Reality

How The Ukrainian Government Is Giving Away Citizenships So Foreigners Can Run The Country

Claims that the new government in Ukraine is nothing more than a Western puppet Parliament have been swirling around consistently since February. Nevertheless, we think it’s very significant that the takeover is now overt, undeniable and completely out in the open

Meet American, Natalie Jaresko, who runs private equity fund Horizon Capital, and just became Ukraine’s Finance Minister.

Government's Small Business Administration Exposed As Corporate Welfare For Big Business

Many people have noted that the more insidious or corrupt a law or agency, the more positive sounding its name. The most egregious example during my lifetime, was naming legislation that stripped Americans of most of their civil liberties the “Patriot” Act. In a similar vein, which red-blooded American could ever be opposed to something called the Small Business Administration (SBA). As such, the SBA is the perfect vehicle for cronyism, corruption and corporate welfare, which indeed appears to be its primary reason for existence.

Russia's Monetary Solution

The hypothesis that follows, if carried through, is certain to have a significant effect on gold and the relationship between gold and all government-issued currencies. The successful remonetisation of gold by a major power such as Russia would draw attention to the fault-lines between fiat currencies issued by governments unable or unwilling to do the same and those that can follow in due course. It would be a schism in the world's dollar-based monetary order.

"We Are All In A Ponzi-World Right Now, Hoping To Get Bailed-Out By The Next Person"

"We all are in a Ponzi world right now. Hoping to be bailed out by the next person. The problem is that demographics alone have to tell us, that there are fewer people entering the scheme then leaving. More people get out than in. Which means, by definition, that the scheme is at an end. The Minsky moment is the crash. Like all crashes it is easier to explain it afterwards than to time it before. But I think it is obvious that the endgame is near."

"Today central banks give money to institutions, which are not solvent, against doubtful collateral for zero interest. This is not capitalism."

James Montier: "Stocks Are Hideously Expensive" In "The First Central Bank Sponsored Bubble"

"The stock market just keeps zooming up. A low equity allocation must be hurting you now... For all purposes, this is a hideously expensive market. I don’t care if it’s a bubble or not. It’s too expensive, and I don’t need to own it. That is the problem. This is the first central bank sponsored near-bubble. There is just nowhere to hide... but... to think that central banks will always be there to bail out equity investors is incredibly dangerous."

Say Goodbye To Mid-2015 Rate Hikes: Revised "Hourly Compensation" Crashes

But all the clever talking heads (the same ones that to-a-man saw rising rates this year) keep telling us that wage inflation is coming any minute, it has to right, and will create escape velocity and nirvana on American soil. Sorry, nope. Unit labor costs dropped 1.0% in Q3 against a 0.3% preliminary print and expectations of a mere 0.2% drop (the 4th missing quarter of th elast 5 and lowest growth since Q4 2013. What is more problematic is real hourly compensation was revised drastically lower - quite a plunge.

Energy Selling And "The Greatest Crisis Of Faith In The Markets Since The 1930s"

The selling is because the dominant Common Knowledge regarding energy sector stocks is that they move up and down with the price of oil. Common Knowledge is not what everyone knows; that’s the consensus. Common Knowledge is what everyone knows that everyone knows, and it’s the driving force behind the Game of Sentiment. Everyone knows that everyone knows energy stocks are tied to oil prices, we just took another sharp leg down in oil prices, and so energy stocks must be sold. The fact that energy stocks are down “proves” the relationship (a wonderful example of Soros’s concept of reflexivity), which adds to the selling. The reality (not that it matters) is that energy stocks are barely correlated with the price of oil, and their correlation with each other is barely driven by oil prices. What’s really driving this across-the-board decline is the fact that “long energy” has become a very crowded trade.

Government Construction Spending Surges Most Since 2006

After 4 months of missed expectations, US Construction Spending rose 1.1% in October, beating the 0.6% expectations, and the highest MoM since May 2014. Great news... the recovery is back, right? Scratch barely below the surface of this algo-loving headline though and the unsustainable reality peaks out. US Government construction spending spiked 19.3% in October, the most since 2006... seems like we need to dig some holes and fill them in again...

Obama Planning To Increase Funding For The Militarization Of America's Police Force

Since 2006,MRAPs, helicopters, machine guns, and night-vision-goggle have been increasingly evident across America as the good ol' yankee copper morphs into a full-metal-jacket-looking killer (even as the FBI admits the threats to police have not escalated as much as the media would like). So it isjust 'lucky' that Ferguson has reignited a narrative that enables President Obama "to discuss federal programs and funding that provide equipment to the state and local enforcement agencies," in a series of meetings today at The White House. We suspect funding will increase (for your own protection) and a new SWATification Tzar will be unveiled.

"You've All Gone Mad" - The S&P Is More Than Double Its Historical Valuation Norms

"As was true at the 2000 and 2007 extremes, Wall Street is quite measurably out of its mind. There’s clear evidence that valuations have little short-term impact provided that risk-aversion is in retreat (which can be read out of market internals and credit spreads, which are now going the wrong way). There’s no evidence, however, that the historical relationship between valuations and longer-term returns has weakened at all. Yet somehow the awful completion of this cycle will be just as surprising as it was the last two times around – not to mention every other time in history that reliable valuation measures were similarly extreme. Honestly, you’ve all gone mad."

Surprise: GAAP S&P500 EPS Set To Decline 1.3% In 2014

As of Q3, when adding the consensus number for Q4 EPS, we find that while non-GAAP EPS is set to rise by a healthy 6.6%, real rarnings, as in GAAP EPS, will actually decline by 1.3% in 2014, meaning that for yet another year, the only upside in stocks has been due to - thank you Fed - multiples expansion.

Guest Post: Fanning The Flames In Ferguson

The scripted quality of the Ferguson events seemed as formally predictable as an 1856 minstrel show, and the parallel is worth reflecting on because the nation appears determined to explode again in some kind of a civil war — bearing in mind Karl Marx’s advisory that “history repeats, first as tragedy, then farce.” As is the case with many show-biz extravaganza’s of our time the script had many authors. A week after the grand jury decision and the riot that followed, the Michael Brown incident is already disappearing down the national memory hole. Why? Mainly because anyway you cut it Michael Brown was a poor candidate for martyrdom.

FBI Report Accidentally Exposes The Severity Of The Police State

A recently published FBI report accidentally proves that while the police claim cops face growing threats from rowdy populations – like in Ferguson – the opposite is true. The governemnt places a higher priority on their own than on the lives of those they claim to “serve,” “protect,” and “work for.” It cares more about exonerating the police of their crimes than providing justice to those they abuse. There is no justice when the criminal is the cop.

"Why Anyone Believes Printing Money Will Leave Us Better Off Is Beyond Me"

The big selloff in 2015 will come from housing and housing-related investments as the marginal cost of capital rises through regulation and through “margin calls” on banks as their profit-to-GDP ratios grow too high for the economy to function properly. The dividend society is here and the true manifestation of Japanisation is not a future event but a thing we are living in right now…