http://www.zerohedge.com/fullrss2.xml/component/option%2Ccom_docman/Itemid%2C200023/gid%2C397/BoomBustBlog/BoomBustBlog/BoomBustBlog/BoomBustBlog/2009/2009/07/2009/2009/2009/07/2009/07/2009/2009/2009/2009/2009/07/2009/2009/2009/07/2009/07/2009/07/2009/07/news/t en Debt, Deficits & Economic Warnings http://www.zerohedge.com/news/2016-08-30/debt-deficits-economic-warnings <p><a href="https://realinvestmentadvice.com/debt-deficits-economic-warnings/"><em>Submitted by Lance Roberts via RealInvestmentAdvice.com,</em></a></p> <p>While the world has been focused on the Federal Reserve, the markets, and the upcoming election, few have noticed the expansion of the deficit in recent months which is now in excess of $667 billion up from a recent low of $530 billion. The chart below shows the history of U.S. surplus/deficit:</p> <p><a href="https://realinvestmentadvice.com/wp-content/uploads/2016/08/Taxes-Deficit-082916.png"><img alt="Taxes-Deficit-082916" class="alignnone size-full wp-image-16656" height="401" src="https://realinvestmentadvice.com/wp-content/uploads/2016/08/Taxes-Deficit-082916.png" width="600" /></a></p> <p>During the financial crisis, the deficit ballooned to a record of $1.35 trillion as tax revenue declined as Government spending swelled. <strong>Importantly, the Federal Deficit was approaching 10% in 2009, a historical record for the U.S., but still remains at levels associated with weaker economic growth rates and recessions.</strong></p> <p><a href="https://realinvestmentadvice.com/wp-content/uploads/2016/08/Taxes-Deficit-GDP-082916.png"><img alt="Taxes-Deficit-GDP-082916" class="alignnone size-full wp-image-16658" src="https://realinvestmentadvice.com/wp-content/uploads/2016/08/Taxes-Deficit-GDP-082916.png" style="width: 600px; height: 323px;" /></a></p> <p>The decline in the deficit was artificial in many ways as it was primarily due to the reforms from the&nbsp;&ldquo;<em>2011 Budget Control&nbsp;Act&rdquo;</em> which including tough spending cuts and a big tax bite that impacted a large majority of the middle class. <strong>Much of that <em>&ldquo;austerity&rdquo;</em> has now been reversed.</strong></p> <p>&nbsp;</p> <h2><u><span style="color: #008000;"><strong>Tax The Rich</strong></span></u></h2> <p>The surge in tax&nbsp;revenues was a direct result of the <em>&ldquo;fiscal cliff&rdquo;</em> at the end of 2012 as companies rushed to pay out special dividends and bonuses ahead of what was perceived to a fiscal disaster and higher tax rates. <strong>The large surge in incomes was primarily generated at the upper end of the income brackets where individuals were impacted by higher tax rates. Those taxes were then paid in April and October of 2013 and accounted for the sharp decline in the deficit. Also, it is important to remember that payroll taxes also increased due to the expiration of the payroll tax cut from 2010. </strong><span style="color: #993300;"><em>(Note: the increased tax collection from payrolls remains currently.)</em><strong>&nbsp;</strong></span></p> <p>This surge in tax revenue can be seen more clearly in the chart below of tax receipts as a percentage of GDP.</p> <p><a href="https://realinvestmentadvice.com/wp-content/uploads/2016/08/Tax-Receipts-GDP-082916.png"><img alt="Tax-Receipts-GDP-082916" class="alignnone size-full wp-image-16661" src="https://realinvestmentadvice.com/wp-content/uploads/2016/08/Tax-Receipts-GDP-082916.png" style="width: 599px; height: 325px;" /></a></p> <p><strong>While making the rich <em>&ldquo;pay their fair share&rdquo;</em> may increase revenue in the short run, over the longer term higher tax rates, and the subsequent redistribution of wealth leads to lower economic growth.</strong>&nbsp;Louis Woodhill put&nbsp;it best:</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p>&ldquo;<em><strong>To &lsquo;tax&rsquo; is to take away something from someone and give it to the government.</strong> &lsquo;The rich&rsquo; are rich because they own a lot of assets. So, what it means to &lsquo;tax the rich&rsquo; is to take assets away from rich people and transfer them to the government.</em></p> <p>&nbsp;</p> <p><em>So, what are the assets that the rich own? <strong>The rich don&rsquo;t have money bins full of cash, like Scrooge McDuck. Rather, they own things like factories, office buildings, and oil wells, either directly or indirectly via stocks and bonds.</strong> In other words, the rich own most of the &lsquo;nonresidential fixed assets&rsquo; of the nation. These assets certainly count as &lsquo;wealth&rsquo;, but what <strong>they are physically are the</strong>&nbsp;<strong>tools that workers use to produce America&rsquo;s GDP.&rdquo;</strong></em></p> </blockquote> <p>This is critically important to understand. By increasing taxes, to generate additional revenue for the government, you decrease the available capital that could be used for productive investments. <strong>Since the government doesn&rsquo;t want factories, office buildings, or oil wells, but rather cash, this forces the liquidation of productive investments thereby reducing capacity for economic growth.</strong></p> <p>The current Administration is failing once again to recognize the problems that exist with this country, at this moment, does not lie with the&nbsp;<em>&ldquo;rich.&rdquo;&nbsp;</em><strong>Instead, the problem is a lack of ability <a href="https://realinvestmentadvice.com/why-19-trillion-in-debt-is-a-problem/" target="_blank">for&nbsp;consumers to maintain a standard of living</a> that is well beyond their earnings capability.</strong>&nbsp;While the two most recent Administrations have been heavily criticized for running burgeoning deficits &ndash; <strong>the reality is that the average American has been doing the same for the past thirty years.</strong></p> <p><img alt="PCE-Wages-GDP-Debt-040416" class="alignnone size-full wp-image-14305" src="http://static.realinvestmentadvice.com/wp-content/uploads/2016/04/PCE-Wages-GDP-Debt-040416.png" style="width: 600px; height: 361px;" /></p> <p><strong>While tax dollars do get recycled back into the economy, repeated studies have shown that government spending has a much lower&nbsp;<em>&ldquo;multiplier&rdquo;</em>&nbsp;effect as compared to dollars spent directly by consumers and businesses.&nbsp;</strong></p> <p><strong>I have highlighted the periods when receipts as a percentage of GDP have peaked. There are two things worth noting in the chart above/below.</strong> Rising levels of receipts have coincided with stronger levels of economic growth in the early stages which is not surprising as more revenues lead to higher collections. <span style="color: #993300;"><strong>However, once those collections exceed 18% of GDP, it has generally marked the peak of economic activity and a subsequent recessionary drag in the economy.</strong></span></p> <p>There is one other point to be made. <strong>While there are many calls to raise taxes on the rich, give more to the poor, what the chart shows is that none of that really makes much difference.</strong> Regardless of the level of tax rates &ndash; tax receipts as a percentage of the economy has remained mired between 16 and 21%. <strong>Why? Because when you raise taxes, you lower economic growth and, therefore, collect less in revenue.</strong> During recessions, tax collections are at the lower end of the range while during expansions collections are at their highest.</p> <p>So, what does all of this mean? <strong>As&nbsp;Arthur Laffer noted 3 decades ago, it really is possible to set tax rates too high such that it actually hurts the economy.</strong></p> <p>We appear to once again be in such a condition now.</p> <p>The chart below shows receipts as a percent of GDP as compared to the S&amp;P 500 index. <span style="color: #993300;"><em>(Note: Each peak in tax collections has coincided with a mean-reverting event in the markets as a recessionary drag took hold.)</em></span></p> <p><a href="https://realinvestmentadvice.com/wp-content/uploads/2016/08/Tax-Receipts-GDP-SP500-082916.png"><img alt="Tax-Receipts-GDP-SP500-082916" class="alignnone size-full wp-image-16662" src="https://realinvestmentadvice.com/wp-content/uploads/2016/08/Tax-Receipts-GDP-SP500-082916.png" style="width: 599px; height: 321px;" /></a></p> <p><strong>While there are many that expect that the markets can repeat the secular bull market of the 90&rsquo;s, and by extension, receipts could test the previous high, this is not likely.</strong> The demographic and economic makeup, valuation levels and interest rates currently weigh heavily against that probability.</p> <p>&nbsp;</p> <h2><u><span style="color: #008000;"><strong>It&rsquo;s The Deficit Stupid</strong></span></u></h2> <p>As stated above, as the&nbsp;<em>&ldquo;rich&rdquo;&nbsp;</em>invest in productive investments it leads to higher employment, strong consumer demand and economic growth. In turn, this leads to higher tax revenue.</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p><strong><em>However, deficits, and deficit spending, are HIGHLY destructive to economic growth as it directly impacts gross receipts and saved capital equally. Like cancer &ndash; running deficits, along with continued deficit spending, continues to destroy saved capital and damages capital formation</em></strong><strong>.&nbsp;</strong></p> </blockquote> <p>Debt is, by its very nature, a cancer on economic growth. As debt levels rise it consumes more capital by diverting it from productive investments into debt service. <strong>As debt levels spread through the system it consumes greater amounts of capital until it eventually kills the host.</strong> The chart below shows the rise of federal debt and its impact on economic growth.</p> <p><a href="https://realinvestmentadvice.com/wp-content/uploads/2016/07/Debt-GDP-072816-2.png"><img alt="Debt-GDP-072816-2" class="alignnone size-full wp-image-16186" src="https://realinvestmentadvice.com/wp-content/uploads/2016/07/Debt-GDP-072816-2.png" style="width: 601px; height: 388px;" /></a></p> <p><strong>The reality is that the majority of the aggregate growth in the economy since 1980 has been&nbsp;financed by deficit spending, credit creation and a reduction in savings</strong>. This reduced productive investment in the economy and the output of the economy slowed. As the economy slowed, and wages fell, the consumer was forced to take on more leverage to maintain their standard of living which in turn decreased savings.&nbsp;<strong>As a result of the increased leverage more of their income was needed to service the debt &ndash; and with that the <em>&ldquo;debt cancer&rdquo;</em> engulfed the system.</strong></p> <p>The Austrian business cycle theory attempts to explain business cycles through a set of ideas. The theory views business cycles:</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p>&ldquo;<strong>As the inevitable consequence of excessive growth in bank credit, exacerbated by inherently damaging and ineffective central bank policies, which cause interest rates to remain too low for too long, resulting in excessive credit creation, speculative economic bubbles and lowered savings</strong>.&rdquo;</p> </blockquote> <p><a href="https://realinvestmentadvice.com/wp-content/uploads/2016/02/Debt-Austrian-Theory-022216.png"><img alt="Debt-Austrian-Theory-022216" class="alignnone size-full wp-image-13607" src="https://realinvestmentadvice.com/wp-content/uploads/2016/02/Debt-Austrian-Theory-022216.png" style="width: 599px; height: 381px;" /></a></p> <p><strong>The problem that is yet not recognized by the current Administration and mainstream economists is that the excessive deficits and exponential credit creation can no longer be sustained. </strong>The process of a&nbsp;<em>&ldquo;credit contraction&rdquo;</em>&nbsp;will eventually occur over a long period of time as consumers and governments are ultimately forced to deal with the deficits.</p> <p><strong>The good news is the process of&nbsp;<em>&ldquo;clearing&rdquo;</em>&nbsp;the market will eventually allow resources to be reallocated back towards more efficient uses and the economy will begin to grow again at more sustainable and organic rates.</strong></p> <p>Today, however, expectations of a return to economic growth rates of the past are most likely just a fairy tale. <strong>The past 8-years of stock market returns have been fueled by trillions of dollars of support and direct injections into the financial system &ndash; that support is not sustainable in the long run.</strong> While the injections have kept the economy from falling into a depression in the short term &ndash; <strong>the unwinding of that support will suppress economic growth for many years to come.</strong></p> <p>There is no way to achieve the necessary goals&nbsp;<em>&ldquo;pain-free.&rdquo;</em>&nbsp; <strong>The time to implement austerity measures is when the economy is running a budget surplus and is close to full employment.&nbsp;</strong>That time was two Administrations ago when the economy would have slowed but could have absorbed and adjusted to the restrictive measures. <strong>However, when things are good, no one wants to&nbsp;<em>&ldquo;fix what isn&rsquo;t broken&rdquo;.&nbsp;</em></strong>The problem today is that with a high dependency on government support, high levels of underemployment and rising&nbsp;budget deficits, the implementation of austerity measures will only deter future economic growth, which is dependent on the very things that need to be&nbsp;<em>&ldquo;fixed&rdquo;.</em></p> <p><strong>The processes that fueled the economic growth over the last 30 years are now beginning to run in reverse, and when combined with the demographic shifts in the U.S., the impact could be far more immediate and prolonged than the media, economists and analysts are currently expecting.</strong> Sacrifices will have to be made, the economy will drag on at subpar rates of growth, individuals will be working far longer into their retirement years and the next generation of Americans will lead a far different life that what the currently retiring generation enjoyed.</p> <p><strong>It is simply a function of the math.</strong></p> <div class="field field-type-filefield field-field-image-teaser"> <div class="field-items"> <div class="field-item odd"> <img class="imagefield imagefield-field_image_teaser" width="711" height="446" alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/20160830_debt.jpg?1472578055" /> </div> </div> </div> http://www.zerohedge.com/news/2016-08-30/debt-deficits-economic-warnings#comments Capital Formation Deficit Spending Federal Deficit Federal Reserve fixed None Reality Tax Revenue Tue, 30 Aug 2016 22:10:00 +0000 Tyler Durden 571072 at http://www.zerohedge.com Michael Lewitt: "We're In The Late Stages of Ponzi Finance" http://www.zerohedge.com/news/2016-08-30/michael-lewitt-were-late-stages-ponzi-finance <p>Since Michael Lewitt, aka "<a href="http://thecreditstrategist.com/about/">The Credit Strategist</a>" is one of our preferred bond market analysts, we enjoyed his <a href="http://www.financialsense.com/contributors/michael-lewitt/late-stages-ponzi-finance">latest interview by Financial Sense</a>'s Jim Puplava, where he discusses the only thing that matters: "are we on the verge of a massive market crash." It will hardly come as a surprise that Lewitt, author of <a href="http://www.amazon.com/exec/obidos/ASIN/1119183545/financialsenseon">The Committee to Destroy the World</a>: Inside the Plot to Unleash a Super Crash on the Global Economy, argues that the problems we faced in the last recession haven’t been dealt with and, as a result, another crisis is likely, particularly when it comes to the opaque derivatives market. In sum, Lewitt believes we are “in the late stages of Ponzi finance.” </p> <p><img src="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2016/08/27/michael%20lewitt_0.jpg" width="500" height="430" /></p> <p><em>The following is a summary of Puplava's interview with Lewitt, which can be <a href="http://www.financialsense.com/financial-sense-newshour/big-picture/michael-lewitt-book">heard in full here</a>.</em></p> <p><strong>Failed Policies</strong></p> <p>We see abundant evidence that government policies have failed and are failing, Lewitt said.&nbsp; </p> <p>“They’ve tried to solve the debt crisis by printing trillions of dollars of more debt,” he noted. “They’ve added on top of that hundreds of billions of regulations or new regulatory costs, and somehow they expect the economy to grow under the weight of those burdens.” </p> <p>These and other missteps by regulators have hampered growth and have created our current low-yield, low-interest rate muddled economy. Many regulators come from the same class of academic economists, Lewitt argued, and they don’t understand how the world actually works. </p> <p>As such, he said, our current course is going to lead to another crisis.</p> <p><strong>Debt and Regulations Are Crippling Growth</strong></p> <p>The worst thing about the debt buildup is borrowed money isn’t being used for productive ends, Lewitt said. And what’s more, political will doesn’t exist to fix what is an acknowledged problem, he added. </p> <p>“You couldn’t design this worse if you tried,” he said. “Low-interest rates cover up a lot of things, but eventually you have to pay the money back.” </p> <p>As the debt inevitably matures, companies will be looking back on years of low growth, and they’ll have to default, Lewitt stated. And governments will keep taxing and spending until there’s pushback. </p> <p>In terms of regulations, Lewitt said he feels they were well intentioned. The financial system was grossly overleveraged, but the problem is regulations went too far, he added. </p> <p>“Markets are over-regulated right now. It’s one thing to want to make sure banks aren’t levered 30-to-1, but it’s another thing to come up with a set of regulations that dries up liquidity in markets,” he said.</p> <p>* * * </p> <p><strong>Fed Is a Shadowy, Poorly Understood Force</strong></p> <p>Nobody wants to connect the dots, and most people don’t understand what the Fed does, or even what the fractional reserve banking system is, Lewitt noted. </p> <p>“As a result, we have a system where the most powerful government agency in the world, the Federal Reserve, really operates without very many checks and balances,” he said. </p> <p>We’ve seen regulators that are just hurting markets and making missteps. For example, the Fed should have raised rates at the latest in 2014, but instead persisted with crisis-era policies, Lewitt said. </p> <p>What we’ve ended up with is a massive regulatory state because the government doesn’t trust people to manage themselves, he added.</p> <p>* * * </p> <p><strong>Derivatives Market Is a Mess</strong></p> <p>Right now, American banks are much better capitalized and everything will be fine, Lewitt stated, unless derivatives become a problem. </p> <p>For example, if Deutsche Bank is unable to meet its obligations on its $60 trillion in derivatives, counterparties around the world, including Goldman Sachs, J.P. Morgan, and others, are going to have a problem. </p> <p>“It’s a huge daisy chain,” he noted. “The problem with derivatives has not been solved—it’s been glossed over. There is $200 trillion debt globally, and there’s no way the global economy can generate the productivity to service that debt.”</p> <p>* * * </p> <p><strong>Later Stages of Ponzi Finance</strong></p> <p>“We’re … just borrowing new money to pay back old money,” Lewitt said. “I would say that we’re in the late stages of Ponzi finance.” </p> <p>This doesn’t end well, Lewitt noted. At some point, people will have to come up with real money to pay debts. Or in our case, we’re going to devalue money to pay our debts through inflation and currency debauchment, Lewitt said. Those are our only options. </p> <p>But we can make a positive impact to prevent some of this from happening, Lewitt argued. </p> <p>“We should discourage debt,” he said. “We should encourage equity. We should discourage speculation. We should encourage productive investment. And in order to do that, you need to change the tax code, which right now does the opposite.” </p> <p>We also need to lower the growth of debt, he said. And we need to figure out how to improve productivity and improve economic growth. The ways to do that are to fix the tax code, reduce regulation, and allow the economy rather than the government to run things, Lewitt added.</p> <p>For individuals, this means getting out of bonds, having some gold, not being afraid to hold cash, and being very cautious of equities, Lewitt said. </p> <p>“Now is not the time to be a hero,” he said. “Now’s the time to worry about protecting your capital.”</p> <p>* * *</p> <p><em>The interview can be <a href="http://www.financialsense.com/financial-sense-newshour/big-picture/michael-lewitt-book">accessed here</a>.</em></p> <div class="field field-type-filefield field-field-image-teaser"> <div class="field-items"> <div class="field-item odd"> <img class="imagefield imagefield-field_image_teaser" width="500" height="430" alt="" src="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/michael%20lewitt.jpg?1472589797" /> </div> </div> </div> http://www.zerohedge.com/news/2016-08-30/michael-lewitt-were-late-stages-ponzi-finance#comments Bond Counterparties default Deutsche Bank Federal Reserve Fractional Reserve Banking Global Economy goldman sachs Goldman Sachs Market Crash Recession Tue, 30 Aug 2016 21:43:05 +0000 Tyler Durden 571081 at http://www.zerohedge.com Real Courage & Standing Up Against Sitting Down http://www.zerohedge.com/news/2016-08-30/real-courage-standing-against-sitting-down <p><a href="http://michaelpramirez.com/index.html"><em>Submitted by Michael P Ramirez</em></a>,</p> <p><strong>It always amazes me when people seem to confuse the right to make a statement with the right to be insulated from the reaction to their actions.</strong> Take for example, 49ers quarterback, Colin Kaepernick, who recently sat down during the playing of our National Anthem. There is no question, he has every right to do it. But Newton&#39;s third law of physics applies here:</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p><span style="font-size: small;">For every action, there is an equal and opposite reaction.</span></p> </blockquote> <p><span style="font-size: small;">Americans, in response, have the right to sit at home when asked to stand in line to support him or the 49ers. <em><strong>Just as Colin has a right to make his statement, Americans have a right to disagree with him, to loathe his actions and to use their pocket books to complete their statement of disagreement. </strong></em></span></p> <p><span style="font-size: small;">I will stand up for that. </span></p> <p><span style="font-size: small;"><strong>Colin has every right to sit down.</strong> Just as he has the right make up some lame excuse for his gesture. Colin seems to believe that America is a land of oppression and police abuse. <u><strong>Unfortunately for Colin, the facts contradict his statement.</strong></u></span></p> <p><em><span style="font-size: small;">The majority of Americans that die from police abuse constitute a very small number and are mostly whites. The vast majority of blacks that are killed in homicides are by black on black crime. The percentage of incarceration of minorities is due to the larger percentage of crimes that are committed by those groups.</span></em></p> <p><em><span style="font-size: small;">Perhaps someone should ask Colin if the record number of homicides in Chicago are the result of police abuse.</span></em></p> <p><span style="font-size: small;">Some ESPN columnist seems to think he is courageous.</span></p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p><strong><span style="font-size: small;">Real courage is the Dallas Police running towards gunfire to protect fellow citizens.&nbsp; </span></strong></p> <p>&nbsp;</p> <p><span style="font-size: small;"><strong>Real courage is putting on a uniform for more than one day and going to work with the real possibility of not coming home </strong>because you can be killed in the line of action trying to protect citizens. </span></p> <p>&nbsp;</p> <p><span style="font-size: small;"><strong>Real courage is doing that every day in some of America&#39;s most dangerous places</strong> to serve the public and for a tiny percentage of what high-priced professional athletes make, in communities that I am certain Colin Kaepernick does not live remotely close to.</span></p> </blockquote> <p><span style="font-size: small;">There is no question that racism still exists in America and, unfortunately, the racial climate seems much worse today, after 8 years of progressive policies under the current administration. But last time I checked, the president of the United States was an African American. The head of the Justice Department was an African American. In a 2012 article, six of the top ten highest paid NFL players on the Forbes list were African American. In the 21st century America, racism is represented by the fringe of our society and that constitutes a small percentage of the whole.</span></p> <p><em><strong><span style="font-size: small;">In America, everyone has the right to say and do stupid things, just as people have the right to say Kaepernick&#39;s action, is a self-serving gesture by a player who is failing to win his postion and utilizing some desperate tactic to seek attention. </span></strong></em></p> <p><span style="font-size: small;"><u><strong>Compare Colin&#39;s actions with the recent actions of U.S. Olympic Bronze Medal Pole Vaulter U.S. Army Reserve 2nd LT Sam Kendrick. </strong></u>Sam Kendrick stopped, dropped his pole and stood for the Star Spangled Banner at this year&#39;s Olympic games in the middle of competition, to honor this country that has afforded its people liberty and freedom. </span></p> <p><iframe allowfullscreen="" frameborder="0" height="315" src="https://www.youtube.com/embed/n7yjJqjLGXk" width="560"></iframe></p> <p><strong>As a reservist in the military, Sam and his fellow soldiers have witnessed firsthand, real oppression. They know firsthand, the price of freedom. </strong></p> <p><span style="font-size: small;">But Sam was not trying to draw attention to himself.</span></p> <p><span style="font-size: small;">Perhaps Colin needs to visit countries that do not have the freedom that some spoiled multi-millionaire athletes apparently take for granted.</span></p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2016/08/25/20160830_kap.jpg"><span style="font-size: small;"><img alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2016/08/25/20160830_kap.jpg" style="width: 600px; height: 263px;" /></span></a></p> <p><span style="font-size: small;"><strong>America is great because we have the freedom and liberty to follow our dreams, and the freedom of self expression. </strong>Our national anthem is deserving of respect because it represents this great country that protects the freedom to stand up or sit down for what you believe in.</span></p> <p><strong><span style="font-size: small;">P</span></strong><span style="font-size: small;"><strong>art of that freedom is the right to make stupid gestures. Just don&#39;t be offended when people call you stupid.</strong><br />&nbsp;</span><br /><span style="font-size: small;">There is a quote often attributed to Lincoln which Colin may want to consider in the future...</span></p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p><em><strong><u><span style="font-size: small;">Better to remain silent and be thought a fool than to &quot;sit down&quot; and to remove all doubt.</span></u></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="947" height="415" alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/20160830_kap.jpg?1472581490" /> </div> </div> </div> http://www.zerohedge.com/news/2016-08-30/real-courage-standing-against-sitting-down#comments Tue, 30 Aug 2016 21:20:00 +0000 Tyler Durden 571075 at http://www.zerohedge.com Hillary Has Until September 29 To Respond - Under Oath - To These 25 Questions http://www.zerohedge.com/news/2016-08-30/hillary-has-until-september-29-respond-under-oath-these-25-questions-judicial-watch <p>Judicial Watch announced on its website today that it has submitted a list of 25 questions to Hillary Clinton regarding her email practices while serving as Secretary of State.&nbsp; Pursuant to a decision by U.S. District Court Judge Emmet G. Sullivan, Hillary has 30 days to respond, under oath, to the questions.&nbsp; Per federal law, <a href="http://www.judicialwatch.org/press-room/press-releases/judicial-watch-submits-email-questions-hillary-clinton-written-answers-oath-due-september-29/">Judicial Watch</a> was limited to a total of 25 questions.</p> <p><em><strong>All 25 questions are included in their entirety below (we've highlighted some of the particularly amusing ones):</strong></em></p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <ol> <li>Describe the creation of the clintonemail.com system, including who decided to create the system, the date it was decided to create the system, why it was created, who set it up, and when it became operational.</li> <li>Describe the creation of your clintonemail.com email account, including who decided to create it, when it was created, why it was created, and, if you did not set up the account yourself, who set it up for you.</li> <li>When did you decide to use a clintonemail.com email account to conduct official State Department business and whom did you consult in making this decision?</li> <li>Identify all communications in which you participated concerning or relating to your decision to use a clintonemail.com email account to conduct official State Department business and, for each communication, identify the time, date, place, manner (e.g., in person, in writing, by telephone, or by electronic or other means), persons present or participating, and content of the communication.</li> <li><strong>In a 60 Minutes interview aired on July 24, 2016, you stated that it was “recommended” you use a personal email account to conduct official State Department business. What recommendations were you given about using or not using a personal email account to conduct official State Department business, who made any such recommendations, and when were any such recommendations made?</strong></li> <li>Were you ever advised, cautioned, or warned, was it ever suggested, or did you ever participate in any communication, conversation, or meeting in which it was discussed that your use of a clintonemail.com email account to conduct official State Department business conflicted with or violated federal recordkeeping laws. For each instance in which you were so advised, cautioned or warned, in which such a suggestion was made, or in which such a discussion took place, identify the time, date, place, manner (e.g., in person, in writing, by telephone, or by electronic or other means), persons present or participating, and content of the advice, caution, warning, suggestion, or discussion.</li> <li>Your campaign website states, “When Clinton got to the Department, she opted to use her personal email account as a matter of convenience.” What factors other than convenience did you consider in deciding to use a personal email account to conduct official State Department business? Include in your answer whether you considered federal records management and preservation requirements and how email you used to conduct official State Department business would be searched in response to FOIA requests.</li> <li><strong>After President Obama nominated you to be Secretary of State and during your tenure as secretary, did you expect the State Department to receive FOIA requests for or concerning your email?</strong></li> <li>During your tenure as Secretary of State, did you understand that email you sent or received in the course of conducting official State Department business was subject to FOIA?</li> <li>During your tenure as Secretary of State, how did you manage and preserve emails in your clintonemail.com email account sent or received in the course of conducting official State Department business, and what, if anything, did you do to make those emails available to the Department for conducting searches in response to FOIA requests?</li> <li>During your tenure as Secretary of State, what, if any, effort did you make to inform the State Department’s records management personnel (e.g., Clarence Finney or the Executive Secretariat’s Office of Correspondence and Records) about your use of a clintonemail.com email account to conduct official State Department business?</li> <li>During your tenure as Secretary of State, did State Department personnel ever request access to your clintonemail.com email account to search for email responsive to a FOIA request? If so, identify the date access to your account was requested, the person or persons requesting access, and whether access was granted or denied.</li> <li>At the time you decided to use your clintonemail.com email account to conduct official State Department business, or at any time thereafter during your tenure as Secretary of State, did you consider how emails you sent to or received from persons who did not have State Department email accounts (i.e., “state.gov” accounts) would be maintained and preserved by the Department or searched by the Department in response to FOIA requests? If so, what was your understanding about how such emails would be maintained, preserved, or searched by the Department in response to FOIA requests?</li> <li>On March 6, 2009, Assistant Secretary of State for Diplomatic Security Eric J. Boswell wrote in an Information Memo to your Chief of Staff, Cheryl Mills, that he “cannot stress too strongly, however, that any unclassified BlackBerry is highly vulnerable in any setting to remotely and covertly monitoring conversations, retrieving email, and exploiting calendars.” A March 11, 2009 email states that, in a management meeting with the assistant secretaries, you approached Assistant Secretary Boswell and mentioned that you had read the “IM” and that you “get it.” Did you review the March 6, 2009 Information Memo, and, if so, why did you continue using an unclassified BlackBerry to access your clintonemail.com email account to conduct official State Department business? Copies of the March 6, 2009 Information Memo and March 11, 2009 email are attached as Exhibit A for your review.</li> <li>In a November 13, 2010 email exchange with Huma Abedin about problems with your clintonemail.com email account, you wrote to Ms. Abedin, in response to her suggestion that you use a State Department email account or release your email address to the Department, “Let’s get a separate address or device.” Why did you continue using your clintonemail.com email account to conduct official State Department business after agreeing on November 13, 2010 to “get a separate address or device?” Include in your answer whether by “address” you meant an official State Department email account (i.e., a “state.gov” account) and by “device” you meant a State Department-issued BlackBerry. A copy of the November 13, 2010 email exchange with Ms. Abedin is attached as Exhibit B for your review.</li> <li>Email exchanges among your top aides and assistants in August 30, 2011 discuss providing you with a State Department-issued BlackBerry or State Department email address. In the course of these discussions, State Department Executive Secretary Stephen Mull wrote, “[W]e are working to provide the Secretary per her request a Department issued BlackBerry to replace her personal unit which is malfunctioning (possibly because of her personal email server is down). We will prepare two versions for her to use – one with an operating State Department email account (which would mask her identity, but which would also be subject to FOIA requests).” Similarly, John Bentel, the Director of Information and Records Management in the Executive Secretariat, wrote, “You should be aware that any email would go through the Department’s infrastructure and [be] subject to FOIA searches.” Did you request a State Department issued Blackberry or a State Department email account in or around August 2011, and, if so, why did you continue using your personal device and clintonemail.com email account to conduct official State Department business instead of replacing your device and account with a State Department-issued BlackBerry or a State Department email account? Include in your answer whether the fact that a State Department-issued BlackBerry or a State Department email address would be subject to FOIA affected your decision. Copies of the email exchanges are attached as Exhibit C for your review.</li> <li>In February 2011, Assistant Secretary Boswell sent you an Information Memo noting “a dramatic increase since January 2011 in attempts . . . to compromise the private home email accounts of senior Department officials.” Assistant Secretary Boswell “urge[d] Department users to minimize the use of personal web-email for business.” Did you review Assistant Secretary Boswell’s Information Memo in or after February 2011, and, if so, why did you continue using your clintonemail.com email account to conduct official State Department business? Include in your answer any steps you took to minimize use of your clintonemail.com email account after reviewing the memo. A copy of Assistant Secretary Boswell’s February 2011 Information Memo is attached as Exhibit D for your review.</li> <li><strong>On June 28, 2011, you sent a message to all State Department personnel about securing personal email accounts. In the message, you noted “recent targeting of personal email accounts by online adversaries” and directed all personnel to “[a]void conducting official Department business from your personal email accounts.” Why did you continue using your clintonemail.com email account to conduct official State Department business after June 28, 2011, when you were advising all State Department Personnel to avoid doing so? A copy of the June 28, 2011 message is attached as Exhibit E for your review.</strong></li> <li>Were you ever advised, cautioned, or warned about hacking or attempted hacking of your clintonemail.com email account or the server that hosted your clintonemail.com account and, if so, what did you do in response to the advice, caution, or warning?</li> <li><strong>When you were preparing to leave office, did you consider allowing the State Department access to your clintonemail.com email account to manage and preserve the official emails in your account and to search those emails in response to FOIA requests? If you considered allowing access to your email account, why did you decide against it? If you did not consider allowing access to your email account, why not?</strong></li> <li><strong>After you left office, did you believe you could alter, destroy, disclose, or use email you sent or received concerning official State Department business as you saw fit? If not, why not?</strong></li> <li>In late 2014, the State Department asked that you make available to the Department copies of any federal records of which you were aware, “such as an email sent or received on a personal email account while serving as Secretary of State.” After you left office but before your attorneys reviewed the email in your clintonemail.com email account in response to the State Department’s request, did you alter, destroy, disclose, or use any of the email in the account or authorize or instruct that any email in the account be altered, destroyed, disclosed, or used? If so, describe any email that was altered, destroyed, disclosed, or used, when the alteration, destruction, disclosure, or use took place, and the circumstances under which the email was altered, destroyed, disclosed, or used? A copy of a November 12, 2014 letter from Under Secretary of State for Management Patrick F. Kennedy regarding the State Department’s request is attached as Exhibit F for your review.</li> <li>After your lawyers completed their review of the emails in your clintonemail.com email account in late 2014, were the electronic versions of your emails preserved, deleted, or destroyed? <strong>If they were deleted or destroyed, what tool or software was used to delete or destroy them, who deleted or destroyed them, and was the deletion or destruction done at your direction?</strong></li> <li><strong>During your October 22, 2015 appearance before the U.S. House of Representatives Select Committee on Benghazi, you testified that 90 to 95 percent of your emails “were in the State’s system” and “if they wanted to see them, they would certainly have been able to do so.” Identify the basis for this statement, including all facts on which you relied in support of the statement, how and when you became aware of these facts, and, if you were made aware of these facts by or through another person, identify the person who made you aware of these facts.</strong></li> <li><strong>Identify all communications between you and Brian Pagliano concerning or relating to the management, preservation, deletion, or destruction of any emails in your clintonemail.com email account, including any instruction or direction to Mr. Pagliano about the management, preservation, deletion, or destruction of emails in your account when transferring the clintonemail.com email system to any alternate or replacement server. For each communication, identify the time, date, place, manner (e.g., in person, in writing, by telephone, or by electronic or other means), persons present or participating, and content of the communication.</strong></li> </ol> </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="1280" height="720" alt="" src="http://www.zerohedge.com/sites/default/files/images/user230519/imageroot/hillary-shrug_6.jpg?1472586917" /> </div> </div> </div> http://www.zerohedge.com/news/2016-08-30/hillary-has-until-september-29-respond-under-oath-these-25-questions-judicial-watch#comments B+ FOIA Judicial Watch President Obama Tue, 30 Aug 2016 20:55:00 +0000 Tyler Durden 571078 at http://www.zerohedge.com Oil Extends Losses After Big Distillates Inventory Build http://www.zerohedge.com/news/2016-08-30/oil-extends-losses-after-big-distillates-inventory-build <p>After last week&#39;s surprise crude build (biggest in ~4 months) and builds across the entire complex, API reported a crude build of 942k barreles (just shy of expectations of +1.5mm) and while Cushing and Gasoline saw draws, <strong>Distillates saw a major 3mm barrel build (+275k exp)</strong>. The initial reaction in crude was to extend the day&#39;s losses, back below $46.50...</p> <p>&nbsp;</p> <p><u><strong>API</strong></u></p> <ul> <li>Crude +942k (+1.5mm exp)</li> <li>Cushing -620k</li> <li>Gasoline -1.6mm (-1.25mm exp)</li> <li>Distillates +3mm (+275k exp)</li> </ul> <p>Another Crude build but the big news was a major Distillates build...</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2016/08/30/20160830_API2.jpg"><img alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2016/08/30/20160830_API2_0.jpg" style="width: 600px; height: 463px;" /></a></p> <p>&nbsp;</p> <p>And the reaction in crude after a down day was an initial kneejerk lower...</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2016/08/30/20160830_API1.jpg"><img alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2016/08/30/20160830_API1_0.jpg" style="width: 600px; height: 371px;" /></a></p> <p>&nbsp;</p> <p><em>Charts: Bloomberg</em></p> <div class="field field-type-filefield field-field-image-teaser"> <div class="field-items"> <div class="field-item odd"> <img class="imagefield imagefield-field_image_teaser" width="1827" height="1129" alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/20160830_API1.jpg?1472589378" /> </div> </div> </div> http://www.zerohedge.com/news/2016-08-30/oil-extends-losses-after-big-distillates-inventory-build#comments Crude Distillates Tue, 30 Aug 2016 20:40:10 +0000 Tyler Durden 571080 at http://www.zerohedge.com Is Clinton's Lead Over Trump As Large As Advertised? http://www.zerohedge.com/news/2016-08-30/clintons-lead-over-trump-large-advertised <p><a href="http://www.acting-man.com/?p=46460"><em>Submitted by Pater Tenebrarum via Acting-Man.com,</em></a></p> <h3><u><strong>Is Clinton&rsquo;s Lead Over Trump as Large as Advertised?</strong></u></h3> <p>Once upon a time, political polls tended to be pretty accurate (there were occasional exceptions to this rule, but they were few and far between). Recently there have been a few notable misses though. One that comes to mind is the Brexit referendum. Shortly before the vote, polls indicated the outcome would be a very close one, while betting markets were indicating a solid win of the &ldquo;remain&rdquo; vote. <strong>The actual result was around 52:48 in favor of&nbsp; &ldquo;leave&rdquo;, so this was quite a big miss.</strong></p> <p>&nbsp;</p> <p style="text-align: center;"><img alt="trump-and-hillary-exlarge-169" class="aligncenter wp-image-46463" height="359" src="http://www.acting-man.com/blog/media/2016/08/trump-and-hillary-exlarge-169.jpg" width="640" /></p> <p style="text-align: center;">Polarizing candidates &ndash; one of whom has already managed to confound election forecasters in the nomination race.</p> <p>&nbsp;</p> <p><strong>Another case that confounded even the most seasoned forecasters was the race for the Republican nomination.</strong> See for instance this <a href="http://globaleconomicanalysis.blogspot.com/2016/01/nate-silver-off-mark-on-donald-trump.html">article by Mish from January</a>, in which he rightly berates famous election forecaster Nate Silver for vastly underestimating Trump&rsquo;s chances to win. Silver held them to be around 12% to 13% at the time, which turned out to be a miss of truly monumental proportions. He kept missing the mark for many more months to come (essentially until the point in time when Trump had made the transition to &ldquo;inevitable nominee&rdquo;).</p> <p><strong>We currently follow press coverage on the presidential election only cursorily, for lack of time, and also because it seems both very superficial and one-sided.</strong> The mainstream media bias in this election seems astonishingly blatant. To quote Stefan Molyneux, there is apparently no mud one cannot sling at the orange-haired maniac. We are of course well aware that Donald Trump has an uncanny ability to put his foot into his mouth, but it seems almost as if little else is discussed (skim through a few MSM articles at random and see how much you learn about his policy proposals &ndash; good luck).</p> <p>On the other hand, it is not as if Hillary Clinton were widely considered an angel. The woman has spent decades mired in scandals, from her credulity-stretching career as a cattle futures trader in the 70s, to the Whitewater affair, Travelgate, the harassment of women pointing fingers at her philandering husband, to the recent questions about the Clinton foundation, the gigantic speaking fees she gets for mouthing platitudes at corporate gatherings for 20 minutes a stretch, the&nbsp; e-mail server controversy (and not to forget, her <a href="https://www.youtube.com/watch?v=Fgcd1ghag5Y">sociopathic streak</a>)&hellip; and we&rsquo;re sure we have left a few things out.</p> <p><em><strong>In short, she is just as polarizing a figure as Trump is widely held to be. Then there is the fact that Donald Trump continues to draw huge crowds wherever he goes to speak, a feat Hillary Clinton is not known for.&nbsp; Perhaps this is merely a sign that Trump voters are more energized for their candidate &ndash; but that seems quite an important factoid by itself. Remember the Brexit post mortem in this context: the &ldquo;remain&rdquo; camp mainly failed because it was unable to create even the slightest bit of excitement for its cause.</strong></em></p> <p>All of this made us wonder why Hillary Clinton is so solidly ahead in political polls. Below is a chart of the NYT&rsquo;s &ldquo;national polling average&rdquo;, which concludes that her current lead boils down to an &ldquo;89% chance of winning the presidency&rdquo;. Really? That sounds a bit like Nate Silver judging Trump&rsquo;s chances to win the Republican nomination back in January, i.e., it is a bit hard to believe.</p> <p>&nbsp;</p> <p style="text-align: center;"><a href="http://www.acting-man.com/blog/media/2016/08/1-National-Polling-Average-NYT.png" target="_blank"><img alt="1-National Polling Average, NYT" class="aligncenter wp-image-46461" height="326" src="http://www.acting-man.com/blog/media/2016/08/1-National-Polling-Average-NYT-1024x522.png" width="640" /></a></p> <p style="text-align: center;">The NYT national polling average asserts that Clinton&rsquo;s chance to win the election is 89%. That strikes us as wishful thinking along the lines of &ldquo;Trump will never get the nomination&rdquo; &ndash; click to enlarge.</p> <p>&nbsp;</p> <p>If one looks <a href="http://www.nytimes.com/interactive/2016/us/elections/polls.html?_r=0">at the list of polls the NYT uses</a> to construct this average, one can see that Clinton&rsquo;s lead actually varies quite widely among them. Some of the organizations and/or media conducting the polls either have a known political bias, or a known bias in <em>this</em> particular election. The reported size of her lead seems to be correlating rather closely with these known biases. This is slightly mystifying, is it not?</p> <p>&nbsp;</p> <h3><u><strong>Voter Excitement </strong></u></h3> <p>Most of these polls are conducted via telephone, but there is also an online tracking poll by UPI/CVoter.&nbsp; Its margin of error cannot be calculated because the&nbsp; participants are self-selecting, but UPI mentions a credibility interval of 3 percentage points (apparently based on the Bayesian approach to quantifying uncertainty). This particular poll has fluctuated in quite a wide range, but at the end of last week, Trump has overtaken Clinton again for the first time since July:</p> <p>&nbsp;</p> <p style="text-align: center;"><a href="http://www.acting-man.com/blog/media/2016/08/2-UPI-online-poll.png" target="_blank"><img alt="2-UPI online poll" class="aligncenter wp-image-46462" height="804" src="http://www.acting-man.com/blog/media/2016/08/2-UPI-online-poll-815x1024.png" width="640" /></a></p> <p style="text-align: center;">UPI online poll: it seems Trump is&nbsp; beating Clinton on the intertubes again &ndash; click to enlarge.</p> <p>&nbsp;</p> <p><strong>Once again, it is possible that Trump voters are simply more engaged and more likely to self-select for this poll.</strong> Trump certainly packs more internet punch than Clinton through his Twitter feed, Facebook and You-tube presence (even though his tweets occasionally land him in hot water). As noted above, Trump has something in common with the erstwhile Democratic rival of Clinton, Bernie Sanders: he is generating genuine excitement among his supporters.</p> <p>We wonder what it takes for Democrats to get excited over the prospect of voting for a woman who bears a large share of responsibility for turning an entire country into a war-torn failed state overrun by terrorists and is showered with money by Wall Street (note: she not only gets serious money for her probably sleep-inducing speeches from the likes of Goldman Sachs, she has actually <a href="http://www.wsj.com/video/hedge-funds-donate-485m-to-clinton-19k-to-trump/9BBA12C0-B855-441F-8EEB-18BAD4A2CBE5.html">received 2,550 times more money from hedge funds</a> than Trump).</p> <p><strong>Presumably many are clinging very strongly to the &ldquo;lesser evil&rdquo; fantasy, but surely they realize that she stands for business as usual (including more war) &ndash; the quintessential representative of the cronyism characterizing Washington.</strong></p> <p>&nbsp;</p> <h3><u><strong>What Might be Skewing the Polls?</strong></u></h3> <p>One thing that occurred to us already during the nomination process was that certain <strong>Trump supporters were likely to refrain from identifying themselves as such, </strong>given the steady drumbeat of condemnation of their man in the media.</p> <p>What we didn&rsquo;t know was that the phenomenon actually has a name, which a friend recently pointed out to us. It is called the &ldquo;Bradley effect&rdquo; (you can <a href="https://en.m.wikipedia.org/wiki/Bradley_effect">read all about it here</a>), named after the supposedly winning (but actually losing) candidate in the 1982 gubernatorial election in California. Even the exit polls turned out to be wrong in this case.</p> <p><strong>A short while ago we have come across another possible explanation.</strong> Below is a video in which Stefan Molyneux speaks with Bill Mitchell. It has to be pointed out that Mitchell is a Trump supporter, so his views are presumably colored by his own bias to some extent. Nevertheless, he presents very interesting arguments.</p> <p>Apart from mentioning some of the things we discuss above (e.g. the enthusiasm Trump generates), and the likelihood that independents and currently still undecided voters will overwhelmingly vote for Trump (which incidentally would also be in line with the &ldquo;Bradley effect&rdquo;), he notes that there are certain technical problems with the polls.</p> <p><strong>Specifically, he points out that the polls are skewed because Democratic voters are generally oversampled and the results are not corrected for that. He mentions a few counter-examples that seem to confirm this (note that we have not fact-checked these assertions).</strong></p> <p>While the term &ldquo;social mood&rdquo; isn&rsquo;t mentioned in the course of the conversation, Mitchell does point to it when he says that (we are paraphrasing) &ldquo;Trump is just riding the wave of an already existing trend&rdquo;. This trend is noticeable all over the world as we have previously discussed (see e.g. &ldquo;<a href="http://www.acting-man.com/?p=41344">Incumbents Swept from Office Around the World</a>&rdquo;). Here is the video &ndash; it is well worth watching:</p> <p style="text-align: center;"><iframe allowfullscreen="" frameborder="0" height="315" src="https://www.youtube.com/embed/cAopWX9Mzgs" width="560"></iframe></p> <p style="text-align: center;">Stefan Molyneux speaks to Bill Mitchell about the polls and Trump&rsquo;s chances</p> <p>&nbsp;</p> <p>Part of the &ldquo;Bradley effect&rdquo; would also consist of demographics that are thought to be overwhelmingly favoring Clinton containing more Trump supporters than is generally thought. And there may well be many who are prepared to reassess their views when Trump tries to reach out to them &ndash; which he appears to be doing of late, once again employing a theme tied to the current social mood.</p> <p>Consider this brief video clip from a speech he recently delivered at a rally in Michigan, in which he explains why African-Americans should consider voting for him. His argument is basically: you have it bad now, so what do you have to lose? Better vote for change (in the form of Trump), instead of voting for the status quo again.</p> <p style="text-align: center;"><iframe allowfullscreen="" frameborder="0" height="315" src="https://www.youtube.com/embed/t-jasg-_E5M" width="560"></iframe></p> <p style="text-align: center;">Trump asks African-Americans to consider voting for him</p> <p>&nbsp;</p> <p><strong>This idea may have unexpected appeal, considering that blacks have overwhelmingly voted for Obama and have <a href="http://www.nationalreview.com/article/433222/black-americans-barack-obama-going-backwards-under-president-obama">lost a great deal of ground economically</a> under his administration. </strong>During his presidency, black home ownership has declined from 46.1% to 41.9%, while black food stamp recipients have soared from 7,393,000 to 11,699,000 people. One statistic that was improving &ndash; namely unemployment, and specifically youth unemployment &ndash; has come undone again after the introduction of higher minimum wages, <a href="https://fee.org/articles/following-minimum-wage-increases-unemployment-spikes-among-black-male-teens/?utm_source=dlvr.it&amp;utm_medium=facebook">rising from 28.1% to 40.1%</a> in a single month.</p> <p>&nbsp;</p> <h3><u><strong>Conclusion</strong></u></h3> <p>There seems to be a lot of smug certitude that Trump is definitely destined to lose the election. <strong>We are not so sure. </strong>At the very least we would think that the race between Trump and Clinton is far tighter than it appears according to recent polls. This bring us back to a point we mentioned last week:<em><strong> the market is <a href="http://www.acting-man.com/?p=46356">not pricing in the &ldquo;risk&rdquo; of an election upset</a>.</strong></em></p> <p>We happen to think that presidents cannot change as much as is widely thought, or as they would perhaps like to &ndash; the one area in which they can actually make a difference is foreign policy. This is probably also the main reason why Trump is vilified so extensively, as he has repeatedly stressed that he would alter the US approach to foreign policy, which is seen as a threat to <a href="http://www.acting-man.com/?p=41465">the greatest racket of all time</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="229" height="144" alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/20160819_trump_0.jpg?1472580423" /> </div> </div> </div> http://www.zerohedge.com/news/2016-08-30/clintons-lead-over-trump-large-advertised#comments Bernie Sanders Cronyism Demographics Donald Trump goldman sachs Goldman Sachs Michigan Nomination Social Mood Twitter Twitter Unemployment Tue, 30 Aug 2016 20:25:00 +0000 Tyler Durden 571074 at http://www.zerohedge.com Crude Carnage & A Confident Consumer Send Stocks Lower, USD Higher http://www.zerohedge.com/news/2016-08-30/crude-carnage-confident-consumer-send-stocks-lower-usd-higher <p>Only one possible clip for today... (RIP)...</p> <p><iframe frameborder="0" height="315" src="https://www.youtube.com/embed/aDEdKzAZgko" width="560"></iframe></p> <p>&nbsp;</p> <p>Despite crude&#39;s collapse, Trannies managed gains on the day as big tech weighed on the rest of the indices...</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2016/08/30/20160830_EOD12.jpg"><img alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2016/08/30/20160830_EOD12_0.jpg" style="width: 600px; height: 472px;" /></a></p> <p>&nbsp;</p> <p>Financials outperformed again... now where have we seen this decoupling before?</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2016/08/30/20160830_EOD13.jpg"><img alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2016/08/30/20160830_EOD13_0.jpg" style="width: 600px; height: 628px;" /></a></p> <p>&nbsp;</p> <p>Standard 330ET Ramp was in evidence, pumping to VWAP on another dismal volume day...</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2016/08/30/20160830_EOD10.jpg"><img alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2016/08/30/20160830_EOD10_0.jpg" style="width: 600px; height: 316px;" /></a></p> <p>&nbsp;</p> <p>VIX hovered between 13 and 13.5...</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2016/08/30/20160830_EOD9.jpg"><img alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2016/08/30/20160830_EOD9_0.jpg" style="width: 600px; height: 379px;" /></a></p> <p>&nbsp;</p> <p>But from Yellen, it&#39;s mixed with Small Caps and Trannies green...</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2016/08/30/20160830_EOD11.jpg"><img alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2016/08/30/20160830_EOD11_0.jpg" style="width: 600px; height: 472px;" /></a></p> <p>&nbsp;</p> <p>Notably the &quot;Good news&quot; in this morning&#39;s confidence data was bad news...</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2016/08/30/20160830_EOD2.jpg"><img alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2016/08/30/20160830_EOD2_0.jpg" style="width: 600px; height: 392px;" /></a></p> <p>&nbsp;</p> <p>Oddly rate hike odds fell again today...</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2016/08/30/20160830_EOD4.jpg"><img alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2016/08/30/20160830_EOD4_0.jpg" style="width: 600px; height: 317px;" /></a></p> <p>&nbsp;</p> <p>Treasury yields ended the day very modestly higher (though 2Y ticked lower)...</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2016/08/30/20160830_EOD5.jpg"><img alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2016/08/30/20160830_EOD5_0.jpg" style="width: 600px; height: 313px;" /></a></p> <p>&nbsp;</p> <p><strong>The USD Index rose for the 8th day in a row (longest streak since July 2014)...</strong> Yen was the biggest mover as calls for direct intervention were spewed...</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2016/08/30/20160830_EOD6.jpg"><img alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2016/08/30/20160830_EOD6_0.jpg" style="width: 600px; height: 315px;" /></a></p> <p>&nbsp;</p> <p>USDJPY soared (Yen weakness) to a 103 handle - dragging Nikkei 300 points higher... but US equities gave up the Yen carry trade...</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2016/08/25/20160830_EOD1.jpg"><img src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2016/08/25/20160830_EOD1_0.jpg" style="width: 600px; height: 313px;" /></a></p> <p>&nbsp;</p> <p>The strong USD sent commodities lower across the board...</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2016/08/30/20160830_EOD3.jpg"><img alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2016/08/30/20160830_EOD3_0.jpg" style="width: 600px; height: 315px;" /></a></p> <p>&nbsp;</p> <p>Gold was clubbed lower into the close...</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2016/08/30/20160830_EOD8.jpg"><img alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2016/08/30/20160830_EOD8_0.jpg" style="width: 600px; height: 612px;" /></a></p> <p>&nbsp;</p> <p>The Bloomberg commodity index fell for the 5th day in a row with all 24 major commodity futures in the red today...</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2016/08/25/20160830_comms.jpg"><img height="358" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2016/08/25/20160830_comms_0.jpg" width="600" /></a></p> <p>&nbsp;</p> <p>Oil prices continued to plunge despite - <strong>*STORMS HAVE SHUT IN 22% OF GULF OF MEXICO OIL OUTPUT, U.S. SAYS - </strong>With API inventories due tonight...</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2016/08/30/20160830_EOD7.jpg"><img alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2016/08/30/20160830_EOD7_0.jpg" style="width: 600px; height: 281px;" /></a></p> <p>&nbsp;</p> <p><em>Charts: Bloomberg</em></p> <div class="field field-type-filefield field-field-image-teaser"> <div class="field-items"> <div class="field-item odd"> <img class="imagefield imagefield-field_image_teaser" width="600" height="64" alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/20160830_EOD.jpg?1472586318" /> </div> </div> </div> http://www.zerohedge.com/news/2016-08-30/crude-carnage-confident-consumer-send-stocks-lower-usd-higher#comments Carry Trade Crude Mexico Nikkei Yen Tue, 30 Aug 2016 20:05:35 +0000 Tyler Durden 571079 at http://www.zerohedge.com What Really Happened Among The Ja'ss Holes? http://www.zerohedge.com/news/2016-08-30/what-really-happened-among-jass-holes <p><a href="https://www.sovereignman.com/investing/heres-what-really-happened-in-jackson-hole-20133/"><em>Submitted by Tim Price via SovereignMan.com,</em></a></p> <p>The scenic mountain resort of Jackson Hole in Wyoming played snowy host this weekend to the world&rsquo;s major central bankers, <strong>meeting in conclave to discuss their latest victories over the world economy.</strong></p> <p>Thronged by adoring savers, <strong>the so-called <em>Ja&rsquo;ss Holes </em>(the J is silent) were quick to point out that they were nowhere near running out of fatuous experiments with untested monetary policies or making it up as they go along.</strong></p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p><strong>&ldquo;We still have plenty of tools,&rdquo;</strong> remarked a spokesperson: <em><strong>&ldquo;Janet Yellen, Mark Carney, Andy Haldane, Mario Draghi &ndash; does any remote, unelected bureaucracy anywhere in the world have a bigger set of tools?&rdquo;</strong></em></p> </blockquote> <p>The theme of the meeting is<span style="text-decoration: underline;"><em><strong> &ldquo;What, if anything, will be left when we have finished?&rdquo;</strong></em></span></p> <p>Given the Fed&rsquo;s stated intention not to surprise financial markets, it is believed that the next 25 basis point rise in fed funds will come, as it did last year, in December &ndash; but as part of its forward guidance policy, the decision will be announced by means of a &lsquo;policy dove&rsquo; that will be released at the end of the weekend, after a ritual of Native American dancing and hallucinogenic drug-taking, and sent circling around the world with its message of peace and extremely modest monetary tightening.</p> <p><strong>In the event that the &lsquo;policy dove&rsquo; is incapacitated or shot out of the sky, it will be replaced by a &lsquo;policy Elk&rsquo; </strong>from the National Elk Refuge nearby.</p> <p>Although official interest rates seem low, a spokesperson said that was only if you looked at them from the perspective of numbers.</p> <p><em><strong>Viewed more holistically, from the vantage point of a numeric base system yet to be invented, or one that operates only through color, rates could actually be regarded as quite high.</strong></em></p> <p>In any event, the US central bank would not find itself out of weaponry if a new recession caused by the US central bank were to hit.</p> <p><strong>The US Federal Reserve has already commissioned a fleet of B2 Stealth bombers to initiate the next stage of its economic policy, codenamed &lsquo;Obliterate hope&rsquo;.</strong></p> <p>The intention is to bypass the introduction of so-called &lsquo;helicopter money&rsquo; and fast forward instead to the endgame of a long, vicious carpet-bombing of North America&rsquo;s major cities using napalm.</p> <p><strong>A spokesperson for the European Central Bank pointed out that &lsquo;Obliterate hope&rsquo; had already been a key plank of ECB policy across the euro zone for some time, especially in periphery countries.</strong></p> <p>Determined not to be outflanked by its US rival, the Frankfurt- based organization indicated that it had its own plans for weaponizing its existing QE program, codenamed &lsquo;Project Bubo&rsquo;.</p> <p><strong>The ECB, in conjunction with the European Science Foundation, is believed to be planning to tackle the longstanding &lsquo;savings glut&rsquo; by means of <u>reintroducing Europe to the Black Death.</u></strong></p> <p>Economists believe that such a step could be a key means of boosting productivity, among the survivors.</p> <p>Speaking to reporters, Mark Carney for the Bank of England pointed out that by comparison with the efforts of the US and the EU, the next phase of UK central banking stimulus would have to reflect Great Britain&rsquo;s now more modest role in the world, post-Brexit.</p> <p><em><strong>He acknowledged that a coordinated aerial bombardment of the UK&rsquo;s major cities &ldquo;was certainly desirable&rdquo;, but that in these more straitened times we might have to settle for a posse of Team GB Olympians jogging from town to town and assaulting random businessmen with socks full of wet sand.</strong></em></p> <p>Central bankers acknowledge that they were slow off the mark dealing with the last property bubble, and they point out that they have gone beyond the call of duty to fuel the current one and ensure that its collapse will be even more spectacular, given that interest rates are forecast to be close to minus 280% by then.</p> <p>With years of monetary accommodation having inflated bond, equity and property prices to unsustainable levels, developed world economies are now beset by low productivity and weak levels of investment and impaired prospects for banks, insurance companies, pension funds, savers and investors.</p> <p><strong>Ms Yellen, however, piloting an experimental nuclear-powered leisure cruiser, the &lsquo;Permanent Liquidity&rsquo;, was proud to announce that she &ldquo;saw no signs of problems ahead,&rdquo; shortly before steering her yacht into the Teton Glacier where it immediately foundered with all hands.</strong></p> <p>Observers suggested that its shattered debris would likely stay at the bottom of the Snake River &ldquo;lower for longer&rdquo;.</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="587" height="283" alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/20160830_jassholes.jpg?1472578209" /> </div> </div> </div> http://www.zerohedge.com/news/2016-08-30/what-really-happened-among-jass-holes#comments Bank of England Bond European Central Bank Federal Reserve Insurance Companies Janet Yellen Recession Tue, 30 Aug 2016 19:55:00 +0000 Tyler Durden 571073 at http://www.zerohedge.com Soros Seeks To "Reshape American Justice System" By Pouring Funds Into "Powerful" District Attorney Races http://www.zerohedge.com/news/2016-08-30/soros-seeks-reshape-american-justice-system-pouring-funds-powerful-district-attorney <p>With hundreds of millions of dollars poured into presidential and congressional elections in the United States it can be difficult, even for mega donors like George Soros, to truly understand how much influence is being &quot;bought.&quot;&nbsp; <strong>That&#39;s why Soros is pursuing a new strategy to dump millions into the campaigns of local district attorneys, a position which &quot;exercises the greatest discretion and power in the system.&quot;</strong>&nbsp; So far, Soros has funneled $3 million into seven local DA races over the past year but his support is &quot;expected to intensify in the next few years, thanks to longer-term planning and candidate recruitment.&quot;&nbsp; In general, Soros looks to <strong>fund progressive DAs running on platforms to &quot;reduce racial disparity in sentencing&quot; and support prison &quot;diversion programs&quot; for drug offenders instead of trials that could result in jail time.</strong>&nbsp; As <a href="http://www.politico.com/story/2016/08/george-soros-criminal-justice-reform-227519">Politico</a> points out:</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p><strong>Prosecutorial discretion gives district attorneys a huge say in the charges and sentences that defendants face.</strong> But reform efforts have not traditionally focused on harnessing that power.</p> <p>&nbsp;</p> <p>&ldquo;<strong>They are often a very invisible part of the criminal justice system and the political system,</strong>&rdquo; said Brenda Carter, director of the Reflective Democracy Campaign, an arm of the progressive Women Donors Network. &ldquo;Many people can&rsquo;t name their district attorney. It&rsquo;s not an office people think about a lot.&rdquo;</p> <p>&nbsp;</p> <p>Carter&rsquo;s group commissioned research in 2015 that found that 95 percent of elected local prosecutors in the U.S. are white and three-quarters overall are white men. It also highlighted a<strong> Wake Forest University study that found that a vast majority of prosecutors &mdash; 85 percent &mdash; run for reelection unopposed.</strong></p> <p>&nbsp;</p> <p>&ldquo;I found that to be shocking, and <strong>I think people are waking up to the untapped potential for intervention in these seats to really change the day-to-day realities of criminal justice,</strong>&rdquo; Carter said. &ldquo;It&rsquo;s been really gratifying for us to see the research taken up and run with by different groups around the country.&rdquo;</p> </blockquote> <p>So far, <strong>Soros has been quite successful with 6 out of 7 of his candidates ultimately winning their election bids</strong>.&nbsp; Alas, despite the fact that DAs &quot;exercise the greatest discretion and power in the system&quot; one Soros pick in Mississippi proved it&#39;s possible for even a DA to overstep their legal bounds.&nbsp; Hinds County, Mississipi DA, Robert Shuler, whose reelection campaign was funded by Soros, was recently charged by Mississippi&#39;s attorney general for <strong>&quot;improperly providing information to defendants.&quot;</strong> &nbsp; &nbsp;&nbsp;</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p>Soros has spent on district attorney campaigns in <strong>Florida, Illinois, Louisiana, Mississippi, New Mexico and Texas through a network of state-level super PACs and a national &ldquo;527&rdquo; unlimited-money group, each named a variation on &ldquo;Safety and Justice.&rdquo;</strong> (Soros has also funded a federal super PAC with the same name.) Each organization received most of its money directly from Soros, according to public state and federal financial records, though some groups also got donations from nonprofits like the Civic Participation Action Fund, which gave to the Safety and Justice group in Illinois.</p> <p>&nbsp;</p> <p>Soros&rsquo; spending started on these races about a year ago, when he put over $1 million into &ldquo;Safety and Justice&rdquo; groups that helped elect two new district attorneys in Louisiana and Mississippi and reelect a third &mdash; <strong>Hinds County, Miss., DA Robert Shuler Smith &mdash; who has since been charged by the Mississippi attorney general with improperly providing information to defendants.</strong></p> <p>&nbsp;</p> <p><strong>After the Louisiana and Mississippi races, Soros next piled money into two of the biggest jurisdictions in the country: Houston&rsquo;s Harris County (his lone losing effort so far) and Chicago&rsquo;s Cook County, where he funded one of several groups that helped Kim Foxx defeat incumbent state&rsquo;s attorney Anita Alvarez</strong> in a high-profile primary campaign dominated by the 13-month delay between the police shooting of Laquan McDonald and the indictment of the police officer involved.</p> <p>&nbsp;</p> <p><strong>In late spring, $107,000 from a Soros-funded New Mexico super PAC helped Raul Torrez win his Democratic district attorney primary by a 2-to-1 margin in Albuquerque&rsquo;s Bernalillo County</strong>. Torrez&rsquo;s Republican opponent dropped out of the general election soon after, citing the potentially exorbitant cost of opposing the Soros-backed candidate in the general election.</p> </blockquote> <p>But, for those of you worried that Soros isn&#39;t doing enough to &quot;reshape the American justice system&quot; please know that the plan is to &quot;invest&quot; far more in these races going forward.&nbsp; In fact, as Politico points out, the only hold back so far has been a lack of good <span style="text-decoration: line-through; color: #ff0000;">puppets</span>candidates.&nbsp;</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p>While Soros has spent heavily in 2015 and 2016, <strong>a broader national push into local prosecutor campaigns is expected to intensify in the next few years, thanks to longer-term planning and candidate recruitment.</strong> A Safety and Justice group has already organized in Ohio, according to campaign finance filings there. But it has not yet disclosed raising or spending any money.</p> <p>&nbsp;</p> <p>&ldquo;There&rsquo;s been a realization that there&rsquo;s not very much we can do this year, when you&rsquo;re coming up to an election,&rdquo; said Steele. &ldquo;<strong>You have to have the right candidates.</strong> That&rsquo;s a big piece of the puzzle and why I&rsquo;m part of this conversation. ... A lot of the conversations I&rsquo;m having are about 2017 and 2018, about looking forward to next year in Virginia and other places.&rdquo;</p> <p>&nbsp;</p> <p><strong>That means more local candidates should prepare for the shock of one of the biggest donors in American politics flooding their neighborhoods with ads.</strong></p> </blockquote> <p>Oddly enough, not everyone is pleased with New York billionaires meddling in local elections when they have no vested interest in the community.</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p>Opponents of Soros&rsquo; favored candidates have laced into the billionaire, saying that <strong>his influence has wildly tipped the scales of local elections and even charging that he made residents less safe.</strong></p> <p>&nbsp;</p> <p>&ldquo;As a candidate and citizen of Caddo Parish, if an outsider was that interested in the race, I wanted to know exactly what he had in mind for the criminal justice system if he were to win,&rdquo; said Dhu Thompson, a Louisiana attorney who lost a district attorney race to a Soros-backed candidate, James Stewart, in 2015. <strong>Soros gave over $930,000 &mdash; more than 22 times the local median household income &mdash; to the group boosting Stewart.</strong></p> <p>&nbsp;</p> <p>&ldquo;I know some of his troubling opinions on social issues, especially the criminal justice system,&rdquo; Thompson said. &ldquo;I&rsquo;ve never known him as an individual who was very strong on some of our crime and punishment issues. <strong>I felt it was very detrimental to the safety of Caddo Parish, and that&rsquo;s why I took such a strong stand against him.&quot;</strong></p> </blockquote> <p>That said, we&#39;re sure any objections to George&#39;s plan is derived from a simple misunderstanding of his motives.&nbsp; <strong>After all, last time someone said he wanted to &quot;fundamentally transform&quot; America it worked out pretty well, right?</strong></p> <div class="field field-type-filefield field-field-image-teaser"> <div class="field-items"> <div class="field-item odd"> <img class="imagefield imagefield-field_image_teaser" width="600" height="400" alt="" src="http://www.zerohedge.com/sites/default/files/images/user230519/imageroot/Soros_0.jpg?1472579692" /> </div> </div> </div> http://www.zerohedge.com/news/2016-08-30/soros-seeks-reshape-american-justice-system-pouring-funds-powerful-district-attorney#comments Crime And Punishment Florida George Soros Illinois KIM Mexico Ohio Tue, 30 Aug 2016 19:40:00 +0000 Tyler Durden 571066 at http://www.zerohedge.com Deutsche Bank Calculates How Much Of The S&P's Value Is Due To Central Banks http://www.zerohedge.com/news/2016-08-30/deutsche-bank-calculates-how-much-sps-value-due-central-banks <p>It is no secret that earnings have gone nowhere over the past two years (and are set to decline for 6 consecutive quarters), while on a GAAP basis <a href="http://www.zerohedge.com/news/2016-02-27/mind-non-gaap-over-20-sp-500s-value-accounting-gimmicks">earnings as of 2015 were the lowest since 2010</a>...</p> <p><strong>&nbsp;</strong> </p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2016/02/24/S%26P%20PE%20GAAP%20non%20GAAP.jpg"><img src="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2016/02/24/S%26P%20PE%20GAAP%20non%20GAAP_0.jpg" width="499" height="324" /></a></p> <p>&nbsp;</p> <p>... which means that earnings growth has <strong>not </strong>been a factor behind the stock market's recent ascent to all time highs. As a result, the conventional explanation to justify the S&amp;P trading just shy of 2,200 is that the market has been the beneficiary of unprecedented multiple expansion. To be sure, as <a href="http://www.zerohedge.com/news/2016-05-15/goldman-median-stock-has-never-been-more-overvalued">Goldman recently opined</a>, the median stock multiple has never been more overvalue. </p> <p>Indeed, if one left it at that, the answer would not be exactly wrong, however there is one more factor which is rarely discussed, and which - according to Deutsche Bank - explains virtually the entire equity rally of the past four years: <strong>the collapse of the equity risk premium </strong>as a result of plunging bond yields, which as a reminder, is the direct pathway by which central banks operate, by monetizing government, and now corporate, debt. </p> <p>As Deutsche Bank's Dominic Konstam writes over the weekend, "<strong>various Fed officials have raised the issue of financial stability in the context of the reach for yield and riskier products to make up for low rates.</strong> This is part of financial repression. The logic might be that once the Fed has normalized, elements of that reach for yield and risk would be unwound <strong>and this could lead to disruptive financial market volatility</strong>."</p> <p>Put in the simplest possible word, this means the Fed is worried that once rates go up as a result of renormalization and the lack of a central bank to frontrun, stocks will crash. As it turns out the Fed has ample reason to be worried. As Konstam explains, here's the reason why:</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p> We can illustrate this aspect of financial repression in terms of the equity market. In the post crisis world, all assets seem closely correlated to breakevens and real rates but with varying betas. We note that <strong>the equity market recently looks very expensive even to these rates through the shift in the beta on inflation expectations </strong>– so despite low inflation expectations, equities have done even better than otherwise warranted by low real rates. <strong>This shows up as a fall in the equity risk premium and defines well the hunt for yield in a repressive financial regime. </strong></p> </blockquote> <p>How does the decompsition of performance look visually: we can illustrate the extent to which this is unprecedented with the historical performance of the equity market. <strong>Decomposing equity returns into earnings growth, changes in P/E and changes in the risk premium shows that <span style="text-decoration: underline;">the bulk of equity performance is best captured by the shunt lower in equity risk premium</span></strong>.</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2016/08/27/ERP%20DB.jpg"><img src="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2016/08/27/ERP%20DB_0.jpg" width="500" height="406" /></a></p> <p>In turn, this means that every push higher in yield, whether orchestrated by central banks, or due to exogenous events like a "taper tantrum" risks upsetting this precariously compressed ERP "spring", leading to a violent market crash. Because if the ERP is responsible for 92% of the S&amp;P500 move since 2012, or just over 800 points, <strong>that would suggest that central bank policies are directly responsible for approximately 40% of the "value" in the market, </strong>and any moves to undo this support could result in crash that wipes out said ERP contribution, leaving the S&amp;P500 somewhere in the vicinity of 1,400. </p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2016/08/27/20160830_SPX.jpg"><img src="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2016/08/27/20160830_SPX_0.jpg" width="500" height="265" /></a></p> <p>In retrospect, it becomes obvious why the Federal Reserve is petrified about even the smallest, 25bps rate hike.</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="785" height="637" alt="" src="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/ERP%20DB.jpg?1472585066" /> </div> </div> </div> http://www.zerohedge.com/news/2016-08-30/deutsche-bank-calculates-how-much-sps-value-due-central-banks#comments Bond Central Banks Deutsche Bank Federal Reserve GAAP Market Crash Risk Premium Volatility Tue, 30 Aug 2016 19:24:31 +0000 Tyler Durden 571076 at http://www.zerohedge.com