fixed

In what sounds like the plot of a McCarthy-era propaganda spy novel, the Socialists and Communists have overthrown the government in Portugal. That means it's time for the troika to start pushing back against the undesirables by threatening the country with financial ruin. Just call it "tough love." 

For the third day in a row, China dominated the overnight newsflow with the latest industrial output data, which printed at 5.6% missing expectations of a 5.8% increase, and was tied with March for the lowest print since late 2008.

Empires, like adolescents, think they’ll live forever. In geopolitics, as in biology, expiration dates are never visible. When death comes, it’s always a shock. "At the beginning of the great unraveling, in 2015, I was still a young man. Like everyone else, I didn’t see this coming. Today, in 2050, fewer and fewer people can recall what it was like to live among those leviathans... Thirty-five years and endless catastrophes later on a poorer, bleaker, less hospitable planet, it’s clear that we just weren’t paying sufficient attention. Had we been listening, we would have heard the termites. There, in the basement of our common home, they were eating the very foundations out from under us. Suddenly, before we knew quite what was happening, all that was solid had melted into air."

This may sound like one of those generation gap stories, where older folks complain about the “kids” doing their own thing and the kids not trusting “anyone over 30.” It’s not. From sea to shining sea, distrust and anger ripples across America. Older age groups like to criticize millennials: they’re spoiled, have a sense of entitlement. Actually, they should look in the mirror, as they’re leaving those who will follow one hell of a mess.

While the market may still rally to new highs, the late August free fall in stock prices and spike in volatility served as a wake-up call for investors. In the past ten weeks, major equity indices have recovered virtually all those losses, giving investors an unusual second opportunity to position their portfolio for an important inflection point in monetary policy as the Fed likely starts raising interest rates. Simply put, investors who were not properly positioned and frustrated by their performance in the late August swoon are being given a do-over.

The ongoing failure of China to achieve any stabilization in its economy, after already cutting interest rates six times in the past year, and the prospect of a U.S. interest rate hike in December, had made markets increasingly jittery and worried which is not only why the S&P 500 Index had its biggest drop in a month, but thanks to the soaring dollar emerging market stocks are falling for a fourth day - led by China - bringing their decline in that period to almost 4 percent, and the global stock index down for a 5th consecutive day.

The potential outcomes are looking increasingly worrisome for financial markets across the board...

As of the week ended October 28, Primary Dealer corporate holdings tumbled across both IG and HY, plunging to the lowest level in years in what can only be called a rapid liquidation of duration risk.

Don't forget Forex is countertrend market (generally) - here's a strategy to play the Forex 'fix' 

In the next phase of the Obama administration's other war on drugs, The Centers for Medicare & Medicaid Services (CMS) has issued a letter to the CEOs of four large drug providers (AbbVie, Gilead, Johnson & Johnson, and Merck), warning that "manufacturers have a role to play in ensuring access and affordability to these medications," asking for "value-based purchasing arrangements." While there is no "or else" in the letter, the focus on 'significance to many', 'costs', and 'accessible' suggest an overhang of government intervention as new specialty drugs account for nearly a third of overall costs, but represent less than 1% of prescriptions.

China can’t allow its industrial economy to sink without a fight. It will have to devalue the renminbi to try to get more market share for its exports. It still has 80% of its workers earning less than $10 a day. A lower renminbi will reduce real wages further and make China’s exports cheaper than ever. And then, what about the rest of the world? As the renminbi goes down, the dollar, yen, and euro will have to go up. Commodities – priced in dollars – will stay down. U.S. corporate profits will fall. The stock market “tape” will go down. Consumer prices, too, will remain low... or go negative. Deflation. Deflation. Deflation.

At least some very angry Greeks still have not gotten the memo that they are now "fixed"...

Just as one US carrier was leaving the middle east, another widely feared and respected geopolitical superpower was set to replace US carrier presence in the Middle East in the ongoing war against "ISIS" - France.

US equities are surging, talking heads are exuberant, and China's fixed - so why are Americans so miserable? Bloomberg's Consumer Comfort index plunged the most since February in the last week, near 2015 lows as it appears The Fed is rapidly realizing "you can fool all the people some of the time, but you cannot fool all the people all the time." It appears the cohort that 'gave up' the most in the past week was 'black' Americans, whose comfort plunged below 'white' Americans for the first time in over a month.

Other asset-classes are screaming that deflationary headwinds are very much still in play...