en Who's Next? Venezuela's Collapse Puts These Nations At Risk <p><em>&quot;It&#39;s a <strong>wake-up call</strong> for a lot of people who will say &lsquo;<strong>Look, the stuff I own is actually very risky</strong>&#39;...&quot; </em>warns Ray Jian, who oversees about $6 billion at Pioneer Investment Management Ltd. in London. <em>&quot;<strong>People have been ignoring risks</strong> in places like Lebanon for a long time,&quot;</em> and the official default of Venezuela this week has emerging-market money managers are looking to identify countries that might run into trouble down the road.</p> <p><a href=""><img height="287" src="" width="600" /></a></p> <p><a href="">While Bloomberg reports</a> that<strong> while none are nearly as badly off as Venezuela</strong> - <em>where a combination of low oil prices, economic mismanagement and U.S. sanctions did the country in</em> -&nbsp; <strong>traders are scouting for credit risk,</strong> from Lebanon, where Prime Minister Saad Hariri&rsquo;s sudden resignation has once again thrust the nation into a Saudi-Iran proxy war, to Ecuador, where recently elected President Lenin Moreno continues to expand the debt load in a country with a history as a serial defaulter.</p> <p><a href=""><img height="319" src="" width="600" /></a></p> <h3>1. Lebanon:</h3> <p>One of the world&rsquo;s most indebted countries, Lebanon may hit a debt-to-gross domestic product ratio of 152 percent this year, according to International Monetary Fund forecasts. That&rsquo;s coming at a time when political tension is rising. Hariri&rsquo;s abrupt <a href="" itemprop="StoryLink" itemscope="itemscope" target="_blank" title="Saudi-Iran Proxy Conflict to the Fore in Lebanon as PM Quits">resignation</a>, announced from Riyadh on Nov. 4, triggered about $800 million of withdrawals from the country as investors speculated that the nation would be in the crosshairs of a regional feud between the Saudis and Iranians. While the central bank says the <a href="" itemprop="StoryLink" itemscope="itemscope" target="_blank" title="Lebanon’s Central Banker Says Worst May Be Over in Latest Crisis">worst may be over</a>, credit-default swaps have hit a nine-year high.</p> <h3>2. Ecuador:</h3> <p>After a borrowing spree, the Andean nation&rsquo;s external debt obligations over the next 12 months ballooned to a nine-year high relative to the size of its GDP.&nbsp;Ecuador probably has the highest default risk after Venezuela, according to Robert Koenigsberger, the chief investment officer of&nbsp;Gramercy Funds Management. The country will be vulnerable &ldquo;when the liquidity environment changes and they can no longer go to the market to get $2.5 billion to plug the hole,&quot; he said. Finance Minister Carlos de la Torre told Bloomberg in an email on Thursday that there is &quot;no default risk&quot; for any of Ecuador&rsquo;s debt commitments and the nation&rsquo;s indebtedness is nowhere near &quot;critical&quot; levels.</p> <h3>3. Ukraine:</h3> <p>While the Eastern European nation&rsquo;s credit-default swaps have declined from their 2015 highs, persistent economic struggles are giving traders reason for caution. GDP expansion has slowed for three consecutive quarters and the World Bank warns that the economy is at risk of falling into a <a class="terminal-news-story" href="" itemprop="StoryLink" itemscope="itemscope" rel="nofollow noopener" target="_blank" title="Ukraine’s Recovery Fades Amid Warning of ‘Low-Growth Trap’">low-growth trap</a>. Ukraine&rsquo;s parliament approved next year&rsquo;s budget&nbsp;on Tuesday as it eyes a <a class="terminal-news-story" href="" itemprop="StoryLink" itemscope="itemscope" rel="nofollow noopener" target="_blank" title="Ukraine Passes 2018 Budget in First Reading as IMF Visits Kiev">$17.5 billion international bailout</a>.</p> <h3>4. Egypt:</h3> <p>Egypt&rsquo;s credit-default swaps are hovering near the highest since September. The cost for protection surged in June as regional tensions heated up amid a push by the Saudis to isolate Qatar. While Egypt has been able to boost foreign-currency reserves and is <a href="" itemprop="StoryLink" itemscope="itemscope" target="_blank" title="Egypt Signs Expanded $3.1 Billion Funding Deal With Lenders (1)">on course</a> to repay $14 billion in principal and interest in 2018,&nbsp;its foreign debt has climbed to&nbsp;$79 billion from $55.8 billion a year earlier.</p> <h3>5. Pakistan:</h3> <p>Pakistan&rsquo;s credit-default swaps surged in late October and linger near their highest level since June. South Asia&rsquo;s second-largest economy faces challenges as it struggles with dwindling foreign reserves, rising debt payments and a ballooning current account deficit. Pakistan is mulling a potential <a class="terminal-news-story" href="" itemprop="StoryLink" itemscope="itemscope" rel="nofollow noopener" target="_blank" title="Pakistan Is Said to Appoint Banks for $2 Billion Bond Sale">$2 billion debt sale</a> later this year. Speaking at the Bloomberg Pakistan Economic Forum last week, central bank Deputy Governor Jameel Ahmad played down concerns over the country&rsquo;s <a href="" itemprop="StoryLink" itemscope="itemscope" target="_blank" title="Pakistan’s Central Bank Allays Concerns Over Widening Deficits">widening twin deficits</a>.</p> <h3>6. Bahrain:</h3> <p>Bahrain&rsquo;s spread rose dramatically in late October to the highest since January after it was said to <a href="" itemprop="StoryLink" itemscope="itemscope" target="_blank" title="Bahrain Is Said to Ask Allies for Aid to Stave Off Crisis (1)">ask Gulf allies for aid</a>. The nation is seeking to replenish international reserves and avert a currency devaluation as oil prices batter the six Gulf Cooperation Council oil producers. Although its neighbors are likely to help, Bahrain could still be left with the <a href="" itemprop="StoryLink" itemscope="itemscope" target="_blank" title="Bahrain Is Said to Ask Allies for Aid to Stave Off Crisis (1)">highest budget deficit</a> in the region, according to the IMF.</p> <h3>7. Turkey:</h3> <p>Despite high yields, investors are still reluctant to buy Turkish bonds. The nation has been caught up in a blur of political crises, driving spreads on credit-default swaps to their highest level since May. Turkey was the only holdover on S&amp;P Global Ratings&rsquo;s latest &ldquo;<a class="terminal-news-story" href="" itemprop="StoryLink" itemscope="itemscope" rel="nofollow noopener" target="_blank" title="S&amp;P Declares ‘New Fragile Five’ With Turkey Only Previous Member">Fragile Five</a>&rdquo; list of countries most vulnerable to normalization in global monetary conditions.</p> <div class="field field-type-filefield field-field-image-teaser"> <div class="field-items"> <div class="field-item odd"> <img class="imagefield imagefield-field_image_teaser" width="757" height="424" alt="" src="" /> </div> </div> </div> Budget Deficit Business Credit default swap Credit-Default Swaps Debt-for-nature swap default Economy European debt crisis Eurozone crisis Finance Financial crises Gulf Cooperation Council International Monetary Fund International Monetary Fund Money None ratings South Asia Swap Systemic risk Turkey Ukraine Ukraine’s parliament United States housing bubble World Bank World Bank Sun, 19 Nov 2017 01:00:00 +0000 Tyler Durden 607523 at The Coming Economic Downturn In Canada <p><a href="">Authored by Deb Shaw via,</a></p> <div> <ul> <li>Canadian GDP growth has outperformed this year, helping the Canadian dollar</li> <li>As GDP growth slows and the Bank of Canada turns neutral, catalysts turning negative</li> <li>Crude oil and real estate look set for a downturn, with negative implications for the currency</li> </ul> </div> <div> <p><strong>Given its natural resource-based economy, Canada is a boom and bust kind of place. </strong>This year, the country has enjoyed a significant boom. Thanks to a government stimulus program, rising corporate capital expenditures and consumer spending, Canada&rsquo;s GDP growth has been nothing short of spectacular in 2017. According to <a href="">Statistics Canada</a>, the latest reading for year-over-year GDP growth is a healthy 3.5% (as of August 2017). While this is stronger than all major developed countries, growth is decelerating from its most recent peak in May 2017 (when GDP growth was an astounding 4.7%). A visual overview of historical GDP growth is shown below for reference:</p> <h3><span style="text-decoration: underline;">Turning a corner: Canadian growth comes back down to earth</span></h3> <p><a href=""><img alt="11-17-2017 CAD GDP growth" src="" style="width: 599px; height: 358px;" /></a></p> <p><em>Source: Statistics Canada</em></p> <p>Following the crude oil bust in the second quarter of 2014, Canadian growth rates cratered. While the country avoided a technical recession, the economic outlook was poor until early 2016. After crude oil returned to a bull market in the first quarter of 2016, the fortunes of the country turned. Given limited growth in 2015, the economy had no problem delivering 2%+ year-over-year growth rates in 2016. As a substantial stimulus program ramped up government spending in 2017, growth rates have continued to accelerate this year.</p> <p><u><strong>Storm clouds on the horizon: crude oil and real estate</strong></u></p> <p>While Canada has delivered exceptional growth in the last two years, the future outlook is much more challenging. Beyond the issue of base effects (mathematically, year-over-year GDP growth will be much tougher next year), key sectors including the oil &amp; gas industry and Canadian real estate look ripe for a downturn.</p> <p><u><strong>Crude bull market intact today, but at risk in 2018</strong></u></p> <p>As WTI crude strengthens beyond $55, crude oil is clearly in a bull market today. Looking at figures from the International Energy Agency, global demand growth continues to run ahead of supply growth. Thus the ongoing bull market is supported by fundamentals. Thanks to the impact of hurricanes and infrastructure bottlenecks in 2017, US shale hasn&rsquo;t entirely fulfilled its role as the global &lsquo;swing producer&rsquo; this year. The dynamics of supply growth versus demand growth are shown below:</p> <h3><u>Who invited American shale? US supply ruins the crude oil party</u></h3> <p><a href=""><img alt="10-13-2017 crude oil supply demand" src="" style="width: 601px; height: 304px;" /></a></p> <p><em>Source: International Energy Agency, forward OPEC supply estimates via US EIA</em></p> <p><strong>Unfortunately, the status quo looks set to change as US supply returns with a vengeance. </strong>According to estimates from the IEA, supply growth will outstrip demand growth in the first quarter of 2018. Digging deeper into supply estimates, US shale is once again to blame. Our view is that this changing dynamic will lead to a new bear market in crude oil. Looking back at recent history, crude prices formed a long-term top in the second quarter of 2014 once supply growth overtook demand. Similarly, crude prices bottomed in the first quarter of 2016 once supply growth fell below demand in early 2016. Given Canada&#39;s dependence on crude oil exports, a bear market for the commodity is likely to result in a weaker currency.</p> <p><u><strong>As China enters its latest real estate downturn, Canada not far behind</strong></u></p> <p>While Canadian real estate has enjoyed a great year, the future outlook is much tougher. Similar to its peers in Australia and New Zealand, Canadian real estate prices tend to lag real estate prices in China. This is both because Canada&rsquo;s economy is deeply intertwined with China, and because the country is a big destination for overseas investment from China. While overseas investors make up a relatively small portion of buyers (<a href="">around 5%</a> according to government estimates), they serve an important role by acting as the marginal buyer for prime property. A comparison of new house prices in China versus Canada is shown below for reference:</p> <h3><u>Canadian real estate boom set to run out of steam</u></h3> <p><a href=""><img alt="11-17-2017 China Canada real estate" src="" style="width: 601px; height: 361px;" /></a></p> <p><em>Source: Statistics Canada, China National Bureau of Statistics</em></p> <p>As Chinese new house prices accelerated significantly in early 2015, Canadian real estate prices followed in 2016. As the Chinese market is now decelerating, negative growth appears to be on the horizon. In March 2015, Chinese house price growth bottomed at -6.1%. While the Canadian bull market continues for now (September new house prices registered at 3.8%), a downturn is likely over the next 6-12 months. As real estate makes up <a href="">13% of Canadian GDP</a>, a significant decline in the fortunes of the industry are likely to spill over to the broader economy.</p> <p><strong><u>Implications for the Canadian dollar</u></strong></p> <p>At the beginning of the year, the Canadian dollar enjoyed a wide number of bullish catalysts including accelerating GDP growth, rising rate hike expectations, a relatively strong crude oil market and speculator sentiment that was at a bearish extreme. These catalysts, and the Bank of Canada&rsquo;s actions in particular, helped the currency strengthen until late September.</p> <p><strong>Today, almost every factor that drives the Canadian dollar is working against it. </strong>Future GDP growth rates are set to keep decelerating. Looking at the Bank of Canada, its outlook for future rate hikes is now &ldquo;cautious&rdquo;. This is a big change from its hawkish tilt earlier this year. While speculator sentiment is no longer at <a href="">bullish extremes</a>, waning interest in the Canadian dollar is weighing on the currency. The ongoing NAFTA negotiations are another source of potential political risk. Finally, an impending downturn for both crude oil and Canadian real estate further worsen the picture. Thus, our longer term outlook on the Canadian dollar is bearish.</p> </div> <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="821" height="441" alt="" src="" /> </div> </div> </div> Australia Bank of Canada Bear Market Business Canadian Dollar Capital Expenditures Cartels China China National Bureau Crude Crude Oil Economy Economy of China Energy Energy crisis Government Stimulus Gross domestic product International Energy Agency New Zealand OPEC OPEC Organization of Petroleum-Exporting Countries Petroleum Petroleum geology Petroleum industry Petroleum politics Real estate Real estate bubble Recession Sun, 19 Nov 2017 00:30:00 +0000 Tyler Durden 607522 at Apple Diversity Chief Forced Out After Saying White Men Can Also Be 'Diverse' <p>Silicon Valley&#39;s disdain for its mostly white, mostly male tech workforce has reached absurd new heights.</p> <p><a href="">The New York Post</a> is reporting that, after just six months on the job, Apple Diversity Chief Denise Young Smith, who was named vice president of diversity and inclusion in May, has resigned her post after making a &ldquo;controversial&rdquo; comment last month during a summit in Bogota, Colombia.</p> <p><strong>What was Young&rsquo;s crime? <em>She insinuated that &ldquo;diversity&rdquo; can still exist among a group of white men because of their different life experiences. </em></strong></p> <p><a href=""><img alt="" src="" style="width: 500px; height: 262px;" /></a></p> <p><strong>&ldquo;There can be 12 white, blue-eyed, blond men in a room and they&rsquo;re going to be diverse too because they&rsquo;re going to bring a different life experience and life perspective to the conversation,&rdquo;</strong> the inaugural diversity chief said.</p> <p>&ldquo;Diversity is the human experience,&rdquo; she said, according to Quartz. <strong>&ldquo;I get a little bit frustrated when diversity or the term diversity is tagged to the people of color, or the women, or the LGBT.&quot;</strong></p> <p><u><strong>That&rsquo;s right: Young, who is &ndash; for the record &ndash; a black woman, has been forced out of Apple because her views on diversity were too inclusive. </strong></u></p> <p>As the Post pointed out, Young&rsquo;s comments appeared to defend Apple&rsquo;s overwhelmingly white and male leadership at a time when the company&rsquo;s makeup is markedly uneven. This begs the question: What, exactly, was she defending them from?</p> <p>Young, a 20-year Apple veteran who previously served as the company&rsquo;s head of worldwide human resources (a senior level position), was later forced to apologize for her remarks, telling Apple staff that her comments &ldquo;were not representative of how I think about diversity or how Apple sees it.&quot;</p> <p>&ldquo;For that, I&rsquo;m sorry,&rdquo; she said in an email. &ldquo;More importantly, I want to assure you Apple&rsquo;s view and our dedication to diversity has not changed.&quot;</p> <p>&ldquo;We deeply believe that diversity drives innovation,&rdquo; an Apple spokesman told TechCrunch in a statement. &ldquo;We&rsquo;re thrilled to welcome an accomplished leader like Christie Smith to help us continue the progress we&rsquo;ve made toward a more diverse workplace.&quot;</p> <p><strong>In 2017, only 3 percent of Apple&rsquo;s leaders were black, and women held just 23 percent of tech jobs, according to Fortune. Female leadership stood at 29 percent, Apple said. </strong></p> <p>&ldquo;Meaningful change takes time,&rdquo; the company said in its diversity report. &ldquo;We&rsquo;re proud of our accomplishments, but we have much more work to do.&quot;</p> <p><strong>Smith will leave the company at the end of the year. Taking over as VP of inclusion and diversity will be Christie Smith, who spent 17 years as a principal at Deloitte. </strong></p> <p>She is also a white woman.<br />&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="621" height="326" alt="" src="" /> </div> </div> </div> Apple Apple Inc. Apple Store Business Discrimination Diversity Economy Human resource management Identity politics Multiculturalism New York Post Technology Workplace Sun, 19 Nov 2017 00:00:00 +0000 Tyler Durden 607504 at Golden Catalysts <p><a href=""><em>Authored by James Rickards via The Daily Reckoning,</em></a></p> <p><strong>The physical fundamentals are stronger than ever for gold.</strong></p> <p>Russia and China continue to be huge buyers. China bans export of its 450 tons per year of physical production.</p> <p><strong>Gold refiners are working around the clock and cannot meet demand.</strong></p> <p>Gold refiners are also having difficulty finding gold to refine as mining output, official bullion sales and scrap inflows all remain weak.</p> <p><strong>Private bullion continues to migrate from bank vaults at UBS and Credit Suisse into nonbank vaults at Brinks and Loomis, thus reducing the floating supply available for bank unallocated gold sales.</strong></p> <p><a href=""><img height="289" src="" width="600" /></a></p> <p><u><strong>In other words, the physical supply situation has been tight as a drum.</strong></u></p> <p>The problem, of course, is unlimited selling in &ldquo;paper&rdquo; gold markets such as the Comex gold futures and similar instruments.</p> <p>One of the flash crashes this year was precipitated by the instantaneous sale of gold futures contracts equal in underlying amount to 60 tons of physical gold. The largest bullion banks in the world could not source 60 tons of physical gold if they had months to do it.</p> <p><strong>There&rsquo;s just not that much gold available. But in the paper gold market, there&rsquo;s no limit on size, so anything goes.</strong></p> <p>There&rsquo;s no sense complaining about this situation. It is what it is, and it won&rsquo;t be broken up anytime soon. The main source of comfort is knowing that fundamentals always win in the long run even if there are temporary reversals. What you need to do is be patient, stay the course and buy strategically when the drawdowns emerge.</p> <p>Where do we go from here?</p> <p>There are many compelling reasons why gold should outperform over the coming months.</p> <p>Deteriorating relations between the U.S. and Russia will only accelerate Russia&rsquo;s efforts to diversify its reserves away from dollar assets (which can be frozen by the U.S. on a moment&rsquo;s notice) to gold assets, which are immune to asset freezes and seizures.</p> <p>The countdown to war with North Korea is underway, as I&rsquo;ve explained repeatedly in these pages. A U.S. attack on the North Korean nuclear and missile weapons programs is likely by mid-2018.</p> <p>Finally, we have to deal with our friends at the Fed. Good jobs numbers have given life to the view that the Fed will raise interest rates next month. The standard answer is that rate hikes make the dollar stronger and are a head wind for the dollar price of gold.</p> <p>But I remain skeptical about a December hike. As I explained above, the market is looking in the wrong places for clues to Fed policy. Jobs reports are irrelevant; that was &ldquo;mission accomplished&rdquo; for the Fed years ago.</p> <p>The key data are disinflation numbers. That&rsquo;s what has the Fed concerned, and that&rsquo;s why the Fed might pause again in December as it did last September.</p> <p>We&rsquo;ll have a better idea when PCE core inflation comes out Nov. 30.</p> <p><strong>Of course, the Fed&rsquo;s main inflation metric has been moving in the wrong direction since January. </strong>The readings on the core PCE deflator year over year (the Fed&rsquo;s preferred metric) were:</p> <p><em>January 1.9%</em></p> <p><em>February 1.9%</em></p> <p><em>March 1.6%</em></p> <p><em>April 1.6%</em></p> <p><em>May 1.5%</em></p> <p><em>June 1.5%</em></p> <p><em>July 2017: 1.4%</em></p> <p><em>August 2017: 1.3%</em></p> <p><em>September 2017: 1.3%</em></p> <p>Again, the October data will not be available until Nov. 30.</p> <p>The Fed&rsquo;s target rate for this metric is 2%. It will take a sustained increase over several months for the Fed to conclude that inflation is back on track to meet the Fed&rsquo;s goal.</p> <p><strong>There&rsquo;s obviously no chance of this happening before the Fed&rsquo;s December meeting.</strong></p> <p>A weak dollar is the Fed&rsquo;s only chance for more inflation. The way to get a weak dollar is to delay rate hikes indefinitely, and that&rsquo;s what I believe the Fed will do.</p> <p>And a weak dollar means a higher dollar price for gold.</p> <p>Current levels look like the last stop before $1,300 per ounce. After that, a price surge is likely as buyers jump on the bandwagon, and then it&rsquo;s up, up and away.</p> <p>Why do I say that?</p> <p><strong>There&rsquo;s an old saying that &ldquo;a picture is worth a thousand words.&rdquo; This chart is a good example of why that&rsquo;s true:</strong></p> <p class="centered"><img alt="Gold Breakout Chart" class="centered aligncenter" src="" style="height: 421px; width: 600px;" /></p> <p>Gold analyst Eddie Van Der Walt produced this 10-year chart for the dollar price of gold showing that gold prices have been converging into a narrow tunnel between two price trends - one trending higher and one lower - for the past six years.</p> <p>This pattern has been especially pronounced since 2015. You can see gold has traded up and down in a range between $1,050 and $1,380 per ounce. The upper trend line and the lower trend line converge into a funnel.</p> <p>Since gold will not remain in that funnel much longer (because it converges to a fixed price) gold will likely &ldquo;break out&rdquo; to the upside or downside, typically with a huge move that disrupts the pattern.</p> <p><strong>At the extreme, this could imply a gold price on its way to $1,800 or $800 per ounce. Which will it be?</strong></p> <p><u><strong>The evidence overwhelmingly supports the thesis that gold will break out to the upside.</strong></u> Central banks are determined to get more inflation and will flip to easing policies if that&rsquo;s what it takes.</p> <p>Geopolitical risks are piling up from North Korea, to Saudi Arabia, to the South China Sea and beyond.</p> <p>The failure of the Trump agenda has put the stock market on edge and a substantial market correction may be in the cards. Acute shortages of physical gold have also set the stage for a delivery failure or a short squeeze.</p> <p><strong>Any one of these developments is enough to send gold soaring in response to a panic or as part of a flight to quality. </strong>The only force that could take gold lower is deflation, and that is the one thing central banks will never allow. The above chart is one of the most powerful bullish indicators I&rsquo;ve ever seen.</p> <p>Get ready for an explosion to the ups ide in the dollar price of gold. Make sure you have your physical gold and gold mining shares before the breakout begins.</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="792" height="382" alt="" src="" /> </div> </div> </div> Bullion Business Central Banks China Credit Suisse Currency Dollar coin Economy Finance fixed flash Gold Gold as an investment Gold coin Inflation Money North Korea Precious metals Saudi Arabia South China United States dollar US Federal Reserve Sat, 18 Nov 2017 23:30:00 +0000 Tyler Durden 607521 at "We're Not Stupid" - Top US Nuclear Commander Would Disobey "Illegal" Trump Orders <p>A<a href=""> few short months after Admiral Scott Swift,</a> Commander of the US Navy&rsquo;s Pacific Fleet, said he would obey a hypothetical order to launch a nuclear strike against China if the president chose to give it, <strong>Air Force Gen. John Hyten - America&#39;s top nuclear commander - said Saturday he would push back against President Trump if the president ordered a nuclear launch the general believed to be &quot;illegal.&quot;</strong></p> <p>When an audience member asked Hyten, who was speaking at a national security conference in Halifax Canada, about the hypothetical scenario, he responded by assuring his interlocutor that military commanders &ldquo;aren&rsquo;t stupid.&rdquo;</p> <p>Here&#39;s <a href="">CBS:</a></p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p>Air Force Gen. John Hyten, commander of the U.S. Strategic Command (STRATCOM), told an audience at the Halifax International Security Forum in Halifax, Nova Scotia, on Saturday that he has given a lot of thought to what he would say if Mr. Trump ordered a strike he considered unlawful.</p> <p>&nbsp;</p> <p><strong>&quot;I think some people think we&#39;re stupid,&quot;</strong> Hyten said in response to a question about such a scenario. <u><strong>&quot;We&#39;re not stupid people. We think about these things a lot. When you have this responsibility, how do you not think about it?&quot;</strong></u></p> <p>&nbsp;</p> <p>Hyten explained the process that would follow such a command. As head of STRATCOM, Hyten is responsible for overseeing the U.S. nuclear arsenal.</p> <p>&nbsp;</p> <p><strong>&quot;I provide advice to the president, he will tell me what to do,&quot; </strong>Hyten added. <strong>&quot;And if it&#39;s illegal, guess what&#39;s going to happen? I&#39;m going to say, &#39;Mr. President, that&#39;s illegal.&#39; And guess what he&#39;s going to do? He&#39;s going to say, &#39;What would be legal?&#39; And we&#39;ll come up with options, with a mix of capabilities to respond to whatever the situation is, and that&#39;s the way it works. It&#39;s not that complicated.&quot;</strong></p> </blockquote> <p>Hyten said he has been trained every year for decades in the law of armed conflict, which takes into account specific factors to determine legality - necessity, distinction, proportionality, unnecessary suffering and more. Running through scenarios of how to react in the event of an illegal order is standard practice, he said.</p> <p><strong>And Hyten is not the only one who&rsquo;s been thinking about how they might react to a hypothetical order to launch a nuclear strike</strong>. A few months ago, Vanity Fair reported that Defense Secretary Mattis, Chief of Staff John Kelly and Secretary of State Rex Tillerson had discussed the issue, though it&rsquo;s unclear, exactly, how they would respond.</p> <p>Hyten apparently believes that an order from the president could be illegal, under certain unspecified circumstances. And if you execute an illegal order, he said, you could be prosecuted.</p> <p><a href=""><img alt="" src="" style="width: 500px; height: 211px;" /></a></p> <p><em>John Hyten</em></p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p><u><strong>&quot;If you execute an unlawful order, you will go to jail. You could go to jail for the rest of your life,&quot; Hyten said.</strong></u></p> </blockquote> <p>As CBS pointed out, Hyten&rsquo;s comments come at a time when Congress is reexamining the authorization of the use of military force and power to launch a nuclear strike.</p> <p>In a hearing earlier this week, Sen. Ed Markey, D-Massachusetts, said Mr. Trump &quot;can launch nuclear codes just as easily as he can use his Twitter account.&quot;</p> <p>Hyten said the military is always ready to respond to the threat of North Korea, even at that very moment. Trump has been embroiled in a war of words with North Korean leader Kim Jong Un since shortly after taking office, and has repeatedly threatened to respond with overwhelming force if he the North continues to threaten the US.</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p><strong>&quot;And we are ready every minute of every day to respond to any event that comes out of North Korea. That&#39;s the element of deterrence that has to be clear, and it is clear,&quot; Hyten said.</strong></p> </blockquote> <p>But Hyten also said handling North Korea and its unpredictable leader Kim Jong Un has to be an international effort. Mr. Trump has continued to put pressure on China to help manage its tempestuous neighbor.</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p>&quot;President Trump by himself can&#39;t change the behavior of Kim Jong Un,&quot; Hyten said. &quot;But President Trump can create the conditions that the international community can reach out in different ways where we can work with the Republic of Korea, where we can work with our neighbors in the region.&quot;</p> </blockquote> <p>However, <a href="">Admiral Swift, </a>who has led the Pacific Fleet since 2015, has a very different view of the obligations that come with being a military commander in charge of the US&rsquo;s nuclear arsenal.</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p><strong>&ldquo;Every member of the US military has sworn an oath to defend the constitution of the United States against all enemies foreign and domestic and to obey the officers and the president of the United States as commander and chief appointed over us.&rdquo;</strong></p> </blockquote> <p>When it comes to nuclear war, North Korea, for many, is the first adversary that comes to mind. But in the long run, China, which is reportedly developing hypersonic fighter jets that would be able to reach the Continental US within 14 minutes and has been slowly expanding its military footprint in the Pacific,<a href=""> may pose the bigger threat. </a></p> <div class="field field-type-filefield field-field-image-teaser"> <div class="field-items"> <div class="field-item odd"> <img class="imagefield imagefield-field_image_teaser" width="689" height="291" alt="" src="" /> </div> </div> </div> Air Force China Congress Donald Trump John E. Hyten KIM Kim Jong-un Military personnel national security North Korea Politics Politics of the United States Rex Tillerson SWIFT Twitter Twitter U.S. Strategic Command United States United States Navy United States Strategic Command US military Sat, 18 Nov 2017 23:00:00 +0000 Tyler Durden 607528 at The 'Junkie' Market Is Back <p><a href=""><em>Via Dana Lyons&#39; Tumblr,</em></a></p> <p><strong><em>The past few days have seen a reversal from substantial net New lows to substantial net New highs &ndash; a condition that has preceded poor performance in the past.</em></strong></p> <p><strong><em><a href=""><img height="271" src="" width="500" /></a></em></strong></p> <p><strong>We&rsquo;ve posted several pieces in the past regarding what we&rsquo;ve termed &ldquo;Junkie Markets&rdquo; &ndash; junctures characterized by a substantial number of both New 52-Week Highs <em>and </em>New 52-Week Lows.</strong></p> <p>Such conditions represent a key component of various and notorious market warning signals, such as the Hindenburg Omen and others. As the ominous sounding names would imply, the historical stock market performance following such signals has been poor. We have found the same to be true with respect to our &ldquo;Junkie Markets&rdquo;. Today&rsquo;s Chart Of The Day deals with a new variation of the Junkie Market.</p> <p><strong>Specifically, we have seen an unusual development over the past 2 days.</strong> On Wednesday, the number of net New Lows on the NYSE, i.e., New Lows minus New Highs, exceeded 2% of all exchange issues, a fairly large amount. The very next day, yesterday, conditions completely reversed as we saw net New NYSE Highs, i.e. New Highs minus New Lows, actually account for more than 2% of all issues. If you think that sounds strange, you&rsquo;re correct. <strong>It is just the 15th such occurrence since the start of our data in 1970.</strong></p> <p><img alt="image" height="328" src="" width="500" /></p> <p>Here are the dates of these reversals:</p> <p><strong><em>3/25/1970<br />4/14/1972<br />7/11/1974<br />10/20/1977<br />1/2/2001<br />4/22/2004<br />5/11/2004<br />4/18/2006<br />6/28/2007<br />7/19/2007<br />9/19/2008<br />5/30/2013<br />10/10/2013<br />1/15/2015<br />11/16/2017</em></strong></p> <p><u><strong>What would cause such a phenomenon?</strong></u> Well, the only thing we can offer is that a Junkie Market, i.e., one with lots of New Highs and Lows, is really the only type of market in which such a reversal is even possible. Thus, it should not be surprising that the S&amp;P 500&rsquo;s aggregate performance going forward following these precedents has been less than stellar (<em>incidentally, aggregate performance is similar following the 19 occasions of the opposite reversals, i.e., &gt;2% Net New Highs to &gt;2% Net New Lows</em>).</p> <p><img alt="image" height="147" src="" width="500" /></p> <p><strong>With median returns negative from 1 week to 6 months, this appears to be another version of the Junkie Market that, for whatever reason, has not been kind to stocks going forward.</strong> Obviously, the presence of signals near cyclical peaks in the early 1970&rsquo;s as well as 2001 and 2007-2008 do not help the aggregate returns (<em>average </em>returns are even worse than median).</p> <p>Now, not all signals have occurred at the beginning of cyclical bear markets. However, as the chart shows, one interesting observation is that all of the occurrences have occurred during <em>secular </em>bear markets (that is, of course, if one accepts that we are still within the confines of the post-2000 secular bear market, as is our view &ndash; that is a topic for another time, though). The point is that, if true, the ramifications may reinforce the negative tendencies associated with Junkie Markets.</p> <p><strong>The bottom line for now is that, while it is certainly possible that stocks can continue higher in the interim, this condition of elevated New Highs <em>and </em>New Lows is a potential unhealthy headwind in the longer-term.</strong></p> <p>*&nbsp; *&nbsp; *</p> <p><em>If you&rsquo;re interested in the &ldquo;all-access&rdquo; version of our charts and research, please check out <a href=";t=ZTEwNzQ3MGE4MjczYjc0ZTg2MDg5OGUwOTBjZmVlMGNhMzgzMWVlZCxqNFZzcE12cg%3D%3D&amp;b=t%3AiVABxSjy5YaHIczRO2xAuw&amp;;m=0" target="_blank">The Lyons Share</a>. Find out what we&rsquo;re investing in, when we&rsquo;re getting in &ndash; and when we&rsquo;re getting out. Considering that we may well be entering an investment environment tailor made for our active, risk-managed approach, there has never been a better time to reap the benefits of this service. Thanks for reading!</em></p> <div class="field field-type-filefield field-field-image-teaser"> <div class="field-items"> <div class="field-item odd"> <img class="imagefield imagefield-field_image_teaser" width="478" height="259" alt="" src="" /> </div> </div> </div> Bear Market Business Economy Finance Financial markets Hindenburg Omen Market trend Money New York Stock Exchange S&P 500 Technical analysis Sat, 18 Nov 2017 22:30:00 +0000 Tyler Durden 607520 at NYC Subway Managers Receive $300,000 Salaries While MTA Cuts Mechanics <p>During a&nbsp; long-ranging investigation, <a href="">The New York Times</a> interviewed more than 300 people and poured over thousands of documents to sketch out the history of neglect, abuse and mismanagement that fostered the New York City subway&#39;s current state of crisis in what&#39;s probably the most comprehensive explanation of the woes plaguing the MTA.</p> <p><strong>Century-old tunnels and track routes are crubling, but the Times found that the MTA&rsquo;s budget for subway aintenance has barely grown, in inflation adjusted terms, since 1992.</strong></p> <p>Signal problems and equipment failures are occurring twice as frequently as they did a decade ago &ndash; a sign of just how rapidly the transit system is deteriorating.</p> <p><a href=""><img alt="" src="" style="width: 500px; height: 203px;" /></a></p> <p><u><strong>What&rsquo;s worse, is that hundreds of mechanic positions have been cut even as the century-old system groaned under the damage caused by Superstorm Sandy. Meanwhile, compensation for managers has ballooned to nearly $300,000 a year.</strong></u></p> <p><strong>Daily ridership has doubled in the past decade to 5.7 million people. Yet, New York City is the only city in the world with fewer miles of track than it had during World War II.</strong></p> <p>Given the unconscionable state of neglect paid to its budget, it should come as no surprise that New York City&rsquo;s subway system has the worst performance of any major urban transportation system in the world. Only 65% of weekday trains make it to their destination on time.</p> <p>The Times claims that the deplorable state of the city&rsquo;s transit system is the result of negligence by both Republican and Democratic politicians, including former Gov. George Pataki, former mayor Rudolph Giuliani, as well as Mayor Bill De Blasio and Gov. Andrew Cuomo.</p> <p><strong>Over the past two decades, politicians have diverted a whopping $1.5 billion in tax revenue from the MTA to other political priorities. </strong>Politicians are also largely responsible for pressing the agency to spend money on opulent station makeovers, like the new Fulton Street station, that do little to improve service. Politicians also locked the MTA into an unfavorable agreement with creditors that secured a needed short-term cash infusion but left it saddled with $5 billion in interest payments.</p> <p><u><strong>Perhaps most egregiously, Gov. Cuomo recently forced the MTA to send $5 million to three upstate ski resorts that were struggling with a warm winter. </strong></u></p> <p><a href=""><img alt="" src="" style="width: 500px; height: 346px;" /></a></p> <p>The MTA has also suffered from high turnover in its senior ranks, as dozens of high-level officials have taken advantage of a lucrative revolving door whereby they leave jobs at the MTA for high-up jobs at contractors that do business with the MTA.</p> <p>Seemingly at every turn, politicians have failed to act on a series of chances to turn things around. They ignored decades of warnings from state and city comptrollers about MTA funding. They failed to pass a congestion pricing plan in 2008. Thy chose not to give mass transit much of the proceeds from bank settlements after the financial crisis. And they brushed off findings from official commission reports pointing out the system&rsquo;s defects.</p> <p>All of this has amounted to a shocking development: The number of subway riders declined slightly last year, even as the population of NYC has continued to expand rapidly.</p> <p>Problems worsened under Cuomo as the governor tried to micromanage decision making at the agency, a move that only worsened its problems. <strong>For example, a few months ago, the MTA cut $500 million from the signal-repair budget to fund other projects that are more important to Cuomo. For context, signal malfunctions are the biggest contributing factor in train delays.</strong></p> <p>But perhaps the most fundamental flaw in how the MTA is managed is the fact that many of its most high-level decisions are made by a committee of bureaucrats and politicians, the Times reported.</p> <p><strong>&ldquo;A camel is a horse designed by committee, and the MTA is a train service run by committee,&rdquo; </strong>a Cuomo spokeswoman said.<br />&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="1330" height="539" alt="" src="" /> </div> </div> </div> Andrew Cuomo Andrew Cuomo Baltimore Metro Subway Creditors IRT Flushing Line Maryland Transit Administration Metropolitan Transportation Authority New York City New York City Subway New York Times Rail transport Tax Revenue Technology of the New York City Subway Sat, 18 Nov 2017 22:00:00 +0000 Tyler Durden 607512 at Another Step Towards The Sovietization Of American Media <p><a href="">Authored by James George Jatras via The Strategic Culture Foundation,</a></p> <p>This week the US Department of Justice Criminal Division forced the Russian-funded television network RT (formerly Russia Today) to register as a &ldquo;foreign agent&rdquo; under the Foreign Agents Registration Act (FARA). Failure to comply would have risked arrest of RT&rsquo;s management and seizure of its assets. The move comes on the heels of&nbsp;<a href="" target="_blank">Senators&rsquo; recent demands</a>&nbsp;that terrified tech giants Twitter, Facebook, and Google&nbsp;<a href="" target="_blank">act as ideological filters</a>.</p> <p>With no discernable defenders among America&rsquo;s media establishment, RT rightly denounced the selective FARA mandate as an attack on media freedom &ndash; which it is. But <strong>more ominous is what the move against RT says about America&rsquo;s rulers&rsquo; further intention to limit the sources of information available to its subjects</strong>.</p> <p>As&nbsp;<a href="" target="_blank">Daniel McAdams of the Ron Paul Institute</a>&nbsp;writes:</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p>&ldquo;RT America is a news organization operating in the United States that is funded at least partly by a foreign government. So is the BBC. So is Deutsche Welle, France24, Al-Jazeera, and numerous other foreign media organizations. It is assumed that they all to a degree reflect the editorial interests&nbsp;of those who pay the bills.</p> <p>&nbsp;</p> <p>&ldquo;The same is true with other, non-state funded&nbsp;media outlets, of course. It&rsquo;s up to us to factor these things in when we consume media. That&rsquo;s what it means to be a free people.</p> <p>&nbsp;</p> <p><strong>&ldquo;A core value in a free society is that our own government has zero power over what we read, what we watch, how we think, how we come to interpret current events, the conclusions we draw based on these inputs, and so on. These are private matters over which any government that is not tyrannical should have no sway.</strong></p> <p>&nbsp;</p> <p><strong>&ldquo;The real insidiousness of tyrannical systems is that the government most lasciviously seeks control over most private spaces &mdash; including the most private space called our brain, our intellect, our conscience. We must be free to follow our interests down whatever path they may lead us so that we may reach our own conclusions and then perhaps test them ourselves in the marketplace of ideas.&rdquo;</strong></p> </blockquote> <p>The attack on RT (and another Russian network, Sputnik, which evidently has not yet been given a deadline for registration) is a <strong>milestone in the degeneration of the American official (call them what you want &ndash; corporate, legacy, mainstream) media into PR agencies for the governing establishment and its ideological imperatives.</strong> We&rsquo;ve been moving along this path for a while now, and it&rsquo;s going to get worse.</p> <p><strong>Long gone are those halcyon days of yore when Americans could just sit back and watch CBS&rsquo;s Walter Cronkite with total confidence they were getting the truth, the whole truth, and nothing but the truth. </strong>(For youngsters who have no idea who the hell Cronkite was, just Google &ldquo;most trusted man in America.&rdquo;) Back in the naïve infancy of the TV age, from about the 1950s until the beginning of the 1990s, there was a common national media culture that reflected the established, generally liberal, mainly Democratic tilt of the American&nbsp;inteligentsiya&nbsp;that was almost uniform among the (then only) three networks and a handful of major newspapers and magazines. To be sure, that was also a ruling class media of a sort, but it reflected a broad and deep social consensus.</p> <p>Those days are no more. <strong>Perhaps the unraveling of media trust and social consensus alike started in earnest with Vietnam.</strong> But still, for decades afterwards there still seemed to be plenty of empty cranial receptacles for government and corporate propaganda of the first Gulf War under Bush 41, Bill Clinton&rsquo;s phony humanitarian wars in the Balkans, Bush 43&rsquo;s Iraq War, and Obama&rsquo;s Libyan and Syrian imbroglios. Sadly, there are many such cranial receptacles even today.</p> <p><strong>By its attack on RT, the US government is officially telling us that only the mainstream media (MSM) can be regarded as are purveyors of Truth (with a capital T) and that anybody not on the approved list is fake. </strong>How do we know? Why, the MSM themselves tell us! The Washington Post&rsquo;s &ldquo;<a href="" target="_blank">Democracy Dies in Darkness</a>.&rdquo; CNN&rsquo;s &ldquo;<a href="" target="_blank">Facts First</a>.&rdquo; The New York Times&rsquo; &ldquo;<a href="https://sredirect/" target="_blank">The Truth is Hard</a>.&rdquo; (The fact that certifiably authoritative and truthful media are militantly hostile to Russia, not to mention to Donald Trump, is purely coincidental.)</p> <p><u><strong>A lot of Americans don&rsquo;t buy it anymore, though. </strong></u>Some of the skepticism falls along purely partisan lines reflecting increasing moral and political polarization:&nbsp;our&nbsp;media (which I exclusively consult) tells the truth, but&nbsp;your&nbsp;media (which I don&rsquo;t consult) are liars. About one-third of Americans get their talking points from, say, Michael Moore, and from Rachel Maddow on MSNBC, with their related internet echoes, while another third gets theirs from Rush Limbaugh, and from Sean Hannity on Fox News, and their internet echo chambers. Increasingly, there is nothing like a national dialogue on anything, but rather two entirely separate, diametrically opposed ideological cultures &ndash; and alternate realities &ndash; each demonizing &ldquo;them.&rdquo; This is why when after Barack Obama&rsquo;s election the Tea Party appeared, the GOP fell over itself trying to co-opt them, while the Democrats denounced them as a mob of racists and subversives. When later the &ldquo;Occupy&rdquo; and Black Lives Matter movements broke out on the Left, the Democrats tried to figure out how to channel it while top Republicans denounced it as gang of commie anarchists and losers.</p> <p><strong>With the election of Donald Trump the divide intensified further to one of&nbsp;<a href="" target="_blank">latent civil war</a>.</strong></p> <p><strong><em>At some point the false picture of pseudo-reality (as&nbsp;<a href=";q=ideological+pseudo+reality&amp;source=gbs_word_cloud_r&amp;cad=5" target="_blank">Alain Besançon called it in the late Soviet propaganda context</a>) diverges so far from&nbsp;real&nbsp;reality that the official media narrative becomes useless and even counterproductive. While a majority of Americans probably are still glued to the partisan outlets of &ldquo;their&rdquo; side of the political divide, there is a growing sense across the spectrum that not only the MSM but even partisan media like Fox News and MSNBC are untrustworthy.</em></strong></p> <p>In the past, notably in the totalitarian societies of the 20<sup>th</sup>&nbsp;century, maintaining the credibility of official media required the physical repression of alternatives. Today, such a crude approach is unnecessary and almost technologically unfeasible, even for such undemocratic countries as Iran, Cuba, and Saudi Arabia (though North Korea may be successful through the sheer unavailability of modern communications technology to most of the population). Instead of suppressing dissent, is it sufficient to maintain major media&rsquo;s role as gatekeeper and certifier of reliability.</p> <p><strong>Which brings us back to the impact of foreign media like&nbsp;RT, Sputnik, Strategic Culture Foundation, Al-Jazeera, CGTN, Press TV, often in parallel with alternative media like Zero Hedge, Lew Rockwell,, Ron Paul Institute, and others, to break through the information firewall but arguably then being influenced by the agenda of the sponsoring foreign governments. </strong>In any case, a growing segment of the American public is discovering a skill once well-honed by the citizens of the former communist countries: reading between the lines of the official media (which is assumed to be full of lies) and making informed comparisons to&nbsp;samizdat&nbsp;alternative media, foreign sources, and the rumor-mill to guess what the truth might be.</p> <p>Make no mistake &ndash; what has started with RT won&rsquo;t end with RT. Our betters have decided they need to protect our minds from &ldquo;propaganda&rdquo; penetration that might cause us to doubt the truth of what CNN and the Washington Post tell us.</p> <p><u><em><strong>Citizens! Be grateful for such wise leaders and dedicated information workers! Smash the enemy voices that seek to undermine our democracy as&nbsp;<a href="" target="_blank">we march boldly into the radiant future</a>!</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="251" height="164" alt="" src="" /> </div> </div> </div> Al-Jazeera America: Imagine the World Without Her Balkans Barack Obama Broadcasting communications technology Crude Department of Justice Donald Trump firewall Fox News Google Iran Iraq Mass media Michael Moore MSNBC New York Times North Korea Politics Reality Republican Party Ron Paul Ron Paul Institute RT Saudi Arabia State media Strategic Culture Foundation Tea Party Television Twitter Twitter US Department of Justice Criminal Division US government Walter Cronkite Sat, 18 Nov 2017 21:30:00 +0000 Tyler Durden 607519 at Hunting Angels: What The World's Most Bearish Hedge Fund Will Short Next <p>It&#39;s not easy being &quot;the world&#39;s most bearish hedge fund&quot;, a description we first conceived nearly three years ago, and one look at Horseman Capital&#39;s returns over the past three years confirms it:<strong><em> after generating market-beating returns for much of its existence, things went bad in 2015, and much worse in 2016...</em></strong></p> <p><a href=""><img height="294" src="" width="500" /></a></p> <p>... when the Fund had a record net short equity position of over -100%, just as the market ripped higher after the Trump election.</p> <p><strong>That said, 2017 has been much better for Horseman and its CIO Russell Clark, who correctly timed the year&#39;s two big short trades so far: the mall REIT and the shale shorts. </strong></p> <p>Unfortunately, his other positions stood in the way, <strong>and as of the end of October (a good month with 2.04% in P&amp;L), the fund is just 0.25% up on the year</strong>. Worse, after a period of calm, steady, upward grinding monthly performance for much of the previous several years, Horseman&#39;s sharpe ratio has cratered, as the monthly return variance surged, with a -6% month following two +7% months as a result of gross leverage that has never been higher, even if the net equity position - while still largely short - is far more manageable than it was in 2016.</p> <p><a href=""><img height="253" src="" width="500" /></a></p> <p>Still, having been well ahead of the pack on the two big shorts of 2017, most money managers are always curious<strong> what if anything Clark - and Horseman - are shorting next.</strong> Well, they are in luck, because in his latest letter, he unveils the answer: according to Clark,<u><em><strong> the next major source of alpha will be shorting fallen angel bonds.</strong></em></u></p> <p>In his November letter to clients, Clark explains why he is hunting for soon to be &quot;fallen angels&quot;, and where he got the idea from. And after more fund managers read the following excerpt, we have a feeling that the next big leg lower in not only junk, but also crossover credit, is imminent:</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p>Mifid II will come into force soon, and a lot of research that used to be free, will need to be paid for. This has been a reason to ask ourselves some serious questions, namely what research do I read, and what has made me the most money. <strong>Strangely the research that has been most profitable for me, will remain free even post Mifid II as it is publicly available. The International Monetary Fund produces Global Financial Stability Reports. The stand out report for me was the April 2008 report that highlighted Eastern European banks vulnerability to wholesale funding. </strong>I shorted many of the banks named in the report. <strong>Most fell 70% to 90% subsequently. </strong></p> <p>&nbsp;</p> <p>What does the most recent issue of the Global Financial Stability Report have to say? <strong>It notes that BBB bonds now make up nearly 50% of the index of investment grade bonds, an all time high. </strong>BBB bonds are only one notch above high yield, and are at the greatest risk of becoming fallen angels, that is bonds that were investment grade when issued, but subsequently get downgraded to below investment grade, or what is known these days as high yield. <strong>It then points out that investors have never been more at risk of capital loss if yields were to rise. In addition, it notes volatility targeting investors will mechanically increase leverage as volatility drops, with variable annuities investors having little flexibility to deviate from target volatility. </strong>Another interesting point was that mutual fund share of the high yield market in the US have risen from 17% in 2008 to 30% today, and notes that <strong>investors outflows have become much more sensitive to losses than they used to be. </strong></p> <p>&nbsp;</p> <p>So my favourite research (love the price!) is telling me that <strong>US investment grade debt is very low quality, and could produce some large fallen angels. It then goes on to tell me that mutual funds are much larger in the high yield market than they used to be. It also tells me low rates means the capital losses are much higher than they used to be. And that investors in high yield mutual funds are much flightier than they used to be! </strong>Essentially the IMF are telling me that <strong>if you get a large enough fallen angel, the high yield market will freak out, and volatility will spike causing volatility targeting investors to dump leveraged positions. Sounds good to me </strong>- but with growth so good and the market so strong, how on earth would we get a fallen angel?</p> <p>&nbsp;</p> <p>To find a potential fallen angel, <strong>I looked through the holdings of investment grade bond ETFs to find large BBB bond issuers. The biggest of the BBB issuers happened to be the large telecommunication companies. The sector has over USD300bn of BBB rated debt compared to a high-yield market of USD 1tn. </strong>I am not a debt specialist, but I have noticed that falling share prices tend to be good lead indicators on debt downgrades, and the US telecommunication sector has not been participating in the market rally this year. The story looks good to me, and it comes via my favourite research source. <strong>US debt markets look in trouble to me, whether that has any effect on broader equity markets remains to be seen.</strong></p> </blockquote> <p>Aside from this rather original idea, some other notable changes in Horseman&#39;s industry exposure are noted: while both the retail and E&amp;P shorts are still there, they have been notably tamed, and of note are two other major shorts (both in the US): one in real estate (we assume this is a play on the adverse impact of rising rates on real estate valuations), and the healthcare sector, a short whose thesis is quite interesting and we will reveal tomorrow.</p> <p><a href=""><img height="1110" src="" width="500" /></a></p> <p>For those wondering, the top 10 positions by % of NAV are the following:</p> <p><a href=""><img height="127" src="" width="500" /></a></p> <p>Needless to say, we wish Horseman much success with a prompt realization of his BBB-short, especially since it appears that his LPs are starting to get cold feet, and the fund&#39;s AUM has shrunk by half from $2.8 BN&nbsp; one year ago...</p> <p><img height="426" src="" width="500" /></p> <p>... to less than half, or $1.2BN currently.</p> <p><a href=""><img height="425" src="" width="500" /></a></p> <div class="field field-type-filefield field-field-image-teaser"> <div class="field-items"> <div class="field-item odd"> <img class="imagefield imagefield-field_image_teaser" width="803" height="483" alt="" src="" /> </div> </div> </div> Alpha Banking Bond Bond Business Equity Markets Finance Financial markets Fixed income Hedge fund High Yield High-yield debt Institutional investors International Monetary Fund International Monetary Fund Investment Investment Grade Mathematical finance Money Real estate United States housing bubble Volatility Volatility Sat, 18 Nov 2017 21:05:00 +0000 Tyler Durden 607516 at Amazon-opoly: Jeff Bezos May Be About To Control $53 Billion In Federal Government Spending <p><a href=""><em>Authored by Brian McNicoll via The Daily Caller,</em></a></p> <p>Jeff Bezos spends a lot of time directing the newspaper he owns, The Washington Post, to criticize President Donald Trump in every way imaginable. But for some reason, the federal government cannot stop giving Amazon &mdash; the retail empire Bezos also owns &mdash; a slew of taxpayer-subsidized subsidies. <strong>Now, Congress is considering a new federal purchasing plan that could result in Amazon&rsquo;s most lucrative government handout yet.</strong></p> <p><a href=""><img height="228" src="" width="600" /></a></p> <p><strong>The technology giant is no stranger to sweetheart deals that line its pockets at taxpayer expense. </strong>The U.S. Postal Service, for instance &mdash; which has lost $60 billion since 2007 &mdash; <a href="">handles last-mile shipping for two-thirds of Amazon&rsquo;s deliveries.</a> This means overtime for workers and a good incoming revenue number on the USPS&rsquo;s balance sheet, but it&rsquo;s a financial bonanza for Amazon.</p> <p>According to <a href="">media reports</a>, USPS delivers Amazon packages for $2 per package &mdash; even though it costs USPS $3.46 per package to make these deliveries. And that&rsquo;s before you get into the $200 million three years ago for 270,000 handheld scanners to process the packages or the $5 billion or more to replace USPS vehicles with ones better suited to carry Amazon&rsquo;s packages.</p> <p><strong>But even this cozy arrangement pales in comparison to <a href="">the deal Amazon is now trying to push through Congress. </a></strong></p> <p><u><strong>Buried deep in this year&rsquo;s defense spending bill is a provision that would move Defense Department purchases of commercial off-the-shelf products to online marketplaces.</strong></u></p> <p>A <a href="">summary of the proposal</a>, which was inserted into the legislation by House Armed Services Committee Chairman Mac Thornberry, argues it is needed to save money over the burdensome and expensive current system.</p> <p>It pointed to a <a href="">report</a> from the Inspector General of the Government Services Administration that found some IT equipment could be purchased more cheaply on the open market than through the GSA&rsquo;s &ldquo;schedules.&rdquo;</p> <p>In response, the <a href="">plan</a> calls for developing an online marketplace platform through which federal agencies can buy products such as paper clips, bottled water, computers, office furniture and more &mdash; just as any business would do.</p> <p>But it also calls for this platform to be designed to &ldquo;enable government-wide use of such marketplaces.&rdquo; This means the government is looking only for a procurement and supply management firm big enough to offer multiple suppliers for the same product with constantly changing selection and prices and serve the entire U.S. government.</p> <p><strong>That leaves just one likely possibility&nbsp; - Amazon Business - for basically monopoly control of <a href="">$53 billion in federal purchasing</a>, much of the supplies for which comes from no-bid contracts.</strong></p> <p>Amazon provides a platform for e-companies to sell through to their own customers. It <a href="">receives 15 percent to 20 percent</a> of the proceeds from such sales, which means a huge revenue stream for Amazon for doing basically nothing while vendors are forced to cough up as much as half their margin.</p> <p>A government deal with Amazon sets up opportunities for abuse, not to mention control over suppliers. Amazon would get to collect an enormous amount of data on agencies, which could be used to identify top competitors and drive them out of the federal marketplace with increased fees or other rules changes.</p> <p>And it means any discounts that can be negotiated for the bulk rates of purchasing the federal government does would flow not to the government and taxpayers &mdash; but instead into Amazon&rsquo;s pocket.</p> <p><strong>Amazon Business, which only started in 2015, <a href="">already has</a> 1 million customers and $1 billion in sales, and its revenues grew 34 percent in the last year. Adding federal procurement would effectively drive out all competitors for its business service.</strong></p> <p>It already is moving into position to do this at the local level. In January, Amazon <a href="">signed a contract</a> with U.S. Communities, a coalition of 90,000 local governments, to provide them with an online marketplace for office supplies and other goods.</p> <p><strong>The fate of the proposal is unknown. It is in the House version of the defense spending bill but not that of the Senate. This will be resolved in a conference committee, and one solution is to try it as a pilot project before committing the entire government to it.</strong></p> <p>There certainly ought to be a breathing period before yet another government agency signs yet another deal to use tax dollars to further enrich one of the richest men on the planet.</p> <p><em><span style="text-decoration: underline;"><strong>It&rsquo;s beginning to get suspicious.</strong></span></em></p> <div class="field field-type-filefield field-field-image-teaser"> <div class="field-items"> <div class="field-item odd"> <img class="imagefield imagefield-field_image_teaser" width="592" height="385" alt="" src="" /> </div> </div> </div> 3D publishing Amazon controversies Business Business Congress Department of Defense Donald Trump E-commerce Economy of the United States federal government Government Services Administration Jeff Bezos Newspaper Online music stores Politics Senate Services Committee United States Postal Service US government US Postal Service Sat, 18 Nov 2017 20:40:00 +0000 Tyler Durden 607518 at