en It’s Not Just The Police – The Feds Are Also Militarizing Public Schools With Grenade Launchers, M16s & Tanks <p><em>Submitted by <a href="">Mike Krieger via Liberty Blitzkrieg blog</a>,</em></p> <p>Events last month in Ferguson, Missouri (read my detailed thoughts <strong><a href="">here</a></strong>) forced Americans to confront the frightening reality that many of of the nation&rsquo;s&nbsp;police departments have been quietly, but consistently, militarizing over the past couple of decades. It&rsquo;s one thing to intellectually understand that this has happened, it&rsquo;s quite another to see cops deploy&nbsp;tanks and point sniper rifles at peacefully protesting U.S. citizens.</p> <p>Just as disturbing as the scenes themselves, is the fact that this has been happening for so long under the 1033 transfer program with only muted criticism. The program was <a href="">originated in the late 1990&prime;s</a>&nbsp;under the National Defense Authorization Act of 1997 (recall that the NDAA is also being used to allow for the <strong><a href="">indefinite detention of American citizens without trial</a></strong>), and it allows for the transfer of excess Department of Defense equipment to domestic police. In other words, it has been public policy for almost two decades to militarize the police.</p> <p><strong>With the issue squarely still in the public consciousness, it would behoove us to understand that this program is not only arming police with weapons of war. In fact, public schools are also receiving such items, including grenade launchers, M16s and MRAPs.</strong></p> <p>The <a href=""><em>Wall Street Journal</em> reports</a> that:</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p><strong><em>A federal program that has drawn criticism in recent weeks for supplying surplus military gear to local police has also provided high-powered rifles, armored vehicles and other equipment to police at public schools, some of whom were unprepared for what they were getting.</em></strong></p> <p>&nbsp;</p> <p><em>In the wake of school shootings in Newtown, Conn., and elsewhere, some school security departments developed SWAT teams, added weapons and called on the federal government to help supply gear. But now, the program is facing renewed scrutiny from both outside observers and schools using it.</em></p> <p>&nbsp;</p> <p><em><strong>The Los Angeles Unified School District stocked up on grenade launchers, M16 rifles and even a multi-ton armored vehicle from the program.</strong> But the district is getting rid of the grenade launchers, which it never intended to use to launch grenades or use in a school setting, said Steven Zipperman, chief of the Los Angeles Schools Police Department. The launchers, received in 2001, might have helped other police in the county disperse crowds by shooting rubber munitions, he said.</em></p> <p>&nbsp;</p> <p><strong><em>In July, the district received a massive MRAP armored vehicle. Mr. Zipperman said his department thought it could be useful for evacuations and to save lives in a &ldquo;sustained incident.&rdquo;</em></strong></p> </blockquote> <p>Just in case you aren&rsquo;t aware, this is an MRAP:</p> <p><img alt="Screen Shot 2014-09-17 at 12.17.15 PM" class="alignnone size-medium wp-image-17053" src="" style="width: 600px; height: 448px;" /></p> <p>Makes you wonder how schools survived in America for over two hundred years without tanks. More&nbsp;from the <em>WSJ&hellip;</em></p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p><em><strong>In Texas, near the Mexican border, the sprawling Edinburg Consolidated Independent School District has 34,700 students and operates its own SWAT team, thanks in part to military gear it received in recent years from the federal program.</strong> The gear included two Humvees and a cargo truck, as well as power generators, said district Police Chief Ricardo Perez. The district applied for weapons, too, but wasn&rsquo;t given any, so instead purchased its own M4 and AR-15 assault-style rifles, he said.</em></p> <p>&nbsp;</p> <p><em>The weapons are given to schools through the 1033 Program, created by Congress in the early 1990s to allow law-enforcement agencies to obtain excess Defense Department supplies, paying only for shipping. The program has transferred $5.1 billion in items, including $4.5 million worth in 2013.</em></p> <p>&nbsp;</p> <p><strong><em>Among recipients are more than a dozen school police departments, according to a spreadsheet from the Defense Logistics Agency, which runs the program. But for security reasons the list excludes districts that received only &ldquo;tactical&rdquo; gear such as weapons, as opposed to other types of supplies. That means the list likely understates the number of districts that participated.</em></strong></p> <p>&nbsp;</p> <p><em>California is one of few states that provides a list of participating school districts and what they received. Its state website shows that two school police departments received armored vehicles, others added M-16s and grenade launchers to their armories, while one district took in televisions, projectors and a podium but no weapons.</em></p> </blockquote> <p><strong>What I find most interesting about all of this, is where have all the &ldquo;gun control&rdquo; politicians and hysterics been on the dangers of the 1033 for all these&nbsp;years?</strong></p> <p>Indeed, while&nbsp;politicians in D.C. appear&nbsp;determined to invade half the countries on earth, while simultaneously arming the other half, from terrorist groups in the Middle East to police departments and school districts domestically, <strong>it appears the only group being singled out for disarmament is the citizenry itself.</strong> Makes you wonder doesn&rsquo;t it&hellip;</p> <p>For more thoughts on the matter read:&nbsp;<em><a href="">How to Spot a Hypocrite in the Gun Debate and Other Reflections on Newtown</a>.</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="547" height="398" alt="" src="" /> </div> </div> </div> Middle East Reality Wall Street Journal Thu, 18 Sep 2014 02:57:13 +0000 Tyler Durden 494497 at Citi Explains Why FX Moved So Much More Than Other Markets After FOMC <p>The Fed came across as somewhat hawkish relative to expectations, according to Citi's Stephen Englander, but <strong>FX made an outsized move against high-beta G10 and EM relative to equities buying and moderate money market moves...</strong> <em>here's why...</em></p> <p>&nbsp;</p> <p><em>Via Citi's Stephen Englander,</em></p> <p><strong>This contrast may be explained by the benign implications of the Fed’s indicated fed funds path for the US and the not-so-benign implications for other countries.</strong></p> <p><a href=""><img src="" width="600" height="312" /></a><br />&nbsp;<br />In the Figure 1 we see <strong>the USD moving up by 0.6% vs. G10 currencies</strong> (light blue line)&nbsp; in the aftermath of the Statement/Press Conference, the VIX (dark blue)&nbsp; coming off and ending flat, and Dec 2016 eurodollars (purple) selling off.&nbsp; <strong>Equities rose initially but ended flat, like the VIX.</strong></p> <p>To be clear <strong>we see the Forecasts/Press Conference as being hawkish and the Statement as being dovish and to be honest we would not have expected such a dramatic FX move from this combination</strong>. </p> <p><span style="text-decoration: underline;"><strong>So what played out as hawkish?</strong></span></p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p>1.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; The upward shift in the fed funds path and the downward nudge to expected unemployment rates.</p> <p>&nbsp;</p> <p>2.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Even the doves were hawkish. If you count four dots from the bottom, so you are firmly in FOMC doveland, the June dot was&nbsp; 0.5% for end-2015, now it is 0.88% (yesterday’s Dec 15 fed funds contrast was at 0.74%); the fourth dot from bottom in June was 1.75% for 2016, now it is 2.12% (yesterday’s Dec 2016 was 1.77%); the fourth from bottom Dec 2017 forecast is 3.12% (yesterday’s EDZ7 contract suggested a market expectation of about 2.60-2.65%).</p> <p>&nbsp;</p> <p>3.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Fed Chair Yellen had plenty of opportunity to say ‘ignore the dots, only pay attention to the FOMC’s Statement’ , and if anything she seemed to endorse the dots and the forecasts.</p> <p>&nbsp;</p> <p>4.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; She was very emphatic in her data dependence and emphasized the ‘approach the target faster, tighten faster’ side</p> <p>&nbsp;</p> <p>5.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; She was than emphatic in optimism on either productivity or labor force growth, viewing flat participation as success because of the downward trend in participation rates, so implicitly she was reducing the size of the output gap</p> </blockquote> <p><strong>So even with an essentially unchanged Statement, the overall impression was very middle of the road, when investors were looking for her to drive on the left.</strong></p> <p>&nbsp;</p> <p><span style="text-decoration: underline;"><strong>Now why the big move in FX and not so big move in other asset markets?</strong></span> </p> <p><a href=""><img src="" width="600" height="418" /></a></p> <p><strong>Consider Figure 2 which gives a schematic picture of what may be worrying FX markets.</strong>&nbsp; Assume the blue curve gives the distribution of economic/financial&nbsp; market outcomes for the world ex-US, with some risk of terrible outcomes, but most of the risk concentrated in the safe zone. A negative shock such as a backing up of US rates will shift a relatively large part of the distribution into the danger zone. By contrast, the same shock applied to a relatively healthy economy (US or UK, for example, illustrated by the red curve) shifts only a small part of the tail into the danger zone. <strong>So even if the Fed comment were equally as hawkish for the US and non-US economies, the onslaught of bad news on China, Japan, Europe etc. may make the outcomes disproportionately bad for them</strong>. One bit of evidence is that GBP sold off by much less than other major currencies (although GBP’s lower beta may also be a factor.) <br />&nbsp;<br /><span style="text-decoration: underline;"><strong>The worst combination for currencies right now is to be a high-beta currency&nbsp; in a slowing commodity-exporting economy&nbsp; with a&nbsp; large current account deficit.</strong></span></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="965" height="501" alt="" src="" /> </div> </div> </div> China ETC Japan Output Gap Unemployment Thu, 18 Sep 2014 02:22:29 +0000 Tyler Durden 494496 at VoTe NaW... <p><iframe src="" width="1024" height="639" frameborder="0"></iframe></p> Thu, 18 Sep 2014 01:48:12 +0000 williambanzai7 494495 at Thanks To "Title 50", US Boots Are Already On The Ground <p>&quot;When are actual boots-on-the-ground, not Presidential promise-breaking boots-on-the-ground?&quot; ... when, as <a href="">The Washington Post reports</a>, those &#39;boots&#39; are protected by &#39;legal alchemy&#39; called <strong>Title 50...</strong> simply put, as Ignatius concludes, <em>&quot;<strong>U.S. boots are already on the ground, and more are coming</strong>. The question is whether Obama will decide to say so publicly, or remain in his preferred role as covert commander in chief.&quot;</em></p> <p>Here&#39;s Obama from earlier:</p> <ul> <li><strong>*OBAMA REITERATES HE WON&#39;T COMMIT TO ANOTHER GROUND WAR IN IRAQ</strong></li> <li><strong>*OBAMA WON&#39;T `REVIEW OR CONSIDER&#39; COMBAT TROOP OPTION: EARNEST</strong></li> <li><strong>*EARNEST: NO COMBAT TROOPS IS A `STRATEGIC DECISION&#39;</strong></li> </ul> <p>But...<a href=""><em>As The Washington Post reports,</em></a></p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p><strong>Here&rsquo;s a national-security riddle</strong>: How can President Obama provide limited military support on the ground to help &ldquo;degrade and ultimately destroy&rdquo; the Islamic State without formally violating his pledge not to send U.S. combat troops? <strong>The answer may lie in the legal alchemy known as &ldquo;Title 50.&rdquo;</strong></p> <p>&nbsp;</p> <p><span style="text-decoration: underline;"><strong>Title 50 of the U.S. Code regulates the activities of the Central Intelligence Agency. An often-cited passage is Section 413(b), which deals with presidential approval and reporting of &ldquo;covert actions.&rdquo; In essence, this statute gives the president authority, with a proper &ldquo;finding,&rdquo; to send U.S. Special Operations forces on paramilitary operations, under the command of the CIA. The best-known example was the 2011 raid on Abbottabad, Pakistan, that killed Osama bin Laden.</strong></span></p> <p>&nbsp;</p> <p>...</p> <p>&nbsp;</p> <p>Iraqis and Syrians tell me that U.S. Special Operations forces will be decisive in training the Sunni fighters who can carry the battle into the streets of Mosul, Fallujah and Raqqah. <strong>Obama must decide whether this mission is better performed overtly or covertly</strong> - but the Americans who will be doing the training will be the same warriors, drawn from such units as the Army&rsquo;s 5th Special Forces Group.</p> <p>&nbsp;</p> <p>...</p> <p>&nbsp;</p> <p>The decisive issue is whether these U.S. special forces should be embedded with the Iraqi and Syrian forces they train &mdash; and accompany them into battle, where they can coordinate tactics and call in air support. Gen. Martin Dempsey, chairman of the Joint Chiefs of Staff, said in congressional testimony Tuesday that &ldquo;where<strong> I believe our advisers should accompany Iraqi troops on attacks against specific [Islamic State] targets, I&rsquo;ll recommend that to the president.&rdquo;</strong></p> </blockquote> <p>*&nbsp; *&nbsp; *</p> <p>We leave it to Ignatius to conclude...</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p>Let&rsquo;s be honest: <strong>U.S. boots are already on the ground, and more are coming. The question is whether Obama will decide to say so publicly, or remain in his preferred role as covert commander in chief.</strong></p> </blockquote> <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="551" height="373" alt="" src="" /> </div> </div> </div> B+ Iraq President Obama Testimony Thu, 18 Sep 2014 01:47:28 +0000 Tyler Durden 494494 at An Appalling Practice Used In Only Two Nations, Of Which The US Is One <p><em>Submitted by <a href="">Nick Giambruno via Doug Casey&#39;s International Man</a>,</em></p> <p>It&rsquo;s sort of an obscure story, but it&rsquo;s also incredibly instructive.</p> <p><strong>That&rsquo;s the story of how Eritrea&mdash;a tiny, mostly unheard-of country in East Africa&mdash;taxes its citizens who live abroad.</strong></p> <p>Eritrea is one of only two countries in the entire world that taxes its nonresident citizens on their global income. Specifically, Eritrea levies a flat 2% tax on the income of its citizens who reside abroad.</p> <p><u><strong>Nearly every other country in the world bases its tax system on residency rather than citizenship. </strong></u>For example, if you&rsquo;re an Italian citizen and leave Italy to become a resident of and earn income in Dubai, you would not have to pay taxes on that income to the Italian government. If you were an Eritrean citizen, on the other hand, you <em>would</em> have to pay taxes to the Eritrean government no matter where you live and work.</p> <p>This practice has been condemned as &ldquo;extortion&rdquo; and a &ldquo;repressive&rdquo; measure by an &ldquo;authoritarian&rdquo; government by the media.</p> <p>In fact, even the UN has weighed in.<strong> In Resolution 2023, the UN Security Council condemned Eritrea for &ldquo;using extortion, threats of violence, fraud and other illicit means to collect taxes outside of Eritrea from its nationals.&rdquo;</strong></p> <p>You may be thinking, &ldquo;What&rsquo;s the controversy? Eritrea is getting criticized, and rightly so.&rdquo;</p> <p>To understand the controversy, we have to examine the only other country on the planet that has a similar tax system.</p> <h4><u><strong>Eritrea&rsquo;s Expat Tax on Steroids</strong></u></h4> <p><strong>The only other country to tax its nonresident citizens globally is of course the US.</strong></p> <p>The US essentially does exactly the same thing as Eritrea to its nonresident citizens, except that it&rsquo;s done on a much <strong>bigger</strong> scale and with absolutely draconian penalties.</p> <p>Eritrea&rsquo;s paltry 2% tax is a mere fraction of the top 39.6% federal tax rate that expat Americans have to pay&mdash;even if they earned that income abroad and never set foot in the US. (The US does allow for an exemption of a limited amount of foreign earned income, if strict requirements are met.)</p> <p>It should also be noted that Eritrea is a poor country and has a very limited capability to actually enforce its 2% expat tax. Many Eritreans who live abroad have never even heard of it, let alone are frightened by it.</p> <p>The US, on the other hand&mdash;being the world&rsquo;s financial and military superpower (for now at least)&mdash;<strong>does</strong> have the capability to enforce its byzantine tax system literally anywhere in the world. When you consider this capability and the penalties&mdash;which can only be described as <a href="" target="_blank">cruel and unusual</a>&mdash;it&rsquo;s no surprise that US expats are terrified. And they should be&hellip; or they aren&rsquo;t paying attention.</p> <p>American expats are threatened with prison and outlandish fines merely for not filing a litany of complex forms correctly&mdash;<strong>even if no taxes are due</strong> in the first place.</p> <p>When you consider the totality of it, it&rsquo;s not actually a fair comparison to contrast poor little Eritrea and its relatively modest expat tax to the monstrosity of the US system.</p> <p>Eritrea gets hounded, ostracized, and sanctioned for using&mdash;according to the UN&mdash;&ldquo;threats, harassment and intimidation&rdquo; to &ldquo;extort&rdquo; taxes out of its citizens living abroad. You would think there would at least be a peep of criticism for the only other country that does essentially the same thing, but on steroids. But you&rsquo;d be wrong. If you listen for it, all you will hear are the crickets chirping.</p> <p>This isn&rsquo;t surprising, though. Even though it&rsquo;s clearly a double standard, it&rsquo;s easy to understand why it exists.</p> <p>As the world&rsquo;s sole superpower and issuer of the premier reserve currency, the US is not accountable to anyone. It&rsquo;s a heck of a lot easier to push around some small, impoverished African country than it is to stand up to the US juggernaut&mdash;just ask Canada.</p> <h4><u><strong>Canadian Confusion</strong></u></h4> <p>Recently the Canadian government took the drastic step of expelling the head of the Eritrean consulate in Toronto because he had been involved with levying the 2% expat tax on Eritreans living in Canada.</p> <p>It would seem that Canada doesn&rsquo;t like foreign governments shaking down Canadian residents. That is, unless the foreign government is the US government.</p> <p>Somehow I don&rsquo;t expect the Canadian government to give any American officials the boot&hellip; even though they&rsquo;re shaking down vastly more Canadian residents for vastly more money.</p> <p>Curiously, Canada&rsquo;s reaction to the US&rsquo;s expat tax is exactly the opposite of its reaction to Eritrea&rsquo;s. Rather than taking action to prevent the US government from harassing US citizens living in Canada, the Canadian government has amazingly <em>facilitated</em> it, by complying with the <a href="" target="_blank">FATCA law</a>&mdash;even though it contradicts Canadian law.</p> <h4><u><strong>The Uncomfortable Truth</strong></u></h4> <p><strong>It&rsquo;s always better to face reality than to ignore ugly truths.</strong> And the story of Eritrea&rsquo;s expat tax helps us reveal a big one. Namely that Americans&mdash;especially those who live abroad&mdash;are living under one of the worst tax systems in the entire world.</p> <p>A rather ironic situation, when you take a look at history. Americans went from revolting over a comparatively small tax on tea to the system which exists today.</p> <p><strong>But don&rsquo;t hold your breath for positive change.</strong> At least not as long as the US dollar remains the world&rsquo;s premier reserve currency. Until then, no other country is going to meaningfully stand up to the US as it forces its tax policies on the rest of the world through things like FATCA.</p> <p>Likewise, positive change through the US political system is just as unlikely. Most Americans passively accept as &ldquo;normal&rdquo; the current tax system. And insofar as they want change, many Americans want <em>more</em> people to &ldquo;pay their fair share.&rdquo;</p> <p><strong>The bottom line is that it&rsquo;s simply not possible to stop this tsunami.</strong></p> <p><strong>The best you can do is to educate yourself on your options, and take practical steps to protect you and your family.</strong></p> <p>Moving some of your savings abroad in the form of offshore bank and brokerage accounts, foreign real estate, and physical gold held in safe jurisdictions will go a long way toward protecting yourself. Obtaining a second passport is an important part of the mix as well.</p> <p><em>It&rsquo;s not all doom and gloom; the world is your oyster, and there are very attractive jurisdictions that are cause for optimism. That&rsquo;s what International Man is all about&mdash;making the most of your personal freedom and financial opportunity around the world.</em></p> <p><em>Be sure to get the free <a href="" target="_blank">IM Communiqué</a> to keep up with the latest on the best strategies.</em></p> Dubai Federal Tax Italy Real estate Reality Reserve Currency Thu, 18 Sep 2014 01:13:23 +0000 Tyler Durden 494493 at Russia To Deploy "Full-Scale Military Unit" In Crimea <p>Just a day after NATO began military exercises (with troops from the US) near the city of Lviv in Western Ukraine, <a href="">WSJ reports</a> Russia's Defense Minister Sergei Shoigu is responding to the "rising foreign military presence," near Russia. In a not-so-de-escalatory move, Shoigu explained that NATO's comments were "light-minded" and his ministry's <strong>key task now is to "deploy a full-scale and self-sufficient force grouping" in the Crimea region</strong>.</p> <p>First this...</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p><strong>Russian Defense Ministry official calls light-minded NATO general's statements about Russian military presence in Ukraine</strong></p> </blockquote> <p>Then, a<em>s <a href="">The Wall Street Journal reports</a>,</em></p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p><strong>Russia will set up a full-scale military unit on the annexed peninsula of Crimea in response to "rising foreign military presence" next to Russia</strong>, Defense Minister Sergei Shoigu said Tuesday, Interfax news agency reported.</p> <p>&nbsp;</p> <p><strong>One of his ministry's key tasks now is to "deploy a full-scale and self-sufficient force grouping" in the Crimea region, Mr. Shoigu said.</strong></p> <p>&nbsp;</p> <p>The statement comes a <strong>day after the North Atlantic Treaty Organization began military exercises with troops from the U.S. and other NATO members near the city of Lviv in western Ukraine</strong>. The exercises had been slated to take place earlier but were delayed to Sept. 15-26 because of the turmoil in eastern Ukraine. The U.S. and NATO accuse Russia of deploying tens of thousands of troops along its border with Ukraine.</p> </blockquote> <p>As far as the ceasefire.. it's still on...</p> <ul> <li><strong>"More than 10" civilians die in shelling of east Ukraine town - military</strong></li> <li><strong>OSCE DOESN'T REGARD EXCHANGES OF FIRE BETWEEN MILITIA AND UKRAINIAN SERVICEMEN AS END TO CEASEFIRE - RUSSIAN REPRESENTATIVE KELIN</strong></li> <li><strong>LAVROV: CEASEFIRE IN UKRAINE REMAINS, THOUGH CERTAIN INCIDENTS TAKE PLACE BUT THEY SHOULD FADE AWAY</strong></li> </ul> <p>Hhmm - seems they have a different definition of truce... though Ukraine needs to keep stocking up its arms deliveries.</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="687" height="503" alt="" src="" /> </div> </div> </div> Ukraine Wall Street Journal Thu, 18 Sep 2014 00:43:31 +0000 Tyler Durden 494492 at JPY Plunges To 6-Year Lows, Nikkei Tops 16,000 As Japanese Deficit Runs 41st Month In A Row <p>For the<strong> 41st month in a row, the Japanese Trade Balance is in deficit</strong> (around JPY1 trillion). Of course, the fact that exports fell 1.3% (but but devalued currency means competitive?) means nothing as all that really matters is the <strong>collapsing JPY (now at 108.60) at its weakest against the USD in 6 years</strong>. That can mean only one thing - a surging Japanese stock market - as the Nikkei breaks 16,000. What is odd - just as in the US - is the rising equity index (no doubt helped by Japanese pension funds buying JPY393billion in Q2) against a backdrop of plunging indivdidual stocks. Sony is limit down (<a href="">as we explained earlier</a>) with offers outnumbering bids 8-to-1. And that&#39;s Japan...</p> <p>41st month in a row of trade deficits... no J-Curve in sight</p> <p><a href=""><img alt="" src="" style="width: 600px; height: 317px;" /></a></p> <p>&nbsp;</p> <p>The JPY is collapsing...</p> <p><a href=""><img alt="" src="" style="width: 600px; height: 314px;" /></a></p> <p>&nbsp;</p> <p>Japanese stocks are surging...</p> <ul> <li><strong>*JAPAN PENSION FUNDS BUY NET 393B YEN JPN STOCKS APRIL-JUNE QTR</strong></li> </ul> <p><a href=""><img alt="" src="" style="width: 600px; height: 333px;" /></a></p> <p>But Sony is in utter freefall:</p> <ul> <li><strong>*SONY YESTERDAY CLOSED AT 2,123 YEN IN TOKYO</strong></li> <li><strong>*SONY OFFERED LOWER AT 1,623 YEN IN TOKYO PRE-MARKET</strong></li> <li><strong>*SONY UNTRADED AT OPEN IN TOKYO, SET TO FALL</strong></li> <li><strong>*SONY SELL OFFERS OUTNUMBER BIDS 8 TO 1</strong></li> <li><u><strong>SONY FALLS AS MUCH AS 12% IN TOKYO, MOST SINCE NOV. 2013</strong></u></li> </ul> <p>&nbsp;</p> <p>And then there&#39;s this odd regime shift?</p> <p><a href=""><img alt="" src="" style="width: 600px; height: 314px;" /></a></p> <p>&nbsp;</p> <p>&nbsp;</p> <p><em>Charts: Bloomberg</em></p> <p>&nbsp;</p> <p>&nbsp;</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="957" height="506" alt="" src="" /> </div> </div> </div> Japan Nikkei Trade Balance Yen Thu, 18 Sep 2014 00:20:28 +0000 Tyler Durden 494491 at Seth Klarman: "We Are Recreating The Markets Of 2007" <p><em>Exceprted from Seth Klarman's Baupost letter to investors,</em></p> <p><strong>We don’t know now (nor do we ever know) what the overall market will do.</strong> As we’ve discussed in recent letters, there are reasons for investors to be frightened but also numerous individual opportunities worth seizing. Today’s limited opportunity set means that <strong>we are still holding sizable cash balances</strong>, about 35% of the portfolio at June 30. This dry powder will become more valuable if the markets become more turbulent.</p> <p>Equity markets continue to hit successive record highs, volatility remains strikingly low in equity and most other markets, and inflation is ticking higher. <strong>Investors have clearly grown weary of worrying about risky scenarios that never seem to materialize or, when they do, don’t seem to matter to anyone else</strong>. U.S. GDP, for example, was recently restated to minus 2.9% for the first quarter of 2014. Normally, this magnitude drop signals recession. Equities, nevertheless, marched relentlessly higher.</p> <p>...</p> <p><strong>In today’s ebullient markets, we see many investors ratcheting up their own risk levels--buying substandard credits and piling up leverage are two favorite methods--in an attempt to generate near-term performance.</strong></p> <p>...</p> <p><strong>The financial markets could be getting closer to an inflection point, where the economic weakness that the bond market seems to be reflecting derails the more optimistic equity market.</strong> Or perhaps things can go on forever exactly as they are: a “Goldilocks” stock market resulting from a tepid economy, dampened volatility, and relentlessly low interest rates. Amidst the market rally, complacent investors continue to ignore a growing array of global trouble spots. Contrary to claims from the Obama Administration, the world is not a tranquil place at present. As such, risks facing investors seem to be rising but are not yet priced into the markets.</p> <p>...</p> <p><strong>Late in a market cycle--when bargains are increasingly hard to find, valuations are lofty, and most investors have been scoring handsome gains for a number of years--we can say from experience that history tends to rhyme.</strong> Money becomes more freely available to pursue even the most marginal of opportunities. Dollars pour into venture capital, and the largest buy-side firms take strategic stakes in hot, late-stage private investments just prior to an expected big money IPO. Specialized funds are raised, regularly and easily, to invest in things like Greek private investments, Spanish real estate, or European non-performing loan pools. Willing investors abound for these. It doesn’t matter that market prices have mostly rebounded, prospective returns are thereby limited, and the capital in those funds is likely to be put to work whether or not prices warrant and even if conditions on the ground deteriorate. With investment bankers and hedge fund executives canvassing Europe today to bet on recovery, <strong>you have the increasingly common circumstance of proliferating “opportunity funds,” absent only the investment opportunity.</strong> Some clients of hedge funds today are, in a sense, disintermediating themselves, funding new entities to bid higher for the same sort of assets their other, more disciplined managers are already bidding more judiciously for. The discipline problem in this case is not that of the legacy managers; it may just be that of the clients.</p> <p><strong>The pressure to reach for return virtually ensures that many investors will take greater and greater risk for less and less potential reward at market peaks.</strong> If you can’t find bonds that yield 8%, better grab those offering 6%. Or 4%. If you need 8% to meet your bogey (assumed pension fund returns, for example, or promised returns to investors), then you will be prone to own increasingly risky assets or leverage up the safer ones. These pressures, as much as any indicator, are today signaling danger. Investors today are bidding ever higher amidst frenzied competition to buy pools of non-performing loans, and then leveraging them up to get double-digit returns. Mortgage securities backed by questionable loans issued to dicey borrowers now trade close to par and yield a downright stingy 3-5% where they once yielded a generous 15-20%. <span style="text-decoration: underline;"><strong>A recent brokerage report excitedly touted the new HoldCo PIK Toggle notes of a Croatian consumer goods retailer. Nearly every word of that description is a flashing red light to seasoned investors.</strong></span></p> <p>To put it a bit differently, writer and investor John Mauldin is right when he says that <strong>there is “a bubble in complacency.”</strong> Fear has effectively been banished. <strong>The members of the Fed know it. Stock traders who chase the market to new highs almost daily know it.</strong> Implied volatilities (and realized volatilities) are historically low (the VIX Index recently hit a seven-year low), and falling. The Bank for International Settlements recently cautioned that financial markets are euphoric and in the grip of an aggressive search for yield. The S&amp;P has gone over 1,000 days without a 10% decline, according to Birinyi Associates. Dutch and French 10-year government bond yields are at 500 and 250 year lows, respectively; Spain, 225 years. Spanish debt yields were recently inside of U.S. levels. </p> <p><strong>Increasingly, hopes and dreams are being capitalized as if the future is certain and nothing can go wrong, as if up cycles such as the present one don’t inevitably sow the seeds of the next decline. </strong>The European Central Bank recently cut its deposit rate to an unprecedented minus 0.1%, and Mario Draghi assured that he isn’t finished. Can this be done without consequence? Investors have become numb to risk because such policies continue, seemingly forever, and new measures (such as European and now even Chinese QE) are regularly threatened and claimed to be costless and reliably effective. We are far from convinced of this; indeed, the higher the level of valuations and the greater the level of complacency, the more there is to be concerned about. Even as reported inflation remains quite subdued, signs of incipient cost increases are increasingly evident. We are seeing them, for example, in apartment rents, construction costs, and salaries of newly minted engineering graduates and oilfield workers.</p> <p><strong>Like global equity markets, credit markets have been surprisingly resilient, and our worry meter is high here, too.</strong> Ecuador recently issued $2 billion of ten-year bonds, as the market shrugged off its 2008 default. Kenya also completed a $2 billion offering, the largest ever debt sale by an African country, according to The Wall Street Journal. That offering attracted $8 billion worth of bids. In the U.S., issuance of low-grade credit is at record levels, as is covenant-lite issuance. Yields are at or near historic lows, which is especially nutty for junk credits, including the hideously risky CCC-rated issues. June CLO issuance set a record. Given changes in regulation, Wall Street has far less capital available to support the trading of this burgeoning junk issuance and the corresponding surge in debt ETFs. <strong>A sudden change in rates or sentiment could lead to serious market instability. When is harder to predict than if. While we are not predicting imminent collapse (market timing is not our thing), we are saying that a selloff, greater volatility, and investor losses would hardly be surprising from today’s levels.</strong></p> <p>In markets, it’s always hard to tell, in the words of the old commercial starring Ella Fitzgerald, Is it real or is it Memorex? <strong>Is the market nearly triple its spring 2009 level because things are better, or do things feel better because the market has nearly tripled? </strong>Indeed, we can do a simple thought experiment that might be revealing: How would everything feel if the S&amp;P 500 were suddenly cut by one-third or one-half? Would such a drop drive astonishing bargains, or would the U.S. economy soon falter, with festering problems such as unemployment, the federal, state and local deficits, the long-term fiscal situation, and the creditworthiness of most sovereigns suddenly seeming ominous?</p> <p><span style="text-decoration: underline;"><strong>It’s not hard to reach the conclusion that so many investors feel good not because things are good but because investors have been seduced into feeling good—otherwise known as “the wealth effect.” We really are far along in re-creating the markets of 2007, which felt great but were deeply unstable when shocks started to pile up. Even Janet Yellen sees “pockets of increasing risk-taking” in the markets, yet she has made clear that she won’t raise rates to fight incipient bubbles. For all of our sakes, we really wish she would.</strong></span></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="239" height="238" alt="" src="" /> </div> </div> </div> Bond default Equity Markets European Central Bank Janet Yellen Market Timing non-performing loans Obama Administration Real estate Recession recovery Seth Klarman Sovereigns Unemployment Volatility Wall Street Journal Wed, 17 Sep 2014 23:58:01 +0000 Tyler Durden 494490 at The "It Doesn't Matter Until It Matters" Chart Of The Day <p>Growing concerns about the weakness of breadth in the stock &#39;market&#39; where, <a href="">as we noted here</a>,<em> 47% of Nasdaq Composite stocks are down at least 20% from their highs with the average stock in the index in a bear market (down 24%)</em>, continue to be ignored by a market that cares nothing for fundamentals. NewEdge&#39;s Brad Wisack adds another &quot;it doesn&#39;t matter until it matters&quot; chart to the list of worrisome indicators today by noting that <strong>&quot;we haven&#39;t seen this before...&quot;</strong></p> <p>&nbsp;</p> <p><a href=""><img height="314" src="" width="600" /></a></p> <p>&nbsp;</p> <p>As Wisack notes - one thing that is clear is that <span style="text-decoration: underline;"><strong>we have not seen this extent of breadth deterioration before...</strong></span> where the market goes straight up while the # of stocks trading ABOVE the 200 dma trends straight down...</p> <p>*&nbsp; *&nbsp; *<br />Seems like pent-up demand to us... BTFATH, cash on the sidelines, stocks are cheap, Fed has your back... etc. etc...</p> <p><span style="text-decoration: underline;"><strong>Until it matters!!!</strong></span></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="961" height="503" alt="" src="" /> </div> </div> </div> 200 DMA Bear Market BTFATH ETC NASDAQ NASDAQ Composite Wed, 17 Sep 2014 23:33:03 +0000 Tyler Durden 494489 at Paul Krugman Explained <p>Presented with no comment...</p> <p>&nbsp;</p> <p><a href=""><img src="" width="600" height="389" /></a></p> <p>&nbsp;</p> <p><a href=""><em>h/t Coyote Blog</em></a></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="877" height="568" alt="" src="" /> </div> </div> </div> Krugman Paul Krugman Wed, 17 Sep 2014 23:01:15 +0000 Tyler Durden 494488 at