en Electronic Voting Machines & Why Voters Should Be Suspicious Of Every Election <p><a href=""><em>Submitted by Adam Taggart via,</em></a></p> <div class="content clearfix"> <p>Long an &#39;exporter of democracy&#39; to the rest of the world, there is <strong><em>ample evidence that the United States lacks even the most rudimentary, basic protections necessary to preserve voting integrity within its own borders.</em></strong></p> <p>Some of the evidence is circumstantial, some is statistical, and some is pretty direct and clear-cut. Taken together, a pattern that emerges strongly suggesting that ever since electronic voting machines were introduced in the United States, <strong>we&rsquo;ve had a string of suspect election results that frankly are not consistent with a free and fair voting outcome.</strong></p> <div>This week, we&#39;re joined by Brad Friedman,<strong> election integrity analyst to understand better the systems and practices currently in place to collect and tally votes in America. </strong>As we gear up to elect our next president, it&#39;s clear that numerous concerns exist about the state of &#39;free and fair&#39; voting in our country:</div> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p>Trust is different than &#39;verifiable&#39;. Trust, frankly, has no place in elections. There is no reason to ever trust anybody. We need to be able to <em>verify </em>all of this.</p> <p>&nbsp;</p> <p>There are basically two different types of electronic voting systems that are currently used today.</p> <p>&nbsp;</p> <p>One is the touchscreen system that people know about. They&rsquo;ve seen those votes flipping and so forth. <strong>Those machines are, in fact, 100 percent unverifiable -- period.</strong>&nbsp;I&rsquo;ve asked the companies that make the systems many times, if they have any evidence whatsoever that any vote ever cast on one of those machines during an election, for any candidate or initiative on the ballot, if any of those votes have ever been recorded as per the voter&rsquo;s intent, any evidence whatsoever. They have none -- they are 100 percent unverifiable. Thankfully, many states are getting rid of those and they&rsquo;re moving to paper ballots.</p> <p>&nbsp;</p> <p>The problem, however, with hand marked paper ballots is that most of them are run through optical scan computers to be scanned. The problem is, they often don&rsquo;t work. You can&rsquo;t tell whether they have worked properly, whether they have accurately recorded the vote, unless you actually hand count the paper ballots -- begging the question of why the hell are we using these optical scan systems in the first place. So when you have a paper ballot, at least it is verifiable if anybody bothers to do a hand count. But we don&rsquo;t bother to do so in this country; almost never. When problems are found, often they are completely ignored.</p> <p>&nbsp;</p> <p>So that&rsquo;s why I&rsquo;ve argued for years now that the most transparent and reliable way to run an election is to hand count the paper ballots at the precinct on election night publicly in front of everyone with the results posted at the precinct before those ballots are moved anywhere.</p> <p>&nbsp;</p> <p><strong>Short of that, it really is faith-based elections.</strong> We&#39;re trusting that they&rsquo;re recorded accurately, even though we&rsquo;ve got so much evidence that they often are not. I think it&rsquo;s a crazy way to run a democracy if you ask me(...)</p> <p>&nbsp;</p> <p><strong>There is every reason to be suspicious of every election.</strong> There&#39;s a lot of money at stake, a lot of money, a lot of power at stake in these elections and so people should be suspicious about them.</p> <p>&nbsp;</p> <p><strong>No matter what you do, people will try to game elections. There&#39;s just too much at stake</strong> for people to not want to try to do that. That&rsquo;s why you need a system that is as transparent as possible because people are going to try to game it. The trick is you have as many eyeballs looking as possible to make it as difficult as possible to game the election. That&rsquo;s the trick; and when you begin to use security by obscurity and hide the way that votes are actually counted and the way that votes are actually cast and the systems that are used to tally them, we have no idea in the end.</p> <p>&nbsp;</p> <p>I think that&rsquo;s just absolutely crazy. Every time I come out and make that argument, it depends what election has just happened, but I&#39;m then branded either a Democratic partisan, a Republican partisan, a Bernie supporter, a Hillary supporter -- whatever it is. People don&rsquo;t like to hear these facts. So I&rsquo;ve had to go to bat for a lot of candidates who I would have never ever even considered voting for. But I think that their supporters have the right to know whether they won or lost, and have the right to know that the election was tabulated accurately. That&rsquo;s what we no longer have in this country and it&rsquo;s ridiculous.</p> </blockquote> <p>Click the play button below to listen to Chris&#39; interview with Brad Friedman (53m:45s)</p> <p>&nbsp;</p> </div> <p><iframe allowfullscreen="" frameborder="0" height="315" src="" width="560"></iframe></p> <div class="field field-type-filefield field-field-image-teaser"> <div class="field-items"> <div class="field-item odd"> <img class="imagefield imagefield-field_image_teaser" width="915" height="631" alt="" src="" /> </div> </div> </div> None Mon, 30 May 2016 23:00:00 +0000 Tyler Durden 562315 at Things Are Thriving In The "Modern Hooker Economy" <p>Last year <a href="">we exposed </a>the growing trend among thousands of British students who were funding their college experience through &quot;Sugar Daddy&quot; websites, where <strong>&quot;arrangements&quot; were made to allow students to pay off student loans and other living expenses.</strong></p> <p>It turns out that <strong>US students are now following this crafty debt repayment plan in the new &quot;<a href="">modern hooker economy.</a>&quot;</strong></p> <p>Meet Candice Kashani, recent graduate of Villanova University School of Law who despite a scholarship faced tuition and expenses of nearly $50,000. Candice was able to graduate this spring <strong>debt-free</strong> - <strong><em><span style="text-decoration: underline;">with the help of several sugar daddies of course</span>.</em></strong></p> <p><a href=""><img height="443" src="" width="600" /></a></p> <p><a href=""><img height="990" src="" width="600" /></a></p> <p><a href=""><img height="413" src="" width="600" /></a></p> <p>Ron Weitzer, sociology professor at George Washington University and criminologist describes sugar daddy arrangements as<u><em><strong> &quot;prostitution light.&quot;</strong></em></u> However, that&#39;s not how Kashani sees it. Kashani <a href="">says</a> that <strong>sites that connect women seeking financial help with men willing to provide it are a &quot;great resource&quot;</strong>, and that she sifted through many potential suitors before finding one she clicked with. Candice considers her sugar daddy one of her best friends and that they care deeply for each other.</p> <p>&quot;The people who have a stigma, or associate a negative connotation with it, don&#39;t understand how it works.&quot; added Kashani.</p> <p>With undergraduates facing an average of $35,000 in student debt, and graduates facing $75,000 or more, students sometimes need even more money in order to keep up with the cost of living, and are left scrambling.</p> <p><strong>Some students eventually find themselves on sites such as, the third largest of the sugar daddy websites, just as one anonymous graduate student at Columbia University did. </strong>As <a href="">AP reports,</a></p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p><em>One graduate student at Columbia University in New York had a scholarship that covered almost all of her tuition, but not her living expenses. She spoke on the condition of anonymity because of the potential impact on her job prospects. She tried to make do &mdash; sharing a room with a classmate and working a minimum wage job, plus any freelance work she could get. But still she struggled to pay her rent and utilities, and her grades suffered.</em></p> <p>&nbsp;</p> <p><em>&quot;That&#39;s just not why I am here,&quot; she said. &quot;<strong>I wanted to find the most amount of money I could make for the least amount of effort.</strong>&quot;</em></p> <p>&nbsp;</p> <p><em>So she found herself surfing Craigslist and and later,, the largest of the sugar daddy websites. Now she has two sugar daddies, one she sees occasionally and another who is more like a conventional boyfriend, <strong>except that he pays her a monthly allowance and helps rent her an apartment closer to him</strong>.</em></p> <p>&nbsp;</p> <p><em> said it is most popular in Los Angeles and New York. The average rent in both areas is well over $2,000 a month, according to Zillow research.</em></p> <p>&nbsp;</p> <p><em>The Columbia student says she plans to continue &quot;sugaring&quot; after she graduates to buy herself time to find a more traditional job and remain officially unemployed so she can defer repaying the roughly $70,000 in loans she had already racked up.</em></p> <p>&nbsp;</p> <p><em>&quot;There is a lot of moral panic about it,&quot; she said. &quot;<strong>But what are the real estate and academic funding situations that led to this?</strong>&quot;</em></p> </blockquote> <p><a href=""><img height="223" src="" width="600" /></a></p> <p>Brandon Wade, the creator of says it&#39;s an &quot;<strong>alternative to financial aid</strong>&quot; but claims the site didn&#39;t set out to target students, but it stumbled on the niche and began offering students premium free memberships in 2011 which normally cost $30 a month. Sugar daddies are charged $70 to $180 a month, depending on membership level.</p> <p>S<strong>tudent users of the site jumped from 79,400 worldwide in 2010 to 1.9 million this year</strong>, which accounts for one third of its users. Interestingly, the company says enrollment jumps during August and January when tuition is typically due, sometimes to more than double normal levels.</p> <p>Women who have used the site report experiences that are wide ranging, from respectful dates all the way to aggressive solicitation online, and<strong> although sex is not guaranteed, most users say it is implied.</strong></p> <p>Some warn that putting true identities online could put women at risk, but Wade says there are risks inherent in any dating website. Wade said was created out of his own frustration with women, <strong>and realized that a site such as his would highlight what set him apart: money.</strong></p> <p><em><strong>&quot;Money and sex are things that people want. I think the controversy comes into play on seeking arrangement because we are so up front about it.&quot;</strong></em> Wade said.</p> <p>Alas, with the jobs recovery being as weak as it is, it&#39;s only a matter of time before more students transition into full time users of sugar daddy services instead of looking for employment. Perhaps when Tim Geithner penned the now infamous &quot;<a href="">Welcome To The Recovery</a>&quot; piece in the New York Times back in 2010, he should have followed it with <strong><em><span style="text-decoration: underline;">&quot;And The New Modern Hooker Economy.&quot;</span></em></strong></p> <div class="field field-type-filefield field-field-image-teaser"> <div class="field-items"> <div class="field-item odd"> <img class="imagefield imagefield-field_image_teaser" width="804" height="553" alt="" src="" /> </div> </div> </div> New York Times Real estate recovery Student Loans Tim Geithner Mon, 30 May 2016 22:30:00 +0000 Tyler Durden 562337 at "Crooked" Hillary & The Coming Convention Coups <p><a href=""><em>Submitted by Howard Kunstler via,</em></a></p> <p>That was the week Hillary began to look like the candidate who fell off a truck wearing a Nixon mask.<strong> Email-gate is taking on the odor of Watergate &mdash; the main ingredient of which was not the dopey crime itself but the stonewalling around it. </strong>The State Department Inspector General&rsquo;s report saying definitively, no, she was not &ldquo;allowed&rdquo; to use a private, unsecured email server validated Donald Trump&rsquo;s juvenile name-calling of &ldquo;Crooked Hillary.&rdquo;</p> <p>We may never hear the end of that now (if Trump is actually nominated). And, of course, <strong>there lurks the Godzilla-sized skeleton in her closet of the still-unreleased Goldman Sachs speech transcripts, </strong>the clamor over which is sure to grow. Meanwhile the specter of the California primary looms, a not inconceivable loss to Bernie Sanders. And onto the convention in Philly which I contend will be even more fractious and violent than the 1968 fiasco in Chicago.</p> <p><strong>I&rsquo;ll say it again: Hillary is a horse that ain&rsquo;t gonna finish.</strong> The Democrats better be prepared to haul Uncle Joe out of the closet, fluff up his transplanted hair, wax his dentures, give him a few Vitamin B-12 shots, and stick a harpoon in his fist for the autumn run against the White Whale (if Trump is actually nominated).</p> <p><strong>The Republican convention in Cleveland is apt to be as bloody and violent a spectacle too</strong> (if Trump is actually nominated), with Black Lives Matters cadres having already promised to put on a show for global television and their Latino counterparts marching with Mexican Flags and cute signs saying: Trump: Chingate tu madre, perhaps garnished with the sobriquet pendejo. In such a situation, <strong>Trump has enormous potential to make things worse with his childish snap-backs. Hubert Humphrey in 1968 at least had the good sense to keep his mouth shut about the moiling multitudes out on Michigan Avenue inveighing against him.</strong></p> <p>The Vietnam War was a grave debacle, and it especially pissed off the young men subject to being drafted to fight in it, but the woof and warp of American life was otherwise intact. Blue collar workers still pulled in high wages in the Big Three auto plants, and women had not yet declared war on men, and the airwaves weren&rsquo;t pornified, and there were still people in government with moral authority who loudly opposed official policy. The sobering martyrdoms of Martin Luther King and Robert Kennedy sanctified the opposition to the status quo. Even Hubert Humphrey himself, a thoughtful man underneath his Rotarian clown mask, began to turn away from Lyndon Johnson&rsquo;s war hawks.</p> <p>Nixon won. He surely benefited most not so much from the war issue and the riots in the streets as from the mass defection of Southern states from the long-entrenched domination of the Democratic Party &mdash; directly due to Johnson&rsquo;s dismantling of the old Jim Crow laws. As a personality, Nixon was as much a pendejo as Donald Trump, but no one doubted his ability to run the machinery of government, if not the way they wanted to run it.</p> <p><strong>One difference today is that the two supposedly leading candidates, Hillary and Trump, are broadly loathed and mocked by people of all ages, not just disaffected youth.</strong> Trump appears to actually know so little about the major problems the country faces &mdash; energy, trade, the animus of foreigners &mdash; that he would be literally helpless in crisis. Hillary would enter the White House more mistrusted than Tricky Dick, and more starkly wired into the parasitical elites draining the body politic of its precious bodily fluids &mdash; in the immortal words of Doctor Strangelove.</p> <p><strong>Though it appears that Trump has consolidated the delegate vote needed for nomination, something tells me that a move is yet afoot to knock the gold ring out of his grubby fingers.</strong> Speaker of the House Paul Ryan is playing it very cagey and you can imagine that current party stalwarts and office-holders all over the land are wringing their hands over being asked to follow Trump into some dark night of the American soul. Paul Ryan must know that a coup at the convention is still conceivable and that the action inside the hall will be as violent as the street-fighting outside.</p> <div class="field field-type-filefield field-field-image-teaser"> <div class="field-items"> <div class="field-item odd"> <img class="imagefield imagefield-field_image_teaser" width="549" height="354" alt="" src="" /> </div> </div> </div> Bernie Sanders Donald Trump goldman sachs Goldman Sachs Michigan Nomination Tricky Dick White House Mon, 30 May 2016 22:00:00 +0000 Tyler Durden 562324 at Switzerland's Gotthard Base Tunnel: Swiss Engineered, Foreign Made <p>Earlier we <a href="">introduced</a> the Gotthard Base Tunnel, the <strong>longest and deepest tunnel in the world.</strong> The 35 mile long tunnel which cuts underneath the Alps helps remove natural barriers to trade and tourism, and is undoubtedly a <strong>testament to Swiss precision engineering.</strong></p> <p><a href=""><img height="669" src="" width="600" /></a></p> <p><a href=""><img height="269" src="" width="600" /></a></p> <p><a href=""><img height="296" src="" width="600" /></a></p> <p>Interestingly, as Bloomberg <a href="">reports</a>, the tunnel that was 17 years in the making and had workers on three shifts working around the clock to build, <strong>was built primarily by foreigners</strong>.</p> <p><strong>Only 14 percent of the workers were from Switzerland,</strong> while 29 percent came from Italy, 17 percent from Austria, 12 percent from Germany, 7 percent from Portugal, and 21 percent from other countries.</p> <p><a href=""><img height="332" src="" width="600" /></a></p> <p><a href=""><img height="290" src="" width="600" /></a></p> <p>It&#39;s ironic that the tunnel was built primarily by foreigners because two years ago the electorate <strong><a href="">voted for quotas</a> on immigration from EU countries</strong>, and the issue is one of the most pressing that the EU is currently dealing with as German chancellor Angela Merkel, French president Francois Hollande, and Italian prime minister Matteo Renzi are set to attend an opening ceremony for the tunnel on Wednesday.&nbsp;</p> <p>Max Stern, co-founder of the Swiss foreign policy forum says the event can be a chance &quot;<strong>to show that we&#39;re working in good faith and contributing to Europe&#39;s cohesion</strong>&quot;, however given that Switzerland has already <a href="">made arrangements</a> to station troops at its borders if future immigration gets too far out of control, the ceremony will likely be nothing more than a photo op for those involved - just a way for <a href="">Merkel</a> and <a href="">Hollande</a> to escape the real issues they&#39;ve been dealing with back at home.</p> <p>* * *</p> <p>Here is a short clip showing the finished tunnel</p> <p><iframe frameborder="0" height="315" src="" width="600"></iframe></p> <p>And a longer video that shows the type of work that was done in order to get the Gotthard Base Tunnel built.</p> <p><iframe frameborder="0" height="315" src="" width="600"></iframe></p> <div class="field field-type-filefield field-field-image-teaser"> <div class="field-items"> <div class="field-item odd"> <img class="imagefield imagefield-field_image_teaser" width="804" height="389" alt="" src="" /> </div> </div> </div> Germany Italy Portugal Switzerland Mon, 30 May 2016 21:30:00 +0000 Tyler Durden 562327 at "It's Unbearable" 50-Year-Old German Woman Rages "I Have Lost All My Trust In The State" <p><a href=""><em>Via,</em></a></p> <p><a href="">An original translation by Nash Montana of a PI News report</a>...</p> <p><a href=""><img alt="" src="" style="width: 600px; height: 334px;" /></a></p> <p><strong>I am almost 50 years old, I have a University degree, and was &ndash; out of love for nature &ndash; always a trusted voter for the Green Party. </strong>I never felt much interest for politics. In Germany everything seemed to always go its natural regular course. I had trusted our parliamentary democracy, I thought our administration would hardly make mistakes, because it is controlled by the opposition. <strong>Never, absolutely never did I think that I would lose all my trust in the State. It&rsquo;s unbearable that I am afraid of the future. Preferably I&rsquo;d just like to leave. But I feel too old to leave Europe.</strong></p> <p><em><strong>What country would even take me anymore?</strong></em> I am not a shameless African that just seats himself in a refugee boat. I would properly apply to the respective immigration authority. But my chances are close to zero. <strong>I am &ndash; like most Europeans &ndash; damned to impotence as I see this invasion happen.</strong></p> <p>When, about ten years ago, a friend of mine emigrated to Australia, I felt sorry for her. How could one leave our beautiful Europe? A continent with such wonderful nature and culture. I would&rsquo;ve never even thought of this. Today I know: She did the right thing.</p> <p><strong>I am becoming depressed in Europe. Our defenselessness shocks me. The failure to act by our politicians drowns my mind in a fog of powerlessness. </strong>I have not read any of Sarrazin&rsquo;s books, so as not to upset myself even more. Everything I read, in just our daily newspapers, is enough for me already.</p> <p><strong>The Euro is a complete nightmare. The illegal immigration is a complete nightmare. But the single largest outrage is the political correctness which disables us from criticizing these immense breaches of law.</strong></p> <p>We, that is us adult and mature citizens, who are in<strong> this way disenfranchised</strong>. When I went to school, I was taught critical thinking. What good is that to me now?</p> <p>Meanwhile I hate the Green party. They are asinine and dopey, and they are shameless. Just like the SPD and the CDU. They expect that we get up at 6 AM in the morning and encourage our children to succeed, just so that they will wear themselves out like us in order to be able to keep on financing this daily madness. And soon until we&rsquo;re 73 years old. [Translator: Germany plans to raise retirement age to 73]. But a State that provides no more stability, can no more expect of its citizens to function at full capacity. With each pot hole I drive through, with each African that I see loitering around, my motivation tanks more.</p> <p><strong>What does our Politics (Me: Policy?) even still have to offer to us? </strong>Legalization of hemp &ndash; probably so that we can withstand daily life in this insane country! Other than that there is nothing innovative on the program. I have looked at it all. Because I am looking for a new party that I can vote for.</p> <p><strong>I want the Deutsche Mark back and that the outer borders of the EU are being protected.</strong><a href=""> I do not want to see any more pictures like these Daily Mail ones</a>.. I don&rsquo;t want more than that. Is that too much to ask for?</p> <p>I do not have much power. But there are a few things that are within my might:</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p>1. I will dedicate my time to look over my income tax very in depth, and<strong> I will not give away another cent of my money to this robber government.</strong></p> <p>&nbsp;</p> <p>2. I am<strong> seriously thinking of leaving my church</strong>, because the church is not fulfilling their mission duty. With this action, I can save another 1,000 Euro.</p> <p>&nbsp;</p> <p>3. <strong>I will do nothing that stimulates consumption</strong>. Only buy the very necessary things. The finance minister will in the future only collect the absolutely unavoidable consumption taxes.</p> <p>&nbsp;</p> <p>4.<strong> I will not leave any money on bank accounts, instead I will invest it in foreign currency and gold, and keep it stored in my house.</strong></p> <p>&nbsp;</p> <p>5. I will only <strong>vacation in non-EU countries.</strong></p> <p>&nbsp;</p> <p>6. I will in the coming year,<strong> two times for six weeks each of my free time, devote to the AfD and hand out flyers.</strong> When I read the preamble of the AfD program&nbsp; I had to cry because it is so beautiful. I will share this program wherever my feet will take me.</p> </blockquote> <p>Inner Immigration &ndash; <strong>I can&rsquo;t say more to it. Maybe add prayer.</strong> <em>But lastly, I haven&rsquo;t even gone to church anymore. The fiddling of my church with the powers that be does not please me. The new pope does not please me. The church does not provide me with spiritual stability anymore. On the contrary, the church scares me with their crusade against Europe.</em></p> <div class="field field-type-filefield field-field-image-teaser"> <div class="field-items"> <div class="field-item odd"> <img class="imagefield imagefield-field_image_teaser" width="641" height="357" alt="" src="" /> </div> </div> </div> Australia Germany Mon, 30 May 2016 21:30:00 +0000 Tyler Durden 562320 at Grant Williams Warns Of Looming 'Wealth Tax', Says "Own Physical Gold, Not ETFs" <p>Grant Williams, strategy advisor to Vulpes Investment Management and co-founder of Real Vision Television is always worth the read or listen, and he sat down for an interview during his time at this year&#39;s Mauldin Strategic Investment Conference to discuss his views on gold, and why physical cash is being eliminated.</p> <p><a href=""><img height="339" src="" width="600" /></a></p> <p>On the subject of gold, Williams is very quick to point out that he doesn&#39;t buy gold for the price, he owns it for what it does. He goes on to say that once people realize the value of owning physical gold, ETF&#39;s will no longer be what investors want to own.</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p><em>&quot;<strong>I don&#39;t buy gold, I own it</strong>. I don&#39;t buy gold at $1,100 because I think it&#39;s going to go to $1,200. <strong>I buy it for what it does, not what the price is, the price is the last consideration for me</strong>. I think the way the picture has been developing over the last eight years, it&#39;s like when you take a polaroid, you take a picture and you sit there and you watch this thing and it slowly comes into focus, and that&#39;s what it&#39;s been like for me watching gold, we&#39;re watching this picture slowly develop.&quot;</em></p> <p>&nbsp;</p> <p><em>&quot;We&#39;re getting to the point where people are going to be able to see the picture, and at that point gold is the answer. It&#39;s not just an asset anymore it&#39;s the answer to a lot of people&#39;s questions. When that happens, I think the most important stage of this completes itself and that is the resolution between the paper price and the physical asset. <strong>I think when we get to that point where people want to own gold, ETF&#39;s won&#39;t suffice anymore</strong>. A promise to deliver three months hence is not going to be sufficient anymore, people are going to want to own the asset. At that point you realize that there are multiple hundreds of claims per ounce, and those claims won&#39;t be worth anything anymore it&#39;s going to be the asset, and that&#39;s the end game.&quot;</em></p> <p>&nbsp;</p> <p><em>&quot;The picture is becoming clearer, and <strong>everything the central banks are doing is bringing that day forward a little bit</strong>.&quot;</em></p> </blockquote> <p>When asked the question how to hedge the many risks that investors face today, Williams shifts the conversation to holding cash. As people hoard cash it negates what the central banks are trying to do so they&#39;re discouraging holding cash, but he rightly points out that any time someone is telling you &#39;you really shouldn&#39;t do that, we&#39;re going to discourage you from doing that&#39; often times that&#39;s where people want to (and should) go.</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p><em>&quot;<strong>The thing you&#39;re being discouraged most to own is cash</strong>. If people hoard cash it negates what the Fed is trying to do; lower interest rates, get people spending, bring the velocity of money up. You can see, the results are all in the opposite direction. You look at the savings rate which bottomed in 2006, we had the sharp spike in &#39;08 which is a perfectly natural thing to do in a crisis, it came back a little bit but the trend is now such that the savings rate has tripled. That is not something that you would expect as a Federal Reserve governor to be the outcome of taking rates to zero, the idea is let&#39;s make it unattractive to hold cash.&quot;</em></p> <p>&nbsp;</p> <p><em>&quot;Any time someone is telling you, &#39;you really shouldn&#39;t do that, we&#39;re going to discourage you from doing that&#39;, often times that&#39;s where people want to go and so I think holding cash,<strong> the optionality that you have inherent in owning cash now has certainly not been higher since going in to 2008.</strong>&quot;</em></p> </blockquote> <p>On the push to eliminate physical cash, Williams notes that it&#39;s just the logical next step in a plan for the governments to be able to take from those that have money, and give to those who do not. He also accurately points out that the media is helping the government accomplish this task with its constant narrative that only drug dealers and other bad guys use cash.</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p><em>&quot;Having the ability through digital cash, for a government to reach into your bank account and take 10 percent 20 percent, whatever it may be, is what they need. <strong>They can see this coming, at some point they&#39;re going to have to take money from the people who have it to fill the hole of the people who have spent it. This was a perfectly logical next step in that process.</strong>&quot;</em></p> </blockquote> <p>* * *</p> <p><iframe frameborder="0" height="315" src="" width="600"></iframe></p> <div class="field field-type-filefield field-field-image-teaser"> <div class="field-items"> <div class="field-item odd"> <img class="imagefield imagefield-field_image_teaser" width="816" height="461" alt="" src="" /> </div> </div> </div> Central Banks Federal Reserve Savings Rate Mon, 30 May 2016 21:00:00 +0000 Tyler Durden 562309 at The Limits Of Oil's Rebound <p><a href=""><em>Submitted by Anatole Kaletsky, originally posted at Project Syndicate,</em></a></p> <p><strong>For the first time since last October, the price of a barrel of oil has broken through $50.</strong> So it seems a good time to update the <a href="">analysis I presented in January 2015</a>.</p> <p><strong>Back then, I argued that $50 or thereabouts would turn out to be a long-term ceiling for the oil price.</strong> At the time, with crude prices still above $60, almost everyone believed that $50 would be the rock-bottom floor. After all, futures markets <a href="">predicted prices of $75 or higher</a>; the Saudi and Russian governments needed $100 to balance their budgets; and any price much below $50 was considered unsustainable, because it would put the US shale-oil industry out of business.</p> <p>As it happened, the price of Brent crude did fluctuate between $50 and $70 in the first half of last year, before plunging decisively below $50 in early August, when it <a href="">became obvious</a> that the lifting of sanctions against Iran would unleash a massive increase in global supply. Since then, $50 has indeed proved to be a ceiling for the oil price. <strong>But now that this level has been exceeded, will it again become a floor? </strong></p> <p><strong>That seems to be what many investors are expecting.</strong> Hedge funds and other &ldquo;non-commercial&rdquo; speculators have increased their long positions to an all-time high of 555,000 of the main oil contracts traded on the New York futures market, compared to the previous record of 548,000 contracts, set just before the oil price peaked at $120 in June 2014. The return of speculative enthusiasm is usually a reliable sign that the next big price move will probably be down. <span style="text-decoration: underline;"><strong>More important, the fundamental arguments are more compelling than ever that $50 or thereabouts will continue to be a price ceiling, rather than a floor. </strong></span></p> <p>The case begins, as it did in January 2015, by observing that <strong>the oil market is no longer controlled by the monopoly power of OPEC (or the Saudi government and OPEC)</strong>. Because of new sources of supply, advances in energy technology, and environmental constraints, <strong>oil is now operating under a regime of competitive pricing, like other commodities do</strong>.</p> <p>This is what happened for two decades from 1985 to 2004, and, as the chart below shows, trading in the spot market during the past 18 months has been consistent with this idea. So has trading in the futures market:<span style="text-decoration: underline;"><strong> oil for delivery in 2020 has fallen to $56, from $75 a year ago. </strong></span></p> <p><img alt="Oil price" src="" width="600" /></p> <p><strong>If this competitive regime continues, the price of oil will no longer be determined by the needs and desires of oil-producing governments. </strong>Saudi Arabia or Russia may want, or even &ldquo;need,&rdquo; an oil price of $70 or $80 to balance their budgets. But oil producers&rsquo; need for a certain price does not mean that they can achieve it, any more than iron-ore or copper producers can achieve whatever price they &ldquo;need&rdquo; to keep paying the dividends their shareholders expect or want.</p> <p><strong>Similarly, the fact that many debt-burdened shale producers will go bankrupt if the oil price stays below $50 is no reason to expect a rebound. </strong>These companies will simply lose their oil properties to banks or competitors with stronger finances. The new owners will then start to pump oil again from the same acreage, provided prices are above the marginal cost of production, which will now exclude any interest payments on loans that are written off.</p> <p>A clear illustration of the &ldquo;regime change&rdquo; that has taken place in the oil market is the current rebound in prices to around the $50 level (the likely ceiling of the new trading range). <strong>The steepest part of this increase occurred <em>after</em> April 17, when OPEC failed to agree on a new price target and persuade the Saudi, Russian, and Iranian governments to coordinate the output cuts that would be required to achieve any such target.</strong></p> <p>Now that all of the main oil producers are unequivocally committed to maximizing production, regardless of the impact prices, oil will continue to trade just like any other commodity (for example, iron ore) that is in <strong>oversupply in a competitive market</strong>. Prices will be determined as described in any standard economics textbook: by the marginal costs of the last supplier whose production is needed to meet global demand.</p> <p><em><strong>When oil demand is fairly strong, as it is now and tends to be in early summer, the price will be set by the marginal production costs in US shale basins and Canadian tar sands. When demand is weak, as it often is in autumn and winter, the market-clearing price will be set by marginal producers of cheap but less accessible oil in Asia and Africa, such as Kazakhstan, eastern Siberia, and Nigeria.</strong></em></p> <p>From now on, the costs faced by these marginal producers will set the top and bottom of oil&rsquo;s trading range. Low-cost producers in Saudi Arabia, Iraq, Iran, and Russia will continue to pump as much as their physical infrastructure can transport as long as the price is higher than $25 or so. The price needed to elicit enough production from US shale and Canadian tar sands to meet strong demand may be $50, $55, or even $60, but it is unlikely to be much higher than that.</p> <p>Unpredictable shifts in supply and demand will, of course, cause fluctuations within this trading range, which past experience suggests could be quite large. In the 20-year period of competitive pricing from 1985 to 2004, the oil price frequently doubled or halved in the course of a few months. So the near-doubling of oil prices since mid-January&rsquo;s $28 low is not surprising. <strong>But now that the $50 ceiling is being tested, we can expect the next major move in the trading range to be downward.</strong></p> <div class="field field-type-filefield field-field-image-teaser"> <div class="field-items"> <div class="field-item odd"> <img class="imagefield imagefield-field_image_teaser" width="757" height="480" alt="" src="" /> </div> </div> </div> Copper Crude Futures market Iran Iraq Kazakhstan OPEC Saudi Arabia Mon, 30 May 2016 21:00:00 +0000 Tyler Durden 562323 at Why Management Is Incentivized To Fabricate Earnings: It's All About non-GAAP Bonuses <p>When it comes to the stock market, there is no single greater observable divergence right now than that between GAAP and non-GAAP earnings. As the chart below shows, while on a non-GAAP basis earnings have been hurting in recent years, with the LTM EPS of the S&amp;P has declined to 116.4, down from 118.1 as of December 31, 2014, the real surprise is in GAAP EPS, which are back down to 88, a level last seen in 2007 when the market was about 500 points lower.</p> <p>And, depending on whether one believes in adjusting EPS and giving companies the full credit of addbacks, pro forma numbers, and other various fudges, the P/E of the S&amp;P as of this moment, is either 18x on a non-GAAP basis, <strong>or a ludicrous 23.7x if GAAP earnings are used</strong>.</p> <p><a href=""><img src="" width="499" height="324" /></a></p> <p>The reason for the use of this non-GAAP numbers is very simple: to create an illusion of corporate profitability where one does not exist, something which can be seen most vividly in the earnings, or rather loss numbers of Alcoa, easily the most chronic offender of non-GAAP adjustments, <a href="">which has made a half a billion dollar loss into half a billion dollar profit</a>.</p> <p><a href=""><img src="" width="500" height="397" /></a></p> <p>But, as the <a href="">WSJ calculates</a>, it is not just shareholders who enjoy the illusion that their investment is doing better than in reality (and thus their stock is worth more than it would be under a GAAP world) - it is corporate executives themselves who are delighted by non-GAAP numbers.</p> <p>As the <a href="">WSJ reports</a>, non-GAAP adjusted metrics aren’t just showing up in earnings releases: "pro forma figures have been proliferating in annual proxy statements, too." And the reason why in addition to shareholders, management is also infatuated with non-GAAP is because "when used with compensation metrics, <strong>they can help executives draw bigger pay packets</strong>."</p> <p>In other words, in the worst possibly form of skewed incentives, CEOs are ever more compensated to fabricate the most inaccurate profit picture they can come up with. </p> <p>According to research firm Audit Analytics, the term “non-GAAP” appeared in 58% of proxies for companies in the S&amp;P 500 that have released them so far this year. Five years ago, that term showed up in 27% of proxies for current S&amp;P 500 constituents. </p> <p><a href=""><img src="" width="500" height="358" /></a></p> <p>&nbsp;</p> <p>And this is how a major conflict of interest has emerged:</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p>There is nothing improper about using non-GAAP measures as long as they are disclosed properly. And corporate boards decide on the measures they want to use for compensation purposes. Plus, there is an argument to be made for sometimes excluding items from results for compensation purposes. If, say, a natural disaster hits a company with expensive repairs, perhaps an adjustment is in order. </p> <p>&nbsp;</p> <p>But other items that often get excluded in pro forma results, such as layoff-related charges, do seem like a reflection of management’s performance. And boards have too often shown a willingness to set awfully low bars for executives to clear. </p> </blockquote> <p>Why conflict of interest? Because management teams are progressively rewarded to come up with untrue, borderline fraudulent numbers. After all, why else is the <a href="">SEC allegedly "cracking down" on companies </a>to limit the number of non-GAAP adjustments. As the WSJ itself admits, this push to rewarding management based on non-GAAP numbers disadvantages shareholders and wrecks the idea of pay for performance. "In that vein, the dramatic rise in the number of companies using pro forma measures to determine bonuses would indicate the balance between shareholders and executives is being skewed in executives’ favor."</p> <p>Some Dow Jones case studies, where as the WSJ notes an examination of the most recent proxy statements from companies in the Dow Jones Industrial Average shows about <em>a dozen of the index’s 30 constituents had annual pro forma earnings well in excess of GAAP ones and used the pro forma ones in annual bonus calculations.</em></p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p>Coca-Cola’s pretax income increased by 3% under GAAP. But after adjusting for the impact of the stronger dollar and “nonrecurring items,” the income growth figure the Dow component used for bonus purposes rose to 5.5%. </p><p>&nbsp;</p> <p>Absent adjustments, Dow member Home Depot reported operating income of $11.77 billion last year. But the pro forma figure of $12.06 billion it used for compensation figures excluded the impact of the strong dollar and costs associated with its 2014 credit-card data breach. </p> <p>&nbsp;</p> <p>Pfizer earned $1.11 per share last year under GAAP. But the Dow component excluded a number of items from the pro forma results it used for bonus purposes, pushing earnings per share to $2.20—above the $2.05 it had targeted for its annual incentive program.&nbsp; <strong>Without that adjustment, the chief executive’s bonus under the company’s annual incentive program could have been significantly lower</strong>. While in most years, the pro forma earnings the pharmaceutical company has used for compensation purposes have exceeded GAAP, in 2013 they were lower. </p> </blockquote> <p>And if the WSJ thinks the DJIA is bad, please don't even think of looking at the NASDAQ and/or the Russell 2000, where the only difference between profit and loss is the FASB and SEC's overly generous treatment of non-GAAP reporting.</p> <p>The biggest risk here, however, is a simple one, and the WSJ explains it well: </p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p>"more worrisome, <strong>using pro forma to set bonuses provides executives with an incentive to exclude items not because they should, but to hit performance bogeys. </strong>That creates a risk that pro forma results say less about a company’s underlying health than about executives desire to get paid more."</p> </blockquote> <p>To be sure, we have been saying precisely this since 2010. We can only hope that now that the WSJ has also caught on, that the SEC will finally do something about it. </p> <p>There is a problem, however: <strong>a full crackdown on non-GAAP would mean that instead of generating 116 in EPS, the S&amp;P500 actually made 25% less in profits. Which also means that if one assumes an 18x multiple, the fair value of the S&amp;P is just under 1,600. </strong></p> <p>So the question is whether the SEC would ever willingly step into a mine field where the crackdown on fabricated earnings would mean wiping out trillions in fabricated market cap from the S&amp;P500. The answer: of course not. Which is why while the <a href="">SEC may rage all it wants against non-GAAP adjustments</a>, it will never actually do anything. </p> <div class="field field-type-filefield field-field-image-teaser"> <div class="field-items"> <div class="field-item odd"> <img class="imagefield imagefield-field_image_teaser" width="1117" height="800" alt="" src="" /> </div> </div> </div> Dow Jones Industrial Average GAAP NASDAQ Reality Russell 2000 Mon, 30 May 2016 20:28:32 +0000 Tyler Durden 562332 at Ben Carson: President Hillary Would Bring About "Tremendous Carnage And Death" <p>In a world in which everything has devolved to threats of Mutual Assured Destruction of the "<em>if something does not happen then the world will end"</em> variety observed most notably with the scaremongering campaign over Brexit in which <a href="">David Cameron recently went as far as suggesting that war could break out </a>should the UK leave the EU (as well as currency collapse, recession, and some of the worst parts of the bible), it only makes sense to take whatever works and run with it. </p> <p>That's what former GOP presidential candidate Ben Carson, and the first of Trump's former foes to endorse him, said on Monday when he told "Fox and Friends" that America is like a "cruise ship" about to tip over "Niagara Falls," unless Republicans rally around Donald Trump. </p> <blockquote class="twitter-tweet"><p dir="ltr" lang="en">BEN CARSON: America is like a cruise ship that is about to go off of Niagara falls with tremendous carnage and death<a href=""></a></p> <p>— FOX &amp; Friends (@foxandfriends) <a href="">May 30, 2016</a></p></blockquote> <script src="//"></script><p>In other words if Hillary wins, nothing short of the apocalypse would follow according to the neurosurgeon. </p> <p><strong>"America, right now, is like a cruise ship that is about to go off of Niagara Falls with tremendous carnage and death," </strong>Carson said: "What you have to do first is recognize the problem, stop the ship, turn it around and then move in the other direction."</p> <p>Carson also warned that Gary Johnson, the Libertarian Party candidate, and any potential third-party candidate that gets into the race are stealing the spotlight away from Trump because of “petty little differences.” </p> <p>Carson's bashing of the potential Libertarian Party threat continued: "A quarter of a century ago, another Clinton was running for the White House and it was the entrance of a third-party candidate, Ross Perot, that made it possible for him to win,” Carson said. "Now, wouldn’t it be ironic if the same thing happened this time? Wouldn’t we be smart to learn from things that have happened in the past?”</p> <p>"I’m hoping that whoever that third-party candidate is will stop for a moment and think about what the implications are of allowing Hillary Clinton or someone like her to get in there,” he continued. “They get two to four Supreme Court picks and completely change the nature of this&nbsp; country and destroy the prospects for their children and their grandchildren to have the same opportunities that they had."</p> <p>Considering the Libertarian Party, in its current iteration, feels the odd urge to sabotage itself in the most disastrous manner, <a href="">such as last night when the candidate for chairman decided to do </a>a striptease on live TV during the party's Orlando convention and got undressed to his underwear, Carson probably has nothing to fear from a libertarian party third party challenge. </p> <p><a href=""><img src="" width="500" height="281" /></a></p> <p>&nbsp;</p> <p>Meanwhile, as Carson was predicting doom and gloom should Trump not win, across the Atlantic the most famous physicist alive today, Stephen Hawking, also chimed in on the US presidential race, when he called Trump <strong>"a demagogue who seems to appeal to the lowest common denominator,</strong>” during an appearance on the United Kingdom’s ITV network. He added that the success of Donald Trump’s presidential campaign is a mystery.</p> <p>We can understand Hawking's confusion: after all it was only a month ago when official polls discovered that Hawking was in fact dead wrong when as <a href="">Reuters reported</a>, among Trump's supporters were America's "wealthiest, best-educated voters":</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p>Trump's sweep of Pennsylvania, Maryland, Delaware, Connecticut and Rhode Island on Tuesday included wins in some of the richest and best-educated counties in the country - like Fairfield County, Connecticut, and Newport County, Rhode Island - and added to victories in his more traditional strongholds of white working-class neighborhoods. </p> <p>&nbsp;</p> <p>Exit polls from Connecticut, Pennsylvania and Maryland showed Trump winning about half of Republican voters with college degrees, and over half of Republican voters making more than $100,000 a year. </p> <p>&nbsp;</p> <p>“On its face, it is hard to believe he’d be improving with a demographic group that has been so averse to his style, his denigrating language,” said Randall Miller, a professor of American politics at Saint Joseph’s University in Pennsylvania.</p> </blockquote> <p>It appears that in addition to making a mockery of the mainstream media, Trump also managed to stump even the supposedly smartest person alive on earth. </p> <p><a href=""><img src="" width="504" height="273" /></a></p> <p>But while Hawking may be truly a brilliant mind when it comes to cosmology and theoretical physics, his political beliefs seem to be shaped by mainstream media: during the same television appearance, Hawking urged British voters to vote in favor of keeping the U.K. in the European Union. The much-discussed “Brexit” vote is scheduled for June 23 and a vote to leave the EU would cost Great Britain in terms of its economy, national security and scientific research. </p> <p>"Gone are the days we could stand on our own against the world,” he said. “We need to be part of a larger group of nations, both for our security and our trade."</p> <p>At least Hawking refrained from postulating of an alternate reality in which Trump is president and a terminal cosmological event is the consequence. </p> <p>Threats about the end of the world in which a majority has elected Trump (or vice versa) aside, we are more curious what Trump's reaction to Hawking's statement will be, in what will hardly be a fair contest. And speaking of unfair contests, much more than Trump vs Hawking, we are already looking forward to the inevitable slamdown that will follow once Trump unloads on the Keynesian clown himself because as of today, none other than Paul Krugman <a href=";smid=nytcore-iphone-share&amp;_r=0">just decided to join the anti-Trump fray</a>. Please don't disappoint us Donald. </p> <div class="field field-type-filefield field-field-image-teaser"> <div class="field-items"> <div class="field-item odd"> <img class="imagefield imagefield-field_image_teaser" width="449" height="373" alt="" src="" /> </div> </div> </div> Donald Trump European Union Krugman Mutual Assured Destruction national security None Paul Krugman Reality Recession Reuters White House Mon, 30 May 2016 19:57:02 +0000 Tyler Durden 562329 at "An Unusual Number Of Known Unknowns" - These Are The Key Event Risks In June <p>One of the recurring concerns voiced by Bank of America's Michael Hartnett is that with May now in the rearview mirror, we are entering "<em>the event risk month</em>" of June (incidentally, <a href="">over the weekend</a>, the credit strategist presented several ideas how to trade said event risk, either bullish or bearish). Now it is UBS' turn to reiterate the warning that June may see a spike in volatility due to "<em>an unusual number of known unknowns." </em></p> <p>According to UBS, in June there will be "<strong>an unusual number of known unknowns from several sources</strong>. June 2016 is a month in which the number of event risks is particularly high. In our baseline scenarios we do not see market upsets, but the potential is there: Japanese fiscal policy; meetings of the ECB, Fed and BoJ; new ECB policy implementation; a German Constitutional Court ruling; the UK referendum; elections in Spain; and a decision on the FTT are all thrown into the mix."</p> <p><em>Here is the full breakdown, first in table format.</em></p> <p><a href=""><img src="" width="600" height="347" /></a></p> <p><em>And then the chronological narrative:</em></p> <p><strong>1 June: Closing day of the Japanese Diet – new fiscal action?</strong></p> <p>We expect Japanese Prime Minister Shinzo Abe to announce new fiscal policy on 1 June – the closing day of the current session of the Japanese Diet. We think that the scheduled rise in the consumption tax will be delayed and a supplementary budget of ¥5-10tn could be announced. It is also possible that the Lower House is dissolved and new elections called.</p> <p>&nbsp;</p> <p><strong>2 June-16 June: Central bank meetings</strong></p> <p>On balance, we do not expect any change in monetary policy to be announced by the ECB, the Federal Reserve or the BoJ in June, but statements and guidance will be watched closely.</p> <p>First up is the ECB on 2 June. The ECB will present its new staff forecasts at the press conference. We <a href="">think the key challenge for Mr Draghi will be to not appear too hawkish </a>amid rising oil prices and robust Eurozone Q1 GDP growth, and we believe it too early for the ECB to send strong signals about the duration of QE beyond March of next year. But much will be discussed.</p> <p>After that, the FOMC will meet on 15 June. <strong>We think that it will wait until September before it next raises rates </strong>(in part because of upcoming event risk). However, the minutes of the April meeting and recent Fed rhetoric has kept this meeting “live” and expectations higher than they might otherwise have been. </p> <p>We don’t think that the BoJ will announce a further easing on 16 June, but it will be a close call. <a href="">We see a 40% chance that it does, and a 60% chance that this takes place by July</a>. If conducted in combination with a fiscal expansion (see above), Japan would in effect be conducting a policy of 'helicopter money' and we would expect the polemic to increase in global markets on this subject</p> <p>&nbsp;</p> <p><strong>6-10 June / 24 June: TLTROs, and other ECB policy implementation</strong></p> <p>While we do not expect new ECB policy to be announced at the June meeting (see above), June is the month in which some already-announced policies are implemented for the first time. The first auction of the new Targeted Long-Term Refinancing Operations (TLTRO II) will take place on 23 June, with the publication of the results on 24 June. Market focus has been on the ability of banks to borrow 4-year money at an interest rate (to be set by ex-post calculations) as low as the current deposit rate of -0.40%.</p> <p>However, we think that more important will be the first voluntary repayment of TLTRO I to be announced at 11.00am London time / 12.00pm CET on 10 June. (The repayment itself will take place on 29 June, coinciding with the first settlement date of TLTRO I). It is likely that the bank repayment of&nbsp; LTRO I will be larger than the take-up of TLTRO II – and result in the first significant reduction of the ECB's balance sheet since QE began in March of last year. In turn, this might appear as an involuntary tightening of monetary policy.</p> <p>The reason this might happen is that one of the effects of QE has been a largescale creation of deposits in euro area banks. But TLTRO I took place before QE was announced and banks have been unable to repay it until now. Many of them – particularly in core countries – have been burdened with large excess liquidity as a result. In turn, this has meant a drag on Net Interest Margins (NIM) for these banks as risk free rates have been negative while they are (by and large) paying 0% to depositors.</p> <p><a href=""><img src="" width="600" height="498" /></a></p> <p>Also in June, we expect the Eurosystem to begin its purchases of corporate bonds in its Corporate Sector Purchase Programme (CSPP). It is likely that this will begin in the days shortly after the ECB’s press conference on 2 June. The corporate bond market will be watching the implementation of purchases on a daily basis. We believe that once the CSPP settles in, the Eurosystem will be buying around €12bn a month in corporate bonds. Last Wednesday Reuters reported that – citing “several bank sources” – these will amount to €5-10bn per month initially.</p> <p>&nbsp;</p> <p><strong>21 June: German Constitutional Court ruling on OMTs</strong></p> <p>On 21 June, the German Federal Constitutional Court in Karlsruhe will give its final ruling on the acceptability of the ECB’s Outright Monetary Transactions (OMTs) programme in the field of German law. In our view, this represents less of an immediate market risk than a contingent one. In a scenario where the Court ruled against OMTs, uncertainty might increase over the ability of the ECB to respond to another period of extreme volatility in European sovereign markets</p> <p>Some appear to think that a ruling against OMTs might impede the purchase of peripheral bonds in the ECB’s current QE programme. We believe this to be unlikely. Bundesbank opposition to QE as a monetary policy tool in principle (even if not in timing) seems slight.</p> <p>It is widely accepted that the announcement of OMTs in the summer of 2012 was the beginning of the end of the sovereign debt crisis in Europe. But in October 2014, the German Constitutional Court found that the policy was “incompatible with primary law”. At the same time, the judges in Karlsruhe passed it on to the European Court of Justice for review, which last year came to the opposite conclusion (though in the context of European law).</p> <p>&nbsp;</p> <p><strong>24 June: Result of the UK referendum on EU membership</strong></p> <p>The recent rally in sterling and the tightening of peripheral sovereign spreads have been widely attributed in the media to an increase in confidence that the UK referendum will result in a vote to remain. If correct, this would mean that there would be potential for sterling to fall and peripheral spreads to widen once more in a scenario where there is either a vote to leave or if opinion polls showed increased support for that outcome.</p> <p><em>Figure 3: Average Italy and Spain 10-year spread to Germany and EURGBP; past 6 months</em><br /><a href=""><img src="" width="600" height="412" /></a></p> <p>&nbsp;</p> <p><strong>26 June: Elections in Spain</strong></p> <p>Spain will hold another general election on 26 June, after its 21 December 2015 election resulted in no government being formed. In general, we think that Spanish yield spreads to Germany should tighten over the coming months as the relatively strong growth heals the economy and improves debt dynamics. </p> <p>However, Spain missed on its deficit targets in 2015 by a wide margin and is likely to miss again this year, according to the European Commission. In part, this can be attributed to the dominance of elections in the public calendar. But there is a risk to sovereign spreads if a government is formed after the elections which might take an anti-austerity stance and widen the public deficit even more.</p> <p>&nbsp;</p> <p><strong>30 June: A decision on the European Financial Transaction Tax</strong></p> <p>A group of European governments have been proposing a European Financial Transaction Tax (FTT) for several years. In the most recent statement, the proponent governments indicated tha<em>t “taxation should be based on the principle of the widest possible base and low rates and it should not impact the cost of sovereign borrowing”.</em></p> <p>The statement also directs governments to decide on further details – including, importantly, the levels of the tax – by the end of June: “in order to prepare the next step, experts in close coordination with the commission should elaborate adequate tax rates for the different variants. A decision on these open issues should be made until the end of June 2016.”</p> <p>It should be noted, however, that aside from the 10 countries currently promoting the tax there is opposition among other EU member states, most notably the UK. Under the “Enhanced Cooperation” framework, the countries will pursue the policy only if 9 or more member states support it. In December, Estonia withdrew its support for the project.</p> <div class="field field-type-filefield field-field-image-teaser"> <div class="field-items"> <div class="field-item odd"> <img class="imagefield imagefield-field_image_teaser" width="855" height="494" alt="" src="" /> </div> </div> </div> Bond Estonia Eurozone Federal Reserve Germany Italy Japan LTRO Monetary Policy NIM Reuters Sovereign Debt Transaction Tax Volatility Mon, 30 May 2016 18:57:38 +0000 Tyler Durden 562328 at