fiscal Compact, the Growth and Stability Pact, as well as to dismantle monetary union and take Portugal out of the euro, in addition to wanting the dissolution of NATO,” said Mr Cavaco Silva.

   

  “This is the worst moment for a radical change to the foundations of our democracy.

   

  “After we carried out an onerous programme of financial assistance, entailing heavy sacrifices, it is my duty, within my constitutional powers, to do everything possible to prevent false signals being sent to financial institutions, investors and markets,” he said.

   

  Mr Cavaco Silva argued that the great majority of the Portuguese people did not vote for parties that want a return to the escudo or that advocate a traumatic showdown with Brussels.

   

  This is true, but he skipped over the other core message from the elections held three weeks ago: that they also voted for an end to wage cuts and Troika austerity. The combined parties of the Left won 50.7pc of the vote. Led by the Socialists, they control the Assembleia.

   

  The Socialist leader, Antonio Costa, has reacted with fury, damning the president’s action as a “grave mistake” that threatens to engulf the country in a political firestorm.

   

  “It is unacceptable to usurp the exclusive powers of parliament. The Socialists will not take lessons from professor Cavaco Silva on the defence of our democracy,” he said.

   

  Mr Costa vowed to press ahead with his plans to form a triple-Left coalition, and warned that the Right-wing rump government will face an immediate vote of no confidence.

  Note what’s happened here. The will of the people is now being characterized as a “false signal” to “financial institutions, investors, and markets.”

  In other words, what voters want means nothing. This is about what “markets” and “financial instiutions” want. What the electorate wants is nothing more than a “false signal.” 

  This is precisely what we predicted would happen should the political situation in Portugal not unfold in a way that pleases Berlin and Brussels. Germany and, to a lesser extent, the IMF are now in complete control of the European political process. There’s no “democracy” left. It’s either get with the austerity program and stick with it, or face the consequences which, as we saw with Greece, could entail the closure of banks and the willful destruction of the economy. 

  We can however, take solace in the fact that Cavaco Silva’s attempts to appease financial markets will invariably backfire, because if there’s anything investors hate, it’s uncertainty and the move to reappoint Passos Coelho will only serve to bring about a protracted political conflict with the Left. Watch Portuguese bond yields next week for hints as to whether the President’s decision has achieved the stated goal of calming “investors” and “markets.”

  We’ll close with the following quote from The Telegraph’s Ambrose Evans-Pritchard:

  Mr Cavaco Silva is effectively using his office to impose a reactionary ideological agenda, in the interests of creditors and the EMU establishment, and dressing it up with remarkable Chutzpah as a defence of democracy.

   

  The Portuguese Socialists and Communists have buried the hatchet on their bitter divisions for the first time since the Carnation Revolution and the overthrow of the Salazar dictatorship in the 1970s, yet they are being denied their parliamentary prerogative to form a majority government.

   

  This is a dangerous demarche. The Portuguese conservatives and their media allies behave as if the Left has no legitimate right to take power, and must be held in check by any means.

   

  These reflexes are familiar – and chilling – to anybody familiar with 20th century Iberian history, or indeed Latin America. That it is being done in the name of the euro is entirely to be expected.

  

  

  

  

  

• The Drone Debate: Do US Drone Strikes Create More Terrorists Than They Kill?

  In the wake of the war in Iraq and the ground incursion the US launched in Afghanistan after 9/11, the phrase “boots on the ground’ has become something of an obscenity among the American public. 

  Putting American lives at stake by sending soldiers into battle against extremist groups operating in the Mid-East is now viewed by many as the ultimate foreign policy blunder, which helps to explain why Washington has resorted increasingly to i) training and supplying proxy armies, and ii) executing “targets” from the stratosphere via drone strikes. 

  We’ve spent more than enough time of late analyzing the flaws inherent in a strategy that involves providing covert support to those fighting regimes the US deems unfriendly and recalcitrant, but it’s important to remember that the CIA habitually uses unmanned drones to target suspected “terrorists” with virtually no regard for the “collateral damage” that can and does occur when Washington relies on shaky “intelligence” to spot “targets” in Iraq, Afghanistan, Somalia, Pakistan, and Yemen. 

  A few weeks back, The Intercept was provided with what it calls “a cache of secret slides that provides a window into the inner workings of the U.S. military’s kill/capture operations at a key time in the evolution of the drone wars — between 2011 and 2013.”

  We profiled The Intercept’s report earlier this month (see here) and for anyone who missed it we’ve provided some notable excerpts, but the point in raising the issue again is to highlight a debate between Glenn Greenwald, co-founder of The Intercept, and Georgetown University Associate Professor Christine Fair. The video clip is linked below.

  *  *  *

  Via The Intercept

  The documents, which also outline the internal views of special operations forces on the shortcomings and flaws of the drone program, were provided by a source within the intelligence community who worked on the types of operations and programs described in the slides.

  The source said he decided to provide these documents to The Intercept because he believes the public has a right to understand the process by which people are placed on kill lists and ultimately assassinated on orders from the highest echelons of the U.S. government. “This outrageous explosion of watchlisting — of monitoring people and racking and stacking them on lists, assigning them numbers, assigning them ‘baseball cards,’ assigning them death sentences without notice, on a worldwide battlefield — it was, from the very first instance, wrong,” the source said.

  Documents on high-value kill/capture operations in Afghanistan buttress previous accounts of how the Obama administration masks the true number of civilians killed in drone strikes by categorizing unidentified people killed in a strike as enemies, even if they were not the intended targets. The slides also paint a picture of a campaign in Afghanistan aimed not only at eliminating al Qaeda and Taliban operatives, but also at taking out members of other local armed groups.

  Taken together, the secret documents lead to the conclusion that Washington’s 14-year high-value targeting campaign suffers from an overreliance on signals intelligence, an apparently incalculable civilian toll, and — due to a preference for assassination rather than capture — an inability to extract potentially valuable intelligence from terror suspects. They also highlight the futility of the war in Afghanistan by showing how the U.S. has poured vast resources into killing local insurgents, in the process exacerbating the very threat the U.S. is seeking to confront.

  These secret slides help provide historical context to Washington’s ongoing wars, and are especially relevant today as the U.S. military intensifies its drone strikes and covert actions against ISIS in Syria and Iraq. Those campaigns, like the ones detailed in these documents, are unconventional wars that employ special operations forces at the tip of the spear.

  The “find, fix, finish” doctrine that has fueled America’s post-9/11 borderless war is being refined and institutionalized. Whether through the use of drones, night raids, or new platforms yet to be unleashed, these documents lay bare the normalization of assassination as a central component of U.S. counterterrorism policy.

  U.S. intelligence personnel collect information on potential targets, as The Intercept has previously reported, drawn from government watchlists and the work of intelligence, military, and law enforcement agencies. At the time of the study, when someone was destined for the kill list, intelligence analysts created a portrait of a suspect and the threat that person posed, pulling it together “in a condensed format known as a ‘baseball card.’” That information was then bundled with operational information and packaged in a “target information folder” to be “staffed up to higher echelons” for action. On average, it took 58 days for the president to sign off on a target,one slide indicates. At that point, U.S. forces had 60 days to carry out the strike. The documents include two case studies that are partially based on information detailed on baseball cards.

  The system for creating baseball cards and targeting packages, according to the source, depends largely on intelligence intercepts and a multi-layered system of fallible, human interpretation. “It isn’t a surefire method,” he said. “You’re relying on the fact that you do have all these very powerful machines, capable of collecting extraordinary amounts of data and information,” which can lead personnel involved in targeted killings to believe they have “godlike powers.”

  The White House and Pentagon boast that the targeted killing program is precise and that civilian deaths are minimal. However, documents detailing a special operations campaign in northeastern Afghanistan, Operation Haymaker, show that between January 2012 and February 2013, U.S. special operations airstrikes killed more than 200 people. Of those, only 35 were the intended targets.

  During one five-month period of the operation, according to the documents, nearly 90 percent of the people killed in airstrikes were not the intended targets. In Yemen and Somalia, where the U.S. has far more limited intelligence capabilities to confirm the people killed are the intended targets, the equivalent ratios may well be much worse.

  “Anyone caught in the vicinity is guilty by association,” the source said. When “a drone strike kills more than one person, there is no guarantee that those persons deserved their fate. … So it’s a phenomenal gamble.”

   The documents show that the military designated people it killed in targeted strikes as EKIA — “enemy killed in action” — even if they were not the intended targets of the strike. Unless evidence posthumously emerged to prove the males killed were not terrorists or “unlawful enemy combatants,” EKIA remained their designation, according to the source. That process, he said, “is insane. But we’ve made ourselves comfortable with that. The intelligence community, JSOC, the CIA, and everybody that helps support and prop up these programs, they’re comfortable with that idea.”

  *  *  * 

  And there’s much, much more available at “The Drone Papers.”

  While what you’ll read there is deplorable and on a certain level, shocking, those who follow US foreign policy will not be surprised. Essentially, Washington relies on faulty intelligence on the way to bombing targets from the stratosphere and almost everyone who ends up dead isn’t a “terrorist.” In order to conceal that fact, the CIA and the Pentagon classify anyone who was killed as an “enemy”, and this egregious practice has become so commonplace as to be embedded in the drone workflow. 

  Make no mistake, this is nothing short of a travesty and only serves to underscore the notion that Washington’s Mid-East policy is beset by a toxic combination of corruption, buffoonery, and, if The Intercept is correct, murder. 

  Click on the image below, watch the debate, and draw your own conclusions.

  

  

  

  

  

  

• Just When You Thought Wall Street's Heist Couldn't Get Any Crazier…

  Submitted by Pam Martens & Russ Martens via WallStreetOnParade.com,

  Just when you thought Wall Street’s heist of the U.S. financial system couldn’t get any crazier, along comes a regulator’s report on FDIC-insured banks exposure to derivatives. According to the Office of the Comptroller of the Currency (OCC), one of the regulators of national banks, as of June 30 of this year, Goldman Sachs Bank USA had $78 billion in deposits, and – wait for it – $45.7 trillion in notional amount of derivatives. (Notional means face amount of derivatives.) According to the OCC report, Goldman Sachs Bank USA’s notional derivatives are an eye-popping 563 percent of its risk-based capital. You and every other little guy in America is backstopping this bank because it’s, amazingly, FDIC insured.

  

  Compared to its Wall Street peers, Goldman Sachs Bank USA is a midget. JPMorgan Chase Bank NA has just shy of $2 trillion in assets; Citibank NA (part of Citigroup) has $1.3 trillion; Bank of America NA $1.6 trillion. That compares with Goldman Sachs Bank USA, which just became an FDIC insured bank at the height of the financial crisis on November 28, 2008, which has a puny $122.68 billion in assets. But it wants to play with the big boys anyway when it comes to derivatives, as the chart above shows.

  Based on the data, it looks like the average taxpayer is backstopping a ton of risk at this FDIC insured bank and getting very little in return. According to financial data from the FFIEC for the second quarter, the bank had $25.1 billion in trading assets and according to the company’s web site, it’s those high net worth clients of its Private Bank that it’s working with “to manage their cash flow needs, finance private asset purchases, and facilitate strategic investments.”

  According to the New York Times, Goldman Sachs private wealth management services require a minimum of $10 million to get in the front door. The same Times article says Goldman was even kicking out its own employees’ accounts if they fell short of $1 million.

  Quite a few things come to mind in reading these various regulatory reports.

  First, almost none of the promises that were made to the public about what was going to happen under Dodd-Frank financial reform is actually happening. The push-out rule was supposed to push these trillions of dollars of risky derivatives out of the insured banking unit to prevent another epic taxpayer bailout. Citigroup, in a sleight of hand in December, simply legislated that investor protection out of existence.

  Then there was the promise that these trillions of opaque derivative contracts were going to come into the sunshine by being forced onto regulated exchanges. That hasn’t happened either – seven years and counting after derivatives blew up the U.S. economy, leaving millions unemployed and a nation still struggling to find a pulse in its growth rate. According to the FFIEC report, “centrally cleared derivatives” at Goldman Sachs Bank USA represent only a small portion of its total derivatives.

  And then there is the matter of allowing the public to assess counterparty risks building up at our insured banks after AIG sold credit protection derivatives (credit default swaps) across Wall Street that it could not pay in the crisis, forcing another massive government bailout. On the FFIEC report, the lines that would show Goldman Sachs Bank USA’s greatest single counterparty risk and its top 20 greatest counterparty risks, are both marked “Confidential.”

  Welcome to another day at the casino where the model continues to be — heads they win, tails you lose.

  

  

  

  

  

• US Economic Data Has Never Been This Weak For This Long

  Despite the ongoing propaganda reinforcing America's "cleanest sheets in a brothel" economic growth, the fact is, there is a reason why The Fed folded, why Draghi doubled-down, why China cut, and why Kuroda will likely unleash moar QQE this week. It appears the 'trap' that central planners have set for themselves – by enabling massive financial asset inflation in the face of what is now the longest streak of economic weakness and data disappointment on record – now looks set to prove their impotence and/or Enisteinian insanity.

   

  As Ice Farm Capital notes,

  a year ago were looking at 5yr inflation breakevens around 1.5%.  They have since deteriorated to 1.15% (by way of 1%) and this week we are expecting a Q3 GDP print more like 1.5% — a deceleration of a full 240bps.

   

   

  

   

   

  Corporate profit margins have taken a sharp hit and corporate profits for the S&P are now down 3% yoy despite continued share buybacks.

   

  Through this entire period, markets have continually expected happy days to be just around the corner.

  As a result, we have seen economic surprises for the US negative for the longest stretch in the history of the data series:

  

  2015 has been weak from the start

   

  To make it a little clearer, this period of economic weakness and disappointment is not just the longest on record, but it is entirely unprecedented…

  

   

  Hike rates into that!! (Is it any wonder, the market's odds of a Dec rate hike remain at 34%, despite all the talk from The Sell-Side and The Fed that it is a live meeting)

   

  Charts: Bloomberg and Ice Farm Capital

  

  

  

  

  

• The Fatal Fallacy Of Faith In The Fed's Assumed Powers

  Submitted by Jeffrey Snider via Alhambra Investment Partners,

  There is always some chicken and egg to any financial irregularity; as in does a crisis cause a panic or is it the panic that causes the crisis? Though the evidence of the past eight years is decidedly on the side of the irregularity, central banks continue to press as if that were not so. In no uncertain terms, central bankers persist in expressing their own confidence and, if you read or listen closely enough, great disdain for free markets they deem unworthy as if nothing more than unchained emotion. In the context of 2008, as the current FOMC tells it, the markets got all worked up over nothing much and should have instead simply enjoyed the blind faith in the Fed to have fixed it all without the fuss and bother.

  As offensive as that sounds, that is exactly what is being preached. Janet Yellen in April 2014:

  Fundamental to modern thinking on central banking is the idea that monetary policy is more effective when the public better understands and anticipates how the central bank will respond to evolving economic conditions. Specifically, it is important for the central bank to make clear how it will adjust its policy stance in response to unforeseen economic developments in a manner that reduces or blunts potentially harmful consequences. If the public understands and expects policymakers to behave in this systematically stabilizing manner, it will tend to respond less to such developments.

  There is a fatal fallacy at the heart of this philosophy, one in which has blinded these economists as they marvel at their own assumed powers. Yellen suggests that markets should stop worrying so much about liquidity and other perhaps tangential, but no less meaningful, factors and instead only ignore them in the comfort that Yellen has those all under control. It is no less destructive conceit, one which was revealed to all amply this past decade – starting with the housing bubble itself.

  In reality, investors and market agents have good reason to concern about both markets and central banks. Yellen says that they are in perfect position to handle whatever may come, but that clearly hasn’t been the case. Instead, central banks all over the world have been forced into one ad hoc program after another, which by itself refutes Yellen’s assertiveness. Rather than instill great confidence to do as the Fed Chair demands, central banks have only proved themselves far too in love with themselves. In order for this end of the Yellen Doctrine to work, central bankers need to stop thinking that everything they do is magic and saying so.

  We can see that problem in ways both great and small, as “managing” Bear Stearns’ collapse in March 2008 didn’t round out the bottom but rather only instilled unearned confidence in the Fed that, again, their efforts would work. Bear was a great warning to be prepared about truly dire consequences, but somehow the FOMC was wholly unprepared for Lehman, AIG and the rest (including the GSE’s), leaving them scrambling and again pulling together various spontaneous programs from nowhere – and to no avail. Bernanke says that central banks can mitigate recession, so how come the Great Recession? This scenario was repeated (repeatedly) in 2011 and in smaller ways since.

  I believe, in large part, that August 2015 represents just the latest in that gap between how markets do and should work and the ideal utopian scenario central banks plan for. The PBOC, far more so than the Fed, has enjoyed a reputation for control and management that seems to closely align with Yellen’s doctrine (totalitarian envy, the true financial law of central planning hard and soft). The events of August showed once again that there is no true control, only the illusion. The PBOC had clearly “engineered” a RMB/US$ cross without any volatility or variation whatsoever. Rather than view that as Yellen wishes, it was another ad hoc attempt to control and manage a far greater force – a force that none of the central banks wish to appreciate.

  

  In order to contain yuan trading meant any number of growing intrusiveness, none of which we will ever likely know for sure. We can infer from various market components and then make reasonable judgments and extrapolations, but what is hidden and opaque will remain so until revealed by time. The PBOC and Chinese government have, in the past, used that to their advantage, cultivating the legend of near-omniscience for the PBOC, but since August what seemed to be beneficial in screening the true nature of market conditions might now turn in the other direction.

  The narrative about China’s “dollar” efforts has been entirely focused on “selling UST’s” when that is only the gloss. As I noted a few weeks ago, the record of US t-bills more than suggests a deeper financial invective against “dollar” irregularity. It would be preposterous to think that the PBOC would be limiting itself to such an unsuitable arrangement; that the Chinese central bank would not be undertaking much deeper and intentionally muddy measures to at least run down and transform the immediate problem.

  That would mean “reserve” mobilization would have been much more comprehensive and far deeper and multi-dimensional than simply “selling UST” of whatever class. In other words, if the PBOC was altering its bill strategy and engaging outright selling of UST securities, it was surely engaging repos and likely swaps of all flavors. After all, collateral in any of the derivative “reserve” activities is usually UST’s anyway.

   

  It would also suggest transactions in forward contracts, a type of instrument the PBOC is intimately familiar with through its yuan management methodology. Thus, looking at the China’s “dollar” problem through the lens of wholesale finance opens up greater possibilities as far as what China has done (and is doing) about it.

  To this point, it has worked on two fronts. Liquidity volatility has been somewhat improved (though, it has to be pointed out, the boot of PBOC yuan measures remains on SHIBOR which while providing immediate cover only increases the cost down the road) and, more importantly from the Yellen Doctrine standpoint, the “capital” flow numbers for September fooled any number of economists and commentators into issuing their verdict of an end to the emergency. That, of course, was nonsense as any deeper, wholesale appreciation for the PBOC’s tools and likelihoods suggests the opposite; namely that China has indeed followed Brazil. This was no end to the problem, but merely the end of Chapter 1 (if you wish to start the ordinal order at August rather than related prior “dollar” issues).

  

  As Brazil, the PBOC is proving far against any omniscience, instead it, too, is Fed-like mortal in being forced to inefficient and belatedly improvised emergency stirring. The use of forwards as a liquidity tool against a “dollar” run is as dangerous as the run itself because it moves the strain only in maturity (from immediate to more intermediate) but with a geometrically progressing “cost” and potential disorder for doing so.

  Which brings us all back to the question about what, exactly, is an “outflow.” If a flood of PBOC-generated swaps and forwards sets up only a maturity transformation moving the “dollar” pressure from August or September to October and November, then being effective means being able to either deliver “dollars” then (instead of September) without an October disruption, or going deeper into maturity transformations (a form of, as noted above, high cost future indebtedness) in order to continue fooling “markets” into thinking there is nothing going on at all by maintaining this same outward appearance of resumed stability. That latter is surely the motivation behind O/N SHIBOR’s sudden meaninglessness.

   

  In my view, and this is speculative on my part but I don’t think unreasonably so, the October 15 reserve mandate seems to be a hedge on the PBOC’s “dollar” intentions as far as taking the first option so as to keep the process to as much of a minimum as possible. The second option, which is what Brazil opted for (as does every other central bank when forced by sustained “dollar” turmoil), is too asymmetric – you gain more maturity transformation, kicking the can further, but the cost to do so increases more geometrically than linear.

  The Brazil case is not exactly analogous given its unique financial connection to the eurodollar system and how its central bank attempts to manage it, but the situations are in general terms identical. Brazil found itself in “dollar” trouble in the middle of 2013, instituted swaps and forwards and “bought” only a few months peace and the appearance of calm. Once the maturity transformation took its place, starting September 2014, the real has been obliterated an order of magnitude worse than imaginable at the start of the program in 2013.

  

  In my analysis, Brazil had no plausible escape from the “dollar” and thus the central bank’s efforts only amplified greatly the inevitable. From what I have seen of China, especially the first crack at the “dollar” run through July and August, I can’t fathom why they would find themselves any different. That point is bolstered by the belated recognition, in the mainstream no less, the wholesale inner workings that have, to this point, masked the continued difficulties:

  The People’s Bank of China and local lenders increased their holdings in onshore forwards to $67.9 billion in August, positions that would boost China’s currency against the dollar. The amount is five times more than the average in the first seven months, PBOC data show. The positions are part of a three-stage process to support the currency without immediately draining reserves, according to China Merchants Bank Co. and Goldman Sachs Group Inc.

   

  Standard central-bank intervention to support a currency generally involves selling dollars and buying the home tender. In this case, China’s large state banks borrowed dollars in the swap market, sold the U.S. currency in the cash spot market and used forward contracts with the central bank to hedge those positions.

  In the parlance of what I have used to describe for Brazil, the PBOC like Banco do Brasil enticed Chinese banks already short (synthetically) the “dollar” to become more so – all because they are coaxed into believing, as Yellen, that the central bank will have it covered on the other end. The PBOC’s motivation is only immediate, just hoping that the unwind into the future can be more manageable. What Brazilian banks found was quite the opposite, and Brazil is now suffering greatly for it.

  That last is the central issue here, namely that doing as Yellen and her counterparts demand is the biggest risk of all. The Yellen Doctrine requires that central banks be both correct and able, abilities that have been (and can only be) in utter short supply. Her view would show more proactive and effective central bank management where only reactive and impromptu, last minute white-knuckling has abounded. Central banks have been in the past year only holding on for dear life, which is where obscurity has been their benefit. In the end, however, I think it their own downfall as it only serves to make matters worse. Yellen wants the central bank to be viewed as almost godlike, but they continually reveal themselves weak, deceptive and ineffectual; eschewing all long run sustainability in order to just make it through one day at a time.

  They really don’t know what they are doing and China’s forwards put yet another exclamation on that point. That is why I have claimed these past few months that the central bank’s worst nightmare will be when wholesale exposure is revealed and appreciated as exactly the problem rather than the solution. Making Chinese banks “more short” the “dollar” is like giving a morphine addict keys to the medical locker and expecting the printed warning labels as enough to deter overdose.

  

  

  

  

  

• When Is A Ceiling Not A Ceiling?

  When, as Jim Quinn exclaims, corrupt politicians do as they are told by their keepers on Wall Street and in the boardrooms of S&P 500 mega-corps…

   

  

   

  House Republican leaders were slated to propose a bill this week linking a debt ceiling increase to conservative issues. Under the new proposal, the debt ceiling would be increased from $18.1 trillion to $19.6 trillion, and would likely extend through 2018.

  However, new reports out of Washington suggest that internal support for the bill from Republican lawmakers is divided, and it is unlikely to go to the floor. Where things go from here are unclear. If it gets down to the wire, Republicans willing to play ball may have to seek Democrat support, but this would likely void any concessions to spending as originally proposed.

  Congress is likely on the brink of another deadlock, similar to 2011 or 2013, in which debate will rage on even past the Treasury’s deadline of November 3. The end result is obvious: the limit will be increased. However, in the meantime, there is likely to be no shortage of brinkmanship as both parties do their song and dance.

  The chart above shows the parabolic increase to the statutory debt limit from 1970 until today. The chart also includes the potential $19.6 trillion ceiling as described in the most recent proposal, as well as the lawmakers in control during each time period.

  What is clear from this data is that over the past, the debt limit will increase no matter who is in control. While there may be minor differences, the ceiling as well as federal debt have reached unprecedented levels as a result of both parties. That is why the United States now has 29% of total sovereign debt and also the2nd highest national debt when measured in terms of debt-to-revenue.

  If a compromise isn’t reached, at some point the United States government would become unable to make payments on spending it has already committed to. The result would be a default on its debt obligations.

  Source: Visual Capitalist

  

  

  

  

  

• America's Top 10 Fears

  While nearly a decade ago, Americans celebrated the arrival of "hope and change", since then "hope" (not to mention "change") has been all but eradicated (if only for the vast majority of the population), and has been replaced with an emotion that is its polar opposite. Fear.

  Fear of government corruption (which we were delighted to find in the top spot), fear of terrorist attacks, fear of the NSA, fear of ID theft, fear of cyberterrorists, and even fear of economic collapse… all the way in 8th place.

  And yes, "fear of clowns" is in there too.

  In an attempt to quantify these fears, the Chapman University Survey of American Fears provides an unprecedented look into the fears of average Americans.

  In April of 2015, a random sample of 1,541 adults from across the United States were asked their level of fear about eighty-eight different fears across a huge variety of topics ranging from crime, the government, disasters, personal anxieties, technology and many others.

  Domains of Fear

  

  There were 10 major “domains” of fear addressed by the survey, including:

  Fear Domain	Types of Questions Included
  Crime	Murder, rape, theft, burglary, fraud, identity theft
  Daily Life	Romantic rejection, ridicule, talking to strangers
  Environment	Global warming, overpopulation, pollution
  Government	Government corruption, Obamacare, drones, gun control, immigration issues
  Judgment of others	Appearance, weight, age, race
  Man-Made Disasters	Bio-warfare, terrorism, nuclear attacks
  Natural Disasters	Earthquakes, droughts, floods, hurricanes
  Personal Anxieties	Tight spaces, public speaking, clowns, vaccines
  Personal Future	Dying, illness, running out of money, unemployment
  Technology	Artificial intelligence, robots, cyber-terrorism

   

  Top Fear Domains, 2015

  Each fear question asks Americans to rate their level of fear on a scale ranging from 1 (not afraid) to 4 (very afraid). The average score for each domain of fear provides insight into what types of fear are of greatest concern to Americans in 2015.

  On average, Americans expressed the highest levels of fear about man-made disasters, such as terrorist attacks, followed by fears about technology, including corporate and government tracing of personal data and fears about the government (such as government corruption and ObamaCare). The complete, ranked list of Domains of Fear follows:

  Domain of Fear	Average Fear Score (out of 4)
  Man-Made Disasters	2.15
  Technology	2.07
  Government	2.06
  Environment	1.97
  Personal Future	1.95
  Natural Disasters	1.95
  Crime	1.72
  Personal Anxieties	1.63
  Daily Life	1.51
  Judgment of Others	1.31

   

  Top 10 Fears of 2015

  

   

  Below is a list of the 10 fears for which the highest percentage of Americans reported being “Afraid,” or “Very Afraid.”

  Fear	Fear Domain	Afraid or Very Afraid
  Corruption of Government Officials	Government	58.0%
  Cyber-terrorism	Technology	44.8%
  Corporate Tracking of Personal Information	Technology	44.6%
  Terrorist Attacks	Man-Made Disasters	44.4%
  Government Tracking of Personal Information	Technology	41.4%
  Bio-Warfare	Man-Made Disasters	40.9%
  Identity Theft	Crime	39.6%
  Economic Collapse	Man-Made Disasters	39.2%
  Running of out Money in the Future	Personal Future	37.4%
  Credit Card Fraud	Crime	36.9%

   

  The Complete List of Fears, 2015

  The following is a complete, list of all of the fears addressed by the Chapman Survey of American Fears, Wave 2 (2015), including the percent of Americans who reported being afraid or very afraid. 

   

  Sorted by Percent Afraid/Very Afraid

  Fear	Fear Domain	% Afraid or Very Afraid
  Corruption	Government	58.0
  Cyber-terrorism	Technology	44.8
  Corporate Tracking of Personal Data	Technology	44.6
  Terrorist Attack	Man-made Disasters	44.4
  Government Tracking of Personal Data	Technology	41.4
  Bio-warfare	Man-made Disasters	40.9
  Identity Theft	Crime	39.6
  Economic Collapse	Man-made Disasters	39.2
  Running out of Money	Personal Future	37.4
  Credit Card Fraud	Crime	36.9
  Gun Control	Government	36.5
  War	Man-made Disasters	35.8
  Obamacare	Government	35.7
  Illness	Personal Future	34.4
  Pandemic	Natural Disasters	34.3
  Nuclear Attack	Man-made Disasters	33.6
  Reptiles	Personal Anxieties	33.0
  Meltdown	Man-made Disasters	32.3
  Civil Unrest	Man-made Disasters	32.0
  Tornado	Natural Disasters	31.4
  Global Warming	Environment	30.7
  Grid attack	Man-made Disasters	29.8
  Illegal Immigration	Government	29.7
  Drought	Natural Disasters	29.4
  Robots Replacing Workforce	Technology	28.9
  Public Speaking	Personal Anxieties	28.4
  Property Damage	Natural Disasters	27.7
  Heights	Personal Anxieties	27.4
  Pollution of rivers and streams	Environment	26.9
  Earthquake	Natural Disasters	26.7
  Drunk Driver	Crime	26.5
  Flood	Natural Disasters	26.5
  Hurricane	Natural Disasters	26.4
  Trusting Artificial Intelligence to do work	Technology	25.8
  Insects	Personal Anxieties	25.5
  Blizzard	Natural Disasters	25.0
  Overpopulation	Environment	24.0
  Robots	Technology	23.9
  Unemployment	Personal Future	23.8
  Artificial Intelligence	Technology	22.2
  Break ins	Crime	22.2
  Loneliness	Personal Future	22.0
  Dying	Personal Future	21.9
  Theft	Crime	21.6
  Water	Personal Anxieties	21.0
  Drones	Government	20.4
  Claustrophobia	Personal Anxieties	19.9
  Volcano	Natural Disasters	19.7
  Aging	Personal Future	19.6
  Ponzi Schemes and other financial crimes	Crime	19.0
  Technology I don’t understand	Technology	19.0
  Needles	Personal Anxieties	18.5
  Whites no longer majority	Government	18.2
  Dying	Daily Life	16.8
  Germs	Personal Anxieties	16.5
  Mass Shooting	Crime	16.4
  Walking Along at Night	Daily Life	16.4
  Murder by a stranger	Crime	16.0
  Mugging	Crime	15.8
  Police Brutality	Crime	15.4
  Flying	Personal Anxieties	15.2
  Rape by a stranger	Crime	14.5
  Gangs	Crime	14.1
  Whooping Cough	Personal Anxieties	13.5
  Kidnapping	Crime	13.0
  Mammals (Dogs, rats or other animals)	Personal Anxieties	12.9
  Measles	Personal Anxieties	12.7
  Stalking	Crime	12.7
  Dismissed by Others	Daily Life	12.5
  Blood	Personal Anxieties	12.2
  Hate Crime	Crime	12.2
  Weight	Judgment of Others	11.4
  Rape by someone you know	Crime	11.3
  Murder by someone you know	Crime	10.9
  Ridicule	Daily Life	10.6
  Romantic Rejection	Daily Life	10.4
  Expressing Opinion	Daily Life	9.7
  Ghosts	Personal Anxieties	9.7
  Talking to Stranger	Daily Life	9.7
  Gossip	Daily Life	9.6
  Dark	Personal Anxieties	9.3
  Appearance	Judgment of Others	8.7
  Zombies	Personal Anxieties	8.5
  Vaccines	Personal Anxieties	8.4
  Clowns	Personal Anxieties	6.8
  Age	Judgment of Others	5.9
  Race	Judgment of Others	5.6
  Gender	Judgment of Others	4.5
  Dress	Judgment of Others	4.2

   

  Sorted Alphabetically 

  Fear	Fear Domain	% Afraid or Very Afraid
  Age	Judgment of Others	5.9
  Aging	Personal Future	19.6
  Appearance	Judgment of Others	8.7
  Artificial Intelligence	Technology	22.2
  Bio-warfare	Man-made Disasters	40.9
  Blizzard	Natural Disasters	25.0
  Blood	Personal Anxieties	12.2
  Break ins	Crime	22.2
  Civil Unrest	Man-made Disasters	32.0
  Claustrophobia	Personal Anxieties	19.9
  Clowns	Personal Anxieties	6.8
  Corporate Tracking of Personal Data	Technology	44.6
  Corruption	Government	58.0
  Credit Card Fraud	Crime	36.9
  Cyber-terrorism	Technology	44.8
  Dark	Personal Anxieties	9.3
  Dismissed by Others	Daily Life	12.5
  Dress	Judgment of Others	4.2
  Drones	Government	20.4
  Drought	Natural Disasters	29.4
  Drunk Driver	Crime	26.5
  Dying	Personal Future	21.9
  Dying	Daily Life	16.8
  Earthquake	Natural Disasters	26.7
  Economic Collapse	Man-made Disasters	39.2
  Expressing Opinion	Daily Life	9.7
  Flood	Natural Disasters	26.5
  Flying	Personal Anxieties	15.2
  Gangs	Crime	14.1
  Gender	Judgment of Others	4.5
  Germs	Personal Anxieties	16.5
  Ghosts	Personal Anxieties	9.7
  Global Warming	Environment	30.7
  Gossip	Daily Life	9.6
  Government Tracking of Personal Data	Technology	41.4
  Grid attack	Man-made Disasters	29.8
  Gun Control	Government	36.5
  Hate Crime	Crime	12.2
  Heights	Personal Anxieties	27.4
  Hurricane	Natural Disasters	26.4
  Identity Theft	Crime	39.6
  Illegal Immigration	Government	29.7
  Illness	Personal Future	34.4
  Insects	Personal Anxieties	25.5
  Kidnapping	Crime	13.0
  Loneliness	Personal Future	22.0
  Mammals (Dogs, rats or other animals)	Personal Anxieties	12.9
  Mass Shooting	Crime	16.4
  Measles	Personal Anxieties	12.7
  Meltdown	Man-made Disasters	32.3
  Mugging	Crime	15.8
  Murder by a stranger	Crime	16.0
  Murder by someone you know	Crime	10.9
  Needles	Personal Anxieties	18.5
  Nuclear Attack	Man-made Disasters	33.6
  Obamacare	Government	35.7
  Overpopulation	Environment	24.0
  Pandemic	Natural Disasters	34.3
  Police Brutality	Crime	15.4
  Pollution of rivers and streams	Environment	26.9
  Ponzi Schemes and other financial crimes	Crime	19.0
  Property Damage	Natural Disasters	27.7
  Public Speaking	Personal Anxieties	28.4
  Race	Judgment of Others	5.6
  Rape by a stranger	Crime	14.5
  Rape by someone you know	Crime	11.3
  Reptiles	Personal Anxieties	33.0
  Ridicule	Daily Life	10.6
  Robots	Technology	23.9
  Robots Replacing Workforce	Technology	28.9
  Romantic Rejection	Daily Life	10.4
  Running out of Money	Personal Future	37.4
  Stalking	Crime	12.7
  Talking to Stranger	Daily Life	9.7
  Technology I don’t understand	Technology	19.0
  Terrorist Attack	Man-made Disasters	44.4
  Theft	Crime	21.6
  Tornado	Natural Disasters	31.4
  Trusting Artificial Intelligence to do work	Technology	25.8
  Unemployment	Personal Future	23.8
  Vaccines	Personal Anxieties	8.4
  Volcano	Natural Disasters	19.7
  Walking Along at Night	Daily Life	16.4
  War	Man-made Disasters	35.8
  Water	Personal Anxieties	21.0
  Weight	Judgment of Others	11.4
  Whites no longer majority	Government	18.2
  Whooping Cough	Personal Anxieties	13.5
  Zombies	Personal Anxieties	8.5

  h/t ValueWalk

  

  

  

  

• Artist's Impression Of This Week's Failed "Syrian Solution" Meetings

  Prussian roulette…

   

  

   

  Source: Cagle Post

  

  

  

  

  

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