Today’s News September 29, 2015

• "Minority Report" Is 40 Years Ahead of Schedule: The Fictional World Has Become Reality

  Submitted by John Whitehead via The Rutherford Institute,

  “The Internet is watching us now. If they want to. They can see what sites you visit. In the future, television will be watching us, and customizing itself to what it knows about us. The thrilling thing is, that will make us feel we’re part of the medium. The scary thing is, we’ll lose our right to privacy. An ad will appear in the air around us, talking directly to us.”—Director Steven Spielberg, Minority Report

  We are a scant 40 years away from the futuristic world that science fiction author Philip K. Dick envisioned for Minority Report in which the government is all-seeing, all-knowing and all-powerful, and if you dare to step out of line, dark-clad police SWAT teams will crack a few skulls to bring the populace under control.

  Unfortunately, as I point out in my book Battlefield America: The War on the American People, we may have already arrived at the year 2054.

  Increasingly, the world around us resembles Dick’s dystopian police state in which the police combine widespread surveillance, behavior prediction technologies, data mining and precognitive technology to capture would-be criminals before they can do any damage. In other words, the government’s goal is to prevent crimes before they happen: precrime.

  For John Anderton (played by Tom Cruise), Chief of the Department of Pre-Crime in Washington, DC, the technology that he relies on for his predictive policing proves to be fallible, identifying him as the next would-be criminal and targeting him for preemptive measures. Consequently, Anderton finds himself not only attempting to prove his innocence but forced to take drastic measures in order to avoid capture in a surveillance state that uses biometric data and sophisticated computer networks to track its citizens.

  Seemingly taking its cue from science fiction, technology has moved so fast in the short time since Minority Report premiered in 2002 that what once seemed futuristic no longer occupies the realm of science fiction. Incredibly, as the various nascent technologies employed and shared by the government and corporations alike—facial recognition, iris scanners, massive databases, behavior prediction software, and so on—are incorporated into a complex, interwoven cyber network aimed at tracking our movements, predicting our thoughts and controlling our behavior, Spielberg’s unnerving vision of the future is fast becoming our reality.

  Examples abound.

  FICTION: In Minority Report, police use holographic data screens, city-wide surveillance cameras, dimensional maps and database feeds to monitor the movements of its citizens.

   

  REALITY CHECK: Microsoft, in a partnership with New York City, has developed a crime-fighting system that “will allow police to quickly collate and visualise vast amounts of data from cameras, licence plate readers, 911 calls, police databases and other sources. It will then display the information in real time, both visually and chronologically, allowing investigators to centralise information about crimes as they happen or are reported.”

   

  FICTION: No matter where people go in the world of Minority Report, one’s biometric data precedes them, allowing corporations to tap into their government profile and target them for advertising based on their highly individual characteristics. So fine-tuned is the process that it goes way beyond gender and lifestyle to mood detection, so that while Anderton flees through a subway station and then later a mall, the stores and billboards call out to him with advertising geared at his interests and moods. Eventually, in an effort to outwit the identification scanners, Anderton opts for surgery to have his eyeballs replaced.

   

  REALITY CHECK: Google is working on context-based advertising that will use environmental sensors in your cell phone, laptop, etc., to deliver “targeted ads tailored to fit with what you’re seeing and hearing in the real world.” However, long before Google set their sights on context advertising, facial and iris recognition machines were being employed, ostensibly to detect criminals, streamline security checkpoints processes, and facilitate everyday activities. For example, in preparing to introduce such technology in the United States, the American biometrics firm Global Rainmakers Inc. (GRI) turned the city of Leon, Mexico into a virtual police state by installing iris scanners, which can scan the irises of 30-50 people per minute, throughout the city.

   

  Police departments around the country have begun using the Mobile Offender Recognition and Information System, or MORIS, a physical iPhone add-on that allows police officers patrolling the streets to scan the irises and faces of suspected criminals and match them against government databases. In fact, in 2014, the FBI launched a nationwide database of iris scans for use by law enforcement agencies in their efforts to track criminals.

   

  Corporations, as well, are beginning to implement eye-tracking technology in their tablets, smartphones, and computers. It will allow companies to track which words and phrases the user tends to re-read, hover on, or avoid, which can give insight into what she is thinking. This will allow advertisers to expand on the information they glean from tracking users’ clicks, searches, and online purchases, expanding into the realm of trying to guess what a user is thinking based upon their eye movements, and advertising accordingly. This information as it is shared by the corporate elite with the police will come in handy for police agencies as well, some of which are working on developing predictive analysis of “blink rates, pupil dilation, and deception.”

   

  In ideal conditions, facial-recognition software is accurate 99.7 percent of the time. We are right around the corner from billboards capable of identifying passersby, and IBM has already been working on creating real world advertisements that react to people based upon RFID chips embedded in licenses and credit cards.

   

  FICTION: In Minority Report, John Anderton’s Pre-Crime division utilizes psychic mutant humans to determine when a crime will take place next.

   

  REALITY CHECK: While no psychic mutants are powering the government’s predictive policing efforts, the end result remains the same: a world in which crimes are prevented through the use of sophisticated data mining, surveillance, community policing and precrime. For instance, police in major American cities have been test-driving a tool that allows them to identify individuals—or groups of individuals—most likely to commit a crime in a given community. Those individuals are then put on notice that their movements and activities will be closely monitored and any criminal activity (by them or their associates) will result in harsh penalties.  In other words, you are guilty before you are given any chance to prove you are innocent.

   

  The Department of Homeland Security is also working on its Future Attribute Screening Technology, or FAST, which will utilize a number of personal factors such as “ethnicity, gender, breathing, and heart rate to ‘detect cues indicative of mal-intent.’”

   

  FICTION: In Minority Report, government agents use “sick sticks” to subdue criminal suspects using less-lethal methods.

   

  REALITY CHECK: A variety of less-lethal weapons have been developed in the years since Minority Report hit theaters. In 2007, the Department of Homeland Security granted a contract to Intelligent Optical Systems, Inc., for an “LED Incapacitator,” a flashlight-like device that emits a dazzling array of pulsating lights, incapacitating its target by causing nausea and vomiting. Raytheon has created an “Assault Intervention Device” which is basically a heat ray that causes an unbearable burning sensation on its victim’s skin. The Long Range Acoustic Device, which emits painful noises in order to disperse crowds, has been seen at the London Olympics and G20 protests in Pittsburgh.

   

  FICTION: A hacker captures visions from the “precog” Agatha’s mind and plays them for John Anderton.

   

  REALITY CHECK: While still in its infancy, technology that seeks to translate human thoughts into computer actions is slowly becoming a reality. Jack Gallant, a neuroscientist at UC Berkeley, and his research team have created primitive software capable of translating the thoughts of viewers into reconstructed visual images. A company named Emotiv is developing technology which will be capable of reading a user’s thoughts and using them as inputs for operating machinery, like voice recognition but with brain signals. Similar devices are being created to translate thoughts into speech.

   

  FICTION: In Minority Report, tiny sensory-guided spider robots converge on John Anderton, scan his biometric data and feed it into a central government database.

   

  REALITY CHECK: An agency with the Department of Defense is working on turning insects into living UAVs, or “cybugs.” By expanding upon the insects’ natural abilities (e.g., bees’ olfactory abilities being utilized for bomb detection, etc.), government agents hope to use these spy bugs to surreptitiously gather vast quantities of information. Researchers eventually hope to outfit June beetles with tiny backpacks complete with various detection devices, microphones, and cameras. These devices could be powered by the very energy produced by the bugs beating their wings, or the heat they give off while in flight. There have already been reported sightings of dragonfly-like robotic drones monitoring protesters aerially in Washington, DC, as early as 2007.

   

  FICTION: In Minority Report, Anderton flees his pursuers in a car whose movements are tracked by the police through the use of onboard computers. All around him, autonomous, driver-less vehicles zip through the city, moving people to their destinations based upon simple voice commands.

   

  REALITY CHECK: Congress is now requiring that all new cars come equipped with event data recorders that can record and transmit data from onboard computers. Similarly, insurance companies are offering discounts to drivers who agree to have tracking bugs installed. Google has also created self-driving cars which have already surpassed 300,000 miles of road testing. It is anticipated that self-driving cars could be on American roads within the next 20 years, if not sooner.

  These are but a few of the technological devices now in the hands of those who control the corporate police state. Fiction, in essence, has become fact—albeit, a rather frightening one.

  

  

  

  

  

• "Turmoil" – Aussie Miners Mauled, Baht Battered, Japan Jolted, & Asia's "Glencore" Crashes

  Following on from a weak Europe and US session (despite late-day heroics in China last night), Fed confusion and commodity-complex counterparty-risk-concerns have sparked further turmoil across AsiaPac in the early going. Noble Group (asia's Glencore) is crashing, down 6.7% at the open. FX markets are seeing outflows send CNH below CNY for the first time since July and crush Thai Baht to its weakest since Jan 2007. Equity markets are in trouble with Aussie stocks hammered (driven by a plunge in Miners) and Nikkei 225 down 1000 points from Friday's highs. Asia credit markets have spiked to 2-year wides. China injected another CNY40bn and strengthened the fix (by the most since 9/2) for 2nd day in a row.

   

  FX markets are turmoiling across the board with Thai Baht at its weakest sicne Jan 2007…

  

   

  Japanese stocks are plunging as the last leg of support for Abe's government fades into the abyss of suicidal monetary policy… The Nikkei 225 just broke Black Monday's lows and is trading back to January lows

  

  Japan's VIX is surging once again – back above 33.

  In other Japanese news,  Daiichi Chuo KK, a firms that was USD2.5 billion markets cap in 2008 and operates specialized carriers, oil tankers, and coastal shipments, is halted and expected to file bankruptcy today… so much for devaluing your currency by 40% to export growth…

  Aussie stocks are in freefall as Aussie Miners get mauled…

  

   

  And Asia's Glencore, just as we warned…

  If you like GLEN CDS, you will love NOBLE http://t.co/itRvATiSFf

  — zerohedge (@zerohedge) September 28, 2015

  Is getting hammered…

  • *NOBLE GROUP SLUMPS 11%, HEADING FOR LOWEST CLOSE SINCE 2008

  

  And bonds have crashed…

  • *NOBLE 6.75% 2020 BONDS DOWN 15PTS TO RECORD LOW OF 65

  

  *  *  *

  Credit risk is surging…

  

   

  Chinese markets are in serious turmoil also…it appears serious amounts of USDollars are being dumped as….

  • *OFFSHORE YUAN STRONGER THAN ONSHORE SPOT FIRST TIME SINCE JULY
  • *OFFSHORE YUAN TRADES STRONGER THAN MONDAY'S ONSHORE CLOSE

  

   

  and Chinese stocks are weaker…

  • *FTSE CHINA A50 OCTOBER FUTURES DROP 2.2% IN SINGAPORE
  • *CHINA'S CSI 300 STOCK-INDEX FUTURES FALL 1.3% TO 3,108.2

  But this is the real problem in our view that is building up major tension…

  

   

  The PBOC is clearly suppressing interbnak rates "dead" even as defgault risk soars (systemically) – just as we saw with CNY "suppression" this cannot last forever and will blow at some point.

  PBOC strengthens Yuan fix for 2nd day…

  • *CHINA SETS YUAN REFERENCE RATE AT 6.3660 AGAINST U.S. DOLLAR

  

  PBOC injects another 40bn…

  • *PBOC TO INJECT 40B YUAN WITH 14-DAY REVERSE REPOS: TRADER

  But never to worry…

  • *CHINA WILL REMAIN GLOBAL GROWTH ENGINE: PEOPLE'S DAILY

  The propaganda is heavy tonight.

  Charts: Bloomberg

  

  

  

  

  

• Confusing Inevitable With Imminent

  Submitted by Jeff Thomas via InternationalMan.com,

  In the early 2000s, I began to advise friends and associates that much of the world would likely be entering a depression before the decade was out. In my belief, it would happen in stages, first with an initial mini-crash and recovery, but that, at some point, several years later, the recovery would prove to be a false one. The economy would remain in the doldrums. Then, a far bigger crash would take place and the world would be in a full-blown depression. As a hedge, I recommended that they buy gold, as gold would survive and retain value, as stocks, bonds, and even currencies went south.

  I turned out to be correct on the timing of the initial crashes, but entirely incorrect on the timing of the second, greater crash.

  I considered it possible that the major events could begin as early as 2010, but would more likely occur from 2012 on. That date has passed, and, although governments have consistently damaged their economies ever further, the house of cards, however shaky, is still standing.

  Thankfully, I’m not alone in my inexact timing. Those investors and economists who have had decades-long records for accuracy in their prognostication have all been early in their predictions with regard to the major events that surround the coming crashes.

  And each has recommended gold as a hedge, stating that, if and when markets do crash and currencies collapse, there will be a dramatic rise in the price of gold.

  Certainly, gold continued its rise following the mini-crash of 2008, and it seemed that it was on its way skyward. Many prognosticators stated that, if it topped $2,000, that would be it; there would be no stopping gold, as even the average person would finally understand that gold is not an investment as such, but a means of wealth preservation, especially during times of great flux.

  But, after gold passed $1,900, it took a dive. Gold bugs regarded it as an overdue correction, but the “get rich quick” punters dropped gold like a hot potato and gold remained down. Each time gold has rallied, the bullion banks have sold naked gold shorts in the futures market, then purchased the shares, to be redeemed for bullion, which has then been sold in the physical market, hammering down the gold price. Now, four years after the fall from $1,900, gold sits a price that makes it just low enough to prohibit the profitability of taking it out of the ground.

  Certainly, it benefits both the banks and the major governments of the world to hold down gold and we should not be surprised if they endeavour to do so.

  Nowhere is the “gold is dead” message more prominent than in the U.S., where people tend to see the value of any commodity in terms of its relativity to the U.S. dollar. Understanding gold’s real value would be easier if Americans regarded the dollar as “rising against gold” instead of “gold declining against the dollar.” This may seem like hair-splitting, but, in fact, the dollar is concurrently rising against most of the world’s currencies. The currencies of most countries are, in fact, declining against gold.

  These Are the Good Old days

  The U.S. dollar is looking good worldwide and, in fact, so is gold – it’s just that, at present, the dollar is in the number one spot. In fact, I wouldn’t rule out a burst of faith in the dollar when, inevitably, the recent papering-over of the Greek problem once again fails and the EU as a whole is clearly in trouble. When that occurs, gold will again rise, but the dollar will also be likely to rise – possibly more dramatically than gold.

  But, unlike gold, the dollar is at risk. U.S. debt has placed it in a precarious position from which it will most certainly fall. As billionaire investor Jim Rogers has repeatedly stated, “I’m long the dollar, but I hope I’m smart enough to get out in time.” Recently, he added, "If gold goes under $1,000, I hope I'm smart enough to step up and buy more gold – maybe even a lot of gold."

  The dollar is not a truly strong currency; it is essentially, “the best looking horse in the glue factory.” It will be the last to go, but it will indeed go. We may have a bit of time before that happens. Whether it’s measured in months or years, we can’t be certain. But right now (and especially if the dollar rises further against gold), gold is a bargain. It has either reached its bottom, or will do so in the foreseeable future. Any significant drop would be a sign to back up the truck and load up, as its eventual rise is inevitable.

  These are, in fact, the good old days; a time when gold is comparatively cheap.

  Availability of Gold

  But those who are just getting on board with the concept of wealth preservation through gold ownership are bumping into a problem that they hadn’t anticipated – it’s getting harder to find any for sale.

  With the news of each major sell-off, investors assume that availability must be considerable, yet physical gold is becoming evermore difficult to locate. The Chinese, who have a vested interest in holding down the price, repeatedly downplay their purchase volume, yet even the amount that is known to pass into Chinese hands far exceeds that which they claim to hold.

  Further, the issue of coins by those countries that produce gold and silver coins for sale is steadily diminishing. Large private suppliers are advising their retailers that their inventories cannot be maintained. And at the street level, coin shops are announcing that they’re no longer able to promise even thirty-day notice deliveries of coins.

  So, what does this say to the potential gold buyer? Well, first, it says that, whilst there is still paper gold out there in the form of ETF’s, the punters whose approach has been to chase the market, hoping to sell high and buy low, have largely left the market and moved on to other speculations. Those who continue to hold gold tend to be those who do so for wealth preservation. For them, a year (or even several years) of low prices is not a reason to dump the yellow metal. They are the long-termers, who will hold, no matter how low gold may go in the short term. In fact, should the price drop below $1,000, they (like Jim Rogers) are likely to buy with both hands.

  But, there’s still the dollar to be considered. As long as it continues to rise against other currencies, gold will appear to be falling in price. The dollar promises to remain high as long as the yen and the euro hold out. But should they fall, the dollar will be exposed.

  Let’s say the Chinese start selling their U.S. debt back into the U.S. market in a bigger way, or the EU defaults on its debt, or the inflation caused by quantitative easing creates commodity price spikes. There are many, many possible triggers that will cause the dollar to tank and, surely, one of them will occur. We just don’t know which one, or, more importantly, when.

  Of one thing we can be reasonably certain. If the dollar starts to head south, we will see a flood of people seeking to buy gold in an effort to preserve their wealth. However, as all the punters have already been driven out of the market and only the long-termers remain, potential buyers will find themselves making higher and higher offers, as sellers will be almost non-existent.

  With any investment, when panic buying sets in, the sky is the limit. We shall therefore see a gold mania. Most contrarian economists predict a figure in the $5,000 to $8,000 range, but other estimates go far higher.

  A gold mania is not imminent, but I believe it is inevitable.

  *  *  *

  Gold and silver have served as money for centuries and across many different civilizations. They have always been inherently international assets. There is nothing at all particularly American, Chinese, Russian, or European about gold and silver.

  Buying precious metals is perhaps the easiest step you can take toward protecting yourself from an economic collapse.

  The next step is to store that physical gold and silver in a safe foreign jurisdiction. That way it's out of the immediate reach of your home government and cannot be confiscated at the drop of a hat.

  We have done due diligence and on-the-ground research on a number of private vaults and storage facilities around the world. You’ll find all the details on our preferred jurisdictions – like Singapore and Switzerland – and nonbank storage facilities in our Going Global publication.

  Normally, this book retails for $99. But we believe this book is so important, especially right now, that we’ve arranged a way for U.S. residents to get a free copy. Click here to secure your copy.

  

  

  

  

  

• Polish Army Begins Digging For Nazi "Gold" Train

  In late August and early September, Polish media was abuzz with stories that the long-lost, and legendary, Nazi gold train had been finally uncovered by two men, a Pole and a German, in the deep underground tunnels between the Polish towns of of Wroclaw and Walbrzych.

  

  

  The “gold train” is said to be located under this hill

  We covered the saga of the missing 150 meter-long train, which allegedly is full of gold, gems and weapons extensively in the follwoing posts:

  • Is This Where The Long Lost Nazi “Gold Train” Is Located
  • Polish Government Confirms Discovery Of Nazi “Gold Train”, Warns It May Be Booby-Trapped
  • Radar Image Said To Reveals Nazi “Gold Train” Final Resting Place

  Then, some time around the first week of September, virtually all stories involving the “Nazi” train disappeared, and there was hardly any mention of the train. As a reminder, Deputy Culture Minister Piotr Zuchowski said last month he was “more than 99 percent sure” the train exists because of ground-penetrating radar images he had seen.

  But officials since cast doubt on its existence, saying there was no credible evidence of it. They have not however given up on verifying the claim.

  In fact, the story of the mysterious Nazi train was all but forgotten until earlier today, when AFP reported that while the Polish propaganda machine has been busy to neutralize any speculation that such a train may indeed exist (or have been discovered) even though it explicitly admitted as much just a month ago, Poland’s army confirmed that it has begun inspecting the southwestern area where two men claim to have discovered an armoured Nazi gold train buried at the end of World War II.

  

  Soldiers stand next to a van near railway tracks between
  Walbrzych and Wroclaw as they prepare to search for the
  World War II ‘gold train’ on September 28, 2015: AFP

  It strikes us as strange to send in the army to begin industrial – and guarded – excavation if, as officials have claimed, “there is nothing there.”

  But don’t worry: the army isn’t there to recover the alleged $1 billion in gold. “Our goal is to check whether there’s any hazardous material at the site,” said Colonel Artur Talik, who is leading the search using mine detectors and ground-penetrating radar.

  The governor of the region of Lower Silesia, Tomasz Smolarz, added that “other decisions” regarding the search for the train would be made “once safety is assured at the site”. Any by “safety” they mean seclusion from the outside world, giving Poland’s government the freedom to do as it sees fit with what may be the biggest Treasure in history.

  Rumours of two Nazi trains that disappeared in the spring of 1945 have been circulating for years, capturing the imagination of countless treasure-hunters.

  And now that the Polish army is officially “on location” and is guaranteed to have the first and only claim on any undocumented discovery, one can be certain that absolutely no “discovery” will be revealed to the outside world, especially if the Polish army does in fact make a discovery that would send Indian Jones blushing with envy.

  

  

  

  

  

• Fourth Turning: Crisis Of Trust, Part 3

  Submitted by Jim Quinn via The Burning Platform blog,

  In Part 1 of this article I discussed the catalyst spark which ignited this Fourth Turning and the seemingly delayed regeneracy. In Part 2 I pondered possible Grey Champion prophet generation leaders who could arise during the regeneracy. In Part 3 I will focus on the economic channel of distress which is likely to be the primary driving force in the next phase of this Crisis.

  There are very few people left on this earth who lived through the last Fourth Turning (1929 – 1946). The passing of older generations is a key component in the recurring cycles which propel the world through the seemingly chaotic episodes that paint portraits on the canvas of history. The current alignment of generations is driving this Crisis and will continue to give impetus to the future direction of this Fourth Turning. The alignment during a Fourth Turning is always the same: Old Artists (Silent) die, Prophets (Boomers) enter elderhood, Nomads (Gen X) enter midlife, Heroes (Millennials) enter young adulthood—and a new generation of child Artists (Gen Y) is born. This is an era in which America’s institutional life is torn down and rebuilt from the ground up—always in response to a perceived threat to the nation’s very survival.

  For those who understand the theory, there is the potential for impatience and anticipating dire circumstances before the mood of the country turns in response to the 2^nd or 3^rd perilous incident after the initial catalyst. Neil Howe anticipates the climax of this Crisis arriving in the 2022 to 2025 time frame, with the final resolution happening between 2026 and 2029. Any acceleration in these time frames would likely be catastrophic, bloody, and possibly tragic for mankind. As presented by Strauss and Howe, this Crisis will continue to be driven by the core elements of debt, civic decay, and global disorder, with the volcanic eruption traveling along channels of distress and aggravating problems ignored, neglected, or denied for the last thirty years. Let’s examine the channels of distress which will surely sway the direction of this Crisis.

  Channels of Distress

  

  “In retrospect, the spark might seem as ominous as a financial crash, as ordinary as a national election, or as trivial as a Tea Party. The catalyst will unfold according to a basic Crisis dynamic that underlies all of these scenarios: An initial spark will trigger a chain reaction of unyielding responses and further emergencies. The core elements of these scenarios (debt, civic decay, global disorder) will matter more than the details, which the catalyst will juxtapose and connect in some unknowable way. If foreign societies are also entering a Fourth Turning, this could accelerate the chain reaction. At home and abroad, these events will reflect the tearing of the civic fabric at points of extreme vulnerability –  problem areas where America will have neglected, denied, or delayed needed action.” – The Fourth Turning – Strauss & Howe

   

  Economic distress

  Despite incessant corporate fascist propaganda, disguised as positive government economic data, the economic distress for the majority of Americans and majority of the world is soul crushing. The nine charts in the visual below demolish any happy talk about a recovering economy and return to normalcy. They portray a crisis level economic condition. The financial stress on average American families is at punishing levels, masked by the prodigious amount of debt doled out by the government and their Wall Street co-conspirators.

  

  Millennials are buried under $1.3 trillion of student loan debt, with $500 billion of it doled out by the Federal government since 2009 as a ploy to reduce the reported unemployment rate and artificially stimulate spending, to provide the appearance of economic recovery. The falsity of the supposed recovery is borne out in a labor participation rate that is the lowest since 1977, with participation amongst 25 to 54 year olds the lowest in history. With real median household incomes stuck at 1989 levels and far below 2007 peak levels, the stress on middle class families to just pay their monthly bills is intense.

  The 2008 Wall Street created fraudulent subprime mortgage debacle which led to millions of foreclosures, non-existent wage growth, young families enslaved in student loan debt, and the Wall Street hedge fund engineered 30% increase in home prices, has resulted in home ownership falling to historic lows and still falling. This is the result of ownership policies, programs and schemes pushed by Democrat and Republican politicians and executed by greedy Wall Street institutions, generating hundreds of billions in fees, interest and profits.

  Clearly there is no distress among the .1%, as they summer at their Hamptons beach estates gorging on caviar and toasting their financial brilliance (free Fed money) with $1,000 bottles of Dom Perignone, and bid NYC penthouse real estate prices to astronomical levels. But, as the government apparatchiks at the BLS, BEA, and Census Bureau have reported positive economic data month after month since 2009, the number of people on food stamps has grown from 34 million to 46 million over this same time frame. As the middle class and poor have gotten poorer, the .1% and particularly the .01% have accelerated their capture of the national wealth.

  

  The distress of the lower classes is self-evident and confirmed by a poverty rate of 14.8%, up from 12.5% in 2007, while the middle class has borne the brunt of an Obamacare plan written by paid lobbyists for the health insurance industry, Big Pharma, and hospital corporations. The promised $2,500 per family savings have not materialized, as health insurance premiums have increased by double digits for the last five years and small businesses have stopped covering employees. In reality, since 2008, average family premiums have climbed a total of $4,865. Even the few million Americans added to the health insurance roles are stuck with limited choices and deductibles of $5,000. More people were kicked out of existing employer healthcare plans than were newly added.

  

  The two charts which reveal the true level of economic distress are the Federal Debt and Money Printing charts. We’ve accumulated more debt as a nation in the last seven years ($8 trillion) than we did in the first 219 years of this once proud Republic. We continue to add $1.6 billion per day to our $18.3 trillion national debt. This doesn’t even take into consideration the $200 trillion of unfunded liabilities being left to future generations.

  The Fed has printed $3.5 trillion out of thin air in the last six years while keeping interest rates anchored at 0% for their Wall Street owners, with the net impact of punishing senior citizens and other risk averse savers while further enriching their gambling casino owners who dictate the monetary policy for the world. As widowed grandmothers across the land have seen their life sustaining interest income evaporate, even the downwardly manipulated CPI has risen 14% since 2008. Using a real inflation measure, most Americans have seen their daily living expenses rise by more than 30% since 2008, but Yellen and her cronies yammer about deflationary fears.

  Economic distress intensifies by the day for average American household as their real income has been falling for 15 years, while the cost of food, energy, healthcare, education, rent, housing, and vehicles have soared. Government imposed property taxes, sales taxes, income taxes, fees, and tolls have risen exponentially over this time frame as the parasite sucks the host dry. Millions of households have been lured into debt by the Wall Street debt machine and their corporate media mouthpieces as consumer debt has grown from $1.5 trillion to $3.4 trillion since 2000, and mortgage debt has grown from $6.5 trillion to $13.5 trillion.

  The extreme distress felt by households has been caused by their foolish choice to try and maintain their lifestyles by replacing declining income with debt. They are now enslaved by the chains of $1.3 trillion in student loan debt, $1.1 trillion of auto loan debt, $1 trillion of credit card debt, and $13.5 trillion of mortgage loan debt. Has keeping up with the Joneses been worth it? The stress of meeting the monthly obligations with declining income has become unbearable for many.

  

  The continued decline in real household income reveals the falsity of the unemployment propaganda disguised as legitimate data. The decline in unemployment from 10% in 2009 to 5.1% today is a complete and utter lie. Since 2008 there are 4 million more Americans employed, while 15 million working age Americans have supposedly left the workforce, but the government expects us to believe the unemployment rate is lower today than it was in 2008. Using a consistent labor force participation rate of 66% (where it stayed from 2003 through 2008), the unemployment rate would be over 10%. Using the BLS methodology used prior to 1994, real unemployment exceeds 20%. Those figures support the declining household income story.

  Everyone has heard the president boast about the 10 million jobs added since 2009. The politicians like to talk about quantity, but aren’t so keen on discussing quality. The chart below provides the facts regarding jobs added since the recession lows. The top four categories pay less than $10 per hour. This so called economic recovery is being driven by low paying, no benefits, services jobs. These facts also support the declining household income state of affairs.

  With a true unemployment rate above 10% and most new jobs paying $10 an hour, it is understandable to an awake, non-delusional citizen why retail sales remain pathetic and national retailers have stopped expanding and begun closing outlets. This is just what the corporate fascist Deep State wants. They want the proletariat, reliant upon debt to sustain their materialistic driven lifestyles and the lower class peasants dependent upon the scraps handed to them by a government, reliant on central bankers to keep the house of cards from collapsing.

  

  The American economy has been gutted. The financialization of our economy began around 1980 and accelerated after the passage of NAFTA in 1994 and the repeal of Glass Steagall in 1999. There has been a giant sucking sound of manufacturing jobs leaving the U.S., replaced by purveyors of paper, derivatives gamblers, and high frequency traders on Wall Street. Producing goods has been replaced by scamming muppets and peddling debt to the masses so they can consume.

  We’ve been eating our seed corn for the last 35 years and there is nothing left to sow. We allowed American jobs and production to be replaced by cheap foreign labor and cheap foreign produced products, financed by consumer debt. We allowed mega-corporations and Wall Street banks to capture the economic system, financial markets, judicial, legislative, and executive branches, along with the mainstream media, thereby subjugating the best interests of the country to maximizing profits for the .1%.

  

  The distress of the working middle class has been growing since the early 1970s after Nixon closed the gold window and allowed central bankers and politicians the freedom to print fiat and make unfunded promises to voters. From the end of World War II until 1971 the working class reaped the income gains as their standard of living steadily increased. Since 1971 the income growth of the working class has declined, while the income growth of the top 1% has soared. This was mainly driven by the .1% in the financial class who produced nothing but misery for the bottom 90%.

  Unbridled greed and an unquenchable thirst for more and more are the hallmarks of the sociopathic oligarchs who are like blood sucking leeches on the dying carcass of a once great nation. Once the dollar was no longer backed by gold, the ultimate death of the American empire became a forgone conclusion. The weight of lies is wearing on the oligarchs. The Federal Reserve Chairwoman physically falters while spreading monetary falsehoods and the speaker of the house suddenly resigns as he knows the end is drawing near.

  

  Every “solution” the ruling class has implemented since Wall Street blew up the global financial system in 2008 has been sold to the public as beneficial to the people on Main Street. It has slowly dawned on the inhabitants of Main Street that Bernanke, Yellen, Paulson, Geithner, Dodd, Frank, Obama and all D.C. politicians have screwed them. As Main Street’s distress has accelerated, the wealth of anyone associated with Wall Street has soared to obscene levels.

  This distress is revealing itself in the poll numbers of Donald Trump and Bernie Sanders. The flaunting of their immense wealth, political influence, and smug superiority has angered a vast swath of the citizenry. The economic distress perpetrated upon the people by the moneyed interests will be the driving force behind the next phase of this Fourth Turning. The current state of affairs has been seen before, during the previous Fourth Turning about 80 years ago.

  “It has always seemed strange to me…The things we admire in men, kindness and generosity, openness, honesty, understanding and feeling, are the concomitants of failure in our system. And those traits we detest, sharpness, greed, acquisitiveness, meanness, egotism and self-interest, are the traits of success. And while men admire the quality of the first they love the produce of the second.” – John Steinbeck – Cannery Row     

  The solution is not to let politicians redistribute the wealth from the rich to the poor. Crony capitalism must be replaced by true free market capitalism, practiced with integrity, fairness, principled conduct, intelligence, and high moral standards. Profits generated by corporations are not evil, but seeking profits at any cost to society is reckless, shortsighted and immoral. Capitalism without capital is destined for failure. When corporate CEOs, Wall Street bankers, and shady billionaires exercise undue influence over the financial, political and judicial systems, their short-term quarterly profit mindset and voracious appetite for riches override the best interests of the people and create a sick, warped, repressive society. Today our system is in the grasp of psychopaths whose hubris and myopic focus on enriching themselves will ultimately be their downfall.

  

  “This financial system is sick, and is unfortunately and at an increasing pace approaching terminal. I think the problem is due to a simple failure or ‘lack of character.’  It is an old story, and a perennial favorite of the madness of the dark powers of this world. Character provides stability and confidence. When character fails, there is uncertainty and fear. This passive-aggressive posture towards equities in general and risk in particular is because of the lack of reform to create a sustainable, stable recovery fueled by organic demand for growth based across a broader participation amongst the consumers. You cannot have it both ways.  You cannot subject the great part of a people to fear, repression, and enforced deprivation on one hand, and expect them to flourish and consume freely on the other.” – Jesse

  

  In Part 4 I will assess the other channels of distress (social, cultural, technological, ecological, political, military) that are likely to burst forth with the molten ingredients of this Fourth Turning, and potential climaxes to this Winter of our discontent.

  

  

  

  

  

• Fukushima Reactor No.2 May Have Suffered Total Meltdown

  To the extent the memory of Fukushima had faded over the last several years, the “fallout” (no pun intended) from the nuclear-like blast that tore through an industrial complex at the Chinese port of Tianjin last month served to remind the world of how far-reaching and unpredictable the consequences can be when disaster strikes at a site that houses potentially toxic materials. 

  For those unfamiliar, the explosion at Tianjin set the stage for an apocalyptic scenario whereby water soluble sodium cyanide could interact with incoming thunderstorms creating cyanide rain and while that doomsday-ish scenario didn’t play out in as dramatic a fashion as some feared, there was an eerie white foam covering the streets following the first rains that fell in the wake of the explosion.

  In case Tianjin didn’t satisfy your thirst for potential cataclysms, just a few days after the explosion, Japan warned that Sakurajima (one of the country’s most active volcanos) was set to erupt. That was notable in and of itself, but what made the story especially amusing (if worrisome) was that just days earlier, Tokyo had greenlighted the reopening of the Sendai nuclear power plant which is located just 50 kilometers from Sakurajima. The reopening at Sendai marked the first nuclear reactor to be restarted in Japan since the Chernobyl redux at Fukushima in 2011. 

  As The Guardian noted at the time, some experts claim “the restarted reactor at Sendai [is] still at risk from natural disasters,” despite the fact that it was the first nuclear plant to pass new regulations put in place by the country’s Nuclear Regulation Authority on the heels of the disaster in 2011.

  Well, don’t look now but experts now say the No. 2 reactor at Fukushima may have suffered a complete meltdown. Here’s RT with more:

  Fukushima’s reactor No.2 could have suffered a complete meltdown according to Japanese researchers. They have been monitoring the Daiichi nuclear power plant since April, but say they have found few signs of nuclear fuel at the reactor’s core.

   

  The scientists from Nagoya University had been using a device that uses elementary particles, which are called muons. These are used to give a better picture of the inside of the reactor as the levels of radioactivity at the core mean it is impossible for any human to go anywhere near it.

   

  However, the results have not been promising. The study shows very few signs of any nuclear fuel in reactor No. 2.

  This is in sharp contrast to reactor No.5, where the fuel is clearly visible at the core, the Japanese broadcaster NHK reports.

   

  TEPCO has used 16 robots to explore the crippled plant to date, from military models to radiation-resistant multi-

  segmented snake-like devices that can fit through a small pipe.

   

  However, even the toughest models are having trouble weathering the deadly radiation levels: as one robot sent into reactor No.1 broke down three hours into its planned 10-hour foray.

   

  Despite TEPCO’s best efforts, the company has been accused of a number of mishaps and a lack of proper contingency measures to deal with the cleanup operation, after the power plant suffered a meltdown, following an earthquake and subsequent tsunami in 2011.

   

  Recent flooding caused by Tropical Typhoon Etau swept 82 bags, believed to contain contaminated materials that had been collected from the crippled site, out to sea.

   

  “On September 9th and 11th, due to typhoon no.18 (Etau), heavy rain caused Fukushima Daiichi K drainage rainwater to overflow to the sea,” TEPCO said in a statement, adding that the samples taken “show safe, low levels” of radiation.

   

  “From the sampling result of the 9th, TEPCO concluded that slightly tainted rainwater had overflowed to the sea; however, the new sampling measurement results show no impact to the ocean,” it continued.

  Yes, “no impact to the ocean,” other than this: 

  

  Much like how Chinese authorities swear that the Tianjin disaster has had no effect on sea life off China’s shores – unless you count the massive fish die-offs…

  

  

  

  

  

  

• Caption Contest: Hope & Nope – The Odd Couple

  After a 90-minute meeting, Presidents Obama and Putin emerge from the mudslinging apparently agreeing to disagree on everything. Putin blames US – specifically Obama – for “relations being so bad,” adding trhat sanctions are not an “efficient” policy tool, and hopes US can play an active role in fighting ISIS with cooperation. Given the image below, we can only imagine how tense the meeting was…

   

  

   

  Putin Continues:

  • *PUTIN SAYS US-RUSSIA RELATIONS ARE AT A PRETTY LOW LEVEL
  • *PUTIN BLAMES US FOR RELATIONS BEING SO BAD, SAYS OBAMA’S CHOICE
  • *RUSSIA IS THINKING ABOUT MILITARY OPS IN SYRIA: PUTIN
  • *PUTIN SAYS SANCTIONS ARE NOT ‘EFFICIENT’ AS A POLICY TOOL
  • *PUTIN SAYS RUSSIA’S GOAL IS TO FIGHT ISIS WITH COORDINATION
  • *PUTIN SAYS ‘NO ONE KNOWS RESULTS’ OF AIR STRIKES AGAINST SYRIA
  • *RUSSIA SAYS COORDINATION CENTER IS OPEN TO U.S. AND OTHERS
  • *PUTIN RULES OUT RUSSIAN GROUND TROOPS IN SYRIA

  *  *  *

  

  

  

  

  

• Stocks Battered To Black Monday Lows Amid Credit Crash, Biotech Bloodbath, & Commodity Carnage

  Just because…

  The epicenter of today's earthquake was Biotech and Corporate Bonds…

  Biotechs were bloodbath'd – IBB dropped almost 8% today alone – the biggest drop since August 2011 – testing back to Black Monday lows and now unchanged since October 2014…

  

  This is the longest losing streak for Biotechs since Lehman

  Investors should not worry though…

  IBB Update pic.twitter.com/S6jQOysMiW

  — Stalingrad & Poorski (@Stalingrad_Poor) September 28, 2015

  High yield bond prices have fallen for 12 of the last 13 days and today's decline was the biggest daily drop since Nov 2011, breaking towards Nov 2011 spike lows…

  

  In context – this means HYG is unchanged since Lehman!!

  *  *  *

  All the major US Equity Indices are at or below Black Monday Lows…

  

   

  Some context in The Dow futures…

  

   

  So what did the major equity indices do?

  

   

  Cash indices show Small Caps and Nasdaq were the biggest losers…

  

   

  With everything now red post-QE3…

  

   

  The decoupling between XIV (inverse VIX ETF) and SPY (S&P ETF) has begun to rapidly converge…

  

   

  Financials dropped 2% on the day (with homebuilders, materials, energy and healthcare all battered)…

  

   

  More worryingly, US financials made new 2015 lows (below Black Monday lows) as they continue to catch down to credit risk (as Glancore counterparty risks rise)…

  

   

  There were some other total collapses in stocks that are widely held by hedge funds today…

  SUNE crashed another 17% to 2 year lows… (breaking the Black Monday Lows)

  

   

  Not so valiant Valeant after getting a pricing subpoena…

  

   

  And of course – Glencore…

  

  *  *  *

  Treasury yields started the day off higher but as data, and fed speak hit along with US Open selling pressure, safe-haven flows flooded into equities… 30Y -9bps is the biggest absolute drop since early July… NOTE: 2s30s has flattened to 4 week lows

  

   

  High yield bond spreads crashed wider today (after the CDX roll) – this was the worst day in at least a year for CDX HY…

  

   

  as Energy credit risk spiked to near record highs…

  

   

  The USDollar was sold after the US Open – having been bid through the Asia, European day…

  

   

  Commodities were mugged all day as we suspect commodity group liquidations and counterparty risk reductions weighed on the whole complex…

  

   

  Silver had its worst day in a month...6 waterfalls…

  

   

  Charts: Bloomberg

  Bonus Chart: All The FedSpeak has confused markets even more with 2015 rate hike odds now at record lows…

  

   

  Bonus Bonus Chart: It's all priced in…

  

  

  

  

  

• China Is Betting Its Energy Future On This Tiny, Foreign City

  No, it’s not New York, or London; Moscow, Geneva, Vancouver or even D.C. According to Clarmond House, the most important foreign city – the one which China is making the center of its largest offshore infrastructure project – is the tiny port of Gwadar (population 85,000) which Pakistan purchased from Oman in 1958 for $1 million, and which has become the critical hub of China’s future energy policy.

  

  

  Here is why, courtesy of Clarmond House:

  A Postcard From Gwadar

  In 1958 Pakistan purchased Gwadar from Oman for 5.5billion rupees. It remained a sleepy outpost for almost 50 years until 2007 when the governments of Pakistan and China jointly agreed to develop it from scratch into a full-scale port city. And in the last 24 months Gwadar’s prospects have improved even more.

  China, the world’s largest oil importer, gets the majority of this oil from the Persian Gulf. Just look the world map and consider the journey of an oil tanker to reach Shanghai, only for the oil to then arrive in western China! The journey by sea is 16,000 miles, takes 2-3 months and passes through the Straits of Malacca, which is an area rife with piracy and which could also be shut down by anti-Chinese interests.

  Now reconsider Gwadar. It sits just outside the Straits of Hormuz directly in the line of all shipping routes out of the Gulf and, in geographic terms, there is only Pakistan to cross before you reach western China. So China is making Gwadar the centre of one of its largest infrastructure projects in the world.

  Over the next 5 years China will invest approximately $46 billion not only in Gwadar port but also in building the China-Pakistan corridor. This latter development is a massive project that will link Gwadar to Kashgar in western China, a distance of over 2,400 kilometres, all of it through Pakistan. The build will include new rail, road, and pipeline infrastructure. It will not only facilitate imports into China but also their exports into the gulf region; it binds Pakistan to its northern neighbour.

  

  The only concern is the USA’s reaction, especially when China leaves a naval warship or submarine parked at their new port. I suppose we cross that (newly built) bridge when we get to it!

  

  

  

  

  

• Kunstler Rages "Perhaps America Has Gotten What It Deserves"

  Submitted by James H Kunstler via Kunstler.com,

  Did Charlie Rose look like a fucking idiot last night on 60-Minutes, or what, asking Vladimir Putin how he could know for sure that the US was behind the 2014 Ukraine coup against President Viktor Yanukovych? Maybe the idiots are the 60-Minutes producers and fluffers who are supposed to prep Charlie’s questions. Putin seemed startled and amused by this one on Ukraine: how could he know for sure?

  Well, gosh, because Ukraine was virtually a province of Russia in one form or another for hundreds of years, and Russia has a potent intelligence service (formerly called the KGB) that had assets and connections threaded through Ukrainian society like the rhizomorphs of the fungusArmillaria solidipes through a conifer forest. Gosh, Charlie, it’s like asking Obama whether the NSA might know what’s going on in Texas.

  And so there is Vladimir Putin, a former KGB officer, having to spell it out for the American clodhopper super-journalist. “We have thousands of contacts with them. We know who and where, and when they met with someone, and who worked with those who ousted Yanukovych, how they were supported, how much they were paid, how they were trained, where, in which country, and who those instructors were. We know everything.”

  The only thing Vlad left out of course was the now-world-famous panicked yelp by Assistant Secretary of State Victoria Nuland crying, “Fuck the EU,” when events in Kiev started getting out of hand for US stage-managers. But he probably heard about that, too.

  Charlie then voice-overed the following statement: “For the record, the US has denied any involvement in the removal of the Ukrainian leader.” Right. And your call is important us. And your check is in the mail. And they hate us for our freedom.

  This bit on Ukraine was only a little more appalling than Charlie’s earlier segment on Syria. Was Putin trying to rescue the Assad government? Charlie asked, in the context of President Obama’s statement years ago that “Assad has to go.”

  Putin answered as if he were explaining something that should have been self-evident to a not-very-bright high school freshman: “To remove the legitimate government would create a situation which you can witness in other countries of the region, for instance Libya, where all the state institutions have disintegrated. We see a similar situation in Iraq. There’s no other solution to the Syrian crisis than strengthening the government structure.”

  I guess Charlie and the 60-Minutes production crew hadn’t noticed what had gone on around the Middle East the past fifteen years with America’s program of toppling dictators into the maw of anarchy. Not such great outcomes.

  Charlie persisted though, following his script: Was Putin trying to rescue Assad? Vlad had to lay it out for him as if he were introducing Charlie to the game of Animal Lotto: “What do you think about those who support the terrorist organizations only to oust Assad without thinking about what happens to the country after all the state institutions have been demolished…? Look at those who are in control of 60 percent of the territory of Syria.

  Meaning ISIS. Al Nusra (formerly al Qaeda in Syria), i.e., groups internationally recognized as terrorist organizations.

  Charlie Rose, 60-Minutes — and perhaps by extension US government agencies with an interest in propagandizing — seem to want to put over the story that Russia has involved itself in Syria only to aggrandize its role on in world affairs.

  Forgive me for being so blunt, but what sort of stupid fucking idea is this? And are there any non-lobotomized adults left in the USA who can’t see straight through it? The truth is that American policy in Syria (plus Iraq, Libya, Ukraine, Somalia, Afghanistan) is an impressive record of failure in terms of the one basic aim that most rational people might agree upon: stabilizing the region in a way that does not leave Islamic jihadi maniacs in charge.

  Okay, so now the Russians will do what they can to try to stabilize Syria. They’ve had their failures, too (famously, Afghanistan). But Russian territory adjoins the Islamic lands and they clearly have stake in containing the virus of Islamic extremism near their borders. Is that not obvious?

  Charlie made one other extremely dumb statement — he seems to prefer making assertions to asking straight-up questions — to the effect that Russia was misbehaving by deploying troops on its border with Ukraine.

  Putin again seemed astonished by this credulous idiocy. The US had troops and nuclear weapons all over Europe, he answered. Did Charlie think that meant the US was attempting to occupy the nations of Europe now? Was it “a crime” for Russia to defend its own border with a neighboring state (formerly a province) that, he implied, the US had deliberately destabilized?

  The Putin segment was followed by an sickening session with Donald Trump, a man who now — after a month or so of public exposure — proves incapable of uttering a coherent idea. I wonder what Vladimir Putin makes of this incomparable buffoon. Perhaps that America has gotten what it deserves.

  

  

  

  

  

• Bubble Burst? IPOs Are Having Their Worst Year Since Lehman

  IPOs have underperformed the S&P 500 by a stunning 17% year-to-date, extending losses today to 26% year-to-date.

  

   

  This is the worst year for IPOs since 2008… right as Lehman collapsed…

  

   

  With private valuations still sky high in the minds of their VC 'guru' investors, we suspect the fact that this year is now the worst year for IPOs since 2008 will begin to raise doubts about even the most unicorn-y opportunity.

   

  Charts: Bloomberg

  

  

  

  

  

• The Market In Pictures – The Aging Bull

  Submitted by Lance Roberts via STA Wealth Management,

  In January, I did a chart analysis of the markets suggesting that being overly optimistic going into 2015 could be dangerous.  

  "As we enter into 2015, analyst calls for a continued "bull market" advance have never been louder. There have been a litany of articles written recently discussing how the stock market is set for a continued bull rally. The are some primary points that are common threads among each of these articles which are: 1) interest rates are low, 2) corporate profitability is high, and; 3) the Fed's monetary programs continue to put a floor under stocks. The problem is that while I do not disagree with any of those points – they are all artificially influenced by outside factors. Interest rates are low because of the Federal Reserve's actions, and corporate profitability is high due to accounting rule changes following the financial crisis. Lastly, the Fed's liquidity program artificially inflated stock prices.

   

  While the media continues to pound the table with all of the bullish arguments that should continue to drive the current advance in the markets, it is only prudent to at least attempt an understanding of the counter arguments. The "risk" to investors is not a continued rise in the financial markets, but the eventual reversion that will occur. Like Wyle E. Coyote, since most individuals only consider the "bull case," as it creates a confirmation bias to support their "greed factor", they never see the "cliff" until it is far to late."

  As we end the third quarter of the year, those warnings have come to pass. However, the debate that began this year remains – are we still within an ongoing multi-year bull market OR has the next cyclical bear market taken hold?

  The series of charts below is designed to allow you to draw your own conclusions.  I have only included commentary where necessary to clarify chart construction or analysis.

  If you have any questions, or comments, send me a tweet:  @lanceroberts

  ---

  Valuation Measures

  The following chart shows Tobin's "Q" ratio and Robert Shiller's "Cyclically Adjusted P/E (CAPE)" ratio versus the S&P 500. James Tobin of Yale University, Nobel laureate in economics, hypothesized that the combined market value of all the companies on the stock market should be about equal to their replacement costs.

  The Q ratio is calculated as the market value of a company divided by the replacement value of the firm's assets. Dr. Robert Shiller, also a Nobel Prize winning Yale professor, created CAPE to smooth earnings variations and volatility over time. CAPE is calculated by taking the S&P 500 and dividing it by the average of ten years worth of earnings.  If the ratio is above the long-term average of around 16x, the stock market is considered expensive. Currently, the CAPE is at 25.5x, and the Q-ratio is at 1.02.

  

  My friend Doug Short regularly publishes Ed Easterling's valuation work.  Ed Easterling, Crestmont Research, has done extensive studies on valuation and resulting long-term returns.

  

   The next two charts are variants on Robert Shiller's CAPE. The first is just a pure analysis of CAPE as compared to the S&P 500.

  [For More On Shiller's CAPE Debate read: "Is Shiller's CAPE Really B.S." and "Shiller's CAPE, A Better Measure"]

  

  The next chart shows the deviation of valuations from their long-term average.

  

  Measures Versus The Economy

  

  One of Warren Buffet's favorite valuation measures is Market Cap to GDP. I have modified this analysis utilizing real, inflation-adjusted, S&P 500 market capitalization as compared to real GDP.  I have also noted the long-term median level as well as the average since 1990.

  

  Since the stock market should be a reflection of the underlying economy, then the amount of leverage, or margin debt, in the market as a percentage of GDP could provide an important clue.

  

  Deviation Measures

  The following charts are measures of deviation from underlying trends or averages. The greater the deviation from the long-term trends or averages; the greater the probability of a reversion back to, or beyond, those trends or averages.

  The first chart is the 72-month rate of change in the price of the S&P 500 relative to the index itself. Large spikes in the rate of change have normally been seen prior to intermediate and long-term market peaks.

  

  The next chart is the deviation in the price of both the S&P 500 and Wilshire 5000 from the 36-Month moving average.  For more discussion on this chart read this.

  

  The chart below is the same basic analysis but utilizing a 50-week moving average which is a more "real-time" variation. Importantly, note that historically when the market has significantly broken the 50-week moving average in the past, it has denoted a change in market trend. 

  

  This potential change in trend can be more clearly seen in the chart below. Note: The market has not currently broken the previous bullish trend line that begin in 2009, however, historically it has just been a function of time. 

  

  The volatility index (VIX) is representative of investors "fear" of a correction in the market. Low levels represent investor complacency and no fear of a market correction. Despite the recent correction to date, investor complacency remains elevated. 

  

  Just For Good Measure

  I recently wrote about the importance of "record market highs" stating:

  "…while markets have risen over time, the markets spend roughly 95% of their time making up for previous losses."

  

  And A Reminder

  Recently, John Hussman tweeted this chart of the S&P 500 that lists all of the warnings signs of a crash that we are experiencing now.  

  

  "Anatomy of a textbook pre-crash bubble. Don't rely on further blowoff, but don't be shocked. Risk dominates. Hold tight."

  This analysis can tell us much about where we are within the current market cycle if we choose to pay attention. While it is certainly easy to bet on "hope," it is important to remember that it is far harder to make up losses when things go wrong. 

  What has always separated successful professional gamblers from the "weekend sucker" is knowing when to step away from the table.

   

  

  

  

  

  

• Dear Martin Shkreli: This Is How You Hike Drug Prices

  Last week, when the 15 minutes of fame, or rather infamy, of Turing Pharma CEO Martin Shkreli came and went following his now ill-fated attempt to boost the price of a toxoplasmosis drug by 5000%, we said two things: “Martin Shkreli’s (who started his Wall Street career working for Jim Cramer, and apparently still owes the Lehman estate $2.3 million for a Put trade gone wrong) decision to disturb the fragile equilibrium in the biotech industry” and “now that Shkreli’s 15 minutes of fame are over and his Twitter profile is now in “private” mode the attention should shift to the real villains – those truly big pharma companies, who do what Shkreli did but on a far vaster and grander, if less obvious, scale taking advantage of the price cushioning effects that Obamacare provides.”

  Today, this is precisely what happened, when as we reported previously Democrats on the House oversight committee sent a letter demanding that serial biotech rollup Valeant Pharmaceuticals should provide documents explaining hefty price increases for two heart drugs.

  As the WSJ adds, “Valeant refused early this month to provide documents sought by Rep. Elijah Cummings (D., Md.) and Sen. Bernie Sanders (I., Vt.) explaining the 525% and 212% price increases the company took on the two drugs the day it acquired their rights, saying the requested information was “highly proprietary and confidential.”

  That probably would have been the end of it… had it not been the NYT article from last weekend blasting Shkreli’s decision to bring the attention of the entire country to the biotech space in general, and price gougers such as Turing and Valeant in particular.

  The immedaite reaction to today’s news was a historic collapse in Valeant’s share price, which crashed by 17% leading to $600 million in losses for Bill Ackman, and forcing the continued brutalizing of biotech stocks, which just suffered their worst day in 4 years.

  Which brings us back to Shkreli’s action – the ridiculous (or very savvy, if as we suppose he had a massive short biotech trade on to begin with) decision to bring attention not only to himself but the entire drug space with a 5000%+ price hike. As a reminder, what Shrekli did was not in any way unique: everyone else did it too, they were just much smarter about how to do it.

  In a report issued just hours after the subpoena news hit, famed short-seller Citron research, which was just waiting for the news about the Valeant’s potential subpoena, declared that VRX stock is worth at best $135/share in the short term (which would mean the end of Pershing Square) and “worse” in the longer-term, because all the company does is serially acquire numerous small companies simply to raise the prices of their existing drug portfolio into the stratosphere.

  Or rather, just below cloud level. Because this is where the difference between Valeant and Turing is to be found. While the entire US population was shocked, appalled and outraged at Shkreli for daring to boost the price of one drug by 5000%, apparently nobody had a problem with Valeant jacking up the prices of nearly 30 drugs by anywhere between 90% and 786% on the high end, with one solitary outlier, Ofloxacin ear drops seeing its price soar by 2288%.

  Valeant’s price increases, or gouging as some would call it, are shown in the chart below courtesy of Citron:

  

  And there you have it: boost the prices of dozens of drugs in the span of 1-3 years anywhere between 100% and 800% and nobody notices (thank you insurance companies). But hike the price of one drug by 5,500% and suddenly all of America thinks you are satan incarnate.

  Indeed, as Citron concludes, “In the Twitter-storm furor over Turing’s recent one-drug price gouge attempt, the media has overlooked the reality that Martin Shkreli was created by the system. Shkreli is merely a rogue trying to play the gambit that Valeant has perfected.”

  But, as Citron also adds:

  “Martin Skrelli has put a face to the gouging of America by pharmaceutical companies. The media seems roused to demand answers. Now Senate Democrats are demanding action, and this is the stimulus.”

   

  

  And just like Shrekli burst the Valeant bubble and led to broad contagion across the biotech sector, Valeant’s far more egregious pricing strategy, in the words of Citron, “jeopardizes the entire US pharmaceutical industry, and its status as a leader in the development of drugs for the entire medical system.”

  Finally, perhaps the Shkreli-Valeant episode should serve as a wake up call to the US public and the media that “serves” it, and serve to answer the question: just what is the threshold that activates popular aversion – why is it one instance of a grotesque price increase which in the grand scheme of things has a small nominal impact has such a vastly greater impact on the popular psyche over thousands of smaller cases which however when combined, lead to far greater spending on drugs by a far greater group of people… and yet snuck by unobserved for so long.

  In any event, absent some massive bribe by the biotech lobby of Congress, the glory days of the biotech bubble are now over.

  Oh, and in conclusion now that Hillary’s populist fury at price-hiking biotechs is so tangible one can almost taste it, we conclude with what we said one week ago:

  We also are curious to see how Hillary’s populist outrage at Shkreli will be explained when the public realizes that it is only thanks to the benefits of socialized insurance programs such as Obamacare, of which Hillary is a staunch supporter, that such price gouging was possible in the first place.

  As Citron notes, “The US is the only developed country without some form of control over drug pricing; we have the highest pharma prices in the world. Most of the reason devolves from a backroom deal cut when the Bush administration set in motion the Medicare Drug benefit and inexplicably (if you’re not a lobbyist) gave away the rights of the US Government — the nation’s largest buyer of pharmaceuticals — to negotiate drug prices with suppliers.”

  Surprise: the ultimate patsy in this latest get rich quick scheme is… you, dear taxpayer.

  * * *

  Full Citron letter below (pdf)

  

  

  

  

  

• Glencore Implodes: Stock Plunges Most Ever, CDS Blow Out To Record Up On Equity Wipeout Fears

  Update: And there it is: GLENCORE DEBT INSURANCE COSTS SURGE TO RECORD HIGH; 5-YR CREDIT DEFAULT SWAPS RISE 207BASIS POINTS FROM FRIDAY’S CLOSE TO 757 BASIS POINTS

  

  * * *
  

  Just last Thursday we asked whether Goldman was “preparing to sacrifice the next Lehman“, by which of course we meant the world’s largest commodity trading counterparty, Baar, Switzerland-based Glencore which just two weeks ago unveiled an unprecedented “doomsday” capital raising and deleveraging plan which, in retrospect, was not enough.

  The punchline of Goldman’s report was that if commodity prices drop 5%, or even stay where they are, then Glencore’s investment grade rating – the most critical foundation of its entire trading operation where a downgrade to junk would launch a collateral and margin-call waterfall cascade a la AIG – would be lost. From Goldman:

  Glencore’s trading business relies heavily on short-term credit to finance commodity deals and its financing costs would increase if it were to lose its Investment Grade credit rating. In addition, it could even lose some counterparties due to increased counterparty risk.

  As we added on Thursday, “what a junking of Glencore would do, is start a collateral demand waterfall cascade that the cash-strapped company simply would not be able to sustain.” So having laid out the strawman, Goldman next, very conveniently, explains just what would take for the Investment Grade trap to slam shut: “it would only take a c.5% fall in spot commodities prices for concerns about its credit rating to resurface.“

  Of course, Glencore’s leverage to commodity prices was first explained in our March 2014 post, in which we said buying Glencore CDS is the best and easiest way to bet on a Chinese credit and commodity crunch.

  Fast forward to Monday morning when those who bought into Glencore’s equity offering at 125p less than two weeks ago on September 16, are already down a whopping 43% (we won’t even bother calculating the loss since the company’s 2011 IPO), following the biggest daily drop in Glencore history, with the stock mauled some 27% at last check…

  

  … on the heels of a note from Investec which said nothing Zero Hedge readers did not already know, but which is spooking everyone else into realizing that the commodity trading Titanic may well be sinking.

  In the note Investec notes that “using a PE-based approach to evaluate equity value going forward, in proportion to debt, we note that the heavily indebted companies (GLEN, AAL) could see almost all equity value eliminated under spot conditions, leaving nothing for shareholders…. GLEN recent restructuring may prove just the start for the majors if spot prices prevail – this supports our concern that we are still a distance from the “value point” in the sector.

  In other words, even if commodity prices remain unchanged, GLEN equity could be doughnut. If commodity prices continue dropping, then – well – just read out prediction from last year.

  It also means that bondholders are next in line to hold the equity after a debt-for-equity, which has also pushed Glencore’s bonds to record lows, with the GLEN €1.25b notes due March 2021 dropping three cents to 78 cents on euro, while the €750m bonds due March 2025 decline four cents to 67 cents. Both are at record lows.

  If and when the bondholders realize a bankruptcy would leave them with negative enterprise value when netting out all the margin calls, we wouldn’t be surprised to see bonds trading below 50 in the coming months if not weeks.

  Meanwhile, those who listened to our reco to buy Glencore CDS at 170 bps in March 2014 can take the rest of the year off. As of this moment, GLEN Credit Default Swap were pushing on 600 bps, 4 times wider, and on pace to take out the 2011 liquidity crunch highs. After that, it’s smooth sailing to all time wides and the start of a self-fulfilling prophecy which leads to the Companys’s IG downgrade and the collapse of trillions in derivative notionals as what may be the trading desk of the biggest commodity counterparty quietly goes out of business.

  

  

  

  

  

  

• Why Did Ted Cruz's SuperPAC Give Carly Fiorina's SuperPAC $500,000?

  Submitted by  SM Gibson via TheAntiMedia.org,

  A Super PAC associated with GOP presidential candidate Carly Fiorina has raised almost $3.5 million to date for the former CEO in her quest to become commander-in-chief in 2016. One donation in particular, though, stands out among the hundreds of contributions pledged to the CARLY for America Super PAC as so perplexingly bizarre, it has left the Federal Election Commission and a host of others scratching their heads in bewilderment.

  On June 18, a donation of $500,000 was made to the Fiorina-supporting PAC by Keep The Promise I. Not only is Keep The Promise I a generous contributor who believes in Fiorina’s presidential aspirations enough to fork over half a million dollars — it also happens to be a Super PAC set up to fund a political rival of Fiorina’s and fellow presidential candidate, Senator Ted Cruz.

  

   

  Why would anyone seeking the presidential nomination for the Republican party donate such a large sum to a competitor? No one currently knows the answer, but it is a question to which the FEC is actively seeking an answer.

  In a letter sent to Keep The Promise I on September 21, the FEC requested an explanation be given for the disbursement of funds to CARLY for America, and that “Failure to adequately respond by (October 21) could result in an audit or enforcement action.”

  The only explanation listed for the expense at the time of the contribution was “other disbursement.”

  Keep The Promise I is one of four political PACs set up to raise money for Cruz’s presidential campaign endeavors (the other three are “creatively” monikered “Keep the Promise PAC,” “Keep the Promise II,” and “Keep the Promise III”). Keep The Promise I alone has already raised over $11 million dollars for Cruz so far, but not much of that money has been spent yet. According to the FEC, only $536,170 has been used by the PAC. $36,170 of that went towards paying for attorney’s fees and surveys while the bulk of the cash went towards Fiorina’s presidential war chest.

  Even stranger, the large sum was donated to Fiorina while she was still a relatively unknown candidate. According to one Washington Post – ABC News poll, the former HP head was polling at 0% at the time. It wasn’t until August 6 — when Fiorina performed well in the first GOP lower candidate debate — that she was on anyone’s political radar nationally.

  In June, the FEC forced the Fiorina PAC to change its name from “Carly for America” to “CARLY (an acronym for Conservative Authentic Responsive Leadership for You) for America Super PAC.” The name change was in response to the FEC claiming the original title was in violation of its rules. As the Washington Post states: “FEC rules state committees can only use a federal candidate’s name if they’re authorized by that candidate, something super PACS, by rule, cannot be since they’re supposed to be independent.”

  

  

  

  

  

• Found On A Volkswagen In Portland

  Presented with no comment…

   

  

   

  h/t @DonDraperClone

  

  

  

  

  

• Liquid Alts – The World's Most Popular Hedge Fund Strategy Explained

  Via ConvergEx's Nicholas Colas,

  In this month’s installment of our regular series on liquid alternatives, we cover the most popular hedge fund strategy of institutional investors globally: Alternative Global Macro Funds.

   

  These funds capitalize on macroeconomic developments, so the Federal Reserve’s impending decision to hike rates is just one catalyst drawing investors to the strategy. Also known as a “go anywhere” investment style, active managers employ opportunistic trading tactics across asset classes, financial instruments, and geographic regions. Active managers establish positions based on analysis and forecasts of economic cycles, interest rates, commodities, and global capital flows, for example. Representing 30% of the liquid alts universe, global macro funds finished the first half of the year with $137.1 billion in total net assets, up 245% since 2008. Like many liquid alts, global macro funds grew rapidly following the financial crisis as investors looked for strategies that could diversify their portfolios.

   

  The unconstrained nature of the global macro strategy affords these funds the potential to earn positive returns regardless of cycles in the economy and capital markets. Ultimately, success in this classification resides in selecting the right active manager given the strategy’s wide dispersion of returns.

  Note from Nick: The original hedge fund, A.W. Jones, dates to 1949 and was a simple long-short equity investment vehicle. It wasn’t until 1970 that George Soros opened the doors on his fund and took hedged investing to the frontiers of practically any and all asset classes. Since then, of course, global macro funds have flourished and today Jessica brings us the latest on how this strategy plays on Main Street through “Liquid Alt” funds. And don’t forget to check out her book on the topic

  During a year of heightened capital markets volatility, which hedge fund strategies do you think institutional investors favor? They look to the “hedge” in hedge fund during choppy market conditions, after all. Credit Suisse revealed the answer after polling +200 global institutional investors, representing about $700 billion in hedge fund investments, in its mid-year Hedge Fund Investor Survey. The following includes highlights of the results:

  Global Macro (46%) was the most popular investment strategy among institutional investors globally. It was also the top pick in Credit Suisse’s Annual Global Investor Sentiment Survey published in March 2015. The next highest ranking strategy was Event Driven (44%), followed by Equity Long/Short (43%).

   

  The three strategies with the most interest by region include: Americas – Equity Long/Short (56%), Event Driven (47%) and Global Macro (38%); Europe, the Middle East, and Africa (EMEA) – Global Macro (54%), Equity Long/Short (46%) and Event Driven (43%); Asia Pacific (APAC) – Global Macro (44%), Multi-Strategy (44%) and Credit Long/Short (39%).

   

  Ninety-three percent of respondents said that they “plan to maintain or increase hedge fund allocations during the second half of this year”. 

  In light of the intense attention on monetary policy changes around the world, in particular, it’s no surprise institutional investors largely preferred the Global Macro strategy in the first half of 2015. Pivotal central bank decisions provide opportunities to exploit macroeconomic events, or these funds’ bread and butter. In the liquid alternatives universe – the ’40 Act version of hedge funds where their strategies are wrapped in a mutual fund or ETF – global macro funds have garnered the most assets compared to other strategies in the space, demonstrating broad retail interest as well.

  That’s why we chose to focus on the global macro strategy in this month’s edition of our series on the liquid alts asset class. As always, here’s some background information:

  Alternative Global Macro Funds employ opportunistic trading strategies by investing in instruments based on inflection points in macroeconomic trends. This may include shifts in political/monetary policy or economic developments, in which portfolio managers analyze and forecast changes in interest rates, inflation, or global capital flows, for example. Investors typically describe these funds as using a “go anywhere” strategy because it is unconstrained in terms of trading a wide range of markets, industry sectors, and geographic regions. They trade various financial instruments – cash, futures, and derivatives asset classes – and go long or short across asset classes – stocks, bonds, currencies, and commodities. 

   

  The difficulty in classifying global macro funds, in part, explains the classification’s outsized   total net assets compared to the remaining ten liquid alternative strategies as defined by Lipper. With total net assets of $137.1 billion at the end of Q2 2015 according to Lipper, Alternative Global Macro Funds represent 30% of all eleven classifications’ TNA of $462.8 billion. 

   

  While Lipper data shows this strategy lost $14 billion in estimated net flows during the first half of this year, total net assets have grown by 36% over the past five years. Additionally, the largest outflows in Q1 and Q2 stem from only a few funds, one of which – PIMCO Unconstrained Bond Fund – lost its high-profile portfolio manager. Another – MainStay Marketfield Fund – used to serve as the poster child for liquid alts, but took a turn for the worst last year after implementing failed inflation based trades.

   

  Like most liquid alt classifications, Alternative Global Macro Funds grew in popularity following the financial crisis. Since 2008, its TNA is up by 245%. Investors typically add exposure to liquid alts as a means to diversify their portfolios since they are supposed to sport low correlations relative to traditional asset classes, such as stocks and bonds. In this sense, the “go anywhere” approach of global macro funds appeal to investors as they can potentially earn positive returns irrespective of cycles in the economy or capital markets.

  But have they? The classification as a whole has fared well on average over the long-term, but the variances between funds’ returns are wide. Here’s a breakdown of performance numbers for the first half of 2015 (all data was provided By Lipper):

  Alternative Global Macro Funds started the year solidly, gaining 1.7% in the first quarter. This strategy fell 1.5% in the second quarter, however, finishing the first half slightly below the S&P 500’s return: +0.13% versus +0.24% respectively. The average of 5-year annualized returns for this classification is 4.9%, and the average of 10-year annualized returns is a little higher at 5.25%

   

  The five best performing global macro funds earned an average of 11.0% in the first half, while the five worst performing funds declined an average of 7.3%. 

   

  Given the wide dispersion of returns, choosing a portfolio manager is essentially the entire challenge of allocating money to this strategy. Increased volatility is by no means a harbinger of positive returns for global macro funds: active managers must make many accurate calls at the right times. Aside from being an expert in the markets they invest, active managers should have a strong investment process and a bulletproof risk management framework. Yes, that is true for any investment manager, but when it comes to global macro the stakes seem to increase exponentially.

  In sum, exposure to Alternative Global Macro Funds may prove suitable for investors who want access to its “go-anywhere” strategy in order to capitalize on the macroeconomic events that continue to unfold. These funds may help diversify investors’ portfolios in the midst of volatility in the global marketplace and historically high sector correlations against the S&P 500, thereby improving their risk-return profiles. Ultimately, success with this classification – as with liquid alts in general – depends on an investor’s due diligence when selecting a fund manager.

  

  

  

  

  

• UBS Is About To Blow The Cover On A Massive Gold-Rigging Scandal

  With countless settlements documenting the rigging of every single asset class, it was only a matter of time before the regulators – some 10 years behind the curve as usual – finally cracked down on gold manipulation as well, even though as we have shown in the past, central banks in general and the Fed in particular are among the biggest gold manipulators.

  That said, we are confident by now nobody will be surprised that there was manipulation going on in the gold casino. In fact, ever since Germany’s Bafin launched a probe into Deutsche Bank for gold and silver manipulation, it has been very clear that the only question is how many banks will end up paying billions to settle the rigging of the gold market (with nobody going to prison as usual, of course).

  Earlier today, we learned that the Swiss competition watchdog just became the latest to enjoin the ongoing gold manipulation probe when as Reuters reported, it launched an investigation into possible collusion in the precious metals market by several major banks, it said on Monday, the latest in a string of probes into gold, silver, platinum and palladium pricing.

  Here are the details that should come as a surprise to nobody:

  Global precious metals trading has been under regulatory scrutiny since December 2013, when German banking regulator Bafin demanded documents from Deutsche Bank under an inquiry into suspected manipulation of gold and silver benchmarks by banks. Even though the market has moved to reform the process of deciding on its price benchmarks, accusations of manipulation have refused to go away.

   

  Switzerland’s WEKO said its investigation, the result of a preliminary probe, was looking at whether UBS, Julius Baer, Deutsche Bank, HSBC, Barclays, Morgan Stanley and Mitsui conspired to set bid/ask spreads.

   

  “It (WEKO) has indications that possible prohibited competitive agreements in the trading of precious metals were agreed among the banks mentioned,” WEKO said in a statement.

  Don’t hold your breath though: “A WEKO spokesman said the investigation would likely conclude in either 2016 or 2017, adding that the banks were suspected of violating Swiss corporate rules.” Those, and virtually all other market rules.

  The good news is that unlike Bart Chilton’s charade “inquiry” into silver manipulation when after years of “probing” the CFTC found “nothing”, at least the Swiss will find proof of rigging for the simple reason that it is there.

  he banks face financial penalties if WEKO finds them guilty of wrongdoing, the spokesman said, though he declined to comment on the size of any possible fine.

  No please, anything but “financial penalties” for rigging the gold market.

  Aside from regulatory probes, a number of lawsuits have also been filed in U.S. courts alleging a conspiracy to manipulate precious metals prices.

   

  Commenting on the WEKO probe, a Julius Baer spokesman said the bank was cooperating with authorities.

   

  In a statement, Deutsche Bank said it was cooperating with requests for information from “certain regulatory authorities” over precious metal benchmarks but declined to comment further.

   

  Representatives for UBS, Barclays, Morgan Stanley and HSBC declined to comment. Mitsui was not immediately available for comment.

  Some so-called experts promptly scrambled to talk down the upcoming proof that so-called “paranoid” gold bugs have been right all along:

  The impact of the probes on wider precious metals trading was likely to be muted, according to Brian Lucey, professor of finance at the School of Business, Trinity College Dublin.

   

  “The question is not if individuals, or groups of individuals are collaborating to rig the game for themselves, the question is if this has any material effect,” he said. “I’m not convinced collusive behaviour will have a meaningful effect micro-economically to the structure of gold trading around the world.”

  Oh so the question is not if traders and banks made billions in illegal profits by rigging yet another market, but “if this has any material effect.” Give this man another distinguished financial professorship title: with observations like that what can one say but… “Keynesian genius.”

  * * *

  However, as we said above, none of the above, and certainly not the idiotic “finance professor” statements, will come as any surprise to anyone.

  What will, however, is that unlike previous gold probe cases, this one will actually have consequences.

  How do we know?

  Because just like in LIBOR-gate, just like in FX-gate, it is the biggest rat of all, Swiss megabank UBS, that is about to turn on its former criminal peers.

  As Bloomberg reported earlier “UBS was granted conditional leniency in Swiss antitrust probe of possible manipulation of precious metal prices, a person with knowledge of the matter said.“

  Bloomberg adds that the “bank may face lower fine than six other banks and financial firms suspected in probe or may avoid penalty altogether, person says.”

  Why would UBS do this? The same reason UBS did so on at least on two prior occasions: the regulators have definitive proof it is involved, and gave it the option to turn evidence and to rat out its cartel peers, or face even more massive financial penalties.

  UBS promptly chose the former, and took the opportunity to minimize yet another key civil (and criminal) market manipulation charge against it, especially after it was already branded a “criminal recidivist” between Libor, FX and, of course, the tax evasion scandal: one more manipulation scandal and the bank could well lose its license to operate in NYC.

  Which simply means that now the official countdown on the announcement of what will be revealed as the biggest gold-manipulation and rigging scandal in history, has begun.

  

  

  

  

  

• Here Come The Real Nazis: German Extremists Rally Against Refugees

  If we learned anything in September (other than that the Fed has now officially come to terms with its reflexivity problem), it’s that not every EU nation is as excited as Germany claims to be about relocating the hundreds of thousands of refugees fleeing war-torn Syria. 

  Ultimately, it was just a matter of who would push back first and we got the definitive answer when Hungarian PM Viktor Orban, fed up with the thousands of migrants streaming into the country from the south, moved to construct a 100-mile razor wire fence on the border with Serbia.

  When some refugees decided to test Orban’s resolve, he sent in the riot police, serving notice that Budapest has no intention of softening its stance on the issue.

  While we understand the importance of preserving territorial integrity, we’ve also been careful to note that the massive people flow that’s inundated the Balkans carries the very real risk of creating the conditions for dangerous bouts of intense nationalism and scapegoating xenophobia.

  The simple fact is that between Angela Merkel’s willingness to accommodate hundreds of thousands of asylum seekers and the sheer horror of the conditions the refugees are fleeing, it’s going to take a lot more than a fence and a fire hose to deter migrants on their quest to reach the German promised land, which means that Europe is going to have to come to terms with a new reality and a meaningful demographic shift.

  Needless to say, not everyone is going to be happy about that, and the situation is made immeasurably worse by Brussels’ move to force recalcitrant countries to settle asylum seekers against lawmakers’ wishes. But it’s not just Slovakia and Hungary where the backlash is being felt. As The Telegraph reports, quite a few Germans are now unhappy with Berlin’s approach to the crisis and the uneasy feelings are beginning to manifest themselves in protests by far-right extremists. Here’s more: 

  Germany’s domestic intelligence chief warned on Sunday of a radicalisation of Right-wing groups amid a record influx of migrants, as xenophobic rallies and clashes shook several towns at the weekend.

   

  President Joachim Gauck meanwhile warned of Germany’s “finite capacity” to absorb refugees, cautioning against more “tensions between newcomers and established residents”.

   

  Domestic spy chief Hans-Georg Maassen said that “what we’re seeing in connection with the refugee crisis is a mobilisation on the street of Right-wing extremists, but also of some Left-wing extremists” who oppose them.

   

  He added, speaking on Deutschlandfunk public radio, that for the past few years his service had witnessed a “radicalisation” and “a greater willingness to use violence” by all extremist groups, 

  including the far right, the anti-fascist far-left and Islamists. 

   

  
  

   

  Police and soldiers guarded two buses carrying about 100 migrants on Saturday night to a shelter in the town of Niederau, in the eastern Saxony state, after Right-wing protesters had rallied at the site, a former supermarket, since Friday.

   

  More than 1,000 people also demonstrated against refugees in several towns in the eastern state of Mecklenburg-Western Pomerania Friday, including in coastal Stralsund where three people were wounded in clashes with counter-protesters.

   

  In the eastern city of Leipzig, the right-wing rally “Offensive for Germany”, organised by local anti-Islam activists with about 400 marchers, sparked a larger counter-protest that police said drew more than 1,000 activists.

   

  In the ensuing street clashes, the rival groups hurled rocks and fireworks at each other. 

  And if the following from Bloomberg (citing Spiegel) is any indication, the situation will likely escalate further going forward:

  [German] govt plans to start sending trains soon to Salzburg, Austria to bring ~4,000 refugees/day to initial-admission centers in Germany, Spiegel Online reports without saying where it obtained information.

  It goes without saying that just about the last thing the world needs at a time when racial and religious tensions are running high is for Germany to start ever-so-gradually backsliding into the 1920s, and while that might seem far-fetched now, we would point to the shocking electoral gains posted earlier this month by Golden Dawn in Greece as evidence that intense nationalism still strikes a chord when the going gets especially tough and on that note, we close with the following from Gatestone:

  German authorities are applying heavy-handed tactics to find housing for the hundreds of thousands of migrants and refugees pouring into the country from Africa, Asia and the Middle East.

   

  With existing shelters filled to capacity, federal, state and local authorities are now using legally and morally dubious measures — including the expropriation of private property and the eviction of German citizens from their homes — to make room for the newcomers.

   

  German taxpayers are also being obliged to make colossal economic sacrifices to accommodate the influx of migrants, many of whom have no prospect of ever finding a job in the country. Sustaining the 800,000 migrants and refugees who are expected to arrive in Germany in 2015 will cost taxpayers at least at least 11 billion euros ($12 billion) a year for years to come.

   

  As the migration crisis intensifies, and Germans are waking up to the sheer scale of the economic, financial and social costs they will expected to bear in the years ahead, anger is brewing.

  

  

  

  

  

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