“Taming the Messenger: New Threats to Press Freedom” with Nick Gillespie, Wed, 11/5

I’m speaking at what is shaping up to be a great
debate event tomorrow at The Newseum in Washington, D.C.

Sponsored by the great Spiked Online, the day’s panels are
dedicated to preserving
Free Speech Now
.

In the first discussion, “Taming the Messenger: The New Threats
to Press Freedom,” I’ll be talking with Spiked’s Brendan O’Neill,
Al-Jazeera’s Ray Suarez, and the Committee to Protect Journalists’
Courtney Radsch.

In the second debate, “The Press in the 21st Century: Are
we all Journalists Now?,” the panel will ask whether “citizen
journalism” helps or hinders journalism’s pursuit of the
truth.

The “Taming the Messenger” panel starts at 9.15 A.M. ET
and the doors open at The Newseum at 8 A.M.

The event is free but you need to sign up.

Please go here to
RSVP
.

Note: I mistakenly gave the time for my panel as
10 A.M. in an earlier post. The correct time is 9.15
A.M.

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Paul Singer Slams The Fake World: “Fake Growth, Fake Money, Fake Jobs, Fake Stability, Fake Inflation Numbers”

Excerpted from Elliott Management's Paul Singer letter to investors,

FAKING IT

Nobody knows when reality will overtake the rhetoric, lies, phony statistics, wishful thinking, fake prices and tiresome poseurs pretending to be world leaders. The situation is universal, a consequence of incompetent leaders and careless (or ignorant) citizenry. Global problems are continuing to mount, along with the risk that the consequences of years of bad policies and inept leadership compound (as sometimes happens) in a short window of time. Let us start by unpacking some current examples of fakery, and then try to explore the consequences.

Monetary policy.

Either out of ideology or incompetence, all major developed governments have given up (did they ever really try?) attempting to use solid, fundamental policies to create sustainable, strong growth in output, incomes, innovation, entrepreneurship and good jobs. The policies that are needed (in the areas of tax, regulatory, labor, education and training, energy, rule of law, and trade) are not unknown, nor are they too complicated for even the most simple-minded politician to understand. But in most developed countries, there is and has been complete policy paralysis on the growth-generation side, as elected officials have delegated the entirety of the task to central bankers.

For their part, the central bankers are proud and delighted to be providing the primary support for the global economy. Their training for this role took place in the decades before the 2008 financial crisis, when central bankers (led by “The Maestro,” Alan Greenspan) “deftly” headed off crisis after crisis. These policy responses “worked,” we were told, and they promised a new era of fine-tuning, moderation in markets and complete control of the economy by central bankers. The words in quotes are meant to be ironic, of course, because in fact, the Federal Reserve Board’s moves disguised hidden – but serious and real – future costs, which came due in 2008. The ensuing crisis introduced the term “moral hazard” (not meant to be ironic) into the mainstream, meaning that risks were taken by financial institutions and others seeking private reward, while the costs of the risks were borne primarily by the taxpayers. Central bank manipulation of prices and risk taking has become the norm over the last six years, because it is so hard for investors to see the downside. QE and ZIRP have been “free,” as far as most people are concerned, in terms of stability, asset price and economic growth, and economic recovery. “Free” in this context means devoid of future countervailing negative consequences. Unfortunately, this particular magic bullet is illusory – the negative consequences are in the early stages of revealing themselves.

Among the worst consequences of the delegation of responsibility from political leaders to central bankers has been the increasing arrogance of the latter group and their inability to understand the rapidly evolving nature of the world’s major financial institutions. Prior to the crisis, central bankers were unable to understand the risks that were building up in the global financial system and the economy. They did not see the 2008 collapse coming, nor did they perceive how fragile the system had become, or that the major financial institutions had become the largest and most leveraged hedge funds on earth.

This lapse was a catastrophic error, not just of execution but also of theory and structure. During the 2008 crisis, the central bankers (rightly) applied standard (more or less) responses to financial collapse (flooding the system with liquidity and reducing interest rates), which of course truncated the crisis and stabilized the system. But their inability to understand the financial system, or to take responsibility for their massive failures in causing/allowing the crisis to occur, has resulted in a seriously deficient economic recovery phase. Central bankers do not understand that it was their tinkering, manipulation, bailouts and false confidence that encouraged and enabled the insanity that led to the fragility and collapse. Partially as a result of that misunderstanding, the developed world has doubled down on the same policies, feeding the central bankers’ supreme self-confidence. Political leaders have been content to stand aside and watch the central bankers do their seemingly magical and magnificent work.

The believers in the wisdom of this central-banker-centric economic world have been crowing and gloating that those (like us) who have raised concerns about the risks posed by the post-crisis, monetary-dominated policy mix (inflation, distortions, growing inequality, lower growth) are just “wrong” and should apologize for a “massive error.” This, shall we say, “Krugmanization” of a substantial portion of the economics profession and punditocracy is in its triumphalist phase, and whether its smug non-stop “victory lap” ultimately represents an embarrassing high-water mark is for subsequent events to reveal.

However, let us look at the policies that have been implemented post-crisis (in the absence of the kind of solid pro-growth policies that we and others have been advocating) and compare them to the policies that were in place during the run-up to the 2008 crisis.

Pre-crisis, the Fed funds rate was 1% for 2-1/2 years. There was no asset buying by the central bank (QE), but the persistently low Fed funds rate fueled bubbles in leverage, real estate and structured products. The balance sheets and derivatives books of financial institutions went from crazy to colossally insane.

 

Following the crisis, the Fed funds rate has been effectively zero for six years, and QE has put several trillion dollars of government and mortgage debt on the books of the world’s major central banks. Indeed, a substantial portion of government spending in the past six years has been “financed” by QE. If the gibberish that passes for explanations of why this is not just money printing makes sense to you, then please give us a call so we can be educated. The explanation makes no sense to us.

ZIRP has allowed insolvent corporations to issue debt at almost no premium to government bond rates. Companies that should be shuttered or taken over and chopped up are instead able to pursue projects that should never have seen the light of day, and to create fake demand that essentially borrows growth (and jobs) from the future.

A good deal of the economic and jobs growth post-crisis is false growth, with little chance of being sustainable and self-reinforcing. It is based on fake money conjured by the Fed to buy assets at fake prices. What happens when interest rates are normalized and QE stops (and reverses) globally is a question that nobody wants to contemplate. The financial system is fragile, still ultra-leveraged and reliant upon a continuation of superlow interest rates. Thus, the appearance of stability and low volatility is also illusory.

Government economic data.

Some of the most important government data is unreliable, starting with inflation. Reported real GDP growth has been in the 2% annualized range for the last few years. The 4% annualized real growth rate reported for the second quarter of 2014 only reversed the terrible first quarter numbers, so year-over-year growth was still only in the 2% range for the twelve months ended June 30, 2014. Only if third and fourth quarter real GDP growth reaches 3% or higher, and only if that rate persists next year, will it be fair to say that the U.S. economy has finally recovered from the crisis (six tough years later).

But regardless of the purported results for the rest of 2014 and into 2015, all of the reported growth numbers are too high, because the official inflation number is too low. Over a long period of time, these figures have become politicized, always in the direction of under-reporting inflation. Constant repetition has resulted in most policymakers and economists now just accepting the adjustments and tricks that have become part of the reporting culture. From the notion that there is “core” and “non-core” inflation; to ignoring house prices and using “rental equivalence”; to “hedonic adjustments” according to which, if your computer is “better” than last year’s, then you should subtract an amount from the actual price every year to reflect that improvement, even though it is subjective and not really quantifiable; to a handful of other nonsensical adjustments, inflation is understated. Inflation is also distorted by the increasing gap between the spending basket of the well-off and that of the middle class (check out London, Manhattan, Aspen and East Hampton real estate prices, as well as high-end art prices, to see what the leading edge of hyperinflation could look like).

Said differently, inflation is the degradation of the value of money. Money has no meaning beyond the value of the real things for which it can be exchanged. The inventions and tools of modern finance have made things look really complicated, but stripping inflation to its essence is critical to understanding what is real and what is false. The inflation that has infected asset prices is not to be ignored just because the middleclass spending bucket is not rising in price at the same rates as high-end real estate, stocks, bonds, art and other things that benefit from QE and ZIRP. Money is losing value in those areas. This is inflation, plain and simple. If and when the situation gets to be Argentina-like, with generalized increases across the entire spending spectrum, it will be clear to everyone. In the meantime, sadly, policymakers do not recognize the reality of the peculiar and sectoral inflation, in some cases massive and growing, that has been caused by money printing and bad policy.

Even apart from rising prices in high-end goods, all of this suggests that CPI inflation is being understated by some unknowable amount, which we estimate is between 1/2% and 1% per year. This is a big difference in a 2% or 2-1/2% per year reported real GDP growth environment. Middle class citizens who are paying more at the supermarket and for college tuition and for many other goods and services feel that inflation is higher than reported, but they lack access to reliable data. The well-off think that it is their exquisite good choices that enable them to sell their overpriced $10 million co-op apartment and buy a $20 million overpriced Hamptons beach home. Neither group is coming to grips with the insidious and tricky nature of modern inflation, and the government just uses its tone of complete confidence to ignore what citizens see with their own eyes.

Unemployment figures are also a source of faulty or misleading data. The headline currently reported unemployment rate of 5.9% is deeply misleading. A 35-year low in the workforce participation rate, a policy-driven transition from full-time to part-time jobs, and the transition from high-paying jobs to relatively low-paying service jobs, all combine to make the headline rate a poor measure of employment health. Support for our statement is provided by the data on real wages, which have been stagnant during the entire post-crisis period. These figures for trends in real wages avoid the distortions we have described above, and are consonant with the polling numbers which show that Americans believe their country is on the wrong track and that the future prospects for themselves and their children are poor.

Deleveraging.

The 16th Geneva Report on the World Economy (published in September of this year by the Centre for Economic Policy Research) says that the total burden of global non-financial debt, private and public, has risen from 60% of national income in 2001 to almost 200% after the crisis in 2009 and to 215% in 2013. Contrary to widely held beliefs, the world’s leading governments and financial institutions have not yet begun to de-lever, and the global debt-to-GDP ratio is still growing to record highs, even before taking into account entitlement programs.

*  *  *

Nobody can predict how long governments can get away with fake growth, fake money, fake financial stability, fake jobs, fake inflation numbers and fake income growth. Our feeling is that confidence, especially when it is unjustified, is quite a thin veneer. When confidence is lost, that loss can be severe, sudden and simultaneous across a number of markets and sectors.




via Zero Hedge http://ift.tt/1x3Ww0j Tyler Durden

Is Social Science Biased Against Conservatives?

HaidtThat’s the question at the heart of an
interesting
New Yorker article
that focuses on the work of New
York University social and moral psychologist Jonathan Haidt. The
article opens with the now notorious occasion in which Haidt asked
for a show of hands indicating political ideology during his
presentation at the annual convention of the Society for
Personality and Social Psychology. The New Yorker
reports:

First came the liberals: a “sea of hands,” comprising about
eighty per cent of the room, Haidt later recalled. Next, the
centrists or moderates. Twenty hands. Next, the libertarians.
Twelve hands. And last, the conservatives. Three hands.

Social psychology, Haidt went on, had an obvious problem: a lack
of political diversity that was every bit as dangerous as a lack
of, say, racial or religious or gender diversity. It discouraged
conservative students from joining the field, and it discouraged
conservative members from pursuing certain lines of argument. It
also introduced bias into research questions, methodology, and,
ultimately, publications. The topics that social psychologists
chose to study and how they chose to study them, he argued,
suffered from homogeneity. The effect was limited, Haidt was quick
to point out, to areas that concerned political ideology and
politicized notions, like race, gender, stereotyping, and power and
inequality. “It’s not like the whole field is undercut, but when it
comes to research on controversial topics, the effect is most
pronounced,” he later told me.

Haidt and his colleagues more formally lay out their concerns in
a
forthcoming article
in Behavorial and Brain Sciences.
From the abstract:

Psychologists have demonstrated the value of
diversity—particularly diversity of viewpoints—for enhancing
creativity, discovery, and problem solving. But one key type of
viewpoint diversity is lacking in academic psychology in general
and social psychology in particular: political diversity. This
article reviews the available evidence and finds support for four
claims: 1) Academic psychology once had considerable political
diversity, but has lost nearly all of it in the last 50 years; 2)
This lack of political diversity can undermine the validity of
social psychological science via mechanisms such as the embedding
of liberal values into research questions and methods, steering
researchers away from important but politically unpalatable
research topics, and producing conclusions that mischaracterize
liberals and conservatives alike; 3) Increased political diversity
would improve social psychological science by reducing the impact
of bias mechanisms such as confirmation bias, and by empowering
dissenting minorities to improve the quality of the majority’s
thinking; and 4) The underrepresentation of non-liberals in social
psychology is most likely due to a combination of self-selection,
hostile climate, and discrimination.

Of course, in their self-estimation liberals cannot be
close-minded and discriminatory. The New Yorker notes that
Harvard University psychologist Daniel Glibert explained:

“Liberals may be more interested in new ideas, more willing to
work for peanuts, or just more intelligent.”

Well, maybe. But some Dutch psychologists reporting the results
of their survey of academic psychologists offered another reason:
Overt
professional discrimination
against conservatives. From their
study:

Hostility toward and willingness to discriminate against
conservatives is widespread. One in six respondents said that she
or he would be somewhat (or more) inclined to discriminate against
conservatives in inviting them for symposia or reviewing their
work. One in four would discriminate in reviewing their grant
applications. More than one in three would discriminate against
them when making hiring decisions. Thus, willingness to
discriminate is not limited to small decisions. In fact, it is
strongest when it comes to the most important decisions, such as
grant applications and hiring.

The whole The New Yorker
article
is worth your attention.

For more background, see Haidt’s Reason May 2012 cover
article, “Born This
Way?: Nature, nurture, narratives, and the making of our political
personalities
,” and my article reporting on his research into
the libertarian moral personality, “The
Science of Libertarian Morality
.”

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Your Guide to Ignoring Midterm Election Television Coverage

If you find yourself in line behind these guys, you are not at a valid polling location.You may be the type of weirdo
who is not interested in watching a CNN analyst explain in detail
(with charts) the difference in the number of votes in Mecklenburg
County, North Carolina, for President Barack Obama in 2012 versus
the number of votes for Democratic Sen. Kay Hagan today. We all
have our flaws.

But we have you covered at Reason with a less painful, less
intrusive option. At our Reason
24/7 newsfeed
we’ll be busy tonight putting out the latest
information on election outcomes of interest to libertarians. No
inane analysis, just info. (Warning: There may be sarcasm in
headlines. Also: puns.) We’ll have regular posts on the outcomes of
races and ballot initiatives we’ve been highlighting at Reason for
the past couple of weeks, whether it’s
libertarian-leaning candidates
from either party, actual

Libertarian Party
candidates, and important
ballot initiatives
. We’ll also take note of whether the
Republicans have taken control of the Senate, assuming anybody is
able to actually make that call this evening. We’ve made it easy
for you to just check periodically and then turn back to something
more entertaining. You can check out the site feed here. Our Twitter feed is here, and I’ll be tweeting out
numbers and info there periodically throughout the night. If you
have our Reason
app
, the 24/7 feed is right on there, easy to check before
turning back to Instagram or whatever hookup app you’re using to
get some quick nookie.

So what to watch or do instead? Sadly, some networks seem to
have worried that people will actually want to tune in to midterm
election results tonight and are running reruns rather than
counterprogramming. No new episode of The Flash tonight.
Boo! Even worse, no new episode of The Independents
tonight. Boo! For those looking to escape from the wall of talking
heads, here are some options. (We claim no responsibility for
interruptions, commercial breaks, or news tickers that expose you
to midterm election results despite your best efforts.)

In the wake of the end of How I Met Your Mother,
networks have offered a glut of gimmicky romantic comedies, most of
which are bombing. The terribly-named Selfie, which
recasts Pygmalion for the era of social media, is offering
up back-to-back episodes at 8 p.m. on ABC. Fox follows up with its
own comedy block of The New Girl and The Mindy
Project
from 9 to 10 p.m., but before that Fox is serving up a
second season of MasterChef Junior. Normally I wouldn’t
dream of recommending watching any reality show featuring Gordon
Ramsey for any reason other than an education in how phony and
predictable reality shows are. But MasterChef Junior
causes Ramsey and his cohorts to briefly act like acceptable human
beings. Also the children were really good cooks in the first
season, much better than many of the adults that have appeared on
Ramsay’s other shows.

I don’t believe anybody on Sons of Anarchy is legally
allowed to vote with their criminal records, so they will continue
with their final season of killing each other and everybody else at
10 p.m. on FX. I don’t watch the show, and I’m assuming that’s not
a spoiler, and everybody who watches knows that the series is going
to end with everybody dead.

What I would be watching if weren’t serving you all with midterm
news that you will maybe glance at for seconds (I’m not bitter, I
swear!) is Marvel: 75 Years, from Pulp to Pop on ABC at 9
p.m. I grew up reading Marvel comics, particularly the X-Men.
Colossus made me gay. True story.

And of course, there’s always
Netflix
! They’ve got Batman and Batman
Returns
today. Those are the Michael Keaton ones.

But let’s not forget video games.
Call of Duty: Advanced Warfare
is out today, perfect to
remind us all on Election Day that government is above all things,
a purveyor of deadly force. Kevin Spacey provides voice acting for
this edition, presumably playing an amoral asshole with a
deliberately bored vocal affect. Just a guess.

For video game nostalgiamaniacs, the Internet Archive has just
made it possible to play hundreds of old arcade games in your web
browser with an emulator. Check it out here.

And of course, besides our Reason 24/7 result coverage, we’ll
also be blogging our own analysis of the midterm outcomes tonight
here at Hit and Run, so check us out during commercial breaks or
while waiting for your Call of Duty map to load.

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Europe In Triple-Dip Recession, Goldman’s Internal Model Finds

If today’s European Commission slashing of Euro GDP forecasts did not leave a warm and fuzzy feeling in Europeans that the greatest depression ever is proceeding just as planned, if not quite as “forecast” as the following chart shows, confirming yet again that when it comes to predicting the future nobody can hold a candle to the Fed, the IMF or Europe…

…  then here is Goldman with the loudest warning yet, courtesy of its internal RETINA model, that Europe is now effectively in a triple-dip recession, with Q3 GDP for the Euro area at -0.2%.

From Goldman’s Huw Pill

RETINA retreats further into Q3 contraction  

 

Bottom line: We are less than a fortnight away from Eurostat’s publication of its flash estimate of Q3 GDP growth in the Euro area. In today’s Daily, we look through the lens of our contemporaneous tracker of real-time inflation and activity. Since our previous update in mid-October, RETINA’s median estimate of Q3 GDP growth has moved deeper into negative territory, driven largely by a disappointing print for area-wide industrial production in August. The downside risks to our +0.1%qoq judgemental forecast for Q3 GDP now look skewed to such an extent that our point estimate no longer falls within a 50% confidence interval around RETINA’s median reading.

 

RETINA sees negative GDP growth in Q3

 

As Chart 1 shows, from mid-September to mid-October, RETINA’s median estimate for third-quarter GDP growth (the red line in Chart 1) fell from around +0.3%qoq to just short of -0.2%qoq. Following a disappointing contraction in area-wide August IP on 14 October, RETINA’s median estimate fell a further 10bp — yet deeper into negative territory. Having stabilised at around -0.3%qoq in the past fortnight, RETINA’s median estimate is now some 40bp weaker than our current judgemental forecast for Q3 GDP growth (+0.1%qoq, the black dotted line in Chart 1). This is yet more pessimistic than the latest available poll among other private-sector economists (collated on 8 September), which envisaged Q3 growth of around +0.35%qoq.

 

 

RETINA’s latest leg lower is down (solely) to Euro area IP

 

As Chart 2 shows, the latest move lower in RETINA’s median growth tracker (from around -0.2%qoq to -0.3%qoq) was driven almost exclusively by the 1.8%mom contraction in Euro area IP in August. Conditional on this out-turn, subsequent releases of national business surveys (ranging from the Italian ISTAT, the Belgian business survey and the French and German PMIs), as well as a +0.5%qoq sequential expansion in Spanish Q3 GDP, left our RETINA growth tracker largely unmoved.

 

 

The mechanical nature of the RETINA framework implies that it may underestimate the potentially significant ‘calendar effect’ in the German IP data (changes in the timing of holidays is likely to have shifted production out of August into July, as reflected in the month-to-month volatility of outturns). Some caution is required in interpreting the downward shift implied by these data, at least until we see the September print later this week. That said, the broadly confirmatory signal offered by business surveys (e.g. with the German IFO index continue to decline) suggest that idiosyncracies in the data should not be overstated.

 

RETINA suggests that degree of downside risk to our forecast has returned

 

As Chart 3 shows, RETINA’s growth tracker implied an escalation of downside risks to our former (+0.4%qoq) judgemental forecast through most of September. The latest indications are that the intensity of that downside skew has returned through the course of October — even as it pertains to our much weaker current forecast for +0.1%qoq growth in Q3. The Bayesian underpinning beneath RETINA’s growth tracker allows us to quantify this skew. Chart 3 shows that the model-implied probability that Q3 growth beats our judgemental forecast has fallen to 25% — down from around 35% at the time we made our forecast change. Furthermore, as Chart 1 also underscores, the downside risks to our judgemental forecast for Q3 now look skewed to such an extent that our point estimate no longer falls within a 50% confidence interval around RETINA’s median reading.

 

 

So far, we have discussed RETINA’s median tracking estimate. We can also track RETINA’s modal estimate of GDP growth – that is, the single estimate of sequential growth that the models deems more likely. As Chart 4 shows, this modal estimate has been broadly unchanged over the past month.

 

* * *

There is some good news:

It is still too early to be emphatic, but RETINA seems to object less to a small expansion in Q4 GDP than it does to a positive print in Q3.

And that is, what in the New Abnormal, passes for good economic news.




via Zero Hedge http://ift.tt/1uqNniO Tyler Durden

St. Louis County Prosecutor Running Unopposed, But Dem Candidate for County Executive May Lose Because of Him, Maybe

McCulloch, Stenger, supportersIn August, the police killing
of Michael
Brown
in Ferguson, Mo. led to days of protests over police
brutality and the lack of information and communication about the
Brown killing. The St. Louis county government sent in county and
other local law enforcement agencies, often the militarized
variety, leading to even more protests.

October was supposed to be another month of protest. It had
mixed results. Today, voters in St. Louis county go to vote for,
among other positions, county officials. The county executive,
Charlie Dooley, a Democrat, isn’t up for re-election. The Democrat
vying to replace him, Steve Stenger, was
supposed to be
a shoe-in.

But Stenger won his primary largely with the help of Bob
McCulloch, the St. Louis county prosecutor, also a Democrat. While
McCulloch, also a Democrat, is running unopposed he’s become a
lightning rod for criticism of the cosy relationship cops have with
the prosecutors who are charged with deciding whether they’ve
committed a crime. One of McCulloch’s
first cases
when he came into office in 1991 involved defending
cops who shot two unarmed men during an ill-advised drug sting. For
McCulloch the killing was OK because the victims were “bums.”
McCulloch declined to recuse himself from the Darren Wilson case
but his objectivity has been called into questioning, threatening
not just justice for Michael Brown but for Darren Wilson too.

McCulloch’s anti-civil liberties mentality didn’t stop the
Democrat from getting re-elected five times. While there may not be
that much of a difference between a one-party system and a
two-party system, the lack of any choice to register opposition to
McCulloch at the ballot is troubling. In the county executive race,
the Republican candidate Rick Stream, a state legislator is
tackling the racial divide in St. Louis head on, an also supports
appointing special prosecutors for police shootings. Another

Republican state legislator
is proposing a bill that would
permanently take the decision whether to prosecute cops out of the
hands of the local prosecutors they work with. There’s also a civil
rights activist running for county executive as a
write-in
. Ferguson, by the way, which is two-thirds black, has
a majority white, Republican elected leadership. Nobody votes
because it doesn’t matter.

Follow Reason 24/7 tonight for results of the St. Louis
executive race as well as the congressional race involving
incumbent Democrat
Lacy Clay
, whose district includes Ferguson and who has
supported and continues to support the militarization of local
police.

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Into The Unknown

Submitted by Tim Price via Sovereign Man blog,

Strange things are happening in the bond market.

Few of them are stranger than the reports Jeremie Banet, a French fund management colleague of former Pimco executive Bill Gross, quit the bond business altogether to sell croques-monsieur from a food truck.

Bill Gross, whose management style has been described as “bullying”, had reportedly told in front of Pimco’s entire investment committee that, “I never understand what you’re saying. Ever.”

With those credentials, Monsieur Banet is supremely qualified to become the next chairmen of the Federal Reserve. And if so, he has his work cut out for him.

Consider the sort of volatility that the 10-year US Treasury experienced on 15th October.

Intra day yield Into the Unknown

Having begun the day sporting a 2.2% yield, the 10-year note experienced an extraordinary surge in price that took its yield down briefly towards 1.85%.

Later in the same session the buying abated, and the bond closed with a yield of roughly 2.14%.

During the same trading session, equity markets sold off aggressively (the UK’s FTSE 100 index, for example, closed down almost 3% on the day).

What accounts for such melodrama? Analyst Russell Napier takes up the story:

“On October 15th 2014, if only for a few short minutes, market forces broke out and the failure of central bankers was briefly evident.”

 

“There is a very simple lesson that when the markets finally break through the manipulation they move to price in deflation and not inflation. This is key because it means financial repression has failed.”

These days, you don’t tend to hear the words ‘failure’ and ‘central bankers’ in the same sentence (unless the topic happens to be Zimbabwe). But perhaps the omniscience and omnipotence of central bankers is somewhat overstated.

On October 29th, the US Federal Reserve followed a long-rehearsed script and announced that it had “decided to conclude its asset purchase program [also known as QE] this month.”

The Economist’s Buttonwood column described it as “Letting go of Daddy’s hand,” and cautioned, “[W]e may indeed get to see QE4 rolled out. Daddy might have let go of the market’s hand for the moment but he’s still close by.”

That coinage nicely speaks to the juvenilisation to which markets have been reduced during six long years of financial repression, interest rate manipulation, and the unprecedented expansion of central bank balance sheets.

Only the asset purchases have abated (for now): the financial repression, one way or another, will go on.

Whether the asset purchases have really disappeared or merely been suspended will be a function of how risk markets behave over the coming months and years.

And although our crystal ball is no more polished than anyone else’s, we would not be surprised to see petulant markets rewarded with yet more infusions of sweets.

Our fundamental views are clear: bonds are already grotesquely expensive, yet may become even more (we’re not investing in “the usual suspects” so we don’t much care).

Most stock markets are pricey – but in a world beset by QE (and prospects for more, in Europe and Asia) which prices can we really trust ?

By a process of logic, elimination and deduction, out of major, conventional asset classes, only quality listed businesses trading at (or ideally well below) a fair assessment of their intrinsic worth offer any semblance of value or attractiveness.

Pretty much everything else amounts to nothing more than paper, prone to arbitrary gusts from some very powerful, and very windy, bureaucrats.

We note also that former Fed chairman Alan Greenspan, no doubt looking to polish his legacy, managed to front-run the Fed’s QE announcement by pointing to the merits of gold within a government-controlled, fiat currency system.

Strange days indeed.




via Zero Hedge http://ift.tt/1sdcAHE Tyler Durden

New Halloween Menace: Meth in Your Kid’s Candy Bag

Just in
case parents get tired of
fruitlessly searching
trick-or-treat bags for marijuana-infused
candy, a new Halloween scare is in the works. The San Jose
Mercury News
 reports
that “police in Hercules are trying to determine who gave a plastic
bag of methamphetamine to a young girl on Halloween, and are
reminding parents to inspect their children’s candy haul for
suspicious items.” This new menace is promising, since meth is
scarier than marijuana, but it has a definite disadvantage: There
is no indication that anyone tried to disguise the meth as candy.
Far from the strawberry-flavored
meth
of legend, it was just 0.1 gram of white powder in a tiny
zip-lock bag—but still enough to support a felony possession
charge, according to police, which gives you a sense of how insane
our drug laws are.

“This could have been intentional, or it could have been
accidental,” Hercules police Sgt. Ezra Tafesse told the Mercury
News
, “and we won’t know until we speak with the person
who did this.” Or as KNTV, the NBC station in San Jose,
puts it
, “police are unsure if the meth found were given to the
child intentionally or on accident.” On accident, I’m guessing,
since the prank potential seems very low, given the lack of
resemblance between the meth and any candy kids are apt to get on
Halloween.

Speaking of accidentally distributing drugs to children,
Hercules, a city of 24,000 in the San Francisco Bay Area, was the
location of another such Halloween incident, this one involving
marijuana. It was the closest thing I could find to
trick-or-treaters getting cannabis candy instead of the regular
kind: Back in 2000, marijuana buds stuffed into wrappers from
miniature chocolate bars turned up in children’s trick-or-treat
bags. Hercules police traced the pot to a postal worker, who
obtained it from an undeliverable package without realizing what
was actually inside  the wrappers. The San Francisco
Chronicle 
explained:

The treats were the product of a failed and undetected attempt
to mail 5 ounces of marijuana to someone in San Francisco, said
Hercules Police Chief Mike Tye.

“Somebody tried to mail it and didn’t have enough postage or the
address was wrong,” he said.

Because the package, which contained four bags of Snickers bars
destined for San Francisco, did not have a return address, it
landed in the dead-letter office—where it was taken by a postal
employee who planned to hand the candies out to
trick-or-treaters.

“A lot of their dead mail, stuff that’s nonperishable, is given
away to charity,” Tye said. “(The employee) picked up the candy
along with a bunch of canned goods. He took the other items to a
church but kept the candy.”

Because police were convinced that the postal worker had made an
honest mistake, he was neither charged nor publicly named. His
error is obviously quite different from deliberately giving out
marijuana-infused candy disguised as unspiked versions of the same
products: Not only was the marijuana distribution inadvertent, but
no one would mistake marijuana buds for a Snickers bar once the
package was opened. Press coverage of the incident may nevertheless
have fed rumors about malicious strangers trying to trick kids into
ingesting cannabis—just as this meth story may transmogrify into
something more sinister.

According to the Mercury News, by the way, Sgt. Tafesse
said “it is unusual for drugs to be slipped into Halloween candy,
but it happens from time to time, especially with marijuana.” He
did not cite any actual cases.

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Russian Proposal: Marry a Prostitute, Avoid Criminal Penalties

In St. Petersburg, Russia, it’s currently
against the law to sell sexual services but not to pay for them.
One city lawmaker, Olga Galkina, aims to change that with a bit of
provocative political theater.

Galkina recently introduced a bill that would impose heavy fines
on prostitution clients in Russia’s second-largest city. Under her
proposal, those caught purchasing sexual services could face a
charge of 4,000 to 10,000 rubles (about $95-$240) or up to five
days in jail. The fines and jail time would increase if a client
knew an individual was being forced into selling sex. 

However—and here’s where things get interesting—a client could
evade these penalties if
they agreed to marry the person
providing the sexual
service. From RT

In the explanatory note attached to the bill Galkina quotes
international experience, saying that introducing responsibility
for clients had helped to decrease the prostitution rate in
Finland, Norway, Sweden and Iceland. If the St. Petersburg city
legislature approves the bill in two readings it would be sent to
the Federal parliament with the possibility to become a national
Russian law.

Law experts say that while the purpose of the bill is good it
might face difficulties in real life as it would be very difficult
to collect proof of the crime.

Let’s be clear: the purpose of the bill is good. But
not for the reasons these alleged law experts purport. Galkina’s
true motive in introducing the legislation was to get Russians
thinking about how and why they criminalize sex.

The lawmaker told Kommersant-St Petersburg that she’s
actually an advocate for decriminalizing prostitution for sex
workers and their clients. Her marry-a-prostitute proposal
has almost no chance of passing, but she introduced it to spark a
conversation. 

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