http://www.zerohedge.com/fullrss2.xml en Bernanke Says "No Large Mispricings In US Securities"; These 5 Charts Say Otherwise http://www.zerohedge.com/news/2015-05-24/bernanke-says-no-large-mispricings-us-securities-these-5-charts-say-otherwise <p>Retired central banker, blogger, bond guru and hedge fund consultant Ben Bernanke just uttered the following total rubbish...</p> <ul> <li><strong>*BERNANKE: NO LARGE MISPRICINGS IN U.S. SECURITIES, ASSET PRICES</strong></li> </ul> <p>In an effort to save whoever it is that will pay him $250,000 next for these wise words, we offer five charts.</p> <p>&nbsp;</p> <p>One of these things is <strong>not like the others...</strong></p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2015/05-overflow/20150524_Bernanke1.jpg"><img alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2015/05-overflow/20150524_Bernanke1_0.jpg" style="width: 600px; height: 316px;" /></a></p> <p>&nbsp;</p> <p>nope, no <em><strong>mispricing </strong></em>there at all...</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2015/05-overflow/20150524_Bernanke2.jpg"><img alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2015/05-overflow/20150524_Bernanke2_0.jpg" style="width: 600px; height: 315px;" /></a></p> <p>&nbsp;</p> <p>Almost imperceptible amount of <em><strong>mispricing </strong></em>here...</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2015/05-overflow/20150524_Bernanke3.jpg"><img alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2015/05-overflow/20150524_Bernanke3_0.jpg" style="width: 600px; height: 314px;" /></a></p> <p>&nbsp;</p> <p><u><strong>So now &quot;relative&quot; mispriings at all.. </strong></u></p> <p><u><strong>How about &quot;absolute&quot; mispricings?</strong></u></p> <p>Cyclically, even Yellen thinks stocks are expensive...</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2015/05-overflow/20150524_Bernanke4.jpg"><img alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2015/05-overflow/20150524_Bernanke4_0.jpg" style="width: 600px; height: 319px;" /></a></p> <p>&nbsp;</p> <p>and the median stock has never been more expensive...</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2015/05-overflow/20150522_stock.jpg"><img alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2015/05-overflow/20150522_stock.jpg" style="width: 600px; height: 505px;" /></a></p> <p>&nbsp;</p> <p>But apart from that - nope - no mispricing whatsoever.</p> <p>*&nbsp; *&nbsp; *</p> <p>Which is why it seems odd that Bernanke would conclude his speech with this statement:</p> <ul> <li><strong>*BERNANKE: HOW TO MANAGE ASSET PRICE DROP SCENARIO MORE CRUCIAL</strong></li> </ul> <p>Why would asset prices drop if they are not mispriced?</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="404" height="410" alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/20150524_Bernanke5.jpg?1432520841" /> </div> </div> </div> http://www.zerohedge.com/news/2015-05-24/bernanke-says-no-large-mispricings-us-securities-these-5-charts-say-otherwise#comments Ben Bernanke Ben Bernanke Bond Mon, 25 May 2015 02:28:49 +0000 Tyler Durden 506932 at http://www.zerohedge.com Another Decapitator-in-Chief Of America's Working Class http://www.zerohedge.com/news/2015-05-24/another-decapitator-chief-americas-working-class <p><a href="http://www.tanosborn.com/columns/2015/another-decapitator-chief-america-s-working-class"><em>Submitted by Ben Tanosborn,</em></a></p> <p><strong>It is not Senators Elizabeth Warren and Bernie Sanders who don&rsquo;t get it.&nbsp; It is our near-sighted Globalist-in-Chief who really doesn&rsquo;t get it,</strong> following in the footsteps of that other Republican-lite president, William Jefferson Clinton.&nbsp; But what can one expect, given the advice he&rsquo;s getting from a cadre of Wall-Streeters working with, or influencing, the White House?&nbsp; Or, from a president who has confessed to being a &ldquo;great admirer&rdquo; of celebrated JP Morgan Chase chief, Jamie Dimon?</p> <p>A few days ago President Obama honored our Portland (Oregon) area with a visit to promote the Trans-Pacific Trade Partnership (TPP) agreement; which for all intents and purposes is but another addition to the gallery of NAFTA, CAFTA, and PNTR ugly siblings.&nbsp; Perhaps an even uglier sibling in this period of expanding economic inequality!</p> <p>It seems comical, yet ill-omened, how Barack Obama is herding the already decimated middle class along a path sure to reach economic oblivion,<strong> while maintaining support from much of the old guard of school-government-trade unionists which has kept the Democratic Party afloat during the last five decades</strong> in a conservative sea dominated by currents of old-time religion and misguided patriotism.</p> <p>Common sense and humanity, and not just blind acceptance of global economics, tell us that eventually most barriers to competition should be coming down; and that there will be a significant trend towards greater homogenization in both productivity and personal income throughout much of world.&nbsp; But we might still be two or three generations away from such happening, assuming changes take place in an orderly and least painful fashion&hellip; without allowing our politicians, Democrats or Republicans alike, to follow the will of the elite that place them in power&hellip; and, correspondingly, expect a payback.</p> <p>And that&rsquo;s where we are today in Congress, ominously on the eve of passing this terrible TPP legislation sure to reach a smiling Obama, pen in hand ready to sign, instead of rejecting it with a forceful and merited veto.</p> <p><strong>Could it be that Obama is suffering from the same illusionary political disease as Bill Clinton, after the latter&rsquo;s receipt of unmerited kudos for all the low-paying jobs created during his two terms in office?&nbsp; Is it so difficult to understand that job numbers can have a profoundly different significance in economic, social and political terms than labor income?</strong></p> <p>Regardless of the POTUS&rsquo; misleading sermonizing on &ldquo;what&rsquo;s good for the United States,&rdquo; the reality is acrimoniously different.&nbsp; <strong>The anticipated net outsource of labor income sure to come from the TPP agreement is likely to be similar in results as past global renditions initiated with NAFTA.</strong>&nbsp; The economic capillary effect of this agreement (TPP) will affect labor significantly, not just in the manufacturing sector (possibly losing half as many jobs as the number lost to China and the American hemisphere in the past two decades), but also in the service sector &ndash; and here, we are not referring to jobs in low remuneration call centers, but jobs with high technical skills in both medicine and engineering, which could result in the loss of half of the&nbsp; now existing &ndash; and anticipated increases &ndash; programmer jobs; and a reduction in overall pay of the remaining half by a third or more.</p> <p><strong>Other areas in Americans&rsquo; lives will also be affected or threatened, from food safety standards, to the environment, to increases in the already stratospheric cost of drugs, to the protection of rights and sovereignty that we&rsquo;ve inherited from the sacrifice of past generations.</strong></p> <p><strong>So who&rsquo;s to gain from this TPP agreement that Barack Obama is pushing with greater fervor than that exhibited in critical domestic issues such as immigration reform and the (dirty secret) racial divide?</strong>&nbsp; As it&rsquo;s always the case in our predatory society, Corporate America and its circle of influential friends are the culprit&hellip; and it&rsquo;s beginning to look as if the villains will get their way: Wall Street, Big Pharma, and a long list of multinationals displaying their corporate flags at the top of the pole, knowing that their safety is in the good hands of the Pentagon; all international policing costs defrayed by the American taxpayer&hellip; in its incredible masochistic docility.</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2015/05-overflow/20150524_bank.jpg"><img alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2015/05-overflow/20150524_bank_0.jpg" style="width: 600px; height: 317px;" /></a></p> <p>ISIS&rsquo; literal style of decapitation is repugnant and shocking. <strong>US&rsquo; self-imposed economic decapitation may not appear at first as shocking, but the end result will be as gruesome to America&rsquo;s working class</strong>: not the proletariat of old, but most everyone holding both blue and white collar jobs.</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="843" height="445" alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/20150524_bank.jpg?1432490411" /> </div> </div> </div> http://www.zerohedge.com/news/2015-05-24/another-decapitator-chief-americas-working-class#comments Barack Obama Bernie Sanders China Corporate America Elizabeth Warren Jamie Dimon Personal Income President Obama Reality White House Mon, 25 May 2015 02:05:05 +0000 Tyler Durden 506908 at http://www.zerohedge.com Hanergy Contagion Sparks Chinese Investor Rotation From Shenzhen "Ponzi" To Shanghai "Safety" http://www.zerohedge.com/news/2015-05-24/hanergy-contagion-sparks-chinese-investor-rotation-shenzhen-ponzi-shanghai-safety <p>It appears <strong>the reality that <a href="http://www.zerohedge.com/news/2015-05-22/glimpse-endgame-how-chinas-formerly-richest-man-crashed-his-own-stock-when-he-tried-">we exposed in all its unbelievable ponzi-ness </a>has filtered into the psyche of Chinese investors</strong>.. though ever so gently for now. Hanergy's self-dealing self-referential loans collateralized by stock and Goldin financial's farcical flop, along with 500% return year-to-date stocks by the dozen, has sparked some selling with <strong>CHINEXT down around 4%, Shenzhen down 1-2% (both heavily dominated by these high-flying idiot-maker stocks)</strong> while Shanghai Composite and CSI-300 (China A-Share proxy) is bid...</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2015/05-overflow/20150524_china1.jpg"><img src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2015/05-overflow/20150524_china1_0.jpg" width="600" height="315" /></a></p> <p>&nbsp;</p> <p> because why wouldn't you greatly rotate to the index that is only up 47% YTD and not 92%?</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2015/05-overflow/20150524_china2.jpg"><img src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2015/05-overflow/20150524_china2_0.jpg" width="600" height="314" /></a></p> <p>&nbsp;</p> <p><em>Charts: Bloomberg</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="959" height="504" alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/20150524_china1.jpg?1432519293" /> </div> </div> </div> http://www.zerohedge.com/news/2015-05-24/hanergy-contagion-sparks-chinese-investor-rotation-shenzhen-ponzi-shanghai-safety#comments China Reality Shenzhen Mon, 25 May 2015 02:03:01 +0000 Tyler Durden 506931 at http://www.zerohedge.com From the Very Creation of the Internet, U.S. Spy Agencies Fought to Block Encryption http://www.zerohedge.com/news/2015-05-24/very-creation-internet-us-spy-agencies-fought-block-encryption <p>American spy agencies have intentionally weakened digital security <a href="http://www.washingtonsblog.com/2014/01/american-british-spy-agencies-intentionally-weakened-security-many-decades.html" title="for many decades">for many decades</a>. This&nbsp;<a href="http://www.washingtonsblog.com/2014/01/open-letter-top-u-s-computer-security-experts-slams-nsa-spying-destroying-security.html" title="breaks the functionality of our computers and of the Internet">breaks the functionality of our computers and of the Internet</a>. It reduces functionality and reduces security by &ndash; for example &ndash; <a href="http://www.washingtonsblog.com/2014/01/open-letter-top-u-s-computer-security-experts-slams-nsa-spying-destroying-security.html" title="creating backdoors that malicious hackers can get through">creating backdoors that malicious hackers can get through</a>.</p> <p>The spy agencies have treated patriotic Americans who want to use encryption to protect their privacy as <a href="http://www.washingtonsblog.com/2014/07/nsa-targets-extremists-people-try-avoid-intrusive-spying-using-privacy-tools.html" title="extremists … or even terrorists">extremists &hellip; or even terrorists</a>.</p> <p>As Gizmodo&rsquo;s Matt Novak <a href="http://paleofuture.gizmodo.com/the-nsa-hated-civilian-encrypted-data-way-back-in-the-1-895351153" target="_blank" title="points out">points out</a>, this attack started at the very birth of the internet:</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p class="first-text" data-textannotation-id="c67376e528976cbe318144a31c054db0">In the 1970s, civilian researchers at places like IBM, Stanford and MIT were developing encryption to ensure that digital data sent between businesses, academics and private citizens couldn&rsquo;t be intercepted and understood by a third party. This concerned folks in <strong>the U.S. intelligence community</strong> who <strong>didn&rsquo;t want to get locked out of potentially eavesdropping on anyone</strong>, regardless of their preferred communications method. Despite their most valiant efforts, agencies like the NSA ultimately lost out to commercial interests. But it wasn&rsquo;t for lack of trying.</p> <p class="first-text" data-textannotation-id="c67376e528976cbe318144a31c054db0">&nbsp;</p> <p class="first-text" data-textannotation-id="c67376e528976cbe318144a31c054db0">***</p> <p data-textannotation-id="a4d5ad1b86944adf40b798ef3ed818be">&nbsp;</p> <p data-textannotation-id="a4d5ad1b86944adf40b798ef3ed818be">When the NSA got wind of the research developments at IBM, Stanford and MIT in the 1970s they <strong>scrambled to block publication of their early studies</strong>. When that didn&rsquo;t work, the NSA sought to work with the civilian research community to develop the encryption. As Stowsky writes, &ldquo;the agency struck a deal with IBM to develop a data encryption standard (DES) for commercial applications in return for full pre-publication review and right to <strong>regulate the length, and therefore the strength of the crypto algorithm</strong>.&rdquo;</p> <p data-textannotation-id="04b580c5c523180736e343d9b3e9ea5f">&nbsp;</p> <p data-textannotation-id="04b580c5c523180736e343d9b3e9ea5f">Naturally, in the Watergate era, many researchers assumed that if the U.S. government was helping to develop the locks that they would surely give themselves the keys, effectively negating the purpose of the encryption. Unlike IBM, the researchers at Stanford and MIT didn&rsquo;t go along with the standard and developed their own encryption algorithms. Their findings were published (again, against the wishes of the NSA) in the late 1970s after courts found that researchers have the right to publish on the topic of cryptography even if it makes the government uncomfortable. According to Stowsky, the <strong>NSA retaliated by trying to block further research funding</strong> that Stanford and MIT were receiving through the National Science Foundation.</p> </blockquote> <p>Novak also notes that &ndash; right <a href="http://paleofuture.gizmodo.com/1975-article-on-internet-spying-not-written-by-time-tra-1703089185" target="_blank" title="from">from</a> <a href="http://gizmodo.com/a-history-of-internet-spying-part-i-1685242386" target="_blank" title="the">the</a> <a href="http://gizmodo.com/a-history-of-internet-spying-part-2-1686760364" target="_blank" title="start">start</a> &ndash; people realized the potential of the internet as a tool for conducting mass surveillance on the public. And see <a href="http://www.washingtonsblog.com/2015/04/u-s-government-tracked-billions-phone-calls-decades.html" title="this">this</a>, <a href="http://www.washingtonsblog.com/2014/06/senior-nsa-manager-agency-started-spying-reporters-wait-make-sure-didnt-report-nsas-mass-surveillance.html" title="this">this</a> and <a href="http://www.washingtonsblog.com/2015/05/researchers-predicted-in-1971-that-debit-cards-would-become-the-ultimate-spy-tool.html" title="this">this</a>.</p> http://www.zerohedge.com/news/2015-05-24/very-creation-internet-us-spy-agencies-fought-block-encryption#comments SPY Mon, 25 May 2015 01:56:56 +0000 George Washington 506930 at http://www.zerohedge.com How iTunes Destroyed The Music Business In 1 Simple Chart http://www.zerohedge.com/news/2015-05-24/how-itunes-destroyed-music-business-1-simple-chart <p><strong>The music industry was the first entertainment business to confront the digital transition, although it was not exactly a willing pioneer.</strong> Rather, it was thrust into this role as a matter of survival, as it grappled with the rapid rise of online piracy in the early 2000s.</p> <p>The music industry was incredibly slow to respond to the digital transition. Napster, the original music piracy site, burst onto the scene in 1999, but <strong><span style="text-decoration: underline;">it wasn’t until 2004 when Apple iTunes debuted that consumers grew more and more primed to free music.</span></strong></p> <p><strong>This was a serious error and haunted the music industry for years thereafter, costing the industry multi-billions in annual sales. </strong>The rest of the entertainment industry has taken note and, as a result, all other entertainment sectors, including video, have been comparatively quick to embrace digital distribution.</p> <p><strong>The music industry, rather than focusing on a legal digital download service, initially focused all its effort on shutting down Napster by way of a copyright infringement lawsuit.</strong> Ultimately, the industry prevailed and the courts shut down Napster in mid-2001; however, this was a pyrrhic victory. By the time Napster was shut down, the pirates had moved on to the next new thing: decentralized peer-to-peer file sharing, led by Gnutella. Unlike Napster, these piracy sites were virtually impossible to shut down because there was no central server storing the files. Shutting down Gnutella would have been tantamount to shutting down the entire internet.</p> <p><strong>In addition to the failure to launch a legal alternative to the pirate sites, the music industry was, understandably, paralysed by its fear of album unbundling.</strong> Piracy had given consumers a taste for singles and there was no going back to albums.</p> <p>Against this backdrop of piracy and absent a legal digital alternative, music sales plummeted. From a peak of nearly US$15 bn in 1999, US music sales declined cumulatively by 15% to US$12 bn in 2003 (previous exhibit). The decline in song units (assuming 10 songs per album) was even more dramatic, declining by 29% cumulatively to 7.7 bn over the same time. <strong>Little did the industry know that this was only the beginning of the decline. By 2004, the music industry was in dire straits. Physical sales were in free fall and its own efforts to launch a digital download service were failing.</strong></p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2015/05-overflow/20150524_music1.jpg"><img src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2015/05-overflow/20150524_music1.jpg" width="600" height="455" /></a></p> <p>&nbsp;</p> <p>Apple, with the dominant digital music player and superior software engineering skills, was a perfect partner (nay, savior) for the music industry, with Steve Jobs Achieving a very consumer-friendly retail price of US$0.99 per song and a wholesale price of US$0.70. This wholesale price was, in effect, a 30% price reduction from the implicit price per song on a physical album (i.e., US$10 album wholesale price, 10 songs per album).</p> <p><span style="text-decoration: underline;"><strong>After a small bump in sales in 2004 from the launch of iTunes, the declines resumed as the double whammy of album unbundling and a 30% wholesale price cut took its toll. From 2004 to 2014, US music unit and dollar sales declined cumulatively by another 50%, erasing US$5 bn in annual sales.</strong></span></p> <p><strong><a href="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2015/05-overflow/20150524_music.jpg"><img src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2015/05-overflow/20150524_music_0.jpg" width="600" height="439" /></a></strong></p> <p><strong>There is no rest for the weary, and the music industry is already confronting another digital transition, call it digital transition 2.0, in the form of online streaming. </strong>Song sales stabilised from 2010 to 2012, but have since resumed declining as music demand is now shifting from digital downloads (ownership) to online streaming (rentals), such as Pandora.</p> <p><em>Source: Goldman Sachs</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="671" height="491" alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/20150524_music.jpg?1432491423" /> </div> </div> </div> http://www.zerohedge.com/news/2015-05-24/how-itunes-destroyed-music-business-1-simple-chart#comments Apple Goldman Sachs goldman sachs Steve Jobs Mon, 25 May 2015 01:30:14 +0000 Tyler Durden 506909 at http://www.zerohedge.com Ron Paul: The Case For Truly 'Free' Trade http://www.zerohedge.com/news/2015-05-24/ron-paul-case-truly-free-trade <p><a href="https://mises.org/blog/ron-paul-case-free-trade"><em>Submitted by Ron Paul via The Misess Institute</em></a>,</p> <p><em>With recent DC politicking on both the Export-Import Bank and the Trans-Pacific Partnership, we revisit Ron Paul&#39;s 1981 essay &quot;<a href="https://mises.org/library/case-free-trade">The Case for Free Trade</a>&quot; which explains the basics of truly free trade:&nbsp;</em></p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p><strong>Although we think of ourselves as a free-trading nation, it takes more than 700 pages just to list all the tariffs on imported goods, and another 400 to inventory all the non-tariff restraints, such as quotas and &quot;orderly marketing agreements.&quot;</strong></p> <p>&nbsp;</p> <p>A tariff is a tax levied on a foreign good, to help a special interest at the expense of American consumers.</p> <p>&nbsp;</p> <p>A trade restraint or marketing agreement&mdash;on the number of inexpensive Taiwanese sneakers that Americans can buy, for example&mdash;achieves the same goal, at the same cost, in a less forthright manner.</p> <p>&nbsp;</p> <p>And all the trends are towards more subsidies for U.S. exporters, and more prohibitions and taxes on imports.</p> <p>&nbsp;</p> <p>Trade is to be subsidized or restrained, not left to the voluntary actions of consumers and producers.</p> <p>&nbsp;</p> <p>In 1930, Congress passed the Smoot-Hawley tariff bill, imposing heavy tariffs on imports, with the avowed motive of &quot;protecting&quot; U.S. companies and jobs. Within one year, our 25 major trading partners had retaliated with their own tariffs on American goods. World trade declined sharply, and the depression was made world-wide and longer-lasting.</p> <p>&nbsp;</p> <p>Today the policy of protectionism is again gaining favor in Congress, and in other countries.&nbsp;But it must be fought with all our strength.</p> <p>&nbsp;</p> <p><strong>Not only does protectionism make everyone poorer&mdash;except certain special interests&mdash;but it also increases international tensions, and can lead to war.</strong></p> <p>&nbsp;</p> <p>&quot;If a foreign country can supply us with a commodity cheaper than we ourselves can make it,&quot; wrote Adam Smith in 1776, &quot;better buy it of them with some part of the pro duce of our own industry, employed in a way in which we have some advantage. The general industry of the country will not therefore be diminished... but only left to find out the way in which it can be employed to the greater advantage.&quot;</p> <p>&nbsp;</p> <p>An important economic principle is called the division of labor. It states that economic efficiency, and therefore growth, is enhanced by everyone doing what he does best.</p> <p>&nbsp;</p> <p>If I had to grow my own food, make my own clothes, build my own house, and teach my own children, our family&#39;s living standard would plummet to a subsistence, or below-subsistence, level.</p> <p>&nbsp;</p> <p>...</p> <p>&nbsp;</p> <p><strong>Every economic intervention in trade, domestic or foreign, should be abolished, for practical and moral reasons.</strong></p> <p>&nbsp;</p> <p>Even if other countries maintain tariffs or subsidies, <strong>we would be helped, not hurt, by unilaterally ending ours.</strong></p> <p>&nbsp;</p> <p>We would improve our productivity, shift resources to those areas where we &#39;have an advantage, grow more pros-perous, and make a greater variety of less-expensive goods available to our people.</p> <p>&nbsp;</p> <p>And we would serve the cause of peace and set a good example for the world to emulate.</p> <p>&nbsp;</p> <p><strong>&quot;When people and goods cross borders,&quot; Ludwig von Mises used to quote, &quot;armies do not.&quot; Free and extensive trade, unsubsidized, between the peoples of the Earth lowers tensions and makes us all better off It is, morally and economically, the only proper policy.</strong></p> </blockquote> <p><em><a href="https://mises.org/library/case-free-trade">Read the full article here.&nbsp;</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="805" height="709" alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/20150524_free.jpg?1432489063" /> </div> </div> </div> http://www.zerohedge.com/news/2015-05-24/ron-paul-case-truly-free-trade#comments Ludwig von Mises Ron Paul World Trade Mon, 25 May 2015 00:55:44 +0000 Tyler Durden 506906 at http://www.zerohedge.com McDonalds Responds To Minimum Wage Protests http://www.zerohedge.com/news/2015-05-24/mcdonalds-responds-minimum-wage-protests <p>But all they wanted was $15 per hour?</p> <p>&nbsp;</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2015/05-overflow/20150524_mcd.jpg"><img src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2015/05-overflow/20150524_mcd_0.jpg" width="600" height="393" /></a></p> <p>&nbsp;</p> <p><em>h/t @Stalingrad_Poor</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="694" height="455" alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/20150524_mcd.jpg?1432499884" /> </div> </div> </div> http://www.zerohedge.com/news/2015-05-24/mcdonalds-responds-minimum-wage-protests#comments McDonalds Mon, 25 May 2015 00:20:16 +0000 Tyler Durden 506913 at http://www.zerohedge.com Lake Mead Water Level Mysteriously Plunges After Nevada Quake http://www.zerohedge.com/news/2015-05-24/lake-mead-water-level-mysteriously-plunges-after-nevada-quake <p><a href="http://www.reviewjournal.com/trending/silver-state/8-biggest-earthquakes-nevada-history">A 4.8 magnitude earthquake (originally reported 5.4) shook Las Vegas and surrounding areas Friday morning </a>causing roads and bridges to be closed. The quake went little-reported outside of local news <em>(since there was at first glance minimum damage caused)</em> but, since the quake's occurrence, something considerably more worrisome has occurred.<strong> </strong></p> <p><strong>In the 36 hours since the quake's occurrence, <a href="http://lakemead.water-data.com/">water levels at Lake Mead have plunged precipitously</a>. </strong>While we know correlation is not causation, the 'coincidence' of an extreme loss in water levels occurring in the aftermath of one of the largest quakes in recent Vegas history does raise a suspicious eyebrow - especially when there has been <strong>no official word on the precipitous decline</strong>.</p> <p><a href="http://www.reviewjournal.com/news/las-vegas/48-magnitude-earthquake-shakes-las-vegas-spaghetti-bowl-ramps-have-reopened">The earthquake hit mid-morning on Friday:</a></p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p><strong>A 4.8 magnitude earthquake shook Las Vegas and surrounding areas Friday morning, forcing loose a rubber casing on a bridge and leading state officials to close Spaghetti Bowl interchanges for several hours.</strong></p> <p>&nbsp;</p> <p>After the Nevada Department of Transportation inspected bridges for possible structural damage, they deemed the roads safe for travel and reopened them just before 5 p.m. Traffic had backed up for miles during the closures, which came at the start of the Memorial Day weekend.</p> <p>&nbsp;</p> <p><strong>The quake, which hit at 11:47 a.m., was centered about 23 miles south-southwest of Caliente, the U.S. Geological Survey said. The magnitude was originally reported as 5.4, but the official number was lowered twice Friday.</strong></p> <p>&nbsp;</p> <p>The ramp from southbound U.S. Highway 95 to southbound Interstate 15 was closed about 12:20 p.m. Friday, officials said.</p> <p>&nbsp;</p> <p>“The joint damage was pre-existing. The tremblor simply dislodged the protective rubber encasing the bridge seam making it look much worse than it was in reality” and prompting an immediate shutdown of the ramps, NDOT engineer Mary Martini said in a news release about 3:45 p.m.</p> </blockquote> <p>Since then, official water level data shows an incredible 8 foot plunge in water levels since the earthquake.</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2015/05-overflow/20150524_mead2.jpg"><img src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2015/05-overflow/20150524_mead2_0.jpg" width="600" height="274" style="display: block; margin-left: auto; margin-right: auto;" /></a></p> <p>considering the (average drop in the last 10 years is 1 inch, this is a troubling outlier. </p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2015/05-overflow/20150524_mead.jpg"><img src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2015/05-overflow/20150524_mead_0.jpg" width="600" height="641" style="display: block; margin-left: auto; margin-right: auto;" /></a></p> <p><a href="http://lakemead.water-data.com/"><em>Source: Lake Mead Water Database, </em><em>&nbsp;</em></a><em><a href="http://professordoom1.wix.com/doom-with-a-view#!update-lake-mead/coie">h/t Professor Doom</a> and Quasar</em></p> <p>There is , of course, <strong>a possibility that the drop is the result of broken sensors </strong>and we will be following up during the week to see if levels normalize.</p> <p><a href="http://www.zerohedge.com/news/2015-05-04/leaking-las-vegas-forced-rationing-looms-lake-mead-faces-federal-water-emergency">This is crucial since, as we noted previously,</a></p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p><span style="text-decoration: underline;"><strong>If the water level drops below 1,075 feet elevation by January 1, 2016, it will trigger a federal water emergency. And water rationing.</strong></span></p> <p>&nbsp;</p> <p><a href="http://www.reviewjournal.com/news/water-environment/lake-mead-water-levels-records-continue-fall" target="_blank"><span style="text-decoration: underline;">Las Vegas Review Journal</span></a> reported that forecasters expect the level to drop to 1073 feet by June, before Lake Powell would begin to release&nbsp;more water. Assuming “average or better snow accumulations in the mountains that feed the Colorado River – something that’s happened only three times in the past 15 years,” the water level on January 1 is expected to be barely above the federal shortage level.</p> <p>&nbsp;</p> <p>Even with&nbsp;these somewhat rosy assumptions of “average or better than average snow accumulations,” the water level would begin set new lows next April.&nbsp;But if the next winter is anything like the last few, all bets are off.</p> <p>&nbsp;</p> <p><span style="text-decoration: underline;"><strong>If the level drops below 1050 feet, one of the two intake pipes for the Las Vegas Valley, which gets 90% of its water that way, will run dry.</strong></span></p> </blockquote> <p><a href="http://romancatholicimperialist.blogspot.com/2015/05/doom-precipitous-drop-in-lake-mead.html">As Roman Catholic Imperialist notes,</a> this is quite unprecedented... For a sense of just how bad things are gettiing, the following images will help...</p> <p>&nbsp;</p> <div class="separator" style="clear: both; text-align: center;"><a href="http://4.bp.blogspot.com/-mJOcoulzvhs/VWIySqNW_nI/AAAAAAAAU48/xnazaSj9AVs/s1600/lake%2Bmead%25281%2529.gif" style="margin-left: 1em; margin-right: 1em;"><img src="http://4.bp.blogspot.com/-mJOcoulzvhs/VWIySqNW_nI/AAAAAAAAU48/xnazaSj9AVs/s1600/lake%2Bmead%25281%2529.gif" border="0" /></a></div> <div style="text-align: center;"><a href="http://www.takepart.com/article/2014/08/25/california-drought-7-gifs"><strong>&nbsp;Lake Mead, July 2007 to July 2014</strong></a></div> <p>&nbsp;</p> <div class="separator" style="clear: both; text-align: center;"><a href="http://3.bp.blogspot.com/-GLndibCnTgw/VWIyXBStnuI/AAAAAAAAU5E/JJGuONGqcg8/s1600/lake%2Bmead%25282%2529.gif" style="margin-left: 1em; margin-right: 1em;"><img src="http://3.bp.blogspot.com/-GLndibCnTgw/VWIyXBStnuI/AAAAAAAAU5E/JJGuONGqcg8/s1600/lake%2Bmead%25282%2529.gif" border="0" /></a></div> <div style="text-align: center;"><a href="http://www.takepart.com/article/2014/08/25/california-drought-7-gifs"><strong>&nbsp;Lake Mead, July 2007 to July 2014</strong></a></div> <p>&nbsp;</p> <div class="separator" style="clear: both; text-align: center;"><a href="http://1.bp.blogspot.com/-W5YPkCpWs6M/VWIyY2wMwII/AAAAAAAAU5M/HK3KWWIpHRI/s1600/lake%2Bmead%2B%25283%2529.gif" style="margin-left: 1em; margin-right: 1em;"><img src="http://1.bp.blogspot.com/-W5YPkCpWs6M/VWIyY2wMwII/AAAAAAAAU5M/HK3KWWIpHRI/s1600/lake%2Bmead%2B%25283%2529.gif" border="0" /></a></div> <div class="separator" style="clear: both; text-align: center;"><a href="http://www.takepart.com/article/2014/08/25/california-drought-7-gifs"><strong>Lake Mead, July 2007 to July 2014</strong></a></div> <p>&nbsp;</p> <p><strong>Update: </strong>moments ago the Lake Mead National Recreation Area officially denied that the online reading was accurate blaming the water level collapse on inaccurate water levels as of this morning.<em><br /></em></p> <blockquote class="twitter-tweet" lang="en"><p dir="ltr" lang="en">Lake Mead's elevation has NOT dropped to 1,068 feet. Some inaccurate data was posted online. We are at 1,077 feet. <a href="http://t.co/a0YUo9iD0P">http://t.co/a0YUo9iD0P</a></p> <p>— Lake Mead (@LakeMeadNRA) <a href="https://twitter.com/LakeMeadNRA/status/602582307799633921">May 24, 2015</a></p></blockquote> <script src="//platform.twitter.com/widgets.js"></script><blockquote class="twitter-tweet"> <p dir="ltr" lang="en"><a href="https://twitter.com/jeffreyneillong">@jeffreyneillong</a> This information is not accurate. The website had incorrect data this morning. It has been updated <a href="http://t.co/0ls3f4yoC5">http://t.co/0ls3f4yoC5</a></p> <p>— Lake Mead (@LakeMeadNRA) <a href="https://twitter.com/LakeMeadNRA/status/602584078093713408">May 24, 2015</a></p></blockquote> <script src="//platform.twitter.com/widgets.js"></script><p> Dare we say it: <strong>double seasonally-adjusted water levels?</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="356" height="311" alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/20150524_mead1.jpg?1432503261" /> </div> </div> </div> http://www.zerohedge.com/news/2015-05-24/lake-mead-water-level-mysteriously-plunges-after-nevada-quake#comments Las Vegas Mon, 25 May 2015 00:12:16 +0000 Tyler Durden 506915 at http://www.zerohedge.com Grexit "Disaster" Looms As Greek Hospitals Run Out Of Sheets, Painkillers http://www.zerohedge.com/news/2015-05-24/grexit-disaster-looms-greek-hospitals-run-out-sheets-painkillers <p>The default countdown is about to go under 10 days and it is becoming increasingly apparent that both Greece and its creditors have had enough.</p> <p>Months of tense negotiations have gone nowhere and yielded exactly nothing and it now looks like PM Alexis Tsipras and FinMin Yanis Varoufakis may be willing to miss a June 5 payment to the IMF if it means proving they are serious about keeping their campaign promises and forcing the troika to the bargaining table. The implications of a missed payment aren’t entirely clear but Athens is keen to predict the worst as it tries to squeeze concessions from creditors. <a href="http://www.bloomberg.com/news/articles/2015-05-23/tsipras-urges-euro-area-creditors-to-compromise-for-greek-deal">Bloomberg</a> has more:</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p><em>A day after Prime Minister Alexis Tsipras said Greek society can’t absorb any more austerity measures, Finance Minister Yanis Varoufakis said his government has met the euro area and IMF three-quarters of the way, and that it’s up to creditors to cover the remainder.</em></p> <p>&nbsp;</p> <p><em>“Greece has made enormous strides reaching a deal, it is now up to the institutions to do their bit,” Varoufakis said Sunday on BBC’s Andrew Marr Show. “It is not in their interests as our creditors that the cow that produces the milk should be beaten into submission to the extent that the milk will not be enough for them to get their money back”...</em></p> <p>&nbsp;</p> <p><em>German Finance Minister Wolfgang Schaeuble, meanwhile, signaled there isn’t much wiggle room after Tsipras’s government committed to policy changes in return for aid in a euro-area accord on Feb. 20.</em></p> <p>&nbsp;</p> <p><em>“That is the condition for completing the current program,” Schaeuble said in a Deutschlandfunk radio interview aired Sunday. “The problems are rooted in Greece. And now Greece does have to fulfill its commitments.”</em></p> <p>&nbsp;</p> <p><em>Some members of Tsipras’s Syriza party advocate defaulting on loans rather than backing down from the anti-austerity policies that swept it to power in January even if that leads the country out of the euro.</em></p> <p>&nbsp;</p> <p><em><strong>Greece doesn’t have the money, and won’t pay what it owes the IMF in June, Interior Minister Nikos Voutsis said in a Mega TV interview on Sunday.</strong> Spiegel Online on April 1 cited Voutsis as saying Greece should delay an April 9 payment to the fund, which was made.</em></p> <p>&nbsp;</p> <p><em>“We’ve done remarkably well for an economy that doesn’t have access to the money markets to meet our obligations,” Varoufakis said. “At some point we will not be able to do it.”</em></p> <p>&nbsp;</p> <p><em>“Once you are in a monetary union, getting out of it is catastrophic,” Varoufakis said. <strong>“It would be a disaster for everyone involved. It would be a disaster primarily for the Greek social economy but it would also be the beginning of the end of the common currency project in Europe, whatever some analysts might be saying.”</strong></em></p> </blockquote> <p>And "whatever some analysts might be saying", Greeks are now suffering mightily, as the €22 million per day hit to the economy has now bankrupted the country's hospitals which have reportedly run out of painkillers and sheets. Here's <a href="http://www.independent.co.uk/news/world/europe/greek-hospitals-cannot-afford-painkillers-scissors-or-sheets-as-budget-cuts-bite-10271819.html">The Independent</a>:</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p><em>Greek hospitals have run out of supplies such as painkillers, scissors and sheets as budget cuts have left the health service unable to provide even basic provisions for operations and medical procedures…</em></p> </blockquote> <div> <blockquote> <div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <div><em>Huge cuts to the healthcare budget, amid the economic turmoil which made millions unemployed, have left than 2.5m Greeks uninsured, up from 500,000 in 2008..</em></div> <div><em>healthcare spending has fallen by 25 per cent since 2009, creating shortages of the most basic surgical equipment and leaving too little money to pay nurses' salaries.</em></div> <div><strong><em>Reports have surfaced of patients being turned away from hospital because there was no meter to measure their high blood pressure, while others have had to do without painkillers during medical procedures. One patient was even asked to bring their own sheets to hospital.</em></strong></div> <div><em>A trainee surgeon at KAT, a respected state hospital in Athens, said the situation was at “breaking point”.</em></div> <div><em>“There is no money to repair medical equipment, no money for ambulances to use for petrol, no money to hire nurses and no money to buy modern surgical supplies."</em></div> </blockquote> <div>Meanwhile, Tsipras is steadfastly refusing to compromise on the now ubiquitous "red lines" and the most outspoken austerity advocates look to be entrenching themselves even further as the following quote from German FinMin Wolfgang Schaeuble makes clear:</div> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <div><em>Greece committed itself to the fulfillment of this program on Feb. 20 and therefore we don't need to talk about alternatives.</em></div> </blockquote> <div>Clearly, the end game is approaching although it's till unclear what form it will take. The idea that a developed country cannot provide basic emergency medical care because it is in poor standing with the institutions that print a fiat currency is patently absurd and simply isn't tenable meaning that one way or another, this 'situation' will resolve itself in the coming weeks, an event which will put Europe's broken bond markets to a rather difficult test.</div> </div> <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="519" height="320" alt="" src="http://www.zerohedge.com/sites/default/files/images/user92183/imageroot/Tsipras_1.png?1432480024" /> </div> </div> </div> http://www.zerohedge.com/news/2015-05-24/grexit-disaster-looms-greek-hospitals-run-out-sheets-painkillers#comments Bond Creditors default Greece Sun, 24 May 2015 23:58:24 +0000 Tyler Durden 506895 at http://www.zerohedge.com The "New Era" Is An Old Story http://www.zerohedge.com/news/2015-05-24/new-era-old-story <p><a href="http://www.hussmanfunds.com/wmc/wmc150518.htm"><em>Excerpted from John Hussman&#39;s Weekly Market Comment</em></a>,</p> <p class="largeText"><strong>Among the recurring features of speculative episodes across history is the appearance of &ldquo;new era&rdquo; arguments to justify the elevated prices, coupled with arguments that historically reliable measures no longer apply.</strong> In our view, the problem is not that investors search for new, more reliable tools of market analysis &ndash; that should always be an objective. The problem is when investors adopt theories and models that embed the most optimistic assumptions possible, run contrary to historical evidence, or embed subtle peculiarities that actually drive the results (see, for example, the &ldquo;novel valuation measures&rdquo; section of <a href="http://www.hussmanfunds.com/wmc/wmc131223.htm">The Diva is Already Singing</a>). Eventually,<strong> the final refuge of speculation is to abandon historically reliable measures wholesale, resting faith instead on the advent of some new era in which the old rules simply don&rsquo;t apply.</strong></p> <p class="largeText">John Kenneth Galbraith noted this phenomenon decades ago in his book <em>The Great Crash 1929</em>: &ldquo;It was still necessary to reassure those who required some tie, however tenuous, to reality. This process of reassurance eventually achieved the status of a profession. However, the time had come, as in all periods of speculation, when men sought not to be persuaded by the reality of things but to find excuses for escaping into the new world of fantasy.&rdquo;</p> <p class="largeText">In late-1929, Business Week observed: &ldquo;This is the longest period of practically uninterrupted rise in security prices in our history&hellip; The psychological illusion upon which it is based, though not essentially new, has been stronger and more widespread than has ever been the case in this country in the past. This illusion is summed up in the phrase &lsquo;the new era.&rsquo; The phrase itself is not new. <strong>Every period of speculation rediscovers it&hellip; During every preceding period of stock speculation and subsequent collapse business conditions have been discussed in the same unrealistic fashion as in recent years.</strong> There has been the same widespread idea that in some miraculous way, endlessly elaborated but never actually defined, the fundamental conditions and requirements of progress and prosperity have changed, that old economic principles have been abrogated&hellip; that business profits are destined to grow faster and without limit, and that the expansion of credit can have no end.&rdquo;</p> <p class="largeText"><strong>&ldquo;This time&rdquo; is not different.</strong> There&rsquo;s no question that investors have come to believe that somehow quantitative easing has durably changed the world &ndash; that central banks have (or even can) put a floor under the markets as far as the eye can see. But if you examine the persistent and aggressive easing by the Fed during the 2000-2002 and 2007-2009 plunges, it&rsquo;s clear that monetary easing has little effect once investor preferences shift toward risk aversion &ndash;which we infer from the behavior of observable market internals and credit spreads. Monetary easing only provokes yield-seeking speculation <em>when</em> low-interest money is viewed as an inferior asset.</p> <p class="largeText"><u><em><strong>It&rsquo;s not monetary easing, but the attitude of investors toward risk that distinguishes an overvalued market that continues higher from an overvalued market that is vulnerable to vertical losses. That window of vulnerability has been open for several months now, and the immediacy of our downside concerns would ease (despite obscene valuations) only if market internals and credit spreads were to shift back toward evidence of investor risk-seeking. </strong></em></u></p> <p class="largeText"><strong>Zero interest rate policy has two effects on the financial markets. </strong>One is <strong>legitimate </strong>&ndash; every <em>year</em> in which short-term interest rates are expected to be zero instead of say, a typical 4%, should reasonably warrant a 4% valuation premium in stocks and bonds, over and above run-of-the-mill historical norms (one can demonstrate this using any discounted cash flow approach). So if investors expect short-term rates to be zero for another 4 years, it would be reasonable for stocks and bonds to be about 16% higher than historical valuation norms. At present, the most historically reliable measures we identify suggest that S&amp;P 500 valuations are <em>more than twice</em> their pre-bubble norms.</p> <p class="largeText">The other effect of zero interest rate policy is <strong>pure delusion.</strong> It is to convince investors that there is some miraculous support, &quot;endlessly elaborated but never actually defined,&quot; that places a floor under the financial markets. By creating that delusion, investors become prone to &ldquo;carry trade&rdquo; speculation &ndash; buying any risky security that offers a yield better than zero. That carry trade mentality can only survive in a world where the possibility of capital loss is quietly assumed away.</p> <p class="largeText"><strong>Our view is simple.</strong> The U.S. stock market is in the third valuation bubble of the past 15 years, which is likely to be resolved by losses similar to the outcomes we observed in the first two. In the face of constant cheerleading in 2000 based on theories and valuation measures that were historically unfounded, I wrote in February of that year:</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p class="largeText">&ldquo;If you turn off CNBC and think about the market independently for even a few minutes, it is clear that this market displays none of the conditions which have historically been followed by sustained market advances, and all of the conditions which have historically been followed by market crashes. The aphorism &lsquo;Buy low, sell high&rsquo; has long been discarded. The replacement &lsquo;Buy high, sell higher&rsquo; has also been abandoned. The rallying cries of investors are now just &lsquo;Buy&rsquo; and &lsquo;Get me in!&rsquo;</p> <p class="largeText">&nbsp;</p> <p class="largeText">&ldquo;Are we the only sane people on the planet? While investors are conditioned to think that &lsquo;extreme risk&rsquo; means 15-20% downside, let&rsquo;s not be shy&hellip; we expect a 50% plunge in the S&amp;P 500 by the time this cycle is over. Fortunately, investors who decide to buy on a 15% drop will only lose about 41%, and investors who hold out for a 20% drop before buying will only lose about 38% by the bottom. That&rsquo;s how the math works&hellip; So that&rsquo;s the good news. The bad news is that the more speculative sectors of the market are likely to be hit harder&hellip; The difficult part of all of this is the short term. I have no answer for that, except that in each prior instance, every scrap of short-term gain was wiped out in the eventual downturn.&quot;</p> </blockquote> <p class="largeText"><strong>As it happened, yes, we were evidently among the only sane people on the planet.</strong> The S&amp;P 500 went on to lose half of its value by October 2002, while the Nasdaq 100 lost 83% of its value. We expressed similar concerns (and projections of potential loss for the S&amp;P 500) in 2007, which were validated in the financial crisis that followed.</p> <p class="largeText">I can write this a thousand times, but we&rsquo;re still regularly asked questions that implicitly assume that we&rsquo;ve neither learned anything, nor addressed anything as a result our challenge in the recent half-cycle since 2009. I&rsquo;ll say this again: our central challenge was not the result of our valuation methods, which didn&rsquo;t miss a beat (see <a href="http://www.hussmanfunds.com/wmc/wmc081020.htm">Why Warren Buffett is Right and Why Nobody Cares</a>). Rather, the challenge was the inadvertent result of my 2009 insistence on stress testing our methods of classifying return/risk profiles against Depression-era data. The ensemble methods that came out of that effort, while performing even better than our pre-2009 methods in full cycles across history, also subtly reduced the impact of various components we use to infer investor risk preferences. The one thing that QE did to make things legitimately &ldquo;different this time&quot; was to <em>reduce the overlap</em> between overvalued, overbought, overbullish syndromes and corresponding deterioration in market internals. Because those syndromes were historically a reliable warning of subsequent deterioration in market action, we responded too strongly when they emerged. Put simply, QE made that overlap unreliable. We <em>imposed</em> overlays in mid-2014 that essentially <em>rule out</em> a hard-negative outlook until that deterioration in market internals or credit spreads becomes evident (as it has at present).</p> <p class="largeText">Don&rsquo;t imagine that our stumble in this half-cycle makes current market valuations any less breathtaking. An advancing stock market is not evidence that stocks are not obscenely overvalued. If overvalued markets always crashed immediately, <em>extreme</em> overvaluation could never emerge in the first place. Instead, we have to ask a different question: what <em><span style="text-decoration: underline;">distinguishes</span></em> an overvalued market that continues higher from an overvalued market that crashes? History repeatedly provides the same answer (which, like most discoveries, only seems &ldquo;obvious&rdquo; after you&rsquo;ve figured it out). What distinguished the late-1990&rsquo;s valuation bubble from the crash that followed that bubble? A shift in investor risk-preferences, as revealed by a subtle (and eventually profound) deterioration of observable market internals and risk measures. What distinguished the advance to the 2007 peak from the collapse that followed? A shift in investor risk-preferences, as revealed by a subtle (and eventually profound) deterioration of observable market internals and risk measures. The same is likely to be the case in the present instance, and on historically reliable measures, that shift has <em>already</em> occurred. <strong>Our concerns about market risk will become less immediate if they were to improve. At present, the market remains vulnerable to losses similar to those we observed in 2000 and 2007.</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="253" height="185" alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/20150524_huss.jpg?1432489806" /> </div> </div> </div> http://www.zerohedge.com/news/2015-05-24/new-era-old-story#comments Carry Trade Central Banks John Hussman Market Internals NASDAQ Nasdaq 100 None Quantitative Easing Reality Warren Buffett Sun, 24 May 2015 23:45:16 +0000 Tyler Durden 506907 at http://www.zerohedge.com