Today’s News October 27, 2015

• SmartKnowledgeU: What is the Fair Value of Gold? Ounces Over Dollars

  As I write this article, at about 11:30AM NY time, on 27 October 2015, the probability of another banker raid in the paper gold and silver derivatives markets increases and remains elevated. Yet, every time bankers raid paper prices, if indeed this happens again sometime over the next few trading days, their raids on the fiat currency prices of gold and silver always trigger a lot of frustration on behalf of physical gold and physical silver owners due to an improper equating of fiat currency price with real value and improper equating of “perceived” value with “real” value. To debunk these widely held inaccurate beliefs, how can one truly accept a valuation of sound money (physical gold and physical silver) in an unsound, counterfeit fiat currency? In fact, it astounds me when I witness intelligent people repeatedly make the mistake of pricing a sound money in terms of unsound money and then equating this fake price to physical gold’s (or silver’s) value.

   

  A huge reason we all tend to make these types of sophomoric mistakes is due to the fact that the bankers erased all real knowledge about sound money from textbooks and the collective conscience of society long before any of us living on this planet today had even been born. Therefore, we were raised to believe that valuing gold and silver in terms of fake fiat currencies is acceptable, whereas if you transported a 5-year old child that lived during a period of a real gold standard persisted to the present day, that child would laugh at our foolishness regarding the manner in which we value physical gold and silver. During periods of true gold standards (and not anti-gold standards like the Bretton Woods system, that was still truly a US dollar standard), the only accepted way of valuing gold and silver was by its weight, in grams or in troy ounces. The reasons why the Bretton Woods system was much more of an anti-gold standard as opposed to a true gold standard is beyond the scope of this article, but something we explain in fully and in great detail in our upcoming SmartWealth Academy. Any paper note that simultaneously circulated with gold and silver coins during true gold and silver standards only represented that standard monetary unit of gold and silver weight. And when governments and bankers reneged on their promise to redeem these paper notes into a pre-specified precious metal monetary weight, the paper notes depreciated against the precious metal.

   

   

  Today, bankers have brainwashed us all to believe that the precious metal, when it is falling in fiat currency prices, is dropping in value (our “perceived” value), when in reality, the value of the precious metal always remains constant because its “real” value can only be measured by its weight. In fact, when bankers raid paper gold and silver futures markets and artificially drop its associated gold and silver price, if we were able to distinguish the differences between “perceived” value and “real” value, and the difference between price versus value, we would all be ecstatic instead of depressed. Why? Because we would understand that in manufacturing such events, bankers have increased the value of our paper notes in terms of real gold and real silver. Remember, I just told you that historically, under periods of real silver standards, when the bankers committed fraud, the paper notes depreciated greatly, up to as much as 40%, in terms of the real silver it could then buy (I explain this historical event in much more detail in my vlog below). Today, banker fraud causes our paper notes to appreciate, not depreciate, in terms of the value of gold and value of silver they can buy.

   

   

  This reversal of fortune, from the same committed bank fraud, should blow your mind. To understand these concepts further, please watch our two part series, SmartKnowledgeU_Vlog_002: What is the Fair Value of Gold? Ounces Over Dollars, below. If you watch the two-part series below, then when bankers soon likely raid gold and silver futures markets and force the fiat currency prices down, you will remain much more calm as you realize this has no affect whatsoever on the real value of physical gold and physical silver.

   

   

  

  

  To watch the above vlogs, please click on the photos and then click the text

  “Watch this video on YouTube.”

  
  

  
  

   About the Author: JS Kim is the Managing Director of SmartKnowledgeU, a fiercely independent consulting, research, and education firm that focuses on providing wealth preservation strategies to clients in 30+ different countries around the world. Stay tuned for othe release of our upcoming SmartWealth Academy, an online education academy designed to provide an alternative to business school at a fraction of the price of top business programs, yet with the provision of knowledge completely lacking from MBA and business school programs necessary to survive our ongoing currency wars.
  

  

  

  

  

• Does Red Meat – or FAKE Meat – Cause Cancer?

  The World Health Organization said today that eating even unprocessed red meat “probably” causes cancer.

  But as we reported in 2012, it may not be red meat – but FAKE meat – that’s killing us.

  Specifically, the modern factory farm creates meat that is much higher in saturated fats – and much lower in healthy omega 3s – than traditional grass-fed cows.

  Feedlot cows are also dosed with large quantities of antibiotics and estrogen.

  Worse, the FDA allows a drug banned in 160 nations and responsible for hyperactivity, muscle breakdown and 10 percent mortality in pigs to be added to animal feed shortly before slaughter.

  While the practice of feeding cow parts to other cows – one of the main causes of mad cow disease – has been banned on paper, cow blood “products”, feather meal, pig and fish protein, and chicken manure are all still fed to cows.   Remember – unlike bacteria or viruses – heat does NOT kill the deadly prions which cause mad cow disease. (And cows are fed to  chickens, pigs and fish – which are then fed back to the cows – so cows may end up eating the prions from other cows anyway.)

  And yet the government is so protective of the current model of industrial farming that private citizens such as ranchers and meat packers are prohibited from testing for mad cow disease.

  And genetically-engineered meat isn’t even tested for human safety. (Read this if you think there is a scientific consensus that gm foods are safe.)

  On top of that, there are a slew of meat additives added after butchering.

  So yes … factory-farmed, mass-produced red meat may be bad for us.  But that doesn’t necessarily mean that organic, grass-fed meat is …

  

  

  

  

• Why Is The IRS Spying On Americans' Phone Calls?

  Submitted by Derick Broze via TheAntiMedia.org,

  Following the first ever congressional hearing on “Stingray” cellphone surveillance, new details reveal the Secret Service and the Internal Revenue Service are also using the controversial spying devices.

  At a congressional hearing last Wednesday, officials with the Department of Justice and Department of Homeland Security released new details about the federal government’s use of “Stingray” cellphone surveillance. Stingrays, also known as cell site simulators, constitute another example of military tools finding their way into the hands of federal agencies and local police departments across the United States.

  According to the Electronic Frontier Foundation:

  “The Stingray is a brand name of an IMSI (International Mobile Subscriber Identity) Catcher targeted and sold to law enforcement. A Stingray works by masquerading as a cellphone tower – to which your mobile phone sends signals to every 7 to 15 seconds whether you are on a call or not – and tricks your phone into connecting to it.  As a result, the government can figure out who, when and to where you are calling, the precise location of every device within the range, and with some devices, even capture the content of your conversations.”

  Elana Tyrangiel, a deputy assistant attorney at the Justice Department, told lawmakers the particular cell site simulators employed by the DOJ do not collect the content of calls. The devices do, however, collect location and the number being dialed.

  Much of the discussion at the hearing centered around the use of warrants. In early September, the Justice Department announced rules about how the department will handle the use of Stingrays, including new warrant requirements. After the rules were announced, Senator Patrick Leahy, the ranking member on the Senate’s Judiciary Committee, challenged the warrant exemptions and the overall effectiveness of the rules.  According to the District Sentinel, Leahy stated, “I will press the Department to justify them.”

  As of last week, the Department of Homeland Security is now following similar rules. Officials warned Congress the devices would be used without obtaining warrants in “time-sensitive, emergency situations.”

  California Congressman Ted Lieu, a member of the House Oversight and Government Reform Committee, told CNN he believes “The mass surveillance of peoples’ [sic] cell phone signals requires a warrant.”

  The AP reports that during the hearing, Homeland Security Assistant Secretary Seth M. Stodder revealed a new policy that allows the Secret Service to use cell site simulators without a warrant if they believe there is a “nonspecific threat to the president or another protected person.”

  Stodder stated that under “exceptional circumstances,” exceptions would be made and use of the device would only require approval from “executive-level personnel” at Secret Service headquarters and the U.S. attorney for the relevant jurisdiction. Despite the exemption, Stodder said the Secret Service would not use the devices in routine criminal investigations.

  Just days after the congressional hearing, The Guardian has revealed the Internal Revenue Service (IRS) is also making use of the Stingray devices. The Guardian reports:

  “Invoices obtained following a request under the Freedom of Information Act show purchases made in 2009 and 2012 by the federal tax agency with Harris Corporation, one of a number of companies that manufacture the devices. Privacy advocates said the revelation “shows the wide proliferation of this very invasive surveillance technology.

   

  The 2009 IRS/Harris Corp invoice is mostly redacted under section B(4) of the Freedom of Information Act, which is intended to protect trade secrets and privileged information. However, an invoice from 2012, which is also partially redacted, reports that the agency spent $65,652 on upgrading a Stingray II to a HailStorm, a more powerful version of the same device, as well as $6,000 on training from Harris Corporation.”

  The HailStorm is an upgraded version of the Stingray, which is capable of gathering the actual contents of conversations and images in addition to gathering location and numbers dialed.

  The history of the use of Stingrays is filled with secrecy, lies, and redacted documents. The FBI, the Harris Corporation, and local police departments continue to hide the details of how exactly the devices are being used. Should we trust government officials when they tell us they will get a warrant unless “exceptional circumstances” arise? Who defines what exactly “exceptional” means anyway? It would be wise for all those who value privacy and freedom to begin challenging the official narrative and investing in technologies that can counter the State’s surveillance.

  We should also take a moment to acknowledge all the activists and journalists who have been working to expose this issue for the last several years. As Christopher Soghoian, an ACLU technologist, pointed out, “This is the first ever congressional hearing on Stingrays. This is a device the FBI started using in 1995. It shouldn’t take 20 years to get a hearing on a surveillance technology.”

  It is through the work of the awakened masses that the collective springs into action. Without YOU spreading information through the internet and in the streets, this important topic would not have become part of the national dialogue. However, we must not rest. There is much work to do. For a more in-depth look at the use of Stingrays, please read this investigation.

  

  

  

  

  

• Something Just Snapped – Sudden Yen Strength Sends Crude, Copper & China, US Stocks Sliding

  Catalysts are unclear for now – whether it was stronger than expected industrial profits in China, tensions growing in the South China Sea, or more chatter of no imminent increased easing from BoJ – but broadly speaking, JPY strength (lower USDJPY) is weighing on risk assets across the world as US, Japanese, and Chinese stocks tumbles (US Treasuries bid) and crude and copper prices slump.

   

  USDJPY broke back below 120.50 (erasing its post-PBOC move)…

  

   

  And as goes JPY, so goes US equities… with the S&P giving up all its post-PBOC gains…

  

   

  JPY strength (left) and a sudden safety bid to US Treasuries (right)

  

   

  Sparking derisking in Japanese stocks (left), US equities (middle), and Crude (rightz-0

  

   

  For now paper gold prices have yet to react but Bitcoin jumped notably…

  

   

  Charts: Bloomberg

  

  

  

  

• As China 'Buys Low' To Build SPR, Washington Forced To Sell Strategic Crude To Meet Budget

  The signs of regime change are everywhere. From embarrassment by Russia's success in Syria to China's creation of its own 'World Bank' and SWIFT alternative, the trend of de-empirization are growing, but tonight's news that Washington will sell oil from its strategic reserve in order to meet budget constraints and avoid default (as China takes advantage of low prices to build its own reserves) is simply stunning in its analogy of the shifting world order.

   

  As CNN reports,

  Bipartisan congressional leaders and the White House struck a major fiscal deal in principle Monday that would raise the debt ceiling and lift budget caps on both defense and domestic programs, according to congressional sources familiar with the deal.

   

  …

   

  This deal would avoid a potential debt default on November 3, and it would reduce the chances of a government shutdown on December 11.

   

  …

   

  The deal includes $80 billion in increased defense and domestic spending over two years‎, a senior House source told CNN.

   

  …

   

  That new spending would be offset by sales from the strategic petroleum oil reserve, use of public airwaves for telecommunications companies and changes to the crop insurance program — among other measures. Moreover, the deal would spread out increases in Medicare premiums over time so beneficiaries don't feel them acutely. It would also aim to preserve the Social Security disability trust fund, sources said.

   

  Conservatives sharply panned the deal.

   

  "It's emblematic of five years of failed leadership," said Rep. Justin Amash, R-Michigan.

  So, to summarize, 'Murica – the world's reserve currency superpower and "cleanest dirty sheet in a brothel" economy is about to sell its "strategic" petroleum reserves at multi-year low prices in order to meet an ever-expanding welfare state's needs…

  

   

  As China "buys low" adding to its reserves amid the multi-year low prices…

  

  *  *  *

  Of course this move by The US is echoing what many Petrodollar States are being forced to do to (sell 'reserves' to meet social welfare needs); however, in this case, it is not some massively indebted banana republic, but The Unites States of America (oh wait!).

  *  *  *

  As we recently pointed out, there are two general schools of thought amongst noted contrarians and libertarians regarding China’s overriding objectives.

  One school has it that China is very much a part of the One World Government philosophy and their primary goal is to acquire a more powerful seat at the IMF. Having done so, they will settle in and be content to be one of the leading jurisdictions that run the world collectively.

   

  The other school suggests that China means to become the most powerful nation in the world – to replace the US in every way as the world’s dominant nation.

  My own appraisal is a combination of the two. China’s behaviour – not only their public stance, but their massive economic infrastructural development efforts indicate to me that they intend to go full-bore with their new economic infrastructure, giving them powers that rival and even overtake the EU and US. At that point, they will be unconcerned as to whether they will be welcomed into the “club” that is presently dominated by the EU and US. They will be an unstoppable freight train passing through town. The western world can either get on board, or fall by the wayside. The Chinese will prefer the former, as it would be more profitable and would avoid conflicts (both military and economic), but they will not be deterred.

  At this moment in time, we’re observing a part of that effort. The old structure is being slowly bulldozed and a new structure is underway. It’s very likely that, in order to assure its success, it will be a better one – one which offers its users greater freedom. We can be certain that, like all governmental constructs, it will eventually become corrupted and be just as oppressive as the one it hopes to replace. However, in its early years (and hopefully beyond that) the people of the world will enjoy a period of increased economic freedom.

  Some time ago, when we first predicted that China would create such a system, it seemed almost a fairy tale – a highly unlikely development. Yet, China has gotten there even faster than I’d expected. Let’s hope that the day when its benefits trickle down to the street level, worldwide, will also arrive more quickly than we had expected.

   

  Charts: Bloomberg

  

  

  

  

  

• Fear Of The Walking Dead: The American Police State Takes Aim

  Submitted by John Whitehead via The Rutherford Institute,

  “Fear is a primitive impulse, brainless as hunger, and because the aim of horror fiction is the production of the deepest kinds of fears, the genre tends to reinforce some remarkably uncivilized ideas about self-protection. In the current crop of zombie stories, the prevailing value for the beleaguered survivors is a sort of siege mentality, a vigilance so constant and unremitting that it’s indistinguishable from the purest paranoia.”— Terrence Rafferty, New York Times

  The zombies are back. They are hungry. And they are lurking around every corner.

  In Kansas, Governor Sam Brownback has declared October “Zombie Preparedness Month” in an effort to help the public prepare for a possible zombie outbreak.

  In New York, researchers at Cornell University have concluded that the best place to hide from the walking dead is the northern Rocky Mountains region.

  And in Washington, DC, the Centers for Disease Control and Prevention have put together a zombie apocalypse preparation kit “that details everything you would need to have on hand in the event the living dead showed up at your front door.”

  The undead are also wreaking havoc at gun shows, battling corsets in forthcoming movie blockbusters such as Pride and Prejudice and Zombies, running for their lives in 5K charity races, and even putting government agents through their paces in mock military drills arranged by the Dept. of Defense (DOD) and the Center for Disease Control (CDC).

  The zombie narrative, popularized by the hit television series The Walking Dead, in which a small group of Americans attempt to survive in a zombie-ridden, post-apocalyptic world where they’re not only fighting off flesh-eating ghouls but cannibalistic humans, plays to our fears and paranoia.

  Yet as journalist Syreeta McFadden points out, while dystopian stories used to reflect our anxieties, now they reflect our reality, mirroring how we as a nation view the world around us, how we as citizens view each other, and most of all how our government views us.

  Fear the Walking Dead—AMC’s new spinoff of its popular Walking Dead series—drives this point home by dialing back the clock to when the zombie outbreak first appears and setting viewers down in the midst of societal unrest not unlike our own experiences of the past year (“a bunch of weird incidents, police protests, riots, and … rapid social entropy”). Then, as Forbes reports, “the military showed up and we fast-forwarded into an ad hoc police state with no glimpse at what was happening in the world around our main cast of hapless survivors.”

  Forbes found Fear’s quick shift into a police state to be far-fetched, but anyone who has been paying attention in recent years knows that the groundwork has already been laid for the government—i.e., the military—to intervene and lock down the nation in the event of a national disaster.

  Recognizing this, the Atlantic notes: “The villains of [Fear the Walking Dead] aren’t the zombies, who rarely appear, but the U.S. military, who sweep into an L.A. suburb to quarantine the survivors. Zombies are, after all, a recognizable threat—but Fear plumbs drama and horror from the betrayal by institutions designed to keep people safe.”

  We’ve been so hounded in recent years with dire warnings about terrorist attacks, Ebola pandemics, economic collapse, environmental disasters, and militarized police that it’s no wonder millions of Americans have turned to zombie fiction as a way to “envision how we and our own would thrive if everything went to hell and we lost all our societal supports.” As Time magazine reporter James Poniewozik phrases it, the “apocalyptic drama lets us face the end of the world once a week and live.”

  Here’s the curious thing, however: while zombies may be the personification of our darkest fears, they embody the government’s paranoia about the citizenry as potential threats that need to be monitored, tracked, surveilled, sequestered, deterred, vanquished and rendered impotent.

  Why else would the government feel the need to monitor our communications, track our movements, criminalize our every action, treat us like suspects, and strip us of any means of defense while equipping its own personnel with an amazing arsenal of weapons?

  For years now, the government has been carrying out military training drills with zombies as the enemy. In 2011, the DOD created a 31-page instruction manual for how to protect America from a terrorist attack carried out by zombie forces. In 2012, the CDC released a guide for surviving a zombie plague. That was followed by training drills for members of the military, police officers and first responders.

  As journalist Andrea Peyser reports:

  Coinciding with Halloween 2012, a five-day national conference was put on by the HALO Corp. in San Diego for more than 1,000 first responders, military personnel and law enforcement types. It included workshops produced by a Hollywood-affiliated firm in…overcoming a zombie invasion. Actors were made up to look like flesh-chomping monsters. The Department of Homeland Security even paid the $1,000 entry fees for an unknown number of participants…

  “Zombie disaster” drills were held in October 2012 and ’13 at California’s Sutter Roseville Medical Center. The exercises allowed medical center staff “to test response to a deadly infectious disease, a mass-casualty event, terrorism event and security procedures”… 

  [In October 2014], REI outdoor-gear stores in Soho and around the country are to hold free classes in zombie preparedness, which the stores have been providing for about three years.

  The zombie exercises appear to be kitschy and fun—government agents running around trying to put down a zombie rebellion—but what if the zombies in the exercises are us, the citizenry, viewed by those in power as mindless, voracious, zombie hordes?

  Consider this: the government started playing around with the idea of using zombies as stand-ins for enemy combatants in its training drills right around the time the Army War College issued its 2008 report, warning that an economic crisis in the U.S. could lead to massive civil unrest that would require the military to intervene and restore order.

  That same year, it was revealed that the government had amassed more than 8 million names of Americans considered a threat to national security, to be used “by the military in the event of a national catastrophe, a suspension of the Constitution or the imposition of martial law.” The program’s name, Main Core, refers to the fact that it contains “copies of the ‘main core’ or essence of each item of intelligence information on Americans produced by the FBI and the other agencies of the U.S. intelligence community.”

  Also in 2008, the Pentagon launched the Minerva Initiative, a $75 million military-driven research project focused on studying social behavior in order to determine how best to cope with mass civil disobedience or uprisings. The Minerva Initiative has funded projects such as “Who Does Not Become a Terrorist, and Why?” which “conflates peaceful activists with ‘supporters of political violence’ who are different from terrorists only in that they do not embark on ‘armed militancy’ themselves.”

  In 2009, the Dept. of Homeland Security issued its reports on Rightwing and Leftwing Extremism, in which the terms “extremist” and “terrorist” were used interchangeably to describe citizens who were disgruntled or anti-government.

  Meanwhile, a government campaign was underway to spy on Americans’ mail, email and cell phone communications. News reports indicate that the U.S. Postal Service has handled more than 150,000 requests by federal and state law enforcement agencies to monitor Americans’ mail, in addition to photographing every piece of mail sent through the postal system.

  Fast forward a few years more and you have local police being transformed into extensions of the military, taught to view members of their community as suspects, trained to shoot first and ask questions later, and equipped with all of the technology and weaponry of a soldier on a battlefield.

  Most recently, the Obama administration hired a domestic terrorism czar whose job is to focus on anti-government American “extremists” who have been designated a greater threat to America than ISIS or al Qaeda. As part of the government’s so-called war on right-wing extremism, the Obama administration has agreed to partner with the United Nations to take part in its Strong Cities Network program, which will train local police agencies across America in how to identify, fight and prevent extremism.

  In other words, those who believe in and exercise their rights under the Constitution (namely, the right to speak freely, worship freely, associate with like-minded individuals who share their political views, criticize the government, own a weapon, demand a warrant before being questioned or searched, or any other activity viewed as potentially anti-government, racist, bigoted, anarchic or sovereign), have just been promoted to the top of the government’s terrorism watch list.

  Noticing a pattern yet?

  “We the people” or, more appropriately, “we the zombies” are the enemy in the eyes of the government.

  So when presented with the Defense Department’s battle plan for defeating an army of the walking dead, you might find yourself tempted to giggle over the fact that a taxpayer-funded government bureaucrat actually took the time to research and write about vegetarian zombies, evil magic zombies, chicken zombies, space zombies, bio-engineered weaponized zombies, radiation zombies, symbiant-induced zombies, and pathogenic zombies.

  However, in an age of extreme government paranoia, this is no laughing matter.

  The DOD’s strategy for dealing with a zombie uprising, outlined in “CONOP 8888,” is for all intents and purposes a training manual for the government in how to put down a citizen uprising or at least an uprising of individuals “infected” with dangerous ideas about freedom.

  Rest assured that the tactics and difficulties outlined in the “fictional training scenario” are all too real, beginning with martial law.

  As the DOD training manual states: “zombies [read: “activists”] are horribly dangerous to all human life and zombie infections have the potential to seriously undermine national security and economic activities that sustain our way of life. Therefore having a population that is not composed of zombies or at risk from their malign influence is vital to U.S. and Allied national interests.”

  So how does the military plan to put down a zombie (a.k.a. disgruntled citizen) uprising?

  The strategy manual outlines five phases necessary for a counter-offensive: shape, deter, seize initiative, dominate, stabilize and restore civil authority. Here are a few details:

  Phase 0 (Shape): Conduct general zombie awareness training. Monitor increased threats (i.e., surveillance). Carry out military drills. Synchronize contingency plans between federal and state agencies. Anticipate and prepare for a breakdown in law and order.

   

  Phase 1 (Deter): Recognize that zombies cannot be deterred or reasoned with. Carry out training drills to discourage other countries from developing or deploying attack zombies and publicly reinforce the government’s ability to combat a zombie threat. Initiate intelligence sharing between federal and state agencies. Assist the Dept. of Homeland Security in identifying or discouraging immigrants from areas where zombie-related diseases originate.

   

  Phase 2 (Seize initiative): Recall all military personal to their duty stations. Fortify all military outposts. Deploy air and ground forces for at least 35 days. Carry out confidence-building measures with nuclear-armed peers such as Russia and China to ensure they do not misinterpret the government’s zombie countermeasures as preparations for war. Establish quarantine zones. Distribute explosion-resistant protective equipment. Place the military on red alert. Begin limited scale military operations to combat zombie threats. Carry out combat operations against zombie populations within the United States that were “previously” U.S. citizens.

   

  Phase 3 (Dominate): Lock down all military bases for 30 days. Shelter all essential government personnel for at least 40 days. Equip all government agents with military protective gear. Issue orders for military to kill all non-human life on sight. Initiate bomber and missile strikes against targeted sources of zombie infection, including the infrastructure. Burn all zombie corpses. Deploy military to lock down the beaches and waterways.

   

  Phase 4 (Stabilize): Send out recon teams to check for remaining threats and survey the status of basic services (water, power, sewage infrastructure, air, and lines of communication). Execute a counter-zombie ISR plan to ID holdout pockets of zombie resistance. Use all military resources to target any remaining regions of zombie holdouts and influence. Continue all actions from the Dominate phase.

   

  Phase 5 (Restore civil authority): Deploy military personnel to assist any surviving civil authorities in disaster zones. Reconstitute combat capabilities at various military bases. Prepare to redeploy military forces to attack surviving zombie holdouts. Restore basic services in disaster areas.

  Notice the similarities?

  Surveillance. Military drills. Awareness training. Militarized police forces. Martial law.

  As I point out in my book, Battlefield America: The War on the American People, if there is any lesson to be learned, it is simply this: whether the threat to national security comes in the form of actual terrorists, imaginary zombies or disgruntled American citizens infected with dangerous ideas about freedom, the government’s response to such threats remains the same: detect, deter and annihilate.

  To return to AMC’s Fear the Walking Dead: it’s the police state “tasked with protecting the vulnerable” that poses some of the gravest threats to the citizenry.

  From the Atlantic:

  When the military arrives, mowing down hostile “walkers” with ease, setting up camp to screen out any further infection, the moment is presented with an ironic note of triumph. The main character, Travis Manawa (Cliff Curtis), tells his group they can rest easy—help has finally arrived… As the soldiers begin hauling anyone spiking a fever away to quarantine zones, Travis insists their intentions are noble while the rest of his family begins to realize the military doesn’t really have a plan except to crush any potential threat. Are you a zombie? They’ll shoot you in the head. Do you look sick? You’re probably about to be a zombie. Do you have a problem with their approach? Then they have a problem with you, too.

  One of the show’s most brilliant touches has been the characterization of the soldiers themselves, not as impassive robots hell-bent on enforcing martial law, but as worryingly recognizable guys around town. Whenever Travis pleads with his local commander to address community fears and complaints, he might as well be talking to an ornery bowling buddy. The soldiers are tetchy and irritable rather than monstrous, clearly overwhelmed by the impossible situation they face, and granted authority through the guns in their hands and little else. In a pivotal scene, one of them tries to cajole Travis into firing a killshot at a distant zombie through a sniper scope, even though he knows Travis believes there might be a cure. The soldiers insist the zombies are dead beyond salvation—an unfortunate truth on the show, but also a sad reflection of just how dehumanized the enemy can become in the midst of war.

  The latest episode, “Cobalt,” revealed the military’s endgame: With the zombie situation deteriorating, they plan to flee and wipe out everyone they leave behind, at this point motivated only by the need to survive, rather than to protect. Countering that is the family unit that has forged new bonds in the crisis. These organically loyal communities, the writers Robert Kirkman and David Erickson argue, are the only kind that can survive in such a world… More than anything, Fear the Walking Dead is a drama about occupation, the breakdown of society, and the ease with which seemingly decent people can decide that might makes right. Like any dystopian fiction, it’s easy to dismiss as fantasy, but remove the zombies and Fear could be taking place in dozens of real-world locations… This is happening here, Kirkman and Erickson are saying, but it could happen anywhere.

   

  

  

  

  

  

• Greek Creditors Refuse To Make Next Loan Payment – German Press

  At first it was cute: when Greece got its first “dramatic” bailout in 2010 sending the global markets and the EUR first plunging then soaring, it was a melodrama of sorts – people still cared.

  Then, by the time the second and third bailouts rolled around, especially in the aftermath of the most ridiculous referendum in modern history, where a majority of Greeks voted for one thing only to get the other, it became a tragicomedy in what everyone hoped would be its final, “German colonial” season.

  It wasn’t.

  Moments ago, Germany’s Suddeutsche Zeitung reported that just two (or is it three, this past summer is one big blur) months after Greece voted through its third bailout, one which will raise its debt/GDP to over 200% on a fleeting promise that someone, somewhere just may grant Greece a debt extension (which will do absolutely nothing about the nominal amount of debt), its creditors have already grown tired with the game and are refusing to pay the next Greek loan tranche of €2 billion.

  Specifically, the payment of the first €2b tranche of €3b is now sait to be delayed because Greek Prime Minister Alexis Tsipras failed to implement reforms on schedule, Sueddeutsche Zeitung reports, citing unidentified senior EU official.

  Wait, you mean the Greeks (over)promised and never delivered? Who could have possibly seen this coming?

  Not the unidentified EU official who blasts Athens as having implemented only a third of the required projects.

  As a result, the tranfer probably will only take place in November, if then, since only 14 of the 48 “milestones” linked to payments have been decided on.

  The report goes on to tell us what we already knew: talks between the government in Athens and the Troika + the ESM (or Quadriga, or whatever it’s called) ended last week without success.

  SZ goes into the unpleasant details, noting that there are inconsistencies in how the banks deal with bad loans, estimated that 320 000 apartment owners have mortgage payments in arrears, threatened with foreclosures, evictions, and so on.

  In other words, the Greek holiday from being held accountable for anything which started in July and lasted until October is over.

  * * *

  Yet, there is still hope: in a separate report, Germany’s Bild tabloid cites Deutsche Bank analysts as anticipating a debt reduction for Greece of €200 billion by year-end, and amount which Bild conveniently calculates corresponds to €700 per inhabitant of the Eurozone.

  It adds that, as noted above, Greek debt would total €340b by year-end, or 200% of Greek GDP, some 140% higher than allowed by European treaties.

  It concludes by citing Lueder Gerken, Chairman of the Centre for European Policy, as saying that a Greek “haircut is economically inevitable, as well as a fourth rescue package.”

  That much is known.

  What is not known is why, out of the blue, the German press decided to remind the public of the Greek disaster story. After all, thanks to the refugee crisis and Volkswagen, Germany has a whole new set of problems to worry about. Or perhaps, it is time to find a diversion from those, and what better antagonist to focus on than the recently annexed Mediterranean colony which is the European ground zero of so many refugee adventures.

  * * *

  That said, the endless Greek default fiasco is no longer funny, or sad, or tragic, or exciting, or anything – the Greek people eagerly voted for their own doom; they only have themselves to blame this time. 

  

  

  

  

  

  

• Caught On Tape: China Commodity Barge Sinks In Seconds

  As those who follow China’s hard landing economic deceleration closely are no doubt aware, Beijing has an excess capacity problem. Recall the following from a report released last month by Daiwa’s Institute of Research:

   The sense of surplus in China’s supply capacity has been indicated previously. This produces the risk of a large-scale capital stock adjustment occurring in the future. Chart 6 shows long-term change in China’s capital coefficient (= real capital stock / real GDP). This chart indicates that China’s policies for handling the aftermath of the financial crisis of 2008 led to the carrying out of large-scale capital investment, and we see that in recent years, the capital coefficient has been on the rise. Recently, the coefficient has moved further upwards on the chart, diverging markedly from the trend of the past twenty years. It appears that the sense of overcapacity is increasing. 

  
  

  

  Fortunately, China is adept at coming up with creative ways to “correct” the issue as we saw in Tianjin when a massive (and tragic) explosion at a chemical warehouse vaporized thousands of brand new cars parked near the blast site. 

  Now, Beijing is apparently working on innovative ways to get rid of unwanted building materials as evidenced by the following video which purports to show a “gravel boat” on a Chinese river…

  

  

  

  

  

• In Latest Obamacare Fiasco, Most Low-Income Workers Can't Afford "Affordable Care Act"

  Just ten days ago we described the latest unintended (we hope) consequence of the Affordable Care Act known as Obamacare, when Colorado’s largest nonprofit co-op health insurer and participant in that state’s insurance exchange, Colorado HealthOP, announcing it was abruptly shutting down ahead of the November 1 start of enrollment for 2016, forcing 80,000 Coloradans to find a new insurer for 2016.

  It wasn’t the first: the Colorado co-op was at least the fifth in the nation to collapse. Similar nonprofit insurers have already failed in Louisiana, Iowa/Nebraska, Nevada and New York. A health insurance cooperative in Tennessee announced this week that it would stop offering new policies.

  The insurer failed because it would fail to be profitable, in the process burning through $23 million in taxpayer-funded loss that would not be repaid.  “Taxpayers are on the hook for millions of dollars in loans given out to the CO-OP, money that will likely never be repaid,” U.S. Sen. Cory Gardner said in a statement after the announcement.

  And while many had anticipated from the beginning that the Obamacare tax was merely a subsidy for the large insurance companies (or rather, their public shareholders), few had expected a far more sinister consequence of the “Affordable” care plan: that the employer mandate would turn out to be unaffordable for a vast majority of low-income workers – the very people who were supposed to benefit from it.

  But before we unveil this latest depressing, if also anticipated, outcome of socialized healthcare, let’s remember that much of the U.S. has press has touted the success of Obamacare. To be sure, nationwide, the Affordable Care Act has significantly reduced the number of Americans without health insurance. Around 10.7% of the country’s under-65 population was uninsured in the first three months of this year, down from 17.5% five years earlier, according to the National Health Interview Survey, a long-running federal study. Some 14 million previously uninsured adults have gained coverage in the last two years, the Obama administration estimates.

  However, what is left unsaid is that most of those gains have come from a vast expansion of Medicaid and from the subsidies that help lower-income people buy insurance through federal and state exchanges. Workers who are offered affordable individual coverage through their employers — a group that the employer mandate was intended to expand — are not eligible for government-subsidized insurance through the exchanges, even if their income would otherwise have qualified them.

  It is the failing of Obamacare to address the needs of America’s struggling lower-middle class, those women and men who work long, hard hours, often at minimum wage, scrambling to make ends meet. It is them, that the NYT writes about in its recent scathing critique of Obamacare (traditionally, it has been the WSJ that gives scathing reports on the disaster that is Obamacare, usually involving soaring monthly premiums for those who were dragged into the Scotus-enabled tax beyond their will).

  Take the case of Billy Sewell who began offering health insurance this year to 600 service workers at the Golden Corral restaurants that he owns. He wondered nervously how many would buy it. Adding hundreds of employees to his plan would cost him more than $1 million — a hit he wasn’t sure his low-margin business could afford. His actual costs, though, turned out to be far smaller than he had feared. So far, only two people have signed up.

  “We offered, and they didn’t take it,” he said.

  But isn’t that against the stated primary objective of Obamacare: to make affordable health insurance more accessible and affordable to everyone? The answer, according to the NYT, is no.

  The Affordable Care Act’s employer mandate, which requires employers with more than 50 full-time workers to offer most of their employees insurance or face financial penalties, was one of the law’s most controversial provisions. Business owners and industry groups fiercely protested the change, and some companies cut workers’ hours to reduce the number of employees who would be eligible.

   

  But 10 months after the first phase of the mandate took effect, covering companies with 100 or more workers, many business owners say they are finding very few employees willing to buy the health insurance that they are now compelled to offer. The trend is especially pronounced among smaller and midsize businesses in fields filled with low-wage hourly workers, like restaurants, retailing and hospitality. (Companies with 50 to 99 workers are not required to comply with the mandate until next year.)

  Hold on, aren’t those some of the “best” performing job categories in the past year? Why yes they are, in fact, with 11.1 million workers, those employed by “food service and drinking places” are the single largest job subcategory tracked by the BLS. It is almost as if the bulk of the jobs growth went to fields that would be mostly disadvantaged by Obamacare.

  Well, there may be millions of waiters and bartenders in the US, but contrary to what Obamacare promised the vast majority are and will remain uninsured:

  “Based on what we’ve seen in the marketplace, we’re advising some of our clients to expect single-digit take rates,” said Michael A. Bodack, an insurance broker in Harrison, N.Y. “One to 2 percent isn’t unusual.”

  The reason? What was supposed to be affordable remains painfully unaffordable for the lowest rung of the employment pyramid.

  Here is the actual math as experienced by both the abovementioned Mr. Sewell of Golden Corral restaurants, and his mostly minimum-wage employees.

  He employs 1,800 people at the 26 Golden Corral franchises he owns in six Southern and Midwestern states, and previously offered insurance only to his salaried management staff. In January, when the employer mandate took effect, he made the same insurance plan, with a bigger employer contribution, available to all employees working an average of 30 or more hours a week.

  Running the math on his plan — a typical one for the restaurant industry — illustrates why a number of low-wage workers are falling through gaps in the Affordable Care Act.

  The annual premium for individual coverage through the Golden Corral Blue Cross Blue Shield plan is $4,800. Mr. Sewell pays 65 percent for service workers, leaving them with a monthly cost of $140.

  The health care law defines affordable employer-sponsored insurance as that priced at 9.5 percent or less of an employee’s annual household income for individual coverage. (Because employers do not know how much money their workers’ relatives make, there are several “safe harbors” they can use for compliance, including basing their calculation on only their own employees’ wages.) Mr. Sewell’s insurance meets the test, but $65 per biweekly paycheck is more than most of his workers are willing — or able — to pay for insurance that still carries steep out-of-pocket costs, including a $2,500 deductible.

  And this is where Obamacare’s employee mandate fails for a vast majority of US workers.

  Clarissa Morris, 47, has been a server at the Golden Corral here for five years, earning $2.13 an hour plus tips. On a typical day, she leaves the restaurant with about $70 in tips. Her husband makes $9 an hour at Walmart but has been offered only a part-time schedule there, without benefits. Their combined paychecks barely cover their rent and daily essentials.

  “It’s either buy insurance or put food in the house,” she said. On the rare occasions that she gets sick, she visits a local clinic with sliding-scale fees. It costs her $25 for a visit, and $4 to fill prescriptions at Walmart.

  Other business owners find the same paradox: 

  Brad Mete, the managing partner of Affinity Resources, a staffing agency in Dania Beach, Fla., began offering insurance this year to most of his workers only because the law required it. He said the alternative, paying a penalty of about $2,000 per full-time employee, was unthinkable, “That would put us out of business, in one swoop.”

   

  Trying to persuade his hourly workers to buy the insurance is “like pulling teeth,” he said. His company’s plan costs $120 a month, but workers making about $300 a week are reluctant to spend $30 of it on insurance.

  That’s ok – if you beleive the Obama administration, wages are about to soar.

  Or maybe not.

  What is truly tragic, however, that just like in the case of “punishing work” when Earned Income Tax benefits for those living around the poverty line, see their after tax pay rise above what comparable workers who make up to $50k per year, Obamacare seems to have been designed only for those making above the median US wage and above:

  A study by ADP, the payroll processing giant, found an income tipping point at which most employees who are eligible for health insurance will buy it: $45,000 a year.

   

  Workers making $15,000 to $20,000 a year buy employer-sponsored individual insurance when it is offered only 37 percent of the time. That rate rises at every income increment ADP studied until $45,000, when it reaches 82 percent and levels off. Further income gains have virtually no effect on the rate, ADP found.

  And so the wheels slowly fall off the socialized healthcare train:

  Low-income, full-time workers like Ms. Morris may prove to be some of the hardest people to bring into the ranks of the insured, said Gary Claxton, a vice president at the Kaiser Family Foundation, which conducts an annual study on employer health benefits.

   

  “This is one of the outcomes of trying to keep employer-based coverage in place,” Mr. Claxton said. “These are folks that didn’t have coverage before, and they’re not being given much help to get coverage now.”

  Then, now that the disastrous law has been observed in practice, the result is nothing short of a bureaucratic nightmare, and everyone is scrambling to find loopholes:

  Mario K. Castillo, a lawyer in Houston who has extensively studied the new law, said it was poorly understood in the industry, and a bureaucratic nightmare.

   

  “They have to issue you a policy, but dropping it after one year is perfectly legal,” he said. “If you’re in this space, you essentially have to shop for insurance every year.”

  But the biggest slap in Obama’s care comes from those who were supposed to be the direct beneficiaries.

  For employees, forgoing coverage can mean facing tax penalties. Ms. Morris said she was surprised by the $95 fee she had to pay this year for being uninsured in 2014. “I had kind of heard about it, but I didn’t think it was going to kick in until later,” she said.

   

  Around 7.5 million taxpayers paid the fine, according to a preliminary report by the Internal Revenue Service. That is significantly more than the three million to six million the government had forecast.

  Actually, considering central planning and government takeover of private industries always leads to disaster, it is more surprising that the number isn’t far, far greater.

  As for those tens of millions of minimum wage workers, who thought they had a right to “hope” for “change”, and instead ended up even worse off – as well as unisnured and paying a penalty –  our apologies, especially since it is all downhill from here. What you should have done is buy the stock of health insurance companies: because their shareholders’ gain (and your loss) is what the “Affordable” Care Act is truly all about.

  

  

  

  

  

• Schadenfreude – How The US Is Helping China Create A New Financial Order

  Submitted by Jeff Thomas via InternationalMan.com,

  

  Here we have an image of a Chinese banknote, featuring Chairman Mao, followed by a seemingly incongruous German word – schadenfreude. Is there an error here?

  Happily, no. We’ll begin with the word, schadenfreude, which means “harm-joy.” It’s used to express an occurrence that’s destructive, yet brings about happiness.

  This would seem to be a conflict in terms, but, looked at a bit more deeply, it could be said that the killing of an enemy may mean that peace will soon prevail – and so the event brings happiness. Or, another analogy: the bulldozing of an old structure may mean that a new one – a better one – will soon be under construction.

  And that’s the case here. The world’s most powerful (and most oppressive) political/economic power structure has begun to go under the bulldozer. Its replacement will hopefully be a better one.

  The Brussels SWIFT system is currently the largest economic settlement system in the world. Almost all financial transfers are made possible through this system. As such, those who control SWIFT have the power to threaten financial institutions and sovereign nations that, if they don’t do as they’re told, can be denied access to the system.

  The controllers of SWIFT have been far from fair in making these judgements. Much of their agenda has been provided by the Organisation for Economic Co-operation and Development (OECD), a cabal made up of many of the world’s most powerful nations, but primarily Europe and the US. The US is the heavy here and they’ve used their power to create FATCA, a means of applying draconian economic pressures on their own citizens. In doing so, they’ve also succeeded in creating a global shakedown racket aimed at financial institutions. If a bank anywhere in the world is found to have a US citizen as a client and the bank fails to regulate that client sufficiently, the bank itself is “held up” – the US imposes a massive fine on the bank.

  Editor’s Note: If you have never heard of FATCA before I can’t blame you. That so few people understand what it is, is perhaps not surprising. Often, otherwise offensive government actions and institutions are given dull and opaque names to obfuscate their true purpose. Obama signed FATCA into law in 2011. To understand what this odious law that is all about, see here.

  Not surprisingly, the banks of the world (other than the central banks, which are not targeted by FATCA) live in dreaded fear of making the slightest error in trying to please the US government. They’ve been learning that although FATCA claims to be aimed primarily at its non-compliant citizens, there have been other targets. The US government has used the opportunity to go after the bigger fish – the banks themselves.

  Again, the reason for this success in creating this shakedown racket has hinged on US control over the levers of the international financial system – the fear in financial institutions that the US could simply end the banks’ ability to do business if they don’t pay the outrageous fines.

  But this scam only works as long as there is no competitor to the US system. Should there be a free market in the transfer of money – should there be even one competitor in the world – one that does not impose economic mafia-tactics, the potency of the US’ threat would collapse. At that point, business and sovereign nations may cease their use of SWIFT and move over to the new competitor.

  Cross-border Interbank Payment System (CIPS)

  And here is where schadenfreude steps in. China has had their own independent settlement system in the works for some time and it has now been introduced.

  But, before opening up a bottle of bubbly, it would be wise to acknowledge that full implementation may take a few years. It will begin as a means by which to settle oil and gas accounts in keeping with agreements that already exist between China and other nations. As CIPS gains strength, its use will spread outward. This is a virtual certainty, as the more it spreads, the greater the Chinese influence over such entities as the IMF.

  And CIPS will not simply replace SWIFT. What will occur will be that it will be presented as a system that can work alongside SWIFT and interface with it. (e.g., if Germany wishes to have enough natural gas to heat its houses in the winter, Russia would require that the payments for Russian gas be settled through the use of CIPS.)

  The final holdout will be the US, as it has so much more to lose. However, once isolated as the only country that avoids the use of CIPS, demands from China that interfacing take place will force the US to either get on board, or be unable to acquire foreign (particularly Chinese) goods.

  At some point along the way, increasing numbers of the world’s banks will cease to query account applicants as to whether they hold a US passport. They will only wish to know if the applicant has access to CIPS. Over time, the FATCA shakedown will die away, as its driving force – intimidation of the world’s banks – will no longer have teeth.

  Other Developments

  In parallel to the creation of CIPS, China has created the Asian Infrastructure Investment Bank (AIIB). This, together with agreements with Russia and other nations (including some EU nations), has made possible the sale of oil to be settled in yuan.

  The yuan has also overtaken the yen as the fourth most-used currency for international settlement. Next target: the pound, then the euro, then the US dollar.

  How Will It All Shake Out?

  There are two general schools of thought amongst noted contrarians and libertarians regarding China’s overriding objectives.

  One school has it that China is very much a part of the One World Government philosophy and their primary goal is to acquire a more powerful seat at the IMF. Having done so, they will settle in and be content to be one of the leading jurisdictions that run the world collectively.

   

  The other school suggests that China means to become the most powerful nation in the world – to replace the US in every way as the world’s dominant nation.

  My own appraisal is a combination of the two. China’s behaviour – not only their public stance, but their massive economic infrastructural development efforts indicate to me that they intend to go full-bore with their new economic infrastructure, giving them powers that rival and even overtake the EU and US. At that point, they will be unconcerned as to whether they will be welcomed into the “club” that is presently dominated by the EU and US. They will be an unstoppable freight train passing through town. The western world can either get on board, or fall by the wayside. The Chinese will prefer the former, as it would be more profitable and would avoid conflicts (both military and economic), but they will not be deterred.

  At this moment in time, we’re observing a part of that effort. The old structure is being slowly bulldozed and a new structure is underway. It’s very likely that, in order to assure its success, it will be a better one – one which offers its users greater freedom. We can be certain that, like all governmental constructs, it will eventually become corrupted and be just as oppressive as the one it hopes to replace. However, in its early years (and hopefully beyond that) the people of the world will enjoy a period of increased economic freedom.

  Some time ago, when I first predicted that China would create such a system, it seemed almost a fairy tale – a highly unlikely development. Yet, China has gotten there even faster than I’d expected. Let’s hope that the day when its benefits trickle down to the street level, worldwide, will also arrive more quickly than I had expected.

  *  *  *

  Because this risk and others have made our financial system a house of cards, we’ve published a groundbreaking step-by-step manual on how to survive, and even prosper, during the next financial crisis. New York Times best-selling author Doug Casey and his team describe the three ESSENTIAL steps every American should take right now to protect themselves and their family.

  These steps are easy and straightforward to implement. You can do all of these from home, with very little effort. Click here to learn more.

  

  

  

  

  

• Meet The "Million Dollar Shack": Documentary Lays Bare California's Housing Bubble

  “It’s almost impossible to find a home from San Jose to San Francisco for less than a million dollars.” 

  That’s a quote from a short documentary entitled “Million Dollar Shack: Trapped in Silicon Valley’s Housing Bubble” which comprises 23 minutes of sheer, unadulterated comedy even as it very effectively critiques the extent to which America has learned absolutely nothing from the meltdown in 2008.

  This clip has it all: absurd prices for rundown properties, soaring costs for rentals, even a tent in someone’s backyard that goes for $46 a night (you get an extension cord, one shower a day, and wi-fi) and all courtesy of i) greed, ii) an utter inability to learn from the past, and iii) the meteoric rise of Silicon Valley “unicorns” with stratospheric valuations.

  To say “this won’t end well” would be an understatement…

  

  

  

  

• Is The Yield Curve Still A Dependable Signal?

  Authored by Michael Lebowitz via 720Global.com,

  Over the last 30 years, there has been a widely held belief, supported by data, in the predictive powers of the “slope” of the yield curve. The slope of the yield curve is a simple calculation comparing interest rates of various maturity terms. Traditionally, the slope of the yield curve is measured by the difference between interest rates of shorter term government debt, such as the 3-month Treasury Bills or 2-year Treasury Notes, and long-term government debt such as 10-year Treasury Notes and 30-year Treasury Bonds. A steep yield curve, where long term government yields are significantly higher than short ones, implies economic expansion in months and quarters ahead. A flat or inverted yield curve, where long term government yields are not much higher or are even lower than short term ones, implies economic weakness and heightened recession risks ahead.

  The past is not always prologue for the future so we ask the following question: Do the normal rules apply when the Federal Reserve (Fed) has lowered the Federal Funds rate to unprecedented levels for over 7 years and quadrupled the money supply? Questioning the value of traditional analysis is not only appropriate, it is necessary, if one is to effectively perform economic analysis given the unique nature of central bank actions.

  Traditional Yield Curve Analysis

  Below we graphically represent the slope of the yield curve and recessionary periods to demonstrate the predictive relationship. The first chart plots the yield on 2-year Treasury notes and the yield on 10-year Treasury notes. The subsequent chart shows the difference between 2-year Treasury Note yields and 10-year Treasury Note yields, otherwise known as the “2’s-10’s curve”. To highlight the predictive nature of the yield curve, periods where the curve was inverted are plotted in red and recessions are highlighted with yellow bars.

  

  

  The simple deduction from the second chart is that when the yield curve, as measured by the 2’s-10’s curve, has inverted the U.S. economy entered a recession within a relatively short period of time.

  Based solely upon the precedent of the last 30-years and the slope of the curve today (1.42%), one might conclude that there is relatively little reason to worry about a pending U.S. recession. In fact, current levels are similar to those when recession typically ended and prolonged periods of economic growth began.

  As proposed in the introduction, Fed monetary policy is far from normal. Investors therefore need to understand that the unprecedented nature of Fed policy and the fact that the Fed Funds rate has been pegged at zero since December 2008 likely plays a larger part in influencing the shape of the curve than in times past. This unprecedented posture by the Fed is distorting not only the price of money through interest rates but also economic activity. Shorter maturity instruments such as the 2-year Treasury note are heavily swayed by the monetary policy stance established by the Fed while longer maturity instruments such as the 10-year Treasury tend to be largely driven by the rate of inflation and economic activity. By keeping short rates artificially low through a zero Fed Funds target rate policy, the Fed is heavily influencing short-term interest rates and causing the yield curve to be artificially steep. One way to test this theory is to use the Taylor Rule as an alternative Fed Funds target guide.

  The Taylor Rule

  The Taylor Rule, proposed by Stanford economist John Taylor in 1993, sets forth a prescriptive policy benchmark for the Fed Funds target rate based upon the state of the economy using the rate of inflation and actual economic growth relative to potential growth. This formula not only suggests what Fed interest rate policy should be but also serves as a useful measure of the aggressiveness of prior Fed policy.

  Currently, the Taylor rule suggests that the Fed Funds target rate should be approximately 2.85%. With current 2-year Treasury yields at 0.60% and 10-year Treasury yields at 2.02%, the 2’s-10’s curve is 1.42%. If the Fed were to follow the Taylor Rule and the Fed Funds rate were reset accordingly, the yield curve would become significantly inverted, with the assumption that 2-year yields rise pro-rata with Fed Funds as is typical. In fact, the yield curve would be more inverted than at any time in the last 30 years and signaling an imminent recession. The chart below compares the current 2’s-10’s curve versus a Taylor Rule-inspired curve.

  

   

   

  Net Interest Margin

  Another yield curve derived tool used to assess the economic outlook is the state of financial institutions’, predominately banks, net interest margins (NIM). Banks generate a substantial portion of their income from the difference between the yield at which they borrow and the yield at which they lend. The inputs to NIM from a financial statement perspective are interest income minus interest expense. Historically, when the yield curve flattens, the ability of banks to generate income is challenged because the rate at which banks borrow converges towards the yield earned on loans and investments (NIM declines). When NIMs contract, banks tend to engage in less lending activity, constricting economic growth and adding further pressure on the slope of the yield curve to flatten. This self-reinforcing cycle is usually broken when the Fed lowers the Fed Funds rate, which tends to steepen the yield curve and increase NIMs. The chart below compares the relationship of the traditional 2’s-10’s curve and NIM. The red circles emphasize periods where the yield curve was inverted, which ultimately led to recessions.

  Clearly a strong correlation exists between the slope of the yield curve and NIM. The chart also reflects that although the 2’s-10’s curve remains steep today, banks NIMs have declined to their lowest levels in over 30 years and are below those associated with an inverted yield curve preceding U.S. recessions.

  

  In the world of a zero interest rate policy, NIM may be a more valid indicator of future economic activity. In other words, economic forecasts based on the shape of the traditional curve may not be as relevant given the unprecedented monetary policy actions of the Fed. Very low levels of interest rates are squeezing bank profits which is one of the key drivers of lending activity and a primary determinant of economic activity. Growth of the U.S. economy, even at today’s below trend pace, is more dependent than ever on a continuation of credit growth. If bank lending activity is challenged as a result of declining NIM, it would stand to reason that NIM may serve as a useful indicator of potential economic weakness. The graph below serves as a reminder of what happened the only time credit growth declined in the last 65 years – the U.S. experienced the largest financial crisis since the Great Depression.

  

   

  Conclusion – Debt Drives Growth

  Economic growth for the last 30 years has been increasingly funded by debt. For this scheme to continue, there must be increased incentives for the private sector to lend money. Since 1985 the incentive to lend, measured by NIM, has never been worse.

  The Fed is currently contemplating raising short-term interest rates. If they follow through, the effect on NIM could slow economic growth. Historical periods of rate increases generally correspond with a flattening of the yield curve. The chart below highlights periods when the Fed initiated rate increases (red circles) and the corresponding reaction of the yield curve flatter (red arrows). Raising short-term rates, all else equal, would increase bank borrowing rates which would further reduce NIM.

  

  The bottom line is that NIM and the Taylor Rule-adjusted curve are both flashing warning signs of economic recession, while the traditional yield curve signal is waving the all clear flag. Given the Fed actions of the last several years – sustained crisis policy of zero short term rates and multiple rounds of quantitative easing – it seems prudent to consider potential distortions to traditional indicators. Using the shape of the yield curve as an indicator for the economic outlook requires more supporting evidence for validation. In this case, NIM and the Taylor Rule-adjusted curve contradict the traditional curve’s signal for the economic outlook.

  To the extent the Federal Reserve decides to increase interest rates, it should be apparent that such a move would be inconsistent with their prior actions. In fact, it may likely be a desperate effort to re-load the monetary policy gun as opposed to a signal of domestic economic strength. Not only is this a departure from the past, this would lead many to question the Fed’s motives. It is worth keeping in mind that blind trust and confidence in the Fed has propelled many markets much higher than fundamentals justify.

   

  See full PDF below.Curve Ball 10.26.2015

  

  

  

  

  

• What Recovery? Record Number Of Americans Become Blood Plasma "Sellers" To Make Ends Meet

  Having previously explained President Obama's recovery in charts, we thought words and pictures would be a better indicator of the dire situation facing so many Americans that get missed by the business media's spotlight. With 9.4 million more Americans below the poverty line than before the crisis, as The LA Times reports, it's disturbing to see so many people so destitute – even if they're working – that they've resorted to selling body fluids to make ends meet. The going rate for plasma donation, which can take a couple of hours, is about $25 or $30. But Octapharma is offering $50 for the first five visits, "when you get that $50, you feel good," one plasma 'seller' said, "I paid my gas bill."

  Despite the Fed continuing to kick this down the road, they continue to claim that we are in the middle of an ongoing recovery. There’s just one problem with that: things are getting worse than pre-crisis levels for millions of the poorest Americans.

  

   

  Obamanomics illustrated…

  

   

  But it gets worse, as 1000s of unemployed (and under-employed) Americans resort to selling their blood plasma to make ends meet (as The LA Times reports)

  "The line was too long," a middle-aged woman named Joyce Rogers said as she got into her car outside Octapharma Plasma in Van Nuys.

   

  Rogers, a certified nurse assistant, told me she was going to a job interview and would return later to see if the line had thinned. But it seldom seems to. I've seen dozens of people reclined on lounges, fat 17-gauge needles in their arms, while dozens more wait in the packed lobby and the parking lot, some of them with children in tow.

   

  The going rate for plasma donation, which can take a couple of hours, is about $25 or $30. But Octapharma is offering $50 for the first five visits, and a poster in the lobby says: "Donate 10X by the end of October for a chance to win a TV!!!"

   

  "When you get that $50, you feel good," Rogers said. "I paid my gas bill."

   

  At the same center, three veterans sat in a skunky-smelling car in the parking lot and told me they pay a different kind of bill with their plasma money.

   

  "Medical marijuana," said one of the three. "It helps with my anxiety."

  Whatever the motive of the sellers, the plasma business is a booming, $20-billion-dollar international enterprise, according to Patrick Robert, an industry analyst. Demand for plasma is growing worldwide, he said, because the body fluid is used to manufacture drugs that treat immune disorders, protein disorders, shock, severe burns and other maladies, with business expanding into developing countries.

  Octapharma and Biomat USA are each a division of a European-based pharmaceutical company, but the vast majority of the world's plasma providers are in the United States, where screening and handling regulations are considered safe, and selling fluids is more culturally acceptable.

  "We have all kinds of donors, under-employed or unemployed," said Vlasta Hakes, spokeswoman for Grifols, the Spanish company that owns Biomat USA.

   

  She said Grifols has 150 plasma centers in the U.S., with five in California including huge, sleek facilities in Bellflower and Lake Balboa. On average, 1,000 people sell plasma weekly at each center.

   

  Like other industry reps, Hakes refers to plasma "donors" rather than plasma sellers, which may sound a little better from a marketing perspective. She emphasizes the great benefit of plasma-based drugs.

   

  But it's disturbing to see so many people so destitute — even if they're working — that they've resorted to selling body fluids. For their trouble, they make something akin to minimum wage while billions of dollars flow into corporate bank accounts.

  Dr. Roger Kobayashi, a Nebraska physician who teaches immunology at UCLA, takes it a step further. He raises moral and ethical questions about the commodification of a body fluid by international businesses that sometimes behave in ways that hurt patients.

  "Prices keep going up, and it's becoming harder to get the drugs to patients because they can't afford it," Kobayashi said. "The people who are making a lot of money are the investors and the corporations."

   

  And they are well aware that for many people living on the edge, personal economics is all that matters.

   

  "This is my first time," a middle-aged woman named Elizabeth told me at the Lake Balboa Biomat USA. She said she took time off from a job to care for her ailing mother, and now she can't find work.

   

  "If you would have told me five years ago that I'd end up in here, I wouldn't have believed it. It's reality, and it's humbled me for sure."

   

  At the Orange Biomat, Navy veteran Tim Edwards told me he makes about $13.50 an hour setting up alcohol displays in stores, and he was waiting to hear if he got a better job he'd applied for.

   

  "I can't pay my debts," he said. "I have mixed feelings because I don't want to have to do this. At the same time, it feels good to be doing something positive for other people."

  However in The Land Of The Free, there are numerous other bodily fluids one can produce and exchange for cash… (as wisebread.com reports)

  1. Sperm

  For a young guy who lacks money, sperm donation can seem like the ultimate gig. It pays well, and the process involved is, um, pretty familiar. (The vast majority of donors are college students.)

   

  What It Involves

   

  Sperm donation kind of seems like getting cash for something you may (or may not, no judgments…) be doing anyway, but it's a lot more complicated than that. You have to be tall (at least 5'10" or taller, depending on the sperm bank.) You have to be smart… or at least be enrolled in college. You have to be between the ages of 18 and 35. In terms of of your chances, most donors are caucasian (most recipients are white couples), of a healthy weight, and not redheads.

   

  If you fit the bill, you'll still have to sit through a job-interview-style round of questions about you, your life, and your future goals. This will be followed by a battery of health questions, including ultra-personal ones about your health status, your sex life, and your sexual partners. Even if you make it through this gauntlet of challenges, you'll have to hand over your first two donations free of charge, so that your little swimmers can be tested.

   

  The Payout

   

  Sperm banks set their own rates, but payouts range from $30 to $200 per, um, donation. However, if you're accepted as a donor, you'll often have to sign a contract to donate weekly over a long period of time — like six months to a year — during which time your checks may be held in escrow until your term is up. The money might be good, but it isn't fast and it isn't as easy as it sounds.

  2. Eggs

  I really don't know if eggs are a liquid or not. What I do know is that they are donated to people who are unable to conceive, and they provide a very high payout compared to most other fluids. So, let's just assume they come in liquid form and roll with it, okay?

  What It Involves

  Donating eggs is no picnic. In fact, just getting to the actual egg donation (and payment) stage takes time, energy, and some degree of physical discomfort. First, donors have to fill out a questionnaire. If that's accepted, they will be asked to come in for a physical exam, psychological testing, blood tests, and a genetic screening. If you're approved as a donor, you'll have to wait at least a month to donate.

   

  Next comes the donation cycle, and that's no picnic either. You will be injected with fertility drugs to stimulate the development of a number of eggs. Over the next two weeks, you'll have to continue to inject yourself with hormones and make daily morning visits to the clinic so that they can adjust your dosage and check on your progress. After seven to 12 days of this carnival ride, you'll be ready to have your eggs retrieved. You'll be anesthetized, and the eggs will be removed with a syringe. The procedure isn't painful, but the hormonal changes make it physically demanding, and mild side effects like moodiness and fluid retention can last up to two weeks. There are also some very serious side effects (although they're rare) to consider with this procedure.

   

  The Payout

  Well, it's big — $6,000 to $10,000 per donation depending on the market, the desirability of your particular donation, and the donation center you choose. If you work full time, that'll be offset by some lost time at work and some serious hassles, not to mention potential health consequences. There are no firm rules on how many times women can donate, but most clinics ask that they only do so a few times because the long-term health risks of the procedure are unknown.

  3. Breast Milk

  If you're a new mother, you may be carrying the equivalent of liquid gold: breast milk. And because some moms have way too much, while others have very little (or none at all), a group of moms got the idea to share the love by donating or selling breast milk to those who can't produce their own.

  What It Involves

  Pumping your breast milk and shipping it, on ice, to people who need it. There are online services to facilitate this process, most prominently onlythebreast.com, the Craigslist of breast milk exchange. You could probably even post your own ad in your community.

  The Payout

  On breast milk exchanges, milk tends to sell for $1.50 to $3.00 per ounce. To put that in perspective, a baby needs between 13 and 42 ounces of milk per day, depending on his or her weight — at $3 an ounce, that's $39 to $126 a day. Yowza!

  4. Urine

  Why would someone want to buy your pee? Because those who are subject to drug tests — whether for work or sports or parole — may not be able to pass those tests with their own urine. And, where there's demand, there will be supply.

  What It Involves

  Producing, packaging, and shipping your pee to other people. If you're really enterprising, you could even make a business out of it. In the late 1990s, a South Carolina man produced 50 urine samples a day, selling more than 15,000 samples per year before the state shut him down. Several other states have since passed similar laws.

  The Payout

  The going rate appears to be about $20 per ounce — and possibly jail time.

  Whether it's a tiny condo in a bad part of town or a bag of someone else's urine, if there's enough demand for something, it will become valuable. Why do people sell bodily fluids for money? Simple answer: Because they can. That's just the way economies work.

  *  *  *

  And finally, if this is the 'recovery' just what will the next recession look like?

  

   

  Charts: Bloomberg

  

  

  

  

  

• Everyone Is Asking: "If Chinese Consumption Is Rising, Why Are Its Malls Empty?" – Here Is The Answer

  With China’s official headline GDP number printing at decade lows, the positive spin on the increasingly negative data out of China has been that this is all a part of China’s transition from an export-oriented to a consumption economy. However, there is a problem with this narrative: malls and shopping centers in China have been, and remain, increasingly empty suggesting that the narrative of the  resurgent Chinese consumer – especially in the aftermath of the biggest stock market bubble burst since 2008 – is greatly exaggerated.

  Case in point: Reuters asks this morning “why are malls closing if consumption is rising?”

  

  Specifically, it looks at the Di Mei shopping center in downtown Shanghai which it finds “a surprisingly depressing place to shop.”

  The underground mall is located in one of the most shopping-mad cities in China, and yet it is run down and starved of customers.“

   

  “Sometimes I cannot sell even one dress in a day,” said dress shop owner Ms Xu, who rents a space in Di Mei.

   

  Rising vacancy rates and plummeting rents are increasingly common in Chinese malls and department stores, despite official data showing a sharp rebound in retail sales that helped the world’s second-largest economy beat expectations in the third quarter.

  It sure makes one wonder just how credible China’s retail sales “data” are, especially since the government is far less willing to provide official commercial vacancy rates: “As growth in retail sales slows because of the country’s lower GDP growth, and in cities where mall space is abundant, vacancy rates have risen substantially,” said Moody’s analyst Marie Lam in a research note.

  One possible answer to this seeming conundrum is a well-known one: the transition to online shopping which however does not explain all the recent bearish commentary from China’s premier online vendor Ali Baba, which recently tumbled below its IPO price after announcing the slowest revenue growth in three years.

  There is another twist: the government is goosing retail sales by acting as a direct end-purchaser:

  The answer to that apparent contradiction lies in the rising competition from online shopping and government purchases possibly boosting retail statistics. Add poorly managed properties into the equation and the empty malls aren’t much of a surprise.

   

  More importantly, the struggles of Chinese brick-and-mortar retailers amplify a policy conundrum; these malls, built to reap gains from rising consumption, are instead adding to China’s corporate debt problem, currently at 160 percent of GDP – twice as high as the United States.

   

  Less foot traffic means cash flow of mall owners and developers are getting squeezed – a potential hazard for an economy growing at its slowest pace in decades.

   

  Di Mei’s owners are trying to refurbish, but it’s unclear whether it will pay off, and others are just closing down. The Sunlight Store in Beijing, for example, is located in another prime pedestrian hub, but it closed its blinds this month, with manager Ni Guifang telling Reuters they are seeking greener pastures online.

   

  “The sales were just OK, but the overall sales were on the downward trend,” Ni said.

   

  * * *

  On the other hand, e-commerce sites continue to post double-digit growth rates, even as some moderation is evident. E-commerce leader Alibaba (BABA.N) is expected to report that sales growth slowed sharply in the second quarter – albeit to around 27 percent on-year, still a ripping pace.

  There is another, potentially benign explanation: overcapacity – after all China’s “ghost shopping malls” have been well-known for years.

  China is currently the site of more than half the world’s shopping mall construction, according to CBRE, a real estate firm, even though it appears that many of these malls will not produce good returns for their investors.  A joint report by the China Chain Store Association and Deloitte showed that by the end of this year, the total number of China’s new malls is projected to reach 4,000, a jump of over 40 percent from 2011.

  This brings up two follow up problems: one is that this overcapacity will remain in place for years, leading to much less construction and expansion in the coming years: “Real estate analysts note that much of the surge in retail space construction came at the behest of local governments, who were rushing to push real estate development as part of attempts to stimulate the economy. The result has been malls built in haste and managed poorly.”

  An even bigger problem is that sooner or later, all these bad debt that was used to fund this construction scramble and which currently generates no cash flow, will have to be reclassified as non-performing sooner or later: “If you build it and they’re not coming, that’s a non-performing loan,” said Tim Condon of ING.

  As a reminder, China’s non-performing debt is the one elephant in the room which nobody dares to touch, yet which CLSA briefly touched upon two weeks ago when it calculated that the real bad debt ratio in China is not 1.5% as per official “data” but really 8.1%. Needless to say, on $30 trillion in bank assets, this is a big problem.

  But the one explanation that had not been provided, also happens to be the simplest one: Chinese consumers are simply not consuming! Luckily, we have insight into that as well, courtesy of the FT’s Martin Sandbu:

  As if on cue, the programmed slowdown in manufacturing, investment, and export growth is perfectly matched by a rise in domestic consumption, retail and services that leaves the total economy growth number just where the government said it would be. For example, industrial output is now reported to increase at 5.8 per cent, while the growth of the services share of GDP remains stable at 8.4 per cent.

   

  The real sceptics go much further — and they have good arguments on their side which the optimists do not convincingly address. As the FT’s new EM Squared service pointed out last week, there are important holes in the shift-to-services story. One is that too much of the services growth is accounted for by finance, which is tricky to measure at the best of times, and whose reported robustness after the third-quarter market mayhem is outright unbelievable. Another is that income and wage growth, which presumably should be powering the supposed consumption and services boom, is slowing.

  And the chart which hammers China’s hard landing home:

  

   

  There is simply no way to spin the above data in a favorable light, which we hope also answers Reuters’ original question on China’s empty malls. 

  In fact, the only question after reading the above should be: “how long before China’s consumption dysfunction leads to empty malls in the middle of the United States itself?”

  

  

  

  

• If This Really Is "1998 All Over Again", Oil Is About To Soar

  Last night, when laying out Bank of America’s case on how much higher this “one final meltup” can push Wall Street, we observed a topic that has gained particular prevalence in recent weeks: following the latest snapback from its September lows, instead of comparisons to 2007, the latest fad is to compare equity index chart to those in late 1998, early 1999 in the aftermath of the LTCM bailout, and just before the dot com bubble took off in earnest.

  As a reminder, this is what BofA said:

  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 most vivid example of why the blow-off top of 1998/1999 is now being cited as the potential scenario, is the following Nasdaq chart: “The 1998-2015 analogy, for what it’s worth, is working for the Nasdaq, 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”

  

   

  Yet one place where the 1998/1999 analogy has so far failed to materialize, is crude oil. As BofA notes “despite the strong ECB & China policy action is conspicuously not rallying yet…in 1998-99 oil acted on the “first-in, last-out” principle, but eventually EM/global growth pushed oil much higher in 1999.”

  Here is how the 1998/1999 overlay would look like for oil if it were indeed a “deja vu, all over again” situation.

  

  The chart above needs no explanation: if this is indeed a rerun of the post-LTCM/pre first tech bubble days, then oil is about to soar by 150%.

  But is it? BofA was skeptical.

  New highs thus require:

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

  That’s a tough ask.

  Tough, but not impossible when your adversaries are entities that print money for a living.

  BofA’s logic is contingent on no incremental news out of central banks; but recall that for China the biggest concern right now is neither reflating the housing bubble, nor boosting its stocks, but pushing the price of commodities higher since more than half of its levered commodity companies are unable to cover interest at current commodity prices, and will sooner or later force a default cascade.

  Which is why anyone logically skeptical that oil and commodities can soar from here, for the simple reason that the latest gusher of central bank liquidity will merely result in more cheap funding and will lead to a production boost, leading to further price declines, should be careful: after all there is nothing in the (lack of) central banker rule book that says commodities are off limits for central banks to buy.

  

  

  

  

  

• Worst News Ever? World Health Organization Says Steak "Probably" Causes Cancer

  Back in June, we highlighted the sobering and yet totally unsurprising fact that Americans are, at the risk of being crass, getting fatter all the time.

  Researchers had just released a new report based on data from the National Health and Nutrition Examination Survey and the conclusions were not encouraging. Around 35 percent of men and 37 percent of women are obese, the researchers said, adding that another 40 percent of men and 30 percent of women are overweight. In all then, some 74% of men are at risk, a rather precipitous increase over the past several decades:

  

  And while none of that is particularly surprising given the proliferation of processed food and ready availability of 84 ounce Big Gulps at the local 7 Eleven, what was shocking about the report is the following: “This generation of Americans is the first that will have a shorter life expectancy than the previous generation, and obesity is one of the biggest contributors to this shortened life expectancy because it is driving a lot of chronic health conditions.”

  Of course Americans are used to their sedentary lifestyle and have become accustomed to gorging themselves at meal time and if persisting in such creature comforts means shaving a few years off their lifespans well, for most people that’s probably a reasonable trade off. 

  But while Americans may not be frightened of heart attacks, they’re still generally scared of cancer and so one way to get everyone to stop blowing themselves up like balloons might be to make people scared to eat. Cue the World Health Organisation (via Reuters):

  Eating processed meat can lead to bowel cancer in humans while red meat is a likely cause of the disease, World Health Organisation (WHO) experts said on Monday in findings that could sharpen debate over the merits of a meat-based diet.

   

  The France-based International Agency for Research on Cancer (IARC), part of the WHO, put processed meat such as hot dogs and ham in its group 1 list, which already includes tobacco, asbestos and diesel fumes, for which there is “sufficient evidence” of cancer links.

   

  “For an individual, the risk of developing colorectal (bowel) cancer because of their consumption of processed meat remains small, but this risk increases with the amount of meat consumed,” Dr Kurt Straif of the IARC said in a statement.

   

  Red meat, under which the IARC includes beef, lamb and pork, was classified as a “probable” carcinogen in its group 2A list that also contains glyphosate, the active ingredient in many weedkillers.

   

  The lower classification for red meat reflected “limited evidence” that it causes cancer. The IARC found links mainly with bowel cancer, as was the case for processed meat, but it also observed associations with pancreatic and prostate cancer.

  Got that? Steak is now in the same category as weedkiller (Monsanto execs are laughing somewhere).

  
  

  Here’s more color from Bloomberg: 

  The red meat study is just the latest of many that WHO has conducted since the 1970s, when it set out to identify and catalogue suspected carcinogens. The organization’s International Agency for Research on Cancer has evaluated 984 agents, from chemicals to careers, that can be linked to cancer.

   

  They fall into one of five classifications, according to the strength of the evidence: agents or activities that definitely, probably, or possibly cause cancer in humans; those that probably don’t cause cancer; and those for which the evidence is inconclusive.

   

  It’s important to note that the agents at the top aren’t necessarily the most dangerous. They’re the ones with the clearest evidence of hazard. WHO seeks to identify carcinogens “even when risks are very low at the current exposure levels, because new uses or unforeseen exposures could engender risks that are significantly higher,” the agency says. In other words, even though WHO has determined that red meat is a carcinogen, the report doesn’t quantify how much meat it would take to cross into the danger zone.

   

  

  Full infographic here

  The question now, we suppose, is whether this will be used as an excuse for government to begin ever so gradually enacting a set of paternalistic regulations on red meat and Lunchables in an all too familiar attempt by lawmakers to save us from ourselves.

  

  Guard your steaks.

  

  

  

  

  

• Complacency Reigns At Epic Levels: "Few Are Ready For What Is Coming"

  Submitted by Howard Kunstler via Kunstler.com,

  Ben Bernanke’s memoir is out and the chatter about it inevitably turns to the sickening moments in September 2008 when “the world economy came very close to collapse.” Easy to say, but how many people know what that means? It’s every bit as opaque as the operations of the Federal Reserve itself.

  There were many ugly facets to the problem but they all boiled down to global insolvency — too many promises to pay that could not be met. The promises, of course, were quite hollow. They accumulated over the decades-long process, largely self-organized and emergent, of the so-called global economy arranging itself. All the financial arrangements depended on trust and good faith, especially of the authorities who managed the world’s “reserve currency,” the US dollar.

  By the fall of 2008, it was clear that these authorities, in particular the US Federal Reserve, had failed spectacularly in regulating the operations of capital markets. With events such as the collapse of Lehman and the rescue of Fannie Mae and Freddie Mac, it also became clear that much of the collateral ostensibly backing up the US banking system was worthless, especially instruments based on mortgages. Hence, the trust and good faith vested in the issuer of the world’s reserve currency was revealed as worthless.

  The great triumph of Ben Bernanke was to engineer a fix that rendered trust and good faith irrelevant. That was largely accomplished, in concert with the executive branch of the government, by failing to prosecute banking crime, in particular the issuance of fraudulent securities built out of worthless mortgages. In effect, Mr. Bernanke (and Barack Obama’s Department of Justice), decided that the rule of law was no longer needed for the system to operate. In fact, the rule of law only hampered it.

  Mr. Bernanke now says he “regrets” that nobody went to jail. That’s interesting. More to the point perhaps he might explain why the Federal Reserve and the Securities and Exchange Commission did not make any criminal referrals to the US Attorney General in such cases as, for instance, Goldman Sachs (and others) peddling bonds deliberately constructed to fail, on which they had placed bets favoring that very failure.

  There were a great many such cases, explicated in full by people and organizations outside the regulating community. For instance, the Pro Publica news organization did enough investigative reporting on the racket of collateralized debt obligations to send many banking executives to jail. But the authorities turned a blind eye to it, and to the reporting of others, mostly on the web, since the legacy news media just didn’t want to press too hard.

  In effect, the rule of law was replaced with a patch of official accounting fraud, starting with the April 2009 move by the Financial Accounting Standards Board involving their Rule 157, which had required banks to report the verifiable mark-to-market value of the collateral they held. It was essentially nullified, allowing the banks to value their collateral at whatever they felt like saying.

  Accounting fraud remains at the heart of the fix instituted by Ben Bernanke and the ploy has been copied by authorities throughout the global financial system, including the central banks of China, Japan, and the European Community. That it seemed to work for the past seven years in propping up global finance has given too many people the dangerous conviction that reality is optional in economic relations. The recovery of equity markets from the disturbances of August has apparently convinced the market players that stocks are invincible. Complacency reigns at epic levels. Few are ready for what is coming.

  

  

  

  

  

• Oct 27th – ECB to ease in December but deposit rate cut unlikely

  EMOTION MOVING MARKETS NOW: 60/100 GREED

  PREVIOUS CLOSE: 58/100 GREED

  ONE WEEK AGO: 48/100 NEUTRAL 
  ONE MONTH AGO: 18/100 EXTREME FEAR

  ONE YEAR AGO: 14/100 EXTREME FEAR

  Put and Call Options: NEUTRAL During the last five trading days, volume in put options has lagged volume in call options by 28.99% as investors make bullish bets in their portfolios. This is a lower level of put buying than has been the norm during the last two years and is a neutral indication.

  Market Volatility:  NEUTRAL The CBOE Volatility Index (VIX) is at 15.29. This is a neutral reading and indicates that market risks appear low.

  Stock Price Strength: EXTREME GREED The number of stocks hitting 52-week lows is slightly higher than the number hitting highs but is at the upper end of its range, indicating extreme greed.

   

  PIVOT POINTS

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

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

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

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

   

  MEME OF THE DAY – IT’S THE JERKS

   

  UNUSUAL ACTIVITY

  AET NOV 99 PUT Activity 2500 block @$2.45

  T JAN 31 PUT Activity 20k @$.35 on offer

  VALE OCT WEEKLY4 4.5 CALL Activity 9766 block @$.18

  MU Oct WEEKLY4 Call Activity 17.5 4900 @$.16 on offer

  WGBS SC 13G Filed by Empery Asset Management, LP 5.19%

  RIT 10% Owner P    10,115  A  $ 13.166   P    1,300  A  $ 13.19

  More Unusual Activity…

  HEADLINES

   

  Congress, White House make progress on budget deal –Politico

  BoC Deputy Governor Cote To Retire At End-January 2016 – BoC

  First Bank of England hike now not expected until second quarter 2016: Reuters poll

  ECB to ease in December but deposit rate cut unlikely: Reuters Poll

  PBOC’s Yi: Rate Liberalisation Is Not A One-Off Move – WSJ

  US New Home Sales Sep: 468K (est 550K; rev prev 529K)

  ICE To Buy Interactive Data For $5.2bln In Cash & Stock – CNBC

  Duke Energy To Acquire Piedmont Natural Gas For $4.9bln – NYT

  Bridgestone to buy US auto parts retailer Pep Boys – Rtrs

   

  GOVERNMENTS/CENTRAL BANKS

  Congress, White House make progress on budget deal –Politico

  Moody’s: Failure to lift debt ceiling, although unlikely, would not mean impending US Debt Default

  BoC Deputy Governor Cote To Retire At End-January 2016 – BoC

  Bundesbank Monthly Report: Despite Slower Q3, German Economic Growth Is Quite Strong

  First Bank of England hike now not expected until second quarter 2016: Reuters poll

  ECB to ease in December but deposit rate cut unlikely: Reuters Poll

  PBOC’s Yi: Rate Liberalisation Is Not A One-Off Move – WSJ

  FIXED INCOME

  U.S. Government Bonds Rise Before Fed’s Policy Meeting –WSJ

  ECB: Buys EUR 12.254bln in PSPP (Total EUR 383.07bln)

  ECB: Buys EUR 200mln in ABSPP (Total EUR 14.665bln)

  ECB: Buys EUR 2.032bn in CBPP (Total EUR 128.133bln)

  U.K.-German Bond Yield Spread Touches Widest Mark Since June –BBG

  Municipal Bond Sales Poised to Decelerate as Redemptions Rise –BBG

  FX

  Dollar falls on lower U.S. yields, home sales data –Rtrs

  AUD/USD: Aussie Advances on Data & Technical Support –WBP

  USD/CAD slips lower after U.S. housing data –Investing

  EUR/USD: Euro Continues Recovery After US Data Disappoint –WBP

  GBP/USD: Sterling Snaps Bearish Streak, Enhanced After US Data –WBP

  COMMODITIES

  Crude oil down, extending two-week slide on product glut worry ?Rtrs

  WTI crude futures settle lower by $0.62 (-1.39%) at $43.98

  Brent crude futures settle at $47.54/bbl, down 0.94%

  Natural gas pounded by supply, warm weather –CNBC

  Gold regains recent loss as weak housing data pressures dollar –MktWatch

  Gold rally brings out options bulls –Rtrs

  EQUITIES

  INDICES: Stocks struggle for gains; Apple weighs on Dow –CNBC

  INDICES: EZ Equity markets dip after weeks of gains; Fed meeting ahead –Rtrs

  M&A: ICE To Buy Interactive Data For $5.2bln In Cash & Stock – CNBC

  M&A: Duke Energy To Acquire Piedmont Natural Gas For $4.9bln – NYT

  M&A: Bridgestone to buy US auto parts retailer Pep Boys – Rtrs

  M&A: China online travel firm Ctrip in tie-up with rival Qunar – Rtrs

  M&A: Starwood Capital to buy apartment units worth $5.37bln – Rtrs

  EARNINGS: LabCorp’s sales soar after Covance acquisition – MktWatch

  EARNINGS: Xerox Stumbles to Loss, Looks Into New Strategies – WSJ

  EARNINGS: Roper Technologies to Buy CliniSys Group; Profit Edges Higher – WSJ

  SERVICES: FedEx sees record holiday shipments on rising retail, e-commerce – Rtrs

  PHARMA: Valeant Forms Board Committee to Review Philidor Arrangement – WSJ

  EMERGING MARKETS

  China’s rate liberalization won’t trigger deposit war –BBG

  India hosts biggest Africa summit; plays catch up with China

   

  Brazilian Minister of Trade Visits Iran to Expand Cooperation

  

  

  

  

  

• New Drone Footage Captures Scope Of EU's Migrant Crisis As Brussels Plans Refugee "Holding Camps"

  Europe took another stab at tackling the bloc’s worsening migrant crisis on Sunday as Jean-Claude Juncker called a mini-summit of 11 regional leaders in Brussels. The immediate concern, Juncker contends, is providing shelter for the hundreds of thousands of asylum seekers who have inundated the Balkans en route to what they hope will be a better life in Germany. 

  So far, Europe has struggled mightily under the weight of the people flows and a plan to place 120,000 asylum seekers based on a quota system met with hostility from some Eastern European nations including Hungary, where PM Viktor Orban has closed the border with both Serbia and Croatia in an effort to, in his words, “preserve the Christian heritage.” Germany’s approach has been to adopt what amounts to an open door policy to migrants and that, in turn, has set off border battles in the Balkans as Serbia, Croatia, and Slovenia bicker about the best way to divert the refugees north. 

  The new “plan” proposed by Merkel and Juncker aims to set up so-called “holding camps” along the Balkan route. The sites will be able to accommodate some 100,000 refugees. 

  “It cannot be that in the Europe of 2015 people are left to fend for themselves, sleeping in fields,” Juncker said.

  Here’s more from The NY Times:

  The leaders of Greece and other countries along the main migrant trail to affluent parts of Europe agreed late Sunday to set up holding camps for 100,000 asylum seekers, a move that Chancellor Angela Merkel of Germany said would help slow a chaotic flow of tens of thousands of people seeking shelter from war or simply better lives.

   

  Amid warnings that the European Unionrisked falling apart if it cannot forge a common response to a largely uncontrolled influx of Syrians, Afghans and others, Ms. Merkel said early Monday in Brussels that Europe “faced one of the greatest litmus tests” in its history and was now moving slowly to ease the crisis.

   

  All the same, she told reporters after an emergency meeting with Eastern and Central European leaders in Brussels that Europe still had a long way to go before it got a grip on its biggest refugee crisis since the end of World War II.

   

  Jean-Claude Juncker, the European Union’s top executive, who convened Sunday’s meeting at the behest of Ms. Merkel, said reception centers would be established along the so-called “Balkan route” taken by most migrants that could hold and process 50,000 people, with facilities for 50,000 more to be set up in Greece. He said leaders had also agreed to stop “waving through” migrants who cross their countries as they rush north toward Germany and Scandinavia.

   

  “The only way to restore order is to slow down the uncontrolled flows of people,” Mr. Juncker told reporters.

   

  Commenting on pledges of coordinated action made by the leaders at the meeting, she said, “Of course this does not solve the problem,” but it does provide “a building stone in the edifice” of a more coherent policy.

  Count us skeptical. 

  In all likelihood, these way stations will swiftly become overcrowded, unsafe refugee internment camps and they’ll likely be easy targets for vociferous anti-migrant protests or worse. 

  With that in mind, we present the following drone footage and still shots which should give you an idea about why we contend that Europe’s “holding camps” will swiftly be overrun. 

  

  

  

  

  

  

  

  

  

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