en The Real Story Behind Turkey's US-Backed "War On Terror" <p>A quick Google search for the phrase "<em>Turkey joins ISIS fight</em>" reveals that generally speaking, the media is doing its best to pitch Ankara’s newfound willingness to engage Islamic State militarily as a kind of come-to-Jesus moment for the Erdogan regime. </p> <p>Here’s the official line, <a href="">excerpted from the NY Times</a>:</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p><strong><em>Turkey plunged into the fight against the Islamic State on Thursday, rushing forces into the first direct combat with its militants on the Syrian border and granting permission for American warplanes to use two Turkish air bases for bombarding the group in Syria.</em></strong></p> <p>&nbsp;</p> <p><em>The developments ended a longstanding reluctance by Turkey, a NATO member and an ally of the United States, to play a more aggressive part in halting the Islamic State’s expanding reach in the Middle East. American officials said it carried the potential to strike Islamic State targets with far greater effect because of Turkey’s proximity, which will allow more numerous and frequent bombings and surveillance missions.</em></p> <p>&nbsp;</p> <p><em>Turkey, a vital conduit for the Islamic State’s power base in Syria, had come under increased criticism for its inability — or unwillingness — to halt the flow of foreign fighters and supplies across its 500-mile border.</em></p> <p>&nbsp;</p> <p><em>Up to now, Turkey has placed a priority on dealing with its own restive Kurdish population, which straddles the Syrian border in the southeast, and in the toppling of Syria’s president, Bashar al-Assad, whom the Turks blame for creating the conditions in his war-ravaged country for the rise of Islamic extremism.</em></p> <p>&nbsp;</p> <p><strong><em>But now that extremism has increasingly menaced Turkey, where 1.5 million Syrian war refugees have also been straining the country. A series of Islamic State attacks on Turks, including a devastating suicide bombing a few days ago that officials have linked to the extremist group, may also have helped accelerate the shift in Turkey’s position.</em></strong></p> <p>&nbsp;</p> <p><em>The agreement was sealed on Wednesday with a phone call between President Recep Tayyip Erdogan of Turkey and President Obama, another administration official said.</em></p> <p>&nbsp;</p> <p><em>A senior Defense Department official said recent Islamic State attacks on Turkish targets had played an important role in Turkey’s decision to join the fight against the militant group directly.<strong> "Attacks in Turkey are part of the catalyst for them to think about how they get in the game,"</strong> the official said, speaking on the condition of anonymity.</em></p> </blockquote> <p>But while the attacks may be "part of the catalyst," skeptics (count us among them) doubt whether they are a large part. </p> <p>In fact, even the most mainstream of news outlets are unable to completely obscure the fact that Turkey’s ISIS "offensive" may amount to nothing more than a smokescreen, as Erdogan launches a renewed effort to crush the PKK and nullify opposition gains won at the ballot box early last month when, for the first time in more than a decade, AKP lost its parliamentary majority. </p> <p>Coalition building efforts since the election have gone largely nowhere, and in what amounted to a sure sign that some manner of crackdown was likely just around the corner, Erdogan warned on June 21 that "if politicians are unable to sort [it] out, then the people are the only recourse" - a nod to his right under the constitution to call new elections. </p> <p>Critically, AKP doesn’t need much to push them back over the top in terms of regaining their majority in parliament. Consider the following <a href="">from WSJ</a>:</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p><em>Turkey’s government—which lost its parliamentary majority last month— bills its new two-front war against Kurdish militants and Islamic State as a much-overdue reaction to terrorism. <strong>But, on the third front of domestic politics, this violence could also help President Recep Tayyip Erdogan and his party regain control.</strong></em></p> <p>&nbsp;</p> <p><em>In the June 7 parliamentary elections, Mr. Erdogan’s Justice and Development Party, or AKP, lost its majority for the first time in 12 years, and has been in coalition talks since. If these negotiations fail in coming weeks, Mr. Erdogan has said he will send the country back to the polls.</em></p> <p>&nbsp;</p> <p><em><strong>A rise in nationalist feelings amid the bloodshed and an unfolding crackdown on the government’s Kurdish political foes could bolster AKP’s chances in such a new election, </strong>many analysts say.</em></p> <p>&nbsp;</p> <p><strong><em>A two-percentage point shift from the last election could restore AKP’s absolute majority, making concessions demanded by its potential coalition partners on press freedom, corruption prosecutions and foreign policy unnecessary. This could also allow Mr. Erdogan to proceed with controversial plans to turn Turkey into a presidential republic and solidify his personal power.</em></strong></p> </blockquote> <p>The last passage there is critical. </p> <p>AKP needs but a two percentage point swing in order to pave the way for Erdogan's power grab and there's no better way to stoke a renewed sense of nationalism and turn voters away from HDP than to invent a conflict and then trot out a few casualities as proof of what can happen when Kurdish "terrorists" are emboldened by a victory at the ballot box. </p> <p>Given this, one could be forgiven for casting a wary eye at the rather convenient series of events that has now culminated in Ankara going back to war with the PKK. Here's a recap:&nbsp;</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p><em>NATO representatives met in Brussels on Tuesday after Turkey made a rare Article 4 request which compels treaty parties to convene in the event a member state is of the opinion that its "territorial integrity, political independence or security" is being threatened.&nbsp;</em></p> <p>&nbsp;</p> <p><em>That’s the case in Turkey, where the security situation has rapidly deteriorated over the past two weeks <strong>following a suicide bombing in Suruc (claimed by Islamic State) and the murder of two Turkish policemen in the town of Ceylanpinar (at the hands of the PKK, which claims the officers were cooperating with ISIS). Ankara responded by launching airstrikes against both Islamic State and PKK.</strong></em></p> </blockquote> <p>So, ISIS launches a suicide attack and the PKK (whose Syrian affiliate YPG is battling ISIS just across the border) retaliates by killing two Turkish policemen, an event which gives the government an excuse to tighten the screws on the Kurds with virtual impunity under the guise of stepping up its efforts against ISIS. </p> <p>Better still, the ISIS red herring has allowed Ankara to effectively obtain NATO's blessing for a brutal crackdown on its Kurdish political rivals. To wit, <a href="">from Salon</a>:</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p><em><strong>The choreography attaching to the accord authorizing Turkey’s entry into war as a combatant is, as often, so careful and predictable as to be self-evident.</strong> On Sunday Ankara announced that it had requested a meeting of NATO ambassadors to consider its new circumstance. The outcome was obvious from the first.</em></p> <p>&nbsp;</p> <p><em>Jens Stoltenberg, NATO’s Norwegian secretary-general, suggested Monday that Turkey was unlikely to get "any substantial NATO military support." </em></p> <p>&nbsp;</p> <p><strong><em>This was a straw man: Material support is not what the Erdo?an government wants. In its fight against ISIS and the Kurds—against both, note—it wants “solidarity and support from our NATO allies,” as the foreign ministry in Ankara later made clear.</em></strong></p> <p>&nbsp;</p> <p><em><strong>Legitimacy, in other words.</strong> And it got it Tuesday in Brussels, where Stoltenberg announced, "We all stand united in condemning terrorism, in solidarity with Turkey." &nbsp;See the problem? Not “united against ISIS," but "united in condemning terrorism."</em></p> <p>&nbsp;</p> <p><strong><em>Erdo?an understood. Within hours he declared that no peace process with the Kurds is possible—and then urged parliament to strip legislators with ties to the PKK of immunity from prosecution. An Istanbul source wrote Tuesday afternoon to say that some sitting parliamentarians have already been arrested.</em></strong></p> </blockquote> <p>So there you have it - mission accomplished. Erdogan has now secured Western support for his effort to nullify an election result he did not like.&nbsp;</p> <p>Of course the most interesting part of the story is that, as <a href="">noted here on Wednesday</a>, many have long suspected Turkey of cooperating with ISIS and indeed, US Vice President Joe Biden admitted last year that <strong>Saudi Arabia, the UAE, Qatar and Turkey had funneled hundreds of millions of dollars to Islamist rebels in Syria that metamorphosed into Islamic State.</strong> Specifically, Biden <a href="">said the following</a> at a question-and-answer session at Harvard University's Kennedy School of Government on October 2 of last year:</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p><strong><em>"What did they do? They poured hundreds of millions of dollars and thousands of tons of weapons into anyone who would fight against Assad – except that the people who were being supplied were (Jabhat) Al-Nusra and al-Qaeda and the extremist elements of jihadis coming from other parts of the world."</em></strong></p></blockquote> <p>Biden would later apologize in a phone call to Erdogan and The White House was quick to disavow "any implication that Turkey or other allies and partners in the region had intentionally supplied or facilitated the growth of ISIL or other violent extremists in Syria." </p> <p>But Biden's apology came across as hollow<span style="font-size: 1em; line-height: 1.3em;">&nbsp;precisely because in all likelihood, his comments were spot on, with the only irony being that the US did precisely the same thing in terms of "supplying and facilitating" the Syrian "oppposition" and indeed, perhaps that's why the Obama administration was so quick to apologize (it's the whole "throwing stones in glass houses" bit).</span></p> <p><span style="font-size: 1em; line-height: 1.3em;">&nbsp;</span><span style="font-size: 1em; line-height: 1.3em;">Now let's jump back to the PKK and the Kurds for a moment. Consider the following </span><a href="" style="font-size: 1em; line-height: 1.3em;">from Al Jazeera</a><span style="font-size: 1em; line-height: 1.3em;">:</span></p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p><em>"When AK party lost [its] absolute majority [in parliament] on June 7, while HDP won, getting over the 10 percent barrier, the results showed how people started seeing that not every Kurd is a terrorist," &nbsp;Ilya U Topper, an Istanbul-based analyst on foreign affairs and democracy for the M'Sur, a Spanish media outlet added.</em> </p><p>&nbsp;</p> <p><em>He noted that HDP was able to perform so well in June's elections because there was peace.</em> </p><p>&nbsp;</p> <p><em>"Two years of peace make people forget bloodshed and give them hope. <strong>Now we are back to square one. Kurds are 'terrorists' again," he said. "If elections are repeated, HDP might fall under the barrier and AK party will achieve [an] absolute majority in the elections. The big question is why the PKK accepted that game."</strong></em></p></blockquote> <p>And that is a very good question.</p> <p>Why would the PKK, whose political affiliate had just won a major victory at the ballot box, suddenly decide that now is the time to break a fragile cease fire, likely knowing that doing so would imperil further political gains and legitimacy for HDP?</p> <p>Perhaps the answer lies with Erdogan, who may have known that given YPG's fight with ISIS and given the PKK's suspicions regarding Ankara's connections with Islamic State, all it would take is one ISIS-linked suicide attack to set off a chain of events that would culminate in NATO backing a renewed Turkish offensive against the Kurds, which would in turn help Erdogan undermine HDP's popularity ahead of new elections. And perhaps ISIS is more than willing to play along if it means YPG will be weakened in the process.</p> <p>In the final analysis, Turkey wants Assad out of Syria and that means backing anyone and everyone who is willing to help make that happen (including ISIS) with the exception of the PKK, who Ankara is keen on crushing especially after June's election results. So now, Turkey will use ISIS as an excuse to procure NATO support for a politically motivated rout of Kurdish "terrorists". The West will hope that ISIS will suffer more damage than YPG, Turkey will hope that PKK and, by extension, YPG will suffer more damage than ISIS, and everyone - Ankara, Washington, ISIS, and PKK - will hope the when the dust (and blood) finally settles, Bashar al-Assad will have met a Gaddafi-esque end.&nbsp;</p> <p>And all for what, you ask? All for <a href="">this</a>:</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p><em>"In 2009 - the same year former French foreign minister Dumas alleges the British began planning operations in Syria -<strong> Assad refused to sign a proposed agreement with Qatar that would run a pipeline from the latter's North field, contiguous with Iran's South Pars field, through Saudi Arabia, Jordan, Syria and on to Turkey, with a view to supply European markets - albeit crucially bypassing Russia."&nbsp;</strong></em></p> <p><em><strong>&nbsp;</strong></em></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="467" height="307" alt="" src="" /> </div> </div> </div> Corruption Fail Google Joe Biden Middle East Nationalism Obama Administration President Obama Saudi Arabia Turkey White House Thu, 30 Jul 2015 19:15:24 +0000 Tyler Durden 510723 at 7 'Saves' In 7 Months: A Market Going Nowhere Fast <p><a href=""><em>Submitted by Charles Hugh-Smith of OfTwoMinds blog</em></a>,</p> <p><em>Can markets be saved an eighth time, a ninth time, a tenth time this year? How about next year?</em></p> <p><strong>What do we make of a stock market that&#39;s been &quot;saved&quot; seven times in a mere seven months?</strong> Saved from what, you ask? Saved from rolling over, of course; after six years of upside, the current uptrend is getting long in tooth, and evidence of global recession is mounting.</p> <p><strong>What&#39;s &quot;saved&quot; the market seven times in seven months? The usual burps of hot air:</strong> the Federal Reserve issued more mewlings (zero rates forever), Greece was &quot;saved&quot; again, China&#39;s crumbling stock bubble was &quot;saved&quot; again, and so on.</p> <p><img align="middle" src="" style="border-width: 0px; border-style: solid; height: 601px; width: 600px;" /></p> <p><strong>The problem for bulls is they keep hitting their head on the ceiling after every &quot;save&quot;:</strong> instead of running to new highs in an extension of the six-year uptrend, the S&amp;P 500 reverses once it reaches the narrow band of recent highs.</p> <p><strong>As soon as the SPX hits this range, somebody starts selling.</strong> It&#39;s called <em>distribution</em>: the smart money sells to whomever is buying--bot, trader, hedge fund, it doesn&#39;t matter, as long as someone takes the shares off their hands.</p> <p><strong>This raises the question: how many more &quot;saves&quot; can there be?</strong> How many more times can Greece be &quot;saved&quot; so global markets rally? How many more times can China&#39;s imploding stock market be &quot;saved,&quot; bailing out global markets again? How many more times can the Fed talk up zero interest rates and put off an eventual click up in rates?</p> <p>Are there an unlimited number of &quot;saves&quot; in the system? Will we wake up one morning in July of 2016 to find the market has been &quot;saved&quot; a 17th time, or a 20th time? can markets bounce once a month on some absurd &quot;save&quot; of a broken system essentially forever?</p> <p><strong>History isn&#39;t especially kind to the faith that the market can be &quot;saved&quot; every month for years on end.</strong> China&#39;s authorities and stock market punters are learning this the hard way: when the sentiment has turned, every &quot;save&quot; gets sold by the smart money, and then by the &quot;dumb&quot; (i.e. margined) money as their hopes of new highs are shredded once again.</p> <p>Can markets be saved an eighth time, a ninth time, a tenth time this year? How about next year? Another 12 months, another 12 saves? If the &quot;saves&quot; are going to run out, why wait to be the last sucker holding the bag when the Fed&#39;s fetid hot air fails to work its magic?</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="533" height="246" alt="" src="" /> </div> </div> </div> Broken System China Federal Reserve Greece Recession Smart Money Thu, 30 Jul 2015 19:02:21 +0000 Tyler Durden 510722 at Caught On Tape: Angry Mexican Crowd Attacks Uber Drivers <p>While everyone knows "you don't mess with Texas," it appears technologists worldwide just learned another truism, <strong><em>"you don't disrupt in Mexico."</em></strong> As the following disturbing clip shows, <a href="">as WFLA reports, </a>an <strong>angry crowd attacked Uber drivers and their vehicles with clubs and stones</strong> Tuesday outside the Mexico City airport.</p> <p>Amateur video captured the incident, <strong>showing people smashing car windows and throwing eggs and flour at vehicles.</strong> One man destroyed a moving car’s rear window with a large rock.</p> <p><strong>Uber said between 10 and 12 cars were damaged in the attack.</strong> There were no reports of serious injuries. Mexico City became the first city in Latin America to make official regulations for smartphone-based taxi services earlier this month. <strong>The Organized Taxi Drivers of Mexico, a union campaigning against Uber, denied any involvement in Tuesday’s attack.</strong></p> <p><iframe src="" width="640" height="360" frameborder="0" scrolling="no"></iframe></p> <p>Perhaps some disruption is too much disruption...</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="338" height="254" alt="" src="" /> </div> </div> </div> Mexico Thu, 30 Jul 2015 18:52:36 +0000 Tyler Durden 510721 at Trade Like A Market Wizard - An Interview With Mark Andrew Ritchie <p><a href=""><em>Submitted by Erico Matias Tavares via Sinclair &amp; Co.</em></a>,<em>&nbsp;</em></p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p><em>Mark Andrew Ritchie grew up in the Deep South, in an Oregon coast logging town and in Afghanistan, where he traded in the bazaar for kites, glass string and homing pigeons. He eventually became a pit trader at the Chicago Board of Trade, a founding partner of CRT (once the largest options trading firm in the world), a participant in Jack Schwager&rsquo;s bestselling book &ldquo;<a href=";ie=UTF8&amp;qid=1438257908&amp;sr=1-1&amp;keywords=The+New+Market+Wizards" rel="nofollow" target="_blank">The New Market Wizards</a>&rdquo; (1994) and creator of the <a href="" rel="nofollow" target="_blank">Ritchie Rule trading app</a>.</em></p> <p>&nbsp;</p> <p><em>After raising five kids with his dream woman, she engaged him to follow her dream working with orphans in Asia where he became a barefoot banker. He is Chairman of RTM2, a trading group, and lives near Chicago. He has authored many widely acclaimed books, including &quot;God in the Pits&quot; (1989) and &quot;Spirit of the Rainforest&quot; (2000). His latest book on trading, &quot;<a href=";ie=UTF8&amp;qid=1437826247&amp;sr=1-1&amp;keywords=my+trading+bible" rel="nofollow" target="_blank">My Trading Bible</a>&quot;, </em><em>scheduled for release in September, is now available on Amazon</em><em>.</em></p> </blockquote> <div class="article-body" dir="ltr"> <p><strong>Erico Tavares: Mark, it is a great pleasure to be speaking with you today. Your life has been an inspiration to many, as a market trader, family man and someone very involved in spirituality and philanthropy. What has inspired you to have such a keen interest in these often conflicting fields? </strong></p> <p>Mark Andrew Ritchie: I spent part of my childhood, aged 9 to 13, in Afghanistan. It was a unique experience, trading in the bazaar for strings, kites and pigeons with some very poor people. After returning to the US and trying to have a normal youth, tragedy struck and I lost my younger brother in an accident.</p> <p>It has occurred to me, only recently in fact, that these two factors have been the most important in shaping my personal development. Throughout all these years I have never discussed them with any of my peers and friends. This is understandable as losing someone so close is a very sensitive topic, and the experiences in Asia were just too distant for any of my peers to have any discussion with me about it. But that&rsquo;s why I am who I am.</p> <p><strong>ET: Given those circumstances, is that why you decided to become a market trader, or did fate play a role?</strong></p> <p>MAR: Becoming a trader was a combination of many coincidences, but on the other hand you bounce around a lot many different communities and you end up migrating towards the one that suits your personality type the best. And obviously trading and risk taking, actually not risk taking just for the fun of it but more the managing risk, is what attracted me.</p> <p>I was actually on a track to resolve my struggle with my own personal Christian faith with which I was raised and while doing that found that buying low and selling high certainly had some rewards that were important and critical to me. As a result, after rubbing shoulders with the poorest of the poor in the streets of Afghanistan buying low and selling high was not just something of interest but had real value.</p> <p><strong>ET: So you became a pit trader. Was that your first trading job?</strong></p> <p>MAR: Yes, you can call it that although we were actually arbitrageurs. But generally speaking, a pit trader is someone who makes as small a profit as often as possible. Normally when you think of traders or you read anything by Richard Dennis and any of the speculators, they want to buy soybeans at $7 and sell them at $12. And we pit traders want to buy soybeans at $7 and sell them at $7.0025, and do that as many times as possible.</p> <p>If you look at a price chart over the last 30 years, you will see that the opportunities to buy soybeans at $7 and sell them at $12 are not that many. In fact you would not have that many chances to buy them at $7 and sell them at $8 either. But you could buy them at $7 and sell them at $7.0025 a thousand times!</p> <p>And that was our goal. That was our place in the investment world and I am going to guess quite a contrast to anyone else&rsquo;s. I will give you an example. There was a seminar at the Board of Trade many years ago where they invited a bunch of bankers who were interested to find out more about what we did. And we tried to educate them as to how things worked in the pit. One of the guys said &ldquo;I don&rsquo;t care about the market I am trading, whether it&rsquo;s soybeans, corn, options on a stock&hellip; I have no interest in that. All I care about is buying at the bid and selling at the offer. I want to buy it at 12.5 and sell it at 12.75 all day long.&rdquo; And the bankers were mystified by this.</p> <p>My brother Joe once described our business as picking up dimes in front of a bulldozer. And that is quite different from what the bankers were doing or from what anyone outside the pit was doing.</p> <p><strong>ET: So in a sense it&rsquo;s like a brokerage commission business where you buy at the bid and sell at the ask, but you could also take risk, or speculate, by holding on the position for longer or shorter. Is this correct?</strong></p> <p>MAR: Actually, to be precise, a commission is the fee that you get when you execute a trade on behalf of somebody else. There are no commissions involved in what we do. We are buying for our own account and it is a speculation. If you buy at 12.5 and sell it at 12.75, you are still a speculator. You are speculating that it is worth more than 12.5 when you buy it. And when you are selling at 12.75, you are speculating that it is worth less when you sell it. But if you are wrong, you may buy it at 12.5 and sell it at 12.25 or even 12.&nbsp;</p> <p>So you are still a speculator, just not the size of a major speculator, although anyone outside of the floor is not going to try to buy it at 12.5 and sell it at 12.75.</p> <p><strong>ET: When you co-founded CRT with your brother later on, did you then become one of those major speculators?</strong></p> <p>MAR: No, we still traded the small edge. At one time in the bond options market our firm executed between 25% to 50%, if I remember correctly, of all the trades in the pit. And that&rsquo;s not because we were taking huge positions. In fact we were taking positions that were as small as possible, because the smaller the position, the more times you can trade in and out. And the more times that you can trade in and out, obviously, the less risk that you are going to have.</p> <p>When you make a trade, the sooner you can get out of it the sooner you can get into another one. So volume was the key. And obviously the higher the volume you traded the lower the profit margin per trade.</p> <p>And that is a luxury that a person off the floor never had in those early days because the transaction costs of getting in and getting out were so high. You probably are too young to remember this but back when I started I think Merrill Lynch was charging $100 a round turn. If you are paying that amount you can never make money. The quarter tick profit on the grain contract that I&rsquo;ve been discussing was $12.50, so you would lose $87.5 on every trade &ndash; and those were the winning trades!</p> <p>A professional trader once called me looking for a little help. He was making $5-10 per round turn but he was still losing money. I told him that it was because of his transaction costs. A trader with a poorer winning record would have gone bust many years before him, but this guy could still not make money even though his trading was profitable. His commissions were killing him.</p> <p><strong>ET: Presumably these days with transaction costs being so low the markets have become fairer and more democratized&hellip;</strong></p> <p>MAR: Transaction costs in the markets have gone down and they should continue to go down in a liquid market, which is the key to a good market.</p> <p>In fact, if you want to look at the macro effects around the world, I have said from the time I started in this business that open outcry is the greatest thing that ever happened. I am not going into a depression because the pits are going away, but that&rsquo;s because they are being replaced by more efficient computers.</p> <p>In fact by now, Erico, you should have been enough times around the world to realize that the first thing you are going to find in third world countries is a lack of free markets. The minute you come off the airplane there&rsquo;s a poor man on the street who will give you a much better price for your dollars than any local organized bank.</p> <p>The lack of a free market is a sophisticated form of oppression and theft that keeps the poor poor. I can&rsquo;t think of a better definition of oppression than that. And in the Western world in general and the US in particular we don&rsquo;t tolerate that kind of stuff.</p> <p><strong>ET: Jack Schwager is known for having interviewed some of the best traders in the business. How did he find you?</strong></p> <p>MAR: Well, it wasn&rsquo;t because my trading was so outstanding. Actually I told Schwager at that time that he could interview as many people he wanted for his book, but that it would never be as successful as his other book &ldquo;Complete Guide to the Futures Market&rdquo;, which I still think is a masterpiece. And he said I was wrong, that the interviews with top traders would be very successful. And he was absolutely correct.</p> <p>I&rsquo;m not sure why he approached me. I said at the time that my track record may not match his typical trader profile, but after having a look at it he said I was in good shape. He turned out to be more interested in my philosophical, empirical outlook and other things I was doing outside of the pit, and that is how the whole thing started. He came to CRT&rsquo;s office and interviewed me and my brother Joe, who I hasten to say is far more responsible for the success of the firm than I was.</p> <p><strong>ET: You mentioned that CRT was exploiting a market edge and trading a large volume in a&nbsp;particular market. If you are swinging for the fences, like hoping to buy at $7 and sell at $12, presumably&nbsp;you have to pay a lot of attention to fundamentals and stay in the trade for a long time. On the other hand, as you said, your goal is to exploit short-term opportunities for a smaller spread over and over again. Does this mean that your edges are purely technical as opposed to fundamental? In fact, how do you come up with your edge?</strong></p> <p>MAR: Great question! I have a chapter in my latest book titled &ldquo;The Crowd is Always Wrong&rdquo;, a hackneyed line from the floor. We had many sayings but I think this was one of the best. Let&rsquo;s suppose you just decide that every time the price jumps up by 2% or 3% it&rsquo;s because there&rsquo;s a crowd that is creating that distortion and so you sell into that. That&rsquo;s just a trading idea. An edge is actually the discovery of a market that in some way is out of balance. So you execute a trade based on that.</p> <p>At CRT we realized that all the trading in options created some sort of out-of-balance situation. So if someone was buying the call you would sell it to them and buy the underlying against it to lay your risk off.</p> <p><strong>ET: Interesting. And do edges change as markets evolve? Do markets become more efficient over time as more people trade them?</strong></p> <p>MAR: I am not sure that markets are becoming more efficient. I suppose it is true that the more traders there are, the more it will tend to be efficient. But prices have to move. The academics who talk about the market being efficient and the price being where it ought to be&hellip; don&rsquo;t make any sense to me. Why does the price have to be where it &ldquo;just happens&rdquo; to be? It doesn&rsquo;t have to be there. It has to move, and when it moves it creates opportunities. The job of the trader is to find the edge, and I am not talking about the fundaments. I&rsquo;m talking about the price movement that must result from daily trading.</p> <p>For instance, if the grain market is going up generally speaking, all the grains are going to go up. If corn is going up too high and wheat is not following it you can sell corn with some degree of confidence and try to cover yourself by buying some wheat. That&rsquo;s a little bit &ldquo;out there&rdquo; for an example, but our goal was always to be market neutral--take advantage of a buying opportunity in one place by selling it somewhere else.</p> <p>You are always looking for an edge one way or another. I don&rsquo;t care how you get it, the key is to get it. You just don&rsquo;t sell something for no good reason, or buy something for no good reason. You need to have a reason. That reason is your edge.</p> <p>And if you do it without a stop you are taking far more risk than your reward would ever justify. In other words, you have to assume that you will be wrong some reasonable percentage of the time and having a stop in the market will take care of that.</p> <p><strong>ET: Can you talk a little bit about risk management? This seems to be so important to you that you have even </strong><a href="" rel="nofollow" target="_blank"><strong>created an app</strong></a><strong> to help traders manage their trades appropriately&hellip; Is that the other important component to your trading in addition to having an edge?</strong></p> <p>MAR: I will not say that risk management is another component. I know I will be criticized for saying this, but your statement is basically why everyone goes broke. It is not another component&hellip; it is <em>THE</em> component of trading! Everyone goes broke because their trading size is wrong.</p> <p>Sometimes traders are hesitant to pull the trigger on a trade. That&rsquo;s because their trading size was not right. If it had been right they would have done the trade; if it had been too large and they did the trade, most likely they would be stressing about the position.</p> <p>If you trade for a while and make 50%, then trade some more and lose 50%, guess what? You have lost money. Even if you had lost 40% you would still have a losing year. This is another way of saying that the size that you are trading is more important than your entry and exit points. That flies in the face of conventional trading wisdom, which states that if your entry and exit points are generally winners, then you are a guaranteed winner. And that is not true!</p> <p>I do this in seminars. Attendees take a winning system which I give them and they turn it into a losing system just by not trading at the right size!</p> <p><strong>ET: That&rsquo;s a fascinating insight Mark. Most trading books focus on&nbsp;when&nbsp;to buy and when to sell. You focus on something else that is critically important, which is having the right size in your trades...</strong></p> <p>MAR: Yes, again this is just not another factor; it is THE factor that produces the results in our business. This is a winning system and I demonstrate it in my app. I have traded it from a hundred thousand dollars to a couple of billion dollars.</p> <p>But almost everyone else who trades this winning system loses money! How do they do that? I give them a proven winning system that can make billions, and yet they lose money simply by mishandling the size with which they trade. That&rsquo;s the factor that will eventually blow everyone out of the water.</p> <p><strong>ET: And that factor is determined how, your adrenaline levels? If you are getting too much adrenaline from that size probably you should be looking for a casino, not the markets&hellip; </strong></p> <p>MAR: That&rsquo;s true, but there&rsquo;s no way you can operate without adrenaline. The goal is to have it reduced and to eventually have none at all, but this takes a lot of experience.</p> <p>Now that I am in my retirement years I have finally given away the exact formula that I use and that I believe is exactly right for trading. I demonstrate this, if you set the numbers exactly right but they are still too big for what you can stomach, at least you can see how that impacts your success.</p> <p>In my seminars I give everyone $100 and tell them to trade this winning system with this money, and whomever makes the most money will keep it. The most common investment people make in the first shot is $20. Now, I am guaranteeing from the outset that this is a winning system, there is no trick involved here. And $20 initially is a guaranteed loser! Breakeven is at around $15. So trading size is absolutely critical.</p> <p>What is even more dangerous is if you invest the right amount, then after making a lot of money you enter into a choppy period with some losses that causes you to abandon this system &ndash; remember, it&rsquo;s a guaranteed winning system. How many traders do you know who stopped trading a system, only to commiserate some time later that if they had continued they would have made a fortune? Every trader out there has a similar story.</p> <p>Why do traders quit then? Most likely because they were trading too big during those drawdowns and they did not have a way to adjust their trading size to help them survive the drawdown. If you are reducing your size as your losses accumulate, you can continue to pull the trigger. If you are not adjusting your size, you will reach a point of pain that will force you to abandon the system; then almost invariably a year down the road you realize that had you continued trading it you would have made a fortune.</p> <p>That phenomenon explains why people tend to be in the market when the system is losing and out of the market when the system is winning. That&rsquo;s why only a fraction of people make money trading.</p> <p>I was making this point at a recent seminar and Jack Schwager was there and interrupted&nbsp;to point out that even the correct mathematical size is way too large. His point is so important that it was well worth the interruption. I belabor this point because ignoring it will guarantee failure.</p> <p><img class="center" height="512" src="" width="346" /></p> <p><strong>ET: You describe all of this in detail in your new book, My Trading Bible. What prompted you to write this book? Your long standing experience as a trader and seeing what works and what doesn&rsquo;t? </strong></p> <p>MAR: Yes, but let me back up for a second, to even more basic concepts. When you say &ldquo;what works and what doesn&rsquo;t&rdquo; you refer to buy and sell points. My book is far more basic than that. A winning trader never gives away the entry and exit points. If I tell you what prompted me to enter the market, for example, that a certain market always rallies on Tuesdays, what will you do? You and everybody else will go long every Tuesday at the open and sell your position by the close. There, I just guaranteed that my winning system will cease to exist because now everybody knows about it. My edge will immediately disappear. It has to!</p> <p>This is why all throughout my career I could have never written a meaningful book that anyone could use to make money, because if I had done that it would have destroyed my edge. I cannot tell you how I am buying and how I am selling. No serious trader would ever do that. Anyone who is doing that is selling a system that he knows he can&rsquo;t use. That&rsquo;s what happens in many of these trading seminars.</p> <p>But now in my retirement years I am giving away this particular formula which is not going to affect my bottom line because it is not sensitive to entry and exit points; it&rsquo;s trade-size sensitive which is far more important. What I am saying is that you can have winning entry and exit points and you can still lose money if you don&rsquo;t trade the right size. Almost every novice loses precisely this way.</p> <p>Let me try to illustrate: A guy called me once saying he had a mechanical system that was a guaranteed winner over the past 20 years, year in year out, and with no discretionary elements &ndash; all the entry and exit points were given. He wanted me to fund his system. I said, ok, tell me the following: When are you going to start trading your system? No answer. How much capital do you want to use in the opening trade? He wasn&rsquo;t sure; he wanted my input on it. How much money are you going to lose before you stop trading this system? No answer again.</p> <p>So you see, he had this system but no idea on the three most important questions of the industry: When will you start trading? How much are you going to invest? And how much do you need to lose to convince you it&rsquo;s a losing system? He did not have an answer to any of them.</p> <p>My book focuses on those most important questions. It shows how to take X number of dollars and execute it into your particular system. Suppose your system has 1000 winners and 2000 losers over the last ten years, with $300 profit on each win and $100 lost on each loss. We are all talking about the law of averages. Then suppose you commit $10,000 to your idea, what size must you trade in order to execute your idea properly. If you do not grasp this concept, I promise that you cannot win over the long term.</p> <p>That is what separates the winners from the losers.</p> <p><strong>ET: That&rsquo;s a phenomenal insight. Who should read this book: novice traders, advanced traders, professional traders&hellip;?</strong></p> <p>MAR: The novice for sure. Anyone who imagines that traders take profit away from the market without adding any benefit. And the professional as well.</p> <p>It will help a professional trader to fine tune his or her systematic approach. I ran into one successful professional trader recently. I asked him how much he risked on a particular trade and he said&nbsp;1% or 2%. First you must notice that there is a huge difference between 1% and 2%. Nevertheless, I asked, &ldquo;1% of what?&rdquo; That question threw him off a little bit. He said 1% of his portfolio. Then the logical follow up question is, &ldquo;Will you reduce that percentage after a loss? Or increase it after a win?&rdquo; Most pros will not. And that is a mistake. This book will show how to avoid that mistake.</p> <p>To clarify: the mistake we pros make is to continue trading the same size until we win our money back, or if the losses continue, we throw the system away when we can take no more, almost always an arbitrary decision, and surely highly discretionary. In that situation, the system was not allowed to recover the losses by trading smaller.</p> <p>That&rsquo;s the key Erico. If you do not allow your system to recover your losses by trading smaller, eventually you will have a problem. You will be required to fund a possible losing system with new capital, or throw it away.</p> <p><strong>ET: In your book you also talk about handling the losses, even advise on how to lose your shirt without thinking about suicide... Can you talk about that?</strong></p> <p>MAR: Any fool can take a profit. It takes a lot of character, discipline and commitment to take losses and continue going &ndash; and that is the only way one can succeed.</p> <p>You can even use your favorite sports philosophy to grasp this. We&rsquo;re Chicago guys here in the Midwest so we all know Michael Jordan was cut from his high school basketball team. If he had seen the handwriting on the wall, which was &ldquo;you did not make the team buddy, study harder in History class and maybe you can do something else&rdquo; he would not have become whom he did. Instead he went out on the basketball court and shot baskets until he became one of the greatest basketball players ever.</p> <p>Now, that&rsquo;s the difference. If you are going to trade you need to have the discipline to be trading small enough so that suicide does not come on the radar screen during a drawdown. The lasting&nbsp;trader will always reduce trading size in order to continue trading and come back.</p> <p>I recently spoke to a group of successful investors from Asia. For them it seemed obvious that you should increase trading size to recover your losses. Of course that&rsquo;s a strategy &ndash; even Edward Thorpe wrote about it; every time you lose, double down, and just keep doing it until you get it all back. I was mystified that these sophisticated investors could think like that. And they were mystified too. They said, &ldquo;You need to recover your money by trading smaller?&rdquo; And I said, &ldquo;Yes, if your systems cannot recover from a loss by trading smaller they&#39;re&nbsp;not worthy of your trading.&rdquo;</p> <p>Of course you can recover your losses quicker by trading larger. And it will work great for a while. But when it stops working - and it will - I can guarantee you there will be trouble. That proverbial &ldquo;stuff&rdquo; will hit the fan. I wrote about it in my other books too, and I have seen what this situation can do to a person.</p> <p><strong>ET: Yes, losses can accumulate much quicker than anyone can imagine&hellip;</strong></p> <p>MAR: Yes. Now, what you want to aim for is that your trading should be boring. Most people can&rsquo;t understand this; for them, trading is all about excitement. But for me I want to be doing profitable boring trades all day. Good trading should be boring.</p> <p><strong>ET: Excellent piece of advice! When you brought up the Michael Jordan example and how you need to persist in the face of adversity, we&rsquo;re sure that resonates with your upbringing and your quest to reconcile your religion with many facets of your life, in particular trading. You write about it in your book. Can you expand on this?</strong></p> <p>MAR: What are we doing here, I mean, on this planet? Who are you, where did you come from, what is the Truth and all of that. This is a question the whole world is facing right now, with terrorism and so forth. I think we have been put here for a reason and you can be a contributor to the problems in this world or to the solutions.</p> <p>I struggled with those questions for many years. There&rsquo;s a great deal of self-sacrifice in Christian life but when all is said and done one needs to be able to look in the mirror and have a peace that his or her existence on this planet is helpful. This is not rocket science and not that difficult either.</p> <p>This will not appear to be a topic for the trader. But when you get into the middle of the worst drawdown of your life, like what I detail in chapter 5, I promise that these questions will come immediately to the surface.</p> <p>One reviewer, borrowing a line from Mark Twain, wrote that I had the confidence of a Christian with four aces. When you get in a drawdown, you lose faith and imagine that you have a pair of nothing.</p> <p>Being raised in a Christian home won&rsquo;t immunize you from facing these struggles. You can choose whatever guru you like to follow, Mohammed, Buddha, Confucius, Krishna... take your pick.&nbsp; When your worst drawdown comes, it will help to have a guru to follow. But the questions remains: Will your guru get you through? They all exemplify humility. One of these gurus was so humble he confessed that he wasn&rsquo;t sure of his own place in heaven. That&rsquo;s humility. My guru said that he came from heaven and would take me there. The point? When that worst drawdown comes, and it will, are you going to be able to trade with &ldquo;the confidence of a Christian with four aces.&rdquo;</p> <p><strong>ET: Final question: is that the reason why you engage in so many philanthropic efforts around the world?</strong></p> <p>MAR: I don&rsquo;t use that word--philanthropic. The great comic Phyllis Diller had a large amount of her jewelry stolen, and she said, &ldquo;I&rsquo;m sorry it has taken me all my life to learn that I could have done something more productive with my money.&rdquo; And she laughed at herself. One person&rsquo;s &ldquo;philanthropy&rdquo; is another person&rsquo;s &ldquo;more-productive-with-my-money.&rdquo;</p> <p>We all know the parable of the talents; it&rsquo;s where we <em>got</em> the word &ldquo;talent.&rdquo; It&rsquo;s about this rich guy who gives a fraction of his wealth &ndash; his talents &ndash; to ten of his servants and then asks what they have done with it.</p> <p>Anyone who supposes that they will not be asked what they have done with their God-given talent is making a huge mistake. This applies to everyone. Even Atheists have an almost subconscious feeling of responsibility for the talents they have.</p> <p>I challenged a fellow trader with this concept and he opened a computer center for inner-city kids to use after school and in the summer. He insisted that I travel to his city to see it. I never saw him so happy. Now here&rsquo;s the punch-line to that story: <em>he</em> was thanking <em>me</em> for making his life meaningful!</p> <p>I know I&rsquo;ve been accused of over-spiritualizing the trading experience. But these intensely private, spiritual themes will loom large in the middle of a traumatic drawdown. And this&nbsp;damages the pro trader&rsquo;s bottom line and completely removes the novice from the business.</p> <p>&nbsp;<strong>ET: We&rsquo;ll end it there Mark. Thank you for sharing so many of your trading insights and personal beliefs. All the best to you and yours, keep up the excellent work!</strong></p> <p>MAR: Thanks, all the best to you too.</p> </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="227" height="252" alt="" src="" /> </div> </div> </div> Afghanistan Bond Futures market Merrill Merrill Lynch None Risk Management Stop Trading Thu, 30 Jul 2015 18:45:27 +0000 Tyler Durden 510720 at Did Planned Parenthood Just "Hack" Its Own Website As A Publicity Stunt? <p>Three days ago, when <a href="">we reported</a> on an alleged DDOS attack by a disgruntled, New York-hating hacker which took down and kept the website of NY Magazine offline for over half a day, we asked rhetorically if we won't see more such episodes used however as a publicity stunt with the explicit blessing of the "target": </p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p>" ...perhaps getting hacked is becoming a good marketing campaign: three weeks ago the market was shocked when the NYSE went offline for a record 4 hours, with speculation this may be due to a Chinese hack attack, before it was revealed that an incompetent software update was the culprit, and that virtually nobody trades on the NYSE anyway.</p> <p>&nbsp;</p> <p>For today's struggling media, this may be an easy way to generate if not clicks (after all the site is down in the period in question), then at least publicity.&nbsp; And how soon until we read about the first case of that "black hats" being quietly retained by the targets of their hacking exploits, to result in a win-win outcome for all involved?"</p> </blockquote> <p>It appears we may have been not too far off the mark, as allegations surfaced overnight that a prominent entity may have fabricated just such a "hacking" of its own website for media publicity and unknown ulterior motives. </p> <p>Only it was not a media company as we mused, but the pro-abortion group Planned Parenthood, which over the past several weeks has been embroiled in a scandal emanating from several videos showing executives discussing how the organization provides fetal organs to researchers, and describe the harvesting and sale of aborted fetal body parts, which two weeks ago <a href="">led to a Congressional investigation</a>. A <a href="">fourth video in the series was released </a>earlier today.</p> <p>As Sean Davis of the <a href="">Federalist reports</a>, Planned Parenthood claims on several of its websites that the organization’s web operations have been attacked by "extremists"&nbsp; but this so-called hacking has all the hallmarks of an orchestrated public relations stunt. A cursory check of the <a href="">website moments ago </a>shows it stating that "Our normal site is currently undergoing maintenance."</p> <p>What makes this hack unique, however, is that <em>"numerous people on Twitter pointed to evidence suggesting that this so-called hack wasn’t a hack at all."</em></p> <blockquote class="twitter-tweet" lang="en"><p dir="ltr" lang="en">Their site is so hacked right now that someone has been rearranging CSS fonts and alignment. <a href=""></a></p> <p>— Stephen Miller (@redsteeze) <a href="">July 30, 2015</a></p></blockquote> <script src="//"></script><blockquote class="twitter-tweet" lang="en"> <p dir="ltr" lang="und"><a href="">@AllianceDefends</a> <a href="">@ChoosingHats</a> <a href="">@seanmdav</a> <a href=""></a></p> <p>— Manny Garza (@Boldmanny316) <a href="">July 30, 2015</a></p></blockquote> <script src="//"></script><p>The Federalist further notes that a review of the source code of the main page that appears at shows that as of 9:30 a.m. today, the page is listed as a “Campaign” and uses a specific template named “Site Down Tempalte” (the typo is theirs). The same page then directs visitors to the Facebook page of Planned Parenthood Action Fund, the political fundraising arm of the nation’s largest abortion provider. The web page for PPAF–which can be accessed via both and–repeats the same hacking claims and contains the exact same source code and template used on the page."</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p>And that’s where Planned Parenthood’s hacking facade begins to crumble. On the splash page declaring that the organization was hacked, visitors are asked “Why do you stand with Planned Parenthood” and invited to share their stories on a separate page housed at</p> <p>&nbsp;</p> <p>And wouldn’t you know it, that page functions perfectly. No sign of hacking. No sign of intrusion. Just a perfectly functional and secure web page that exists solely to build Planned Parenthood’s mailing list:</p> <p>&nbsp;</p> <p><img src="" alt="PP Definitely Not Hacked" width="700" height="427" class="aligncenter size-large wp-image-48694" /></p> <p>&nbsp;</p> <p>&nbsp;</p> <p>Even though redirects to a page saying the site was hacked, the domain still house a perfectly functional URL and page that are being actively used to help build Planned Parenthood’s fundraising list. Coincidentally, this “hacking” happened just days after Planned Parenthood decided to hire a PR firm, SKDKnickerbocker, to help manage its response to the widening baby organ trafficking scandal.</p> </blockquote> <p>The article's conclusion: "Planned Parenthood says it’s been hacked by “extremists,” but a review of the publicly available evidence suggests that the only things being hacked at Planned Parenthood right now are perfectly healthy and viable unborn babies."</p> <p>If confirmed that the anti-abortion group did indeed sabotage their own website (which they have every right to since it is their property) to achieve a certain media goal, one should inquire how else is Planned Parenthood eager to score empathy points with the public, and what other shortcuts may the foundation with an <a href="">annual budget of $1 billion as recently as 2009</a>, be taking?</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="848" height="478" alt="" src="" /> </div> </div> </div> Twitter Twitter Thu, 30 Jul 2015 18:25:53 +0000 Tyler Durden 510719 at Now It's Personal: Koch Brothers "Freeze Out" Donald Trump <p><em><strong>&quot;He&#39;s not going away,&quot;</strong></em> warns one Republican committee member, adding &quot;there are people who think his candidacy is a flash in the pan or a flash in the moment, but I think that underestimates his appeal.&quot; <a href="">As Reuters reports</a>, Trump has surged since suffering a slight downtick in the wake of the McCain furor,<strong> rocketing to 24.9% on Tuesday (compared to his closest rival, former Florida governor Jeb Bush, who trails at 12%)</strong>. With everyone asking &#39;what can derail this?&#39;, perhaps, there is something. <a href="">As Politico reports,</a> the massively influential <strong>Koch brothers are freezing out Donald Trump from their influential political operation</strong> - denying him access to their state-of-the-art data and refusing to let him speak to their gatherings of grass-roots activists or major donors.</p> <p>&nbsp;</p> <p><a href=""><em>As Reuters reports,</em></a></p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p><a href=""><em>&nbsp;</em></a><strong>Predictions of his demise were apparently premature. Instead, Trump is gaining momentum ahead of next week&#39;s first Republican debate, a new Reuters/Ipsos opinion poll shows.</strong></p> <p>&nbsp;</p> <p>The poll shows Trump with his greatest support yet nationally, as nearly a quarter of Republicans surveyed said he would be their choice as the party&#39;s presidential nominee in 2016. He has opened up a double-digit lead over his closest rival, former Florida governor Jeb Bush, who trails at 12 percent.</p> <p>&nbsp;</p> <p>&quot;I&rsquo;m proud to be in first place by such a wide margin in another national poll,&quot; Trump said in a statement to Reuters.</p> <p>&nbsp;</p> <p><strong>Trump has surged since suffering a slight downtick in the wake of the McCain furor. </strong>The five-day rolling online poll had the real-estate mogul and reality TV star at 15 percent among Republicans on Friday before rocketing to 24.9 percent on Tuesday.</p> <p>&nbsp;</p> <p>...</p> <p>&nbsp;</p> <p>But <strong>perhaps of greater concern to establishment Republicans, Reuters/Ipsos polling also shows that in a three-way race with Trump running as an independent in the general election</strong>, Trump would drain support from the Republican nominee and allow the Democrat, likely Hillary Clinton, to skate to victory.</p> <p>&nbsp;</p> <p><strong>Trump has refused to rule out a possible independent run.</strong> In a matchup with Clinton and Bush, he would essentially tie Bush at about 23 percent among likely voters, with Clinton winning the White House with 37 percent of the vote. (About 15 percent of those polled said they were undecided or would not vote.)</p> <p>&nbsp;</p> <p><strong>It is that scenario that should keep party strategists up at night. </strong></p> </blockquote> <p>Which prehaps explains,<a href=""> as Politico reports,</a> The Koch brothers decision to freeze-out The Donald from their operations...</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p>Despite a long and cordial relationship between the real estate showman and David Koch, as well as a raft of former Koch operatives who are now running Trump&rsquo;s presidential campaign, <strong><u>the Koch political operation appears to have concluded that Trump is the wrong standard-bearer for the GOP</u></strong>. And the network of Koch-backed policy and political outfits is using behind-the-scenes influence to challenge Trump more forcefully than the Republican Party establishment &mdash; by limiting his access to the support and data that would help him translate his lead in the polls into a sustainable White House campaign.</p> <p>&nbsp;</p> <p><strong>The Koch operation has spurned entreaties from the Trump campaign to purchase state-of-the-art data and analytics services from a Koch-backed political tech firm called i360, and also turned down a request to allow Trump to speak at an annual grass-roots summit next month in Columbus, Ohio, sponsored by the Koch-backed group Americans for Prosperity, POLITICO has learned.</strong></p> <p>&nbsp;</p> <p>...</p> <p>&nbsp;</p> <p><strong>Continued stiff-arming by the powerful Koch network could limit Trump&rsquo;s ability to build a professional campaign</strong> operation to mobilize supporters ahead of primaries and caucuses.</p> <p>&nbsp;</p> <p><strong>&ldquo;The good news is that Donald Trump doesn&rsquo;t need the Koch brothers, and he can do this perfectly without their assistance,&rdquo; </strong>said Josh Youssef, who&rsquo;s chairing Trump&rsquo;s campaign in Belknap County, New Hampshire. Of the Kochs, Youssef said: &ldquo;Their motivations are clearly not to break the mold of political insider-ship. Their goal is to keep the wheel spinning. Trump&rsquo;s bad for business for them.&rdquo;</p> <p>&nbsp;</p> <p>Still, the Koch network&rsquo;s rejections of Trump are telling because of the relationships between Trump and his aides, and the Kochs and their operation.</p> </blockquote> <p>*&nbsp; *&nbsp; *</p> <p>We conclude with the two opposing views from within the Republican party...</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p><strong>&quot;The activists are doubly angry,&quot;</strong> Geer said. &quot;He&#39;s capturing that anger. They&#39;re looking for a voice, and he happens to be here at the right time.&rdquo;</p> </blockquote> <p>and</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p><strong>&quot;The curtain has not been pulled back yet,&quot;</strong> Feehery said. &quot;In time, people will see Trump is not who they want to have as a nominee. But that&rsquo;s going to take awhile.&quot;</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="590" height="516" alt="" src="" /> </div> </div> </div> Donald Trump Florida Ohio Real estate Reality Reuters White House Thu, 30 Jul 2015 18:06:11 +0000 Tyler Durden 510718 at Threat Of Cyber War – “Other Reason To Own Physical Gold” – Rickards <p><a href=""></a><strong><a href="">Threat Of Cyber War – “Other Reason To Own Physical Gold” – Rickards</a></strong></p> <p><strong>- “Physical gold is a non-digital asset. You can’t attack it with cyberwarfare” – Rickards</strong><br /><strong>- Greek crisis was necessary step towards fiscal unity in Europe</strong><br /><strong>- “Euro creators want to force common fiscal control – Eurobonds”</strong><br /><strong>- Currency wars between U.S. and China may resume next year</strong><br /><strong>- Rickards emphasises importance of holding physical gold</strong><br /><strong>- Eschews “paper gold” in the form of ETFs, futures or unallocated storage</strong><br /><strong>- Gold insurance against “catastrophic event” … “on the horizon”</strong></p> <p><img src="" alt="30-07-2015" width="448" height="251" /></p> <p>Author and monetary expert &nbsp;<a href="">Jim Rickards</a>&nbsp;says that gold, apart from its qualities as a form of insurance against conventional economic crises, is an essential hedge against cyber warfare.</p> <p>In an interview with Henry Bonner at, ahead of the Sprott-Stansberry Vancouver Natural Resource Symposium taking place this week, Rickards said this subject would form part of his talk at the conference.</p> <p>We have frequently covered the risks posed by&nbsp;<a href="">cyber warfare</a>&nbsp;and&nbsp;<a href="">cyber terrorism</a>&nbsp;to markets, investments and deposits, and these risks remain, as yet, widely underappreciated in the mainstream media and the wider world.</p> <p>For example, the Stuxnet virus believed to have been deployed by the U.S. and Israel in&nbsp;<a href="">cyber war</a>&nbsp;against Iranian nuclear reactors almost caused a major environmental disaster in 2010. Dormant malware – believed to be of Russian origin – was found hidden and awaiting activation in the software that runs the Nasdaq exchange.</p> <p>Moscow-based Kaspersky Lab showed earlier this year that an international team of hackers gained access to bank’s customer accounts – with the ability to alter account balances without the banks even being aware of their presence.</p> <p>These examples show the highly vulnerable nature of the interconnected systems upon which people in the west have come to rely.</p> <p>As Rickards astutely points out,</p> <p><em>“Physical gold is a non-digital asset. You can’t attack it with cyber warfare, so I think it has another insurance function for investors there.”</em></p> <p><em><img src="" alt="30-07-2015b" width="624" height="385" /></em></p> <p>He believes that the Greek crisis was a foreseeable step in the centralisation of power in Europe. In 1992 when it was agreed to launch a single currency there was an appetite for a common currency but a strong aversion to fiscal and political union.</p> <p>The architects of the euro knew that the single currency could not exist indefinitely in the absence of fiscal union and so the project was launched in full anticipation of a crisis which could then be used as a “forcing strategy” to achieve fiscal union.</p> <p><em>“We’re getting closer to that now,” he says. “Greece now has to run its government according to German dictates. Greece has already outsourced its monetary policy to the European Central Bank, and now it’s sort of outsourced its fiscal policy to the German finance ministry.”</em></p> <p>“So you’re on a path to unified fiscal policy and ultimately the Eurobonds – bonds backed by full strength and credit of not just any one country but the entire Eurozone.”</p> <p>He believes that there has been a lull in the currency wars between China and the U.S. but that it will likely resume next year if China manages to get the yuan included in the currency basket that makes up the SDRs at the IMF.</p> <p>He says the U.S. is the gatekeeper of the IMF and so China is on its “best behaviour”. He says the Chinese are resisting the temptation to depreciate their currency despite a sluggish economy with this goal in mind but that once the objective has been achieved it will go back to currency manipulation.</p> <p>He points out that the Chinese continue to accumulate large volumes of gold and that China’s stated gold reserves are an understatement.</p> <p><em>“I believe that the numbers they have shown are significant but not nearly as high as what they actually have.”&nbsp;</em></p> <p>When asked whether now is a good time to hold gold, he replied,</p> <p><em>“I think it’s always very important to own gold. I’ve recommended that investors have about 10% of their portfolio in the yellow metal.”</em></p> <p>He believes that such a proportion will not hurt investors too much even if the price continues its decline but that,</p> <p><em>“If I’m right and some catastrophic event is on the horizon, then that 10% would be your portfolio insurance.”</em></p> <p><em>He emphasises, however, the importance of holding physical gold as opposed to digital or paper gold.</em></p> <p><em>“These products allow the counterparties to terminate the agreement by giving the investor a dollar value of their gains. But that would deprive you of any future gains. You might get cashed out just as the crisis was beginning and not be able to participate in the upside as the crises worsened.”</em></p> <p>Rickards is correct in these warnings. If you cannot visit, hold and easily take delivery of your gold in the event of a “catastrophic event” then you do not own gold – rather you are speculating on the gold price.</p> <p>All financial service and investment providers and indeed gold brokers are at the mercy of and dependent on technology today. However, if you only have one point of contact with your gold – a website – and you cannot buy, sell or take delivery of your gold then you do not own gold as financial insurance and a safe haven asset.</p> <p>Henry Bonner’s interview with Jim Rickards can be listened to&nbsp;<a href="">here</a></p> <p>Learn the importance of owning allocated, segregated gold that you can take delivery of&nbsp;<a href="">here</a></p> <p><strong>MARKET UPDATE&nbsp;</strong><br />Today’s AM LBMA Gold Prices were USD 1,085.65, EUR 989.74 and GBP 695.36 per ounce.<br />Yesterday’s AM LBMA&nbsp;<a href="">Gold Prices</a>&nbsp;were 1,096.75, EUR 991.01 and GBP 701.65 &nbsp;per ounce.</p> <p><a href=""><img src="" alt="30-07-2015c" width="624" height="371" /></a><br /><strong>Gold in USD – 10 Years</strong></p> <p><strong></strong>Gold and silver on the COMEX again both rose marginally yesterday – to $1,097.20/oz and $14.82/oz.</p> <p>At the close of trade in Asia, gold fell $9 in less than a minute. Again, there was heavy selling on the COMEX in the December futures contract. More than 750,000 ounces worth of futures contracts were sold in less than 20 minutes. Once again the heavy selling came at an unusual, less liquid time of day which suggests another bear raid by institutions unknown.</p> <p>Gold&nbsp;is down nearly 0.8% this morning after the sharp selling – snapping two days of slim gains. Gold is on track for a sixth week of losses and is down more than 1% on the week – its longest such run lower in 15 years according to Reuters.</p> <p>Silver‘s also down a bit, while&nbsp;platinum&nbsp;and&nbsp;palladium&nbsp;are climbing. Platinum’s on track to snap three weeks of losses, though with a rise of just 0.5% so far on a weekly basis</p> <p><strong>Breaking News and Research&nbsp;<a href="">Here<br /></a></strong></p> <p><strong>Follow&nbsp;<a href="">GoldCore on Twitter</a>,&nbsp;<a href="">GoldCore on Facebook</a>,&nbsp;<a href="">GoldCore on LinkedIn</a></strong></p> China Counterparties European Central Bank Eurozone Greece Israel Jim Rickards Monetary Policy NASDAQ Reuters Twitter Twitter Yuan Thu, 30 Jul 2015 18:04:42 +0000 GoldCore 510707 at "The Virtuous Emerging Market Cycle Is Turning Vicious" Albert Edwards Remembers The 1997 Asian Crisis <p>Given that some <em>two-thirds of Wall Street traders have never experienced a Fed tightening cycle</em>, SocGen&#39;s Albert Edwards is not surprised he gets blank looks when he tries to explain how <strong>recent events in commodity and EM markets are in many key ways similar to the 1997 Asian crisis</strong>.</p> <p>&nbsp;</p> <p>SocGen&#39;s Albert Edwards explains...</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p><strong>Investors are right to feel that the recent rout in commodity prices differs from that seen in the second half of last year.</strong> Back then there was more of a feeling that the decline in the oil price was just partly a catch-up with the weakness seen in other commodities earlier in the year and partly due to a very sharp rise in the dollar ? most notably against the euro.</p> <p>&nbsp;</p> <p>Indeed the excellent Gerard Minack in his Downunder Daily points out that ?US$ strength and expanding supply have been headwinds over the past four years. But <strong>the recent sharp decline in prices has been noteworthy for its breadth: prices have fallen in all major currencies, and across all major commodity groups (see charts below). This suggests that global growth has slowed.&rdquo;</strong> But why?</p> <p>&nbsp;</p> <p>&nbsp;</p> <p><a href=""><img height="208" src="" width="600" /></a></p> <p>&nbsp;</p> <p>One theme that has played out as we expected over the last year has been the rapidly deteriorating balance of payments (BoP) situation of emerging market (EM) countries, as reflected in sharply declining foreign exchange (FX) reserves (the BoP is the sum of the current account balance and private sector capital flows). <strong>We like to stress the causal relationship between swings in EM FX reserves and their boom and bust cycle.</strong></p> <p>&nbsp;</p> <p><span style="text-decoration: underline;"><strong>The 1997 Asian crisis demonstrated that there is no free lunch for EM in fixing a currency at an undervalued exchange rate.</strong></span></p> <p>&nbsp;</p> <p>After a few years of export-led boom, market forces are set in train to destroy that artificial prosperity. <strong>Boom turns into bust</strong> as the BoP swings from surplus to deficit. Why? When an exchange rate is initially set at an undervalued level, surpluses typically result in both the current account (as exports boom) and capital account (as foreign investors pour into the country attracted by fast growth). The resultant BoP surplus means that <strong>EM authorities intervene heavily in the FX markets to hold their currency down</strong>. We saw that both in the mid-1990s and before and after the 2008 financial crisis (see charts below).</p> <p>&nbsp;</p> <p><a href=""><img alt="" src="" style="width: 600px; height: 204px;" /></a></p> <p>&nbsp;</p> <p>Heavy foreign exchange intervention to hold an EM currency down creates money and is QE in all but name and underpins boom-like conditions on a pro-cyclical basis. <strong>Eventually this boom leads to a relative rise in inflation and a chronically rising real exchange rate even though the nominal rate might be fixed. EM competitiveness is lost and the trade surplus declines or in extremis swings to large deficit.</strong> The capital account can also swing to deficit as fixed direct investment flows reverse as EM countries are no longer cost effective locations for plant. Ultimately as the BoP swings to deficit and FX reserves fall, QE goes into reverse, slowing the economy and exacerbating capital flight.</p> <p>&nbsp;</p> <p><u><em><strong>As a virtuous EM cycle turns vicious (like now), commodity prices, EM asset prices and currencies come under heavy downward pressure - at which point it is difficult to discern any longer the chicken from the egg. In my view the egg was definitely laid a few years back as EM real exchange rates rose sharply and the rapid rises of FX reserves began to stall.</strong></em></u></p> </blockquote> <p>*&nbsp; *&nbsp; *</p> <p><a href="">In fact, as we already noted previously, we are seeing this asset-crunching dcrisis unfolding in Emerging Market BoP in China most notably...</a></p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p>As Goldman noted: <strong>The big question is obviously what is driving these flows and how long they are likely to continue.</strong>&nbsp;We continue to take the view that a stock adjustment is at work, although it is clear that the turning point is yet to come. We will look at this in one of our next FX Views. In the interim, we think an easier question is what this means for G10 FX.&nbsp;<strong>This is because this shift in China&rsquo;s balance of payments is sure to depress reserve accumulation across EM as a whole, such that reserve recycling &ndash; a factor associated with Euro strength in the past &ndash; is unlikely to be sizeable for quite some time.</strong></p> </blockquote> <p>In other words, for once Goldman is speechless, however it is quick to point out that what traditionally has been a major source of reserve reflow, the Chinese current and capital accounts, is no longer there.</p> <p>It also means that what may have been <strong><u>one of the biggest drivers of DM FX strength in recent years, if only against the pegged Renminbi, is suddenly no longer present</u></strong>.</p> <p><strong>While the implications of this on the global FX scene are profound, they tie in to what we said&nbsp;<a href="">last November&nbsp;</a>when explaining the death of the petrodollar. For the most part, the country most and first impacted from this capital outflow will be China, something its stock market has already noticed in recent weeks.</strong></p> <p>But what is likely the take home message for non-Chinese readers from all of this, is that while there has been latent speculation over the years that China will dump US treasuries&nbsp;voluntarily&nbsp;because it wants to (as punishment or some other reason), suddenly China is&nbsp;forcedto liquidate US Treasury paper even though it does not want to, merely to fund a capital outflow unlike anything it has seen in history. It still has a lot of 10 Year paper, aka FX reserves, left: about $1.3 trillion at last check, however this raises two critical questions: i) what happens to 10 Year rates when whoever has been absorbing China&#39;s Treasury dump no longer bids the paper and ii) how much more paper can China sell before the entire world starts paying attention, besides just JPM and Goldman... and this website of course.</p> <p>Finally, if China&#39;s selling is only getting started, just what does this mean for future Fed strategy. Because one can easily forget a rate hike if in addition to rising short-term rates, China is about to dump a few hundred billion in paper on a vastly illiquid market.</p> <p>Or let us paraphrase:&nbsp;<u><strong>how soon until QE 4?</strong></u></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="974" height="426" alt="" src="" /> </div> </div> </div> Albert Edwards China fixed Renminbi SocGen Thu, 30 Jul 2015 17:52:47 +0000 Tyler Durden 510717 at Former FDIC Head Sheila Bair Resigns From Parent Of World's Largest Subprime Auto Lender <p><a href="">Just days after <strong>Blythe Masters</strong> took up her role as Chairman of Santander Consumer</a> - the world&#39;s largest subprime auto lenders; former FDIC head <strong>Sheila Bair has resigned her position on the board of Banco Santander citing excess &quot;travel&quot; as a reason</strong>. One cannot help but wonder if the clash of the titans was too much, if the <a href="">embrassment of a <strong>failed stress test</strong> was unbearable</a>, or if Ms. Bair sees the rapidly approach light at the end of the tunnel of subprime lending for what it is... a bigger train that 2008&#39;s.</p> <p><a href=""><em>As The FT reports,</em></a></p> <p>Ms Bair wrote in a letter to the Systemic Risk Council, a regulatory advocacy group, whose chairmanship she is also giving up:</p> <p><em><strong>Though I have very much enjoyed my service on the board of this historic banking institution, the frequent trips to Spain are time-consuming and, I fear, would interfere with my responsibilities to the college.</strong></em></p> <p>The departure is expected to be announced by Santander as soon as Friday and becomes effective at the end of the third quarter, according to people familiar with the matter. Santander declined to comment.</p> <p>*&nbsp; *&nbsp; *</p> <p>One wonders why - apart from her travel excuse...</p> <p><span style="text-decoration: underline;"><a href=""><strong>Blythe Masters taking over a sub...?</strong></a></span></p> <ul> <li><strong><span style="font-size: 1em; line-height: 1.3em;">BLYTHE MASTERS NAMED CHAIRMAN OF SANTANDER CONSUMER USA HOLDING</span></strong></li> </ul> <p>For those unfamiliar with Santander Consumer, they are the lender who, as of Q4 2014, had $15 billion in oustanding subprime auto loans on the books. Here&rsquo;s a peek into the company&#39;s&nbsp;<a href="">recent trials and travails</a>:</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p><em><strong>Santander Consumer &mdash; a unit of one of only two banks to receive the dubious honor of failing the Fed&rsquo;s stress tests yesterday and the market leader in subprime auto lending &mdash; allegedly ignored a law that requires lenders to obtain a court order before repossessing cars from members of the military and will now pay $9.35 million to settle the issue with the government.</strong> Apparently, Santander illegally repoed nearly 800 vehicles from active service members over the course of 5 years and then attempted to extract fees from some 350 additional soldiers in connection with repossessions the bank didn&rsquo;t even execute.</em></p> <p>&nbsp;</p> <p><em><strong>This is the same Santander Consumer that was subpoenaed last year by the Justice Department </strong>in connection with its packaging of subprime auto loans into ABS and whose lending practices also got the attention of the New York Dept. of Consumer Affairs. </em></p> <p>&nbsp;</p> <p><em>Don&rsquo;t think for a second that any of this is slowing down the Santander Consumer subprime auto securitization machine though.<strong> The company, which leads all other lenders when it comes to the total amount of subprime auto loan debt outstanding,</strong> has already done a deal this year worth $1.2 billion which accounts for nearly 25% of all subprime auto ABS issuance YTD.</em></p> <p>&nbsp;</p> <p><em><img height="424" src="" width="461" /></em></p> <p>&nbsp;</p> </blockquote> <p><span style="text-decoration: underline;"><strong>Failed Stress Test?</strong></span></p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p><strong>&nbsp;</strong>The CCAR results are now out and 28 of 31 passed. Deutsche Bank, Santander failed for &quot;qualitative&quot; reasons (with significant and widespreasd deficiencies in risk management) and Bank of America will need to resubmit their proposal.</p> <p>&nbsp;</p> <p>...</p> <p>&nbsp;</p> <p>It&#39;s the<strong> second year in a row that Santander Holdings, a unit Santander Group of Spain, has flunked the second phase of the Fed&#39;s stress test</strong></p> </blockquote> <p><u><strong><a href="">Or fears of an oncoming collapse in subprime auto lending...</a></strong></u></p> <p>Here are 60-day delinquency rates by vintage, which pretty clearly show that most of these issues have a date with double-digits sooner or later&hellip;</p> <p><a href=""><img height="257" src="" width="335" /></a></p> <p>*&nbsp; *&nbsp; *</p> <p>We are sure we will find out soon when a) Blythe is moved up to Banco&#39;s board; and/or b) Subprime lending collapses again.</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="188" height="162" alt="" src="" /> </div> </div> </div> B+ Bank of America Bank of America Blythe Masters Deutsche Bank Risk Management Sheila Bair Stress Test Thu, 30 Jul 2015 17:43:45 +0000 Tyler Durden 510716 at 3 Things: B2B, Warnings & Confidence <p><a href=""><em>Submitted by Lance Roberts via STA Wealth Management</em></a>,</p> <h2><strong><span style="text-decoration: underline;">B2B Data</span></strong></h2> <p>An economist friend of mine from Canada sent me a very interesting article earlier this week. It discussed a data point I haven&#39;t paid much attention to previously, but one that is increasingly important in our technology-driven economy - B2B data.</p> <p>The author, Mark Skousen, may sound familiar to you given an article I wrote previously discussing the <a href="">&quot;Skousen Index.&quot;</a> To wit:</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p>&quot;<em>[Dr. Mark Skousen stated]</em> The reality is that business and investment spending are the true leading indicators of the economy and the stock market. If you want to know where the stock market is headed, forget about consumer spending and retail sales figures.<strong> Look to business spending, price inflation, interest rates, and productivity gains.&quot;</strong></p> </blockquote> <p>Skousen is correct. <strong>The real economy, and one that delivers real levels of higher employment, wage growth, and economic stability, is driven by the <em>&quot;production&quot;</em> side of the economic equation.</strong> Individuals must produce first to have income with which to consume. Therefore, if you want to measure what is happening in the actual economy, measure what businesses, and the factors that directly affect them, are doing. If we combine those factors into a single index we see the following:</p> <p><a class="highslide ageent-ru" href="" target="_blank" title="Skousen-Index-051115"><img alt="Skousen-Index-051115" class="i_want_img5" src="" style="width: 599px; height: 383px;" /></a></p> <p>The Skousen index suggests that the current economy is significantly weaker than headline statistics state. However, Dr. Skousen&#39;s latest<a href=""> discussion on B2B Data</a> is equally important.&nbsp;</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p>&quot;Gross Output (GO) is a measure of sales or receipts of all industries throughout the production process, including business to business transactions (B2B). Most B2B activity is left out of GDP statistics which is a big part of the economy.</p> <p>&nbsp;</p> <p>B2B activity actually declined significantly in the first quarter. According to the new Skousen B2B Index, business spending fell 2.8% to $22.7 billion in nominal terms compared to the 4th quarter.&quot;</p> </blockquote> <p><a class="highslide ageent-ru" href="" target="_blank" title="Skousen-B2B-Index-073015"><img alt="Skousen-B2B-Index-073015" class="i_want_img5" src="" style="height: 435px; width: 600px;" /></a></p> <p>While consumer spending remained fairly stagnant, driven primarily by sharp increases in health care related spending driven by surging premiums, B2B spending has fallen markedly. Historically speaking, and as shown by the chart above, B2B spending has been a good indicator of where the economy is headed. This is because it measures spending through the entire supply chain.&nbsp;</p> <p>So, what is the B2B spending data suggesting to Dr. Skousen?</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p>&quot;The GO data and my own B2B Index demonstrate that total US economic activity has slowed significantly, and dangerously close to going into another recession.&quot;</p> </blockquote> <h2><u><strong>Internal Warnings</strong></u></h2> <p>Yesterday, the Federal Reserve once again postponed lifting interest rates in the hopes that economy and labor data will strengthen in the coming months to allow for a tightening of monetary policy. As I discussed previously in <a href="">&quot;Who&#39;s Right: Commodities Or The Fed,&quot;</a> there is a clear signal being send currently. To wit:</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p>&quot;<strong>The Federal Reserve raises interest rates to slow economic growth to keep an economy from overheating which would potentially lead to a sharp rise in inflationary pressures</strong>. Since commodities are the basis of everything that is bought, consumed or other utilized; if there were indeed inflationary pressures on the rise commodity prices should be on the rise. <strong>As shown, this is clearly not the case.&quot;</strong></p> </blockquote> <p><a class="highslide ageent-ru" href="" target="_blank" title="Commodities-GDP-072215"><img alt="Commodities-GDP-072215" class="i_want_img5" src="" style="width: 600px; height: 349px;" /></a></p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p>&quot;In fact, declines in commodity prices have historically been associated with declines in economic activity as shown in the highlighted boxes. While not every decline in commodity prices led to a recession, and I am not making that case, there is a high correlation between the ebb and flow of commodity prices and economic activity, as would be expected.&quot;</p> </blockquote> <p>I reiterate this point because <a href="">Pater Tenebrarum wrote an excellent piece</a> of commentary yesterday making a similar connection back to the stock market and the deterioration of internals.</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p>&quot;The deterioration in market internals is e.g. evident in new high/new low ratios that are inconsistent with a market making new highs, and a growing divergence between prices and advance/decline statistics. <strong>Also, an ever smaller percentage of stocks remains above important moving averages.</strong> Below is a chart depicting several of the most widely followed market internals (high/low percent, advance/decline line, S&amp;P 500 stocks above 200 day and 50 day EMA).&quot;</p> </blockquote> <p><a class="highslide ageent-ru" href="" target="_blank" title="1-Internals"><img alt="1-Internals" class="i_want_img5" height="716" src="" width="600" /></a></p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p>&quot;<strong>What this essentially tells us, is that capitalization-weighted indexes are held up by an ever smaller number of big cap stocks</strong>. A the time of writing, a strong short term rebound in the stock market is underway. However, the underlying problems with trend uniformity and internals depicted below remain in place.</p> <p>&nbsp;</p> <p><strong>A large proportion of the stocks holding up the cap-weighted indexes are technology stocks, which is actually an additional warning sign.</strong> At the peaks of 1998 (ahead of the Russian/LTCM crisis), 2000 and 2007, <a href="">a handful of &quot;horsemen&quot; from the technology universe</a> were the very last stocks to make new highs &ndash; it seems to happen every time.&quot;</p> <p>&nbsp;</p> <p><strong>A major reason for the deterioration in internals is the economic weakness currently spreading in China, coupled with malinvestment on a grand scale in the commodities sector over previous years</strong>. This combination is putting pressure on commodity prices and the energy and materials sectors have entered bear markets as a result. <strong>These two sectors together currently represent 15% of the market capitalization of the S&amp;P 500 Index. Transportation stocks have begun to sag as well and have been in a downtrend since the end of last year&quot;</strong></p> </blockquote> <p>While the media and Wall Street remain markedly bullish on the economy and the stock market, there is an ever-growing breadth of data that reflects characteristics only observed near previous major market and economic peaks.</p> <h2><u><strong>Confidence Or Lack Thereof</strong></u></h2> <p>This disconnect between Wall Street <em>&quot;euphoria&quot;</em> and &quot;Main Street&quot; economic reality can be clearly seen by the latest Gallup economic confidence poll.</p> <p>The latest poll, for the week of July 26th, showed that 23% of Americans said the economy was good or excellent, compared to 32% rating it as poor. As for the future, 39% said the economy is improving,<strong> while a majority 57% said things are getting worse.</strong></p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p>&quot;<strong>Though Americans&#39; confidence in the national economy has skewed negative for six months now,</strong> the recent drop of the current conditions component comes on the heels of a new path for solving the Greek debt crisis and amid a tumultuous period for Chinese stocks,&quot; Gallup&#39;s Justin McCarthy said. &quot;<strong>The instability abroad could be fueling Americans&#39; doubts about the health of the U.S. economy, not to mention that the Dow closed lower several days in a row last week.&quot;</strong></p> </blockquote> <p><a class="highslide ageent-ru" href="" target="_blank" title="Gallup-EconomicConfidence-073015"><img alt="Gallup-EconomicConfidence-073015" class="i_want_img5" src="" style="width: 601px; height: 322px;" /></a></p> <p>This data also confirms the sharp decline in consumer confidence which recently dropped sharply to a 10-month low as well.</p> <p>Importantly, all of these measures suggest the very long expansionary period in the economy may be coming to an end.</p> <p><strong>This is not a &quot;horrible&quot; thing. It</strong> <strong>is not a &quot;bearish&quot; thing. It is just a &quot;reality&quot; thing. </strong>While monetary policies and governmental interventions can certainly extend and prolong these cycles, such policies can not repeal them entirely.</p> <p><u><em><strong>Since there is a high correlation between downturns in the economy and the financial markets, these are data points that are worth watching closely in the months ahead.</strong></em></u></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="590" height="372" alt="" src="" /> </div> </div> </div> China Consumer Confidence Federal Reserve Gallup Main Street Market Internals Monetary Policy Moving Averages Reality Recession Thu, 30 Jul 2015 17:38:53 +0000 Tyler Durden 510715 at