default

Social Security has long been sold to the public on the notion that what a worker will receive back is what he or she pays into the system. For decades, however, the government has been changing the terms of this "agreement" as part of an effort to avoid outright default, hiding it, instead, with a long, slow method of piecemeal default.

Macy's is down over 13% today, pushing towards a sub-$40 handle - the lowest since February 2013 - after lowering guidance and disappointing a market full of hope (and hype) that retail is back (remember, all the retail hiring last Friday). However, that is not the most prescient issue as 3 years of buying back billions of dollars of Macy's stocks - to financially-engineer earnings to ensure executive compensation is satisfactory - have been completely wasted. And worst still, the additional debt added to fund the total failure in timing of buybacks has now sent Macy's credit spiking to multi-year highs (as the stock tumbles).

Ruane Cunniff & Goldfarb, the investment firm that runs the Sequoia Fund, was Valeant’s largest shareholder as of June 30, with VRX shares growing to 29% of Sequoia’s portfolio at midyear. The latest outflow is a continuation of previous redemptions: "in the first 10 months of 2015, Sequoia Fund’s outflows totaled about $213 million, Bloomberg data show, after investors withdrew more than $500 million in 2014."

“Debt wasn’t a problem during the boom years because profits kept growing. But it’s not sustainable when the economy slows."

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.

There is little evidence currently that the rally over the last couple of months has done much to reverse the more "bearish" market signals that currently exist. Furthermore, as noted by Jochen Schmidt, the current market action may be more indicative of market topping process. Not unlike previous market topping action, the markets could indeed even register "new highs," as witnessed in both 2000 and 2007 before the major market correction begins. This is typically how "bull markets" end by providing false signals and sucking in the last of those willing to "buy the top." The devastation comes soon after.

Having told the world that it will borrow billions (and cut capex) to "return all free cash to investors," it appears ratings agency S&P just needed to remind McDonalds that Shareholder-friendly releveraging no longer comes for free...

*S&P LWRS MCDONALD'S RTG TO 'BBB+' ON SHR BUYBACK PLANS

Who could have seen that coming?

Venezuela is at a political crossroads, with an all-important parliamentary election set to take place in December. Meanwhile, the Venezuelan economy continues to deteriorate as the state seeks to stave off default and a brewing financial crisis. Late last month, Brazil withdrew its involvement in election monitoring after Venezuela rejected the officials Brazil put forward. Maduro is doing his best to keep international observers from scrutinizing the election. The election will take place just as the OPEC meeting will be wrapping up in Vienna, which is expected to yield few benefits for Venezuela. All signs point to OPEC continuing its market share strategy, keeping a lid on any substantial price rebound in the short-run. That does not bode well for Venezuela as it teeters on the brink of catastrophe.

Those who choose to distance themselves (and their wealth – however large or small) geographically from the centre of the hurricane will fare best.

JS Kim Issues Critical Warning About Newly Introduced Global Banking "Gold Programs". Could Bankers Be Duping Us into Yet Another One of Their Reverse Alchemy Schemes?

While ridiculous, Venezuela's decision to liquidate some of its gold is perhaps understandable under the circumstances: Venezulea relies on crude oil for 95% of its export revenue, and with prices refusing to rebound, the only question is when do all those CDS which price in a Venezuela default finally get paid. What is even more understandable is what Venezuela should have done in the first place before dumping a fifth of its gold, but got to do eventually, namely raiding all of the IMF capital held under its name in a special SDR reserve account.

"Given that we are clearly moving into a higher default environment we believe that equity investors may be inclined not to reward stocks that have large buyback programs. And if this is the case, corporate managers will have a diminished incentive to borrow money to finance buybacks."

"This is essentially the result of very low export prices out of China that are impacting prices worldwide. It is obvious that we are operating in a very challenging market."

"Barring disaster, this makes December liftoff a lock. It won’t stop the FOMC from being very dovish sounding and reiterating the commitment to a very slow path, as Evans did on TV a few minutes ago. The question is whether the market believes them if the numbers keep coming in on the strong side."

History tells us that empires are rarely defeated, by any external rival.